Opinion
Case No.: 2:22-cv-01109-APG-EJY
2022-08-01
Cornele A. OVERSTREET, Regional Director of the Twenty-Eighth Region of the National Labor Relations Board on behalf of the National Labor Relations Board, Plaintiff v. APEX LINEN HOLDINGS, LLC, Defendant
Nestor Zarate Mancilla, Rachel Harvey, Kyler Scheid, National Labor Relations Board, Phoenix, AZ, for Plaintiff. Anthony L. Hall, Simons Hall Johnston PC, Reno, NV, Lynne McChrystal, Paul T. Trimmer, Jackson Lewis, P.C., Las Vegas, NV, for Defendant.
Nestor Zarate Mancilla, Rachel Harvey, Kyler Scheid, National Labor Relations Board, Phoenix, AZ, for Plaintiff.
Anthony L. Hall, Simons Hall Johnston PC, Reno, NV, Lynne McChrystal, Paul T. Trimmer, Jackson Lewis, P.C., Las Vegas, NV, for Defendant.
Order Granting in Part Petition for Temporary Injunction
[ECF No. 1]
ANDREW P. GORDON, UNITED STATES DISTRICT JUDGE
Petitioner Cornele Overstreet, Regional Director for the National Labor Relations Board (NLRB or Board), filed a petition for a temporary injunction against respondent Apex Linen Holdings, LLC (Apex Holdings) under § 10(j) of the National Labor Relations Act (NLRA). ECF No. 1. I grant in part Overstreet's motion.
In June 2019, the commercial laundry service Apex Linen Service, Inc. (Apex Inc.) sold to Apex Linen Service, LLC (Apex LLC). ECF No. 1-4 at 2. Eventually, Apex LLC declared bankruptcy and entered an agreement to sell "substantially all" of its operation to Apex Holdings. ECF No. 1-3 at 49. Apex Holdings completed the sale in October 2020. ECF No. 1-4 at 6. Apex Holdings now operates the laundry facility, providing service for commercial entities like hotels and restaurants and employing engineers to maintain its equipment. Id. at 10.
Before Apex Inc. sold in 2019, it entered into a collective-bargaining agreement (CBA) with the International Union of Operating Engineers Local 501, AFL-CIO (the Union). ECF No. 1-3 at 47. The CBA was scheduled to be effective from July 20, 2018 through July 19, 2021. Id. at 2-47. Since Apex Holdings’ acquisition of Apex LLC in October 2020, Apex Holdings has disclaimed the CBA, has not bargained with the Union, and has altered conditions of employment in ways that previously could not occur in the absence of bargaining. See ECF Nos. 1-3 at 78; 1-2 at 7. At least one employee has been discharged, allegedly because of union participation and advocacy. See ECF Nos. 1-2 at 9, 11; 1-4 at 12, 22. Others have been laid off without the benefit of union representation. See ECF No. 1-4 at 12, 30.
From March 2021 through April 2022, the Union filed numerous charges with the NLRB alleging Apex Holdings had engaged in unfair labor practices. ECF No. 1-2 at 5, 7, 9, 11. The NLRB consolidated those charges into a complaint against Apex Holdings. Id. at 34-43. That matter is proceeding before an administrative law judge (ALJ), who will make recommendations to the Board. Id. at 27-31. In the meantime, NLRB Regional Director Overstreet petitions this court for a temporary injunction against Apex Holdings under § 10(j) of the NLRA, alleging unfair labor practices.
Section 10(j) provides:
The Board shall have power, upon issuance of a complaint as provided in subsection (b) charging that any person has engaged in or is engaging in an unfair labor practice, to petition any United States district court, within any district wherein the unfair labor practice in question is alleged to have occurred or wherein such person resides or transacts business, for appropriate temporary relief or restraining order. Upon the filing of any such petition the court shall cause notice thereof to be served upon such person, and thereupon shall have jurisdiction to grant to the Board such temporary relief or restraining order as it deems just and proper.
29 U.S.C. § 160(j). In determining whether temporary relief is just and proper under the circumstances, I "consider the traditional equitable criteria used in deciding whether to grant a preliminary injunction." Small v. Avanti Health Sys., LLC , 661 F.3d 1180, 1187 (9th Cir. 2011) (quotation omitted). Those criteria are: (1) a likelihood of success on the merits, (2) a likelihood of irreparable harm, (3) whether the balance of hardships favors the plaintiff, and (4) whether an injunction is in the public interest. Winter v. Nat. Res. Def. Council, Inc. , 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008). Alternatively, under the sliding scale approach, the party seeking injunctive relief must demonstrate (1) serious questions on the merits, (2) a likelihood of irreparable harm, (3) the balance of hardships tips sharply in the moving party's favor, and (4) an injunction is in the public interest. All. for the Wild Rockies v. Cottrell , 632 F.3d 1127, 1135 (9th Cir. 2011).
In applying these criteria, I am cognizant that the availability of injunctive relief in this context is designed "to protect the integrity of the collective bargaining process and to preserve the [NLRB's] remedial power while it processes the charge." Avanti Health Sys., LLC , 661 F.3d at 1187 (quotation omitted). The remedy is meant to prevent someone from accomplishing an unlawful objective based on the delay between the unfair labor practice and final resolution of the complaint process. See Miller for & on Behalf of NLRB v. Cal. Pac. Med. Ctr. , 19 F.3d 449, 455 n.3 (9th Cir. 1994) (en banc).
The fact that the NLRB exercised its discretion to seek a § 10(j) injunction does not mean I must defer to the Board in deciding whether interim relief is appropriate. Small v. Operative Plasterers’ & Cement Masons’ Int'l Ass'n Local 200, AFL-CIO , 611 F.3d 483, 490 (9th Cir. 2010). However, I "should evaluate the probabilities of the complaining party prevailing in light of the fact that ultimately, the Board's determination on the merits will be given considerable deference." Id. (quotation omitted).
I. Likelihood of Success on the Merits
To show a likelihood of success on the merits in a § 10(j) proceeding, the Regional Director must show a "probability that the Board will issue an order determining that the unfair labor practices alleged by the Regional Director occurred and that this Court would grant a petition enforcing that order, if such enforcement were sought." Frankl ex rel. NLRB v. HTH Corp. , 693 F.3d 1051, 1062 (9th Cir. 2012) (quotation omitted). The Regional Director meets this burden by making a "threshold showing of likelihood of success by producing some evidence to support the unfair labor practice charge, together with an arguable legal theory." Avanti Health Sys., LLC , 661 F.3d at 1187 (quotation omitted). "Conflicting evidence in the record does not preclude the Regional Director from making the requisite showing for a section 10(j) injunction." HTH Corp. , 693 F.3d at 1063 (quotation omitted).
A. Section 8(a)(5)
Section 8(a)(5) makes it an unfair labor practice for an employer "to refuse to bargain collectively with the representatives of his employees, subject to the provisions of section 159(a) of this title." 29 U.S.C. § 158(a)(5). Section 159(a) provides that the selected representative "shall be the exclusive representative[ ] of all the employees in such unit for the purposes of collective bargaining in respect to rates of pay, wages, hours of employment, or other conditions of employment ...." Id. § 159(a).
Overstreet alleges that Apex Holdings is the successor employer of Apex LLC, and therefore Apex Holdings is obligated to recognize the Union and bargain in good faith with it. Overstreet alleges two violations under section 8(a)(5). First, Overstreet alleges that Apex Holdings refused to recognize the Union as the bargaining unit's exclusive representative and refused to bargain collectively with the Union. Second, he alleges that Apex Holdings unilaterally changed the conditions of employment without prior notice to the Union and without affording an opportunity to bargain. Specifically, he alleges Apex Holdings fired certain employees, ceased making pension fund contributions on behalf of employees in the bargaining unit, altered the holiday pay policy, changed employees’ schedules, and reinstated some laid off employees or hired new employees without regard to seniority.
Apex Holdings argues that it is not Apex LLC's successor because the CBA does not provide that the CBA could be assumed by a successor entity. Apex Holdings also contends that given the changes in ownership, management structure, and workforce, it is not Apex LLC's successor. And it contends that the bankruptcy court's order approving the sale states that Apex Holdings is not a successor, that the bankruptcy court ordered that the CBA was rejected, and that the Union did not challenge either of these orders in the bankruptcy proceedings. Apex Holdings also argues that even if it is a successor, it is not a "perfectly clear successor" because it announced to employees early on that it would not abide by the CBA and that it instead would set its own initial terms of employment.
The parties thus dispute whether Apex Holdings is a successor employer and, if so, what type of successor it is. They consequently also dispute what obligations Apex Holdings had with respect to recognizing the Union, bargaining with it, and setting initial terms of employment.
1. Successor Employer
"A successor employer is a firm which, having hired most of its employees from a predecessor employer's workforce, conducts essentially the same business that the predecessor did." NLRB v. Jeffries Lithograph Co. , 752 F.2d 459, 463 (9th Cir. 1985). When a "Board-certified union has represented the predecessor's employees, the law presumes that a majority of the successor's employees support the same union." Id. "This presumption places the successor employer under a duty to bargain with the union over wages, hours, and working conditions." Id. The law imposes this presumption because "a mere change in ownership, without an essential change in working conditions, is not likely to change employees’ attitudes toward union representation." Id. The new employer is a successor if: (1) "the employer conducts essentially the same business as the former employer," and (2) "a majority of the new employer's work force are former employees or would have been former employees absent a refusal to hire because of anti-union animus." Kallmann v. NLRB , 640 F.2d 1094, 1100 (9th Cir. 1981).
Overstreet is likely to succeed in showing that Apex Holdings is Apex LLC's successor. He has presented an arguable legal theory for successorship, and there is some evidence that Apex Holdings conducts essentially the same business as Apex LLC did and that a majority of Apex Holdings’ bargaining unit employees are former Apex LLC employees. Finally, the bankruptcy court's orders do not preclude a finding that Apex Holdings is Apex LLC's successor.
a. Conducting the Same Business
To determine if the new employer is carrying on the same business, I weigh a number of non-exclusive factors, including whether: (1) "there has been a substantial continuity of the same business operations;" (2) "the new employer uses the same plant;" (3) the new employer employs the "same or substantially the same work force ...;" (4) "the same jobs exist under the same working conditions;" (5) the new employer employs the same supervisors; (6) the new employer uses the "same machinery, equipment, and methods of production;" and (7) the new employer manufactures the same product or offers the same service. Jeffries , 752 F.2d at 463 (quotation omitted). The ultimate inquiry is "whether there was an essential change in the business that would have affected employee attitudes toward representation." Id. (quotation omitted). The analysis emphasizes the employees’ perspective because "a successor's § 8(a)(5) duty to bargain in good faith derives from the rebuttable presumption of majority support that a union obtains once it has been certified as the unit's bargaining representative." Resilient Floor Covering Pension Tr. Fund Bd. of Trs. v. Michael's Floor Covering, Inc. , 801 F.3d 1079, 1091 (9th Cir. 2015). "Requiring a successor to bargain with the incumbent union even after a change in corporate structure assures employees that their choice of representative is not subject to the vagaries of an enterprise's transformation, and so promotes industrial peace." Id. at 1091-92 (quotation omitted).
Overstreet has presented evidence that there was no change in employer from the employees’ perspective. According to Brian Grosz, a former Apex engineer, no engineers were laid off at the time ownership changed and, except for being told they were no longer represented by the Union and would have no pension, "things continued as they had before." ECF No. 1-4 at 11. According to another engineer, Charles Walker, there was no break in the employees’ service, and they were not required to reapply for their positions. Id. at 28. Grosz, Walker, and Union representative Richard Lile stated that there were no changes in job duties, operations, services, equipment, or facilities. Id. at 16, 24, 29-30. According to Grosz, there was no change in personnel in the bargaining unit, although some management and office personnel changed. Id. at 16. Apex Holdings responds that 33 of Apex LLC's employees did not join Apex Holdings, but it does not dispute that it hired all the bargaining-unit engineers. And although there was some change in management level personnel, at least one supervisor was the same: Director of Engineering Keith Marsh. Id. at 30. Viewing the factors as a whole, Overstreet has presented evidence that there was not an essential change in the business that would have affected the bargaining unit employees’ attitudes toward union representation.
ECF No. 12-1 at 5.
ECF No. 12-1 at 8.
b. Majority of New Workforce
"The presumption that the old union should represent the new workforce applies only when a majority of the new workforce once worked for the old employer." Jeffries , 752 F.2d at 464. The question is "whether a majority of the new workforce once worked for the old employer, not whether the successor employs a majority of the predecessor's workforce." Resilient Floor Covering Pension Tr. Fund Bd. of Trs. , 801 F.3d at 1098 (quotation omitted). The continuity of the workforce is determined by looking at only the employees within the relevant bargaining unit, not the overall workforce. Id.
As discussed above, Overstreet has presented evidence that Apex Holdings hired all the bargaining unit employees, although some were later discharged. He also has presented evidence that a majority of those hired favored being represented by the Union. According to Grosz, all but two of the engineers that he spoke to "seemed to support the Union." ECF No. 1-4 at 11; see also id. at 12 (stating that he "believe[d] that all but two of the other engineers were ready to sign cards and rejoin the Union"); id. at 18 (stating that to his knowledge the remaining engineers are "still interested in Union representation"). According to Walker, at a meeting shortly after the change in ownership, Apex Holdings’ then-CEO, Jared Wantoch, asked the engineers for a show of hands on who supported the Union and everyone raised their hands, except for Marsh (who was management). Id. at 29. Consequently, Overstreet has presented evidence that a majority of the new bargaining unit workforce worked for the old employer.
c. Apex Holdings’ Response
Apex Holdings argues that the CBA does not expressly allow for a successor entity. But the CBA does not expressly preclude it either. ECF No. 1-3 at 8. And the CBA elsewhere acknowledges there may be a change in ownership. Id. at 22-23. Regardless, successors’ obligations are imposed by law. Apex Holdings also argues that it cannot be the successor because the bankruptcy court stated in the order confirming the sale of Apex LLC's assets that Apex Holdings was not a successor, the bankruptcy court approved Apex LLC's rejection of the CBA, and the Union did not challenge either of these decisions. Overstreet replies that Apex LLC's rejection of the CBA is irrelevant and the determination of whether Apex Holdings is a successor is a matter of substantive labor law for the NLRB that cannot be affected by a bankruptcy court's order approving a sale of assets.
The bankruptcy court's order allowing Apex LLC to reject the CBA has no bearing on the issue of whether Apex Holdings is a successor. After the sale, Apex LLC was no longer the employer and had no further operations, and that is why it sought to reject the CBA. See In re: Apex Linen Service LLC, et al. , (Del. Bankr.), 20-11774-LSS, ECF No. 289 at 6. There being no objection, the bankruptcy court approved Apex LLC's rejection of the CBA. See In re: Apex Linen Service LLC, et al. , (Del. Bankr.), 20-11774-LSS, ECF No. 302. But this order says nothing about Apex Holdings’ obligations (or lack thereof) as a successor. It orders only that Apex LLC was authorized to reject the CBA.
As for the purchase agreement, the bankruptcy court's order approving the sale of Apex LLC's assets to Apex Holdings states:
Except with respect to the Assumed Liabilities or, if at all, as expressly provided for in this Order or the Transaction Documents ..., the transfer of the Assets to [Apex Holdings] under the applicable Transaction Documents shall not result in [Apex Holdings] ... having any liability or responsibility (i) for any Interest, or any other obligation of or against [Apex LLC], and [Apex Holdings shall not] as a result of the Sale or any action taken in connection with the Sale, be deemed to (a) be a successor (or other similarly situated party) to [Apex LLC] or (b) have, de facto or otherwise, merged with or into [Apex LLC] ....
ECF No. 1-3 at 94-95. The bankruptcy court's order also states that Apex Holdings "does not constitute a successor to" Apex LLC. Id. at 95.
But "Congress has explicitly chosen the NLRB as its agent to enforce the National Labor Relations Act." NLRB v. Cont'l Hagen Corp. , 932 F.2d 828, 833 (9th Cir. 1991) (simplified). Consequently, Congress has entrusted the Board, not the bankruptcy court, with the authority to determine whether an unfair labor practice has occurred and, if so, "what measures will remedy the unfair labor practices." Nathanson v. NLRB , 344 U.S. 25, 30, 73 S.Ct. 80, 97 L.Ed. 23 (1952). Whether a business is a successor "normally falls within the Labor Board's primary jurisdiction." Erica Inc., Gen. Partner d/b/a Foodbasket Partners, Ltd. P'ship & United Food & Com. Workers Int'l Union Loc. No. 1564 , 344 NLRB 799, 801 (2005).
Successorship in the "labor-law context is much broader than the strict corporate-law sense of successorship." Resilient Floor Covering Pension Tr. Fund Bd. of Trustees , 801 F.3d at 1099 (simplified). Thus, a bankruptcy court's order "might discharge duties that arose before the bankruptcy petition, but a successor's post-sale conduct can create a new duty to bargain" under labor law. Erica, Inc. v. NLRB , 200 F. App'x 344, 347 (5th Cir. 2006) (concluding that a bankruptcy court's order did not free a successor of its duty to bargain).
The bankruptcy court's order does not preclude a post-sale finding by the Board that Apex Holdings is a successor because the factors that govern successorship under labor law did not materialize until after the sale was complete and Apex Holdings took over the business. Only then could it be determined whether there was a substantial continuity of the same business operations and use of the same plant, workers, jobs, machinery, supervisors, and service. Likewise, the question of whether a majority of Apex Holdings’ bargaining unit employees previously worked for Apex LLC could not be determined until after the sale was completed and Apex Holdings made its hiring decisions. Whether Apex Holdings is a successor under these factors is a matter committed to the Board's primary jurisdiction. Consequently, Overstreet has presented an arguable legal theory and some evidence that Apex Holdings is a successor regardless of the bankruptcy court's orders.
2. Obligations
"A successor is obligated to recognize and bargain with the representative of its predecessor's former employees." NLRB v. Advanced Stretchforming Int'l, Inc. , 233 F.3d 1176, 1180 (9th Cir. 2000) (citing NLRB v. Burns Int'l Sec. Serv., Inc. , 406 U.S. 272, 280-81, 92 S.Ct. 1571, 32 L.Ed.2d 61 (1972) ); see also Fall River Dyeing & Finishing Corp. v. NLRB , 482 U.S. 27, 41, 107 S.Ct. 2225, 96 L.Ed.2d 22 (1987) ("If the new employer makes a conscious decision to maintain generally the same business and to hire a majority of its employees from the predecessor, then the bargaining obligation of § 8(a)(5) is activated."). Although a successor has a duty to recognize the union and bargain in good faith, a successor ordinarily "is not bound by its predecessor's collective bargaining agreement, and is free to set the initial terms of employment for its workers without first consulting with their union." Advanced Stretchforming Int'l, Inc. , 233 F.3d at 1180.
However, there are some situations in which a successor will not be permitted to set the initial terms of employment without first bargaining with the union. Under the "perfectly clear" exception to the ordinary rule of successor obligations, "a successor must bargain before setting terms when it hires all or substantially all of its initial workforce from the ranks of a represented bargaining unit of its predecessor, it being then perfectly clear that a carryover majority desires representation." Id. at 1181 (quotation omitted); see also Burns Int'l , 406 U.S. at 294-95, 92 S.Ct. 1571 ("Although a successor employer is ordinarily free to set initial terms on which it will hire the employees of a predecessor, there will be instances in which it is perfectly clear that the new employer plans to retain all of the employees in the unit and in which it will be appropriate to have him initially consult with the employees’ bargaining representative before he fixes terms."); Bellingham Frozen Foods, Inc. v. NLRB , 626 F.2d 674, 678-79 (9th Cir. 1980) ("When it is perfectly clear that the employer intends to hire a majority of his workforce in a unit represented by a union from the ranks of his predecessor, his duty to bargain with the union commences immediately." (internal quotation marks omitted)). Additionally, the successor "may not unilaterally change conditions of employment without bargaining to impasse even if its predecessor's contract has expired." Carter v. CMTA-Molders & Allied Health & Welfare Tr. , 736 F.2d 1310, 1312 (9th Cir. 1984).
a. Ordinary Successor
Even if Apex Holdings is not a perfectly clear successor, Overstreet has presented evidence that it is an ordinary successor that is required to recognize and bargain in good faith with the Union but has failed to do so. There is no dispute that Apex Holdings initially refused to recognize and bargain with the Union. Apex Holdings stated as much to the employees and the Union, and its answer in the administrative proceeding disputed that it was obligated to recognize or bargain with the Union. ECF No. 1-2 at 30. Sheila Rivera, Apex Holdings’ current President and CFO, states that Apex Holdings’ owners "have offered twice to recognize and bargain with [the Union]," but she provides no information about when, how, or to whom those offers were made. ECF No. 13-1 at 8. According to Adam Stern, an attorney representing the Union, both offers came only recently (in June 2022) and neither addressed concrete terms or the parties’ disputes. ECF No. 16-2 at 3.
The first offer was not to bargain. Rather, Apex Holdings offered to settle the dispute by holding a new election. The Union rejected that because the Union is already the bargaining unit's certified representative and because the offer did not address reinstatement of Grosz and Walker. ECF No. 16-2 at 3. The second offer was to recognize the Union and begin negotiations for a new CBA. Id. The Union rejected that offer because it did not propose to return to the prior CBA's terms in the meantime, did not propose reinstatement for Grosz and Walker, and did not propose dates to meet and begin negotiations. Id. at 3-4. According to Stern, these offers were not in writing, and he has received no other offers to bargain. Id. at 4.
Additionally, even if Apex Holdings was allowed to set the initial terms of employment as an ordinary successor, Overstreet has presented evidence that Apex Holdings changed terms and conditions after setting the initial terms, without prior notice to the Union. See ECF No. 1-4 at 11 (ended holiday pay); id. at 12 (Grosz, Efraim Landero, Rico Magtabay, and Rodney Inigo laid off); id. (shifts changed); id. at 17 (less-senior engineers recalled before Grosz); id. at 22-23, 32 (Walker laid off without respect to seniority rules and two new employees were hired after he was terminated). Consequently, Overstreet is likely to succeed in showing that even if Apex Holdings is an ordinary successor, it violated section 8(a)(5) by refusing to recognize the Union and bargain with it in good faith, and by imposing new conditions without notice and without first bargaining in good faith.
At the meeting, Wantoch told employees he would "look into" holiday pay. ECF No. 1-4 at 11. Consequently, there is some evidence that Apex Holdings had not set an initial term regarding holiday pay.
There is no evidence that the parties discussed shift changes at the meeting. The shift changes did not occur until December 6, 2020. ECF No. 1-4 at 12. Consequently, there is some evidence that this was not an initial term of employment.
There is no evidence that employees were told at the meeting that rehiring would be based on the employer's evaluation of quality of work as opposed to seniority. Consequently, there is some evidence that this was not an initial term of employment.
Apex Holdings contends that Overstreet did not allege in his amended petition that Apex Holdings was a perfectly clear successor. However, the amended petition alleges that Apex Holdings purchased Apex LLC and "continued to operate the business of Apex LLC in basically unchanged form, and has employed as a majority of its employees, individuals who were previously employees of Apex LLC." ECF No. 7 at 7. Additionally, Overstreet alleged that Apex Holdings failed to abide by terms in the CBA, such as stopping the pension payments and reinstating employees without regard to seniority. Id. at 10. Those allegations gave Apex Holdings fair notice that Overstreet contends Apex Holdings was a perfectly clear successor because if Apex Holdings was an ordinary successor, it could have set initial terms regarding terms of employment such as contributing to pensions or reinstating employees.
As discussed above, Overstreet has presented evidence that the Union represented the entirety of Apex Holdings’ bargaining unit at the time of the change in ownership. Additionally, shortly after the change in ownership, Apex Holdings hired only former Apex LLC engineers to fill out its own workforce. Consequently, there is an evidentiary and legal basis for the Board to find that it was "perfectly clear" that the carryover majority would desire union representation. Indeed, Overstreet has presented evidence that a majority of the represented employees in fact desired union representation. Overstreet therefore is likely to succeed in showing that Apex Holdings was a perfectly clear successor and, as such, could not set the initial terms and conditions of employment without first bargaining with the Union.
Apex Holdings contends that it is not a perfectly clear successor because it announced to the employees that it would not abide by the CBA and would set its own terms. Apex Holdings relies on the NLRB's decision in Spruce Up Corporation , in which the NLRB narrowed the application of the perfectly clear doctrine. 209 NLRB No. 19, 1974 WL 4741 (1974). In Spruce Up , the NLRB restricted the perfectly clear doctrine to "circumstances in which the new employer has either actively or, by tacit inference,[ ] misled employees into believing they would all be retained without change in their wages, hours, or conditions of employment, or at least to circumstances where the new employer ... has failed to clearly announce its intent to establish a new set of conditions prior to inviting former employees to accept employment." Id. at *3. The NLRB reasoned that when a new employer "who has not yet commenced operations announces new terms prior to or simultaneously with his invitation to the previous work force to accept employment under those terms, we do not think it can fairly be said that the new employer plans to retain all of the employees in the unit," because the "possibility that the old employees may not enter into an employment relationship with the new employer is a real one," where they may reject the new terms. Id. (quotation omitted).
Apex Holdings contends that the perfectly clear doctrine applies only where the successor actively misleads the employees. But Spruce Up holds that employees can be misled by tacit inference.
The "key question" under Spruce Up is whether the new employer "provided sufficient and timely notice of its intent to change the [bargaining unit's] terms and conditions of employment, thereby clarifying that it was an ordinary rather than perfectly clear successor." Creative Vision Res., LLC v. NLRB , 882 F.3d 510, 517 (5th Cir. 2018). The successor must "clearly announce its intent to establish a new set of conditions prior to, or simultaneously with, its expression of intent to retain the predecessor's employees." Id. (simplified). "But after the successor expresses its intent to retain the predecessor's employees, an announcement of new terms, even if made before formal offers of employment are extended or the successor commences operations, will not vitiate the bargaining obligation." Id. This rule is based on the reasoning that if the successor "expresses an intent to retain the predecessor's work force without concurrently revealing to a majority of the incumbent employees that different terms will be instituted, [the successor] improperly benefits from the likelihood that those employees, lacking knowledge that terms and conditions will change, will choose to stay in the positions they held with the predecessor, rather than seeking employment elsewhere." Id. (quotation omitted).
On October 22, 2020, Apex LLC sent a letter to the Union indicating that it had entered into an agreement to sell its assets to Apex Holdings and that Apex Holdings was not going to assume the CBA as part of the sale. ECF No. 1-3 at 53. The letter also stated that Apex LLC "believes [Apex Holdings] intends to employ the employees covered under the Labor Agreement (and assumes [Apex Holdings] will negotiate a separate agreement with the Union)." Id. Finally, Apex LLC advised the Union that Apex LLC would reject the CBA through its bankruptcy proceeding. Id.
Apex Holdings argues that this letter adequately informed the employees that Apex Holdings would not abide by the CBA's terms, and therefore it could set initial terms under Spruce Up . The NLRB has previously rejected similar reasoning. In First Student Inc. , the Board noted that perfectly clear successors:
are not required as a legal matter to adopt their predecessor employer's collective-bargaining agreement. Rather, their statutory bargaining obligation is only to maintain the status quo conditions of employment under the predecessor until it bargains to agreement or impasse with the representative union over terms of a new collective-bargaining contract for the successor workforce.
366 NLRB No. 13, at *4 (Feb. 6, 2018). Consequently, "a successor's announcement that it will not be adopting the predecessor's bargaining agreement and that certain terms of employment would be subject to negotiations conveys nothing more than a statement of law—that the status quo may change as a result of negotiations, but not in advance of them." Id.
Apex Holdings also relies on a November 12, 2020 meeting with the engineers at which Wantoch announced that Apex Holdings would not be a union shop. ECF No. 13-4 at 9. He also announced numerous changes to the conditions of employment. Id. at 9-11. But there is evidence that before Apex Holdings announced it intended to implement new terms of employment, it had already hired all of Apex LLC's engineers. ECF No. 13-1 at 5. According to Walker, there was no break in his or his co-workers’ employment, and they were not required to apply for their positions. ECF No. 1-4 at 28. Apex Holdings’ own evidence supports that characterization because "[e]mployees were transferred over from the former company to Apex" in the personnel company's system. ECF No. 13-1 at 6. At the hearing, Apex Holdings stated that the engineers were hired on different dates as they were called back to employment, but it appeared to concede that by the November 12 meeting, it had hired all of Apex LLC's engineers. See also ECF No. 13-4 at 3 (Marsh stating that he and Wantoch "conducted a meeting with the engineers that had just been hired by Apex [Holdings]").
Overstreet thus has presented evidence and an arguable legal theory that by actually hiring and employing the bargaining unit employees prior to announcing a change in terms, Apex Holdings’ announcements were too late to benefit from the rule articulated in Spruce Up . Overstreet thus is likely to succeed in showing that Apex Holdings is a perfectly clear successor. See Bellingham Frozen Foods, Inc. v. NLRB , 626 F.2d 674, 679 (9th Cir. 1980) (holding Spruce Up did not apply and the new employer was a perfectly clear successor where the employer stated its intention to retain most of the employees, employees did not have to reapply, and employees worked under the same conditions for a week after the takeover).
If Apex Holdings is found to be a perfectly clear successor, it could not set its own initial terms and instead had to abide by the CBA until it bargained in good faith to an agreement or impasse with the Union. As discussed above, there is no dispute that Apex Holdings refused to recognize and bargain with the Union. Overstreet also has presented evidence that Apex Holdings did not abide by the CBA's terms. See ECF No. 1-2 at 28 (Apex Holdings admits that it ceased making pension fund contributions); ECF No. 1-4 at 11 (ended holiday pay); id. at 12 (employees laid off); id. (shifts changed); id. at 17 (less-senior engineers recalled before Grosz); id. at 22-23, 32 (Walker laid off without respect to seniority rules and two new employees were hired after he was terminated). Overstreet therefore has shown a likelihood of success in demonstrating that Apex Holdings LLC violated section 8(a)(5).
B. Section 8(a)(3)
Section 8(a)(3) provides that it is an unfair labor practice for an employer "by discrimination in regard to ... tenure of employment ... to encourage or discourage membership in any labor organization." 29 U.S.C. § 158(a)(3). "An employer violates Section 8(a)(3) when the employee's involvement in a protected activity was a substantial or motivating factor in the employer's decision to discipline or terminate the employee." HTH Corp. , 693 F.3d at 1062. The Regional Director bears the initial burden of "showing that the employee was engaged in protected activity, the employer knew of such activity, and the employer harbored anti-union animus." Id. If he does so, then "the burden shifts to the employer to demonstrate that it would have taken the same action regardless of the employee's union activity." Id. "An employer cannot prove this affirmative defense where its asserted reasons for a discharge are found to be pretextual." United Nurses Ass'ns of Cal. v. NLRB , 871 F.3d 767, 779 (9th Cir. 2017) (quotation omitted).
Overstreet alleges that Apex Holdings terminated engineer Charles Walker because he supported the Union and otherwise engaged in protected, pro-union activities. Apex Holdings responds that it has not terminated any employee in retaliation for union activity. Instead, it argues that all layoffs have been consistent with seniority.
Overstreet has shown a likelihood of success on the claim that Apex Holdings fired Walker in retaliation for his union activities. He became the Shop Steward at some point after Apex Holdings fired Grosz, the previous Shop Steward, in December 2020. ECF No. 1-4 at 12, 21. Walker served as "the [Union's] main point of contact at [Apex Holdings] for communicating with the employees" because Apex Holdings did not allow the Union on the property post-sale. Id. at 22. In early November 2021, Walker organized a union meeting off-site. Id. at 31. He doubted many employees would attend because "people were fearful because Grosz had been terminated." Id. Only one other employee attended the meeting. Id. at 24, 31. Shortly thereafter, an employee named Kevin Metcalf "sarcastically" asked Walker about the meeting in front of Marsh. Id. at 31. In early December 2021, Marsh laid off Walker, and the termination paperwork read that Walker's layoff was a "voluntary separation" due to "[c]ompany [s]taff reduction." Id. at 32, 35.
Around the same time, a new employee named Joe Fermel began working in the engineering department and "appeared to do the same work" as Walker. Id. at 32. At the time of his layoff, Walker had "more seniority than some of the employees that were retained," including three apprentices. Id. at 23, 32. When Walker raised the seniority issue with Marsh during his layoff meeting, Marsh responded that "the company doesn't see it that way." Id. at 32. Both Marsh and Rivera state generally that layoff decisions have not been motivated by anti-union animus. ECF Nos. 12-4 at 6; 12-1 at 7. Rivera also states that one engineer, presumably Walker, was laid off in December 2021 as part of a staff reduction initiative. ECF No. 12-1 at 6.
But Apex Holdings presents no evidence to rebut that it retained less-senior engineers and hired a new engineer to perform the same duties as Walker around the time of his layoff. See ECF No. 12-1 at 6. Even if Apex Holdings did not hire Fermel, it laid off four employees in December 2020 and rehired two of them in March 2021. ECF No. 1-4 at 12. Presumably, Walker was more senior to them in December 2020, and Apex presents no evidence that they somehow surpassed Walker in seniority leading up to his layoff and their apparent retention in December 2021. Rivera also states that there is "a shortage of qualified engineers ... in the labor market, which has caused [Apex Holdings] hiring difficulty to replace open positions." ECF No. 13-1 at 5. Failure to recall Walker given the competitive market further implies a retaliatory motive.
Overstreet thus has presented evidence that Apex Holdings laid off Walker without regard to seniority and hired a new employee to fill a similar role, despite the "staff reduction" justification asserted for the layoff. The proximity in time between the union meeting Walker organized, Marsh learning of that meeting, and Walker's discharge supports the possibility of a retaliatory motive. Overstreet thus has presented evidence and an arguable legal theory for this charge.
C. Section 8(a)(4)
Section 8(a)(4) makes it an unfair labor practice for an employer "to discharge or otherwise discriminate against an employee because he has filed charges or given testimony" under the NLRA. Section 8(a)(4) is liberally construed "to fully effectuate the section's remedial purpose." NLRB v. Scrivener , 405 U.S. 117, 124, 92 S.Ct. 798, 31 L.Ed.2d 79 (1972).
Overstreet argues that Apex Holdings terminated Walker, in part, because he gave testimony to the Board in the form of affidavits and in Board hearings, and because he was named as a discriminatee in two prior cases (Cases 28-CA-192349, et al., and Cases 28-CA-216351, et al.). Apex Holdings responds that the protected activities in which Walker engaged took place before Apex LLC's sale to Apex Holdings, so Apex Holdings’ upper management had no knowledge of those disputes when they occurred and did not learn of them later.
Liberally construing Section 8(a)(4), Walker's status as a discriminatee in a previous case, his testimony to the Board in the form of affidavits and in Board meetings, and his participation in investigatory interviews while acting as Shop Steward constitute protected activities under the NLRA. Overstreet has presented evidence that Walker was laid off without regard to seniority shortly after engaging in these activities. Rivera states that neither she nor Wantoch knew about the past disputes, and that the two of them never discussed the disputes when considering layoffs. ECF No. 12-1 at 6. But Marsh knew about Walker's past protected activities given his management of the engineering department since 2016 and his own involvement in past disputes, and he states that he made the decision to lay Walker off. ECF No. 12-4 at 3, 6. Consequently, Overstreet has presented evidence and an arguable legal theory for this alleged violation.
D. Section 8(a)(1)
Section 8(a)(1) of the NLRA makes it an unfair labor practice for an employer to "interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 157 of this title." 29 U.S.C. § 158(a)(1). Section 157 gives employees "the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection ...." Id. § 157.
The same evidence and arguable legal theories underpinning the alleged violations of Sections 8(a)(3)-(5) apply here. Consequently, Overstreet has shown a likelihood of success on the allegation that Apex Holdings interfered with its employees’ rights under Section 157, in violation of Section 158(a)(1).
II. Irreparable Harm
A preliminary injunction may not be entered "based only on a possibility of irreparable harm." Operative Plasterers’ and Cement Masons’ Int'l Ass'n , 611 F.3d at 490-91. Instead, the party seeking relief must show irreparable harm is likely in the absence of preliminary relief. Id. "[P]ermit[ing an] allegedly unfair labor practice to reach fruition and thereby render meaningless the Board's remedial authority is irreparable harm." Avanti Health Sys., LLC , 661 F.3d at 1191 (quotation omitted). And "[f]ailure to bargain in good faith[ ] has long been understood as likely causing an irreparable injury to union representation." HTH Corp. , 650 F.3d at 1362.
By refusing to recognize the Union and negotiate in good faith, Apex Holdings has successfully thwarted any agreement for over a year and a half, thus undermining the Union's effectiveness and denying the employees their right to bargain collectively. This is a recognized irreparable harm. See Avanti Health Sys., LLC , 661 F.3d at 1193-95.
Further, Overstreet has presented evidence of a likelihood of irreparable harm regarding the termination of Brian Grosz, Charles Walker, and Rodney Inigo and the resulting chilling of union participation.
As explained above, Overstreet is likely to succeed on the merits of his claim that Apex Holdings must rescind all the changes to the terms and conditions of employment of the unit that it made since it refused to recognize the Union as the unit's collective-bargaining representative and refused to bargain with it. If the NLRB ultimately finds in favor of Overstreet, which is likely, then the NLRB can order Apex Holdings to pay monetary reimbursement and damages due. Therefore, Overstreet has not presented evidence that the Union will be irreparably harmed if I deny the monetary relief he seeks.
III. Balance of the Hardships
Apex Holdings is already compelled by law to recognize the Union and bargain in good faith so an injunction requiring it to do so would not burden it. See Avanti Health Sys., LLC , 661 F.3d at 1197 (finding order that required employer follow its ordinary good faith bargaining obligations under the law did not require the employer do anything to cause it harm). Apex Holdings was not permitted to make the changes it made so an injunction requiring it to return to the status quo would not burden it. While ordering Apex Holdings to rehire Grosz, Walker, and Inigo may impose some burden, Apex Holdings does not present evidence that it could not afford to rehire them. Moreover, "to the extent [Apex Holdings] has hired new workers, the rights of the employees who were discriminatorily discharged are superior to the rights of those whom the employer hired to take their places." Aguayo for & on Behalf of NLRB v. Tomco Carburetor Co. , 853 F.2d 744, 750 (9th Cir. 1988), overruled on other grounds by Miller for & on Behalf of NLRB v. Cal. Pac. Med. Ctr. , 19 F.3d 449 (9th Cir. 1994).
The Union would be harmed if the unit employees had to work without their elected Union representative until a final Board decision because the Union may not know if Apex Holdings committed additional violations, for example, by making more unilateral changes to the terms and conditions of unit employees’ employment. The Union and the unlawfully laid-off employees would be harmed because they might find employment elsewhere and may therefore be more difficult to rehire. The unit employees would be harmed by having to work under unlawfully changed terms and conditions, and by not having their elected Union actively representing them or bargaining on their behalf. The harm to the Union, unit employees, and the discharged employees outweighs the harm to Apex Holdings.
IV. Public Interest
Because Overstreet has shown a likelihood of success, the public interest favors injunctive relief to support the public policies underlying the NLRA and to fulfill § 10(j)’s purpose, which is to prevent an unfair labor practice from being successful due to the delay in the Board's adjudication of unfair practice charges.
V. Relief
Overstreet has shown a likelihood of success on the merits, a likelihood of irreparable injury, and that the balance of hardships and the public interest favor injunctive relief. I therefore consider what relief is just and proper under the circumstances. 29 U.S.C. § 160(j).
An injunction may be prohibitory or mandatory. A "prohibitory injunction prohibits a party from taking action and preserve[s] the status quo pending a determination of the action on the merits." Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co. , 571 F.3d 873, 878-79 (9th Cir. 2009) (quotation omitted). In contrast, a "mandatory injunction orders a responsible party to take action." Id. (quotation omitted). "A mandatory injunction goes well beyond simply maintaining the status quo [p ]endente lite [and] is particularly disfavored." Id. (quotation omitted). Generally, a court should not grant a mandatory injunction "unless extreme or very serious damage will result." Id. (quotation omitted). A mandatory injunction is "not issued in doubtful cases or where the injury complained of is capable of compensation in damages." Id. (quotation omitted).
Overstreet requests both prohibitory and mandatory relief. I grant Overstreet's requested relief that Apex Holdings be enjoined from:
(1) informing employees that the Union is no longer their collective-bargaining representative;
(2) withdrawing recognition from the Union or refusing to recognize and bargain with the Union as the employees’ collective-bargaining representative;
(3) making changes in the terms and conditions of employment of employees in the unit;
(4) failing or refusing to bargain in good faith with the Union for a CBA covering employees in the unit;
(5) failing or refusing to bargain in good faith with the Union over mandatory subjects of bargaining;
(6) discriminating against its employees in regard to hire or tenure of employment or any term or condition of employment by conduct including, but not limited to, laying off, firing, or refusing to reinstate or recall its employees, because they engaged in protected concerted activities, union activities, or Board activities.
These requests are supported by the evidence and require only that Apex Holdings do what it is already obligated to do.
I also grant a mandatory injunction requiring Apex Holdings to:
(1) offer to re-hire Brian Grosz, Charles Walker, and Rodney Inigo, and
(2) bargain in good faith with the union by meeting and negotiating in good faith.
Apex Holdings is already obligated to bargain in good faith. As for Grosz, Walker, and Inigo, ordering an offer to re-hire these three employees is necessary to remedy the irreparable harm to the Union, particularly considering that a final Board decision may be months or even years away. Even if the employees already have other jobs, requiring Apex Holdings to offer re-hire will signal to other employees that it cannot effectively get away with retaliatory discharges or improper layoffs due to the length of time it takes for the Board to resolve unfair labor practice charges.
I also grant a mandatory injunction requiring Apex Holdings to rescind all of the changes to the terms and conditions of employment of the unit that it made since it refused to recognize the Union as the unit's collective-bargaining representative and refused to bargain with the Union, including by returning the Union's bulletin board, rescinding its directive to employees in the unit that they abide by its employee handbook and stop following the terms of the expired CBA, and rescinding the changes it made to the work schedules of unit employees. However, I deny Overstreet's request that Apex Holdings resume unit employee pension contributions and payments for unit employee lunch time. As I explained above, while Overstreet is likely to succeed on the merits of his claims, he has not shown irreparable harm because these alleged violations can be remedied through money damages.
I also grant a mandatory injunction requiring Apex Holdings to:
(1) post copies of this order at the workplace and allow the NLRB access to the workplace to monitor that this has been done;
(2) hold a mandatory meeting at which portions of the court's order (as set forth below) will be read aloud to bargaining unit employees; and
(3) submit an affidavit saying these things have been done.
The Ninth Circuit has approved the remedy of a mandatory meeting to read a Board order to employees. United Nurses Ass'ns of Cal. , 871 F.3d at 788-89. The Ninth Circuit rejected the argument that a reading was "an extraordinary remedy." Id. Rather, the court characterized it as "an effective but moderate way to let in a warming wind of information and, more important, reassurance." Id. (quotation omitted). In United Nurses , the Ninth Circuit concluded a reading order "was clearly warranted in light of [the employer's] several unfair labor practices, including its retaliatory firing of a prominent Union supporter." Id. Although a reading order is mandatory injunctive relief, it is not particularly burdensome and is meant to remedy the harm caused by the unfair labor practices in undermining employee confidence in the union.
I deny Overstreet's request that Apex Holdings purge discharged employees’ files. That interim relief is unnecessary. The Board will resolve whether the employees were discharged in retaliation for union activities, in the absence of necessary Union representation, or in the course of valid layoffs. Purging the files now is premature, especially if the Board finds the discharges were not improper.
VI. Conclusion
I THEREFORE ORDER that petitioner Cornele Overstreet's petition for temporary injunction (ECF No. 1) is GRANTED in part .
I FURTHER ORDER that, pending the underlying administrative proceedings before the Board, respondent Apex Linen Holdings, LLC is hereby RESTRAINED AND ENJOINED from:
1) Informing employees that the International Union of Operating Engineers Local 501, AFL-CIO (the Union) is no longer their collective-bargaining representative;
2) Withdrawing recognition from the Union or refusing to recognize and bargain with the Union as employees’ collective-bargaining representative;
3) Making changes in the terms and conditions of employment of employees in the following appropriate collective-bargaining unit (the Unit) without notice to or bargaining with the Union as the collective-bargaining representative of the Unit:
All full-time, regular part-time and extra board Engineers and Utility Engineers employed by Respondent at its facility located in Las Vegas, Nevada; excluding, all other employees, office clerical employees, guards and supervisors as defined in the NLRA.
4) Failing or refusing to bargain in good faith with the Union for a collective bargaining agreement covering employees in the Unit;
5) Failing or refusing to bargain in good faith with the Union over mandatory subjects of bargaining; and
6) Discriminating against its employees in regard to hire or tenure of employment or any term or condition of employment by conduct including, but not limited to, laying off, firing, or refusing to reinstate or recall its employees, because they engaged in protected concerted activities, union activities, or Board activities.
I FURTHER ORDER Apex Linen Holdings, LLC to:
A. Within five days of this Order, offer Brian Grosz, Charles Walker, and Rodney Inigo in writing, immediate reinstatement to their former jobs at their prior rate of pay (or if those jobs no longer exist then reinstatement to substantially equivalent positions of employment) without prejudice to their seniority and other rights and privileges previously enjoyed, displacing if necessary any workers hired or transferred to replace them.
B. Within five days of this Order, rescind all the changes to the terms and conditions of employment of the Unit made since it refused to recognize the Union as the Unit's collective-bargaining representative and refused to bargain with the Union, including by returning the Union's bulletin board it removed around November 1, 2020, rescinding its directive to employees in the Unit that they abide by its employee handbook and stop following the terms of the expired CBA, and rescinding the changes it made to the work schedules of employees in the Unit around December 7, 2020. Notwithstanding the foregoing, I do not order Apex Holdings to resume Unit employee pension contributions that it ceased making around November 1, 2020, or to resume payments for Unit employee lunch time that it ceased making around December 7, 2020;
C. Within ten days of the conclusion of the evidentiary portion of the hearing before the ALJ, bargain in good faith with the Union through a bargaining representative cloaked with authority to enter into binding agreements with the Union (including by making a comprehensive written proposal on all terms of a successor CBA), continue to do so until an agreement is reached or a good-faith impasse occurs, and reduce any agreements to a writing that is signed and dated by a responsible official of each party;
At the July 28, 2022 hearing on the petition, counsel for Overstreet indicated that after the three-to-four-day evidentiary portion of the hearing in front of the ALJ, there is a 35-day period for additional briefing. Apex is ordered to bargain in good faith with the Union within ten days of the conclusion of the evidentiary portion of the ALJ hearing, which is before the conclusion of the post-hearing briefing period.
D. Within 10 days of this Order, post copies of this Order, as well as translations of this Order provided by the Regional Director of the Board in English and Spanish, at its facility located at 6375 South Arville Street, Las Vegas, Nevada, in all places where notices to its employees are normally posted; maintain these postings during the pendency of the Board's administrative proceeding free from all obstructions and defacements; grant all employees free and unrestricted access to the posting; and grant to agents of the Board reasonable access to its facilities to monitor compliance with this posting requirement;
E. Within 10 days of this Order, hold a mandatory meeting or meetings during working time at its facility located at 6375 South Arville Street, Las Vegas, Nevada, at which this Order is read aloud by a responsible management official in the presence of an agent of the Board (or at its option by an agent of the Board in that official's presence), translated into Spanish, to all Unit employees employed at its facility located at 6375 South Arville Street, Las Vegas, Nevada, including at multiple meetings as necessary to ensure that the Order is read aloud to all Unit employees; and
F. Within 21 days of this Order, file with the court, and submit a copy to the Regional Director for Region 28 of the Board, a sworn affidavit from a responsible agent of Apex Holdings stating, with specificity, the manner in which it has complied with the terms of this Order.