Ninth Circuit Enjoins new Hospital Owner from Refusing to Bargain

A company purchasing a hospital required the seller to reject a collective bargaining agreement with a nurse’s union as a condition to the purchase. After the purchase, the company refused to recognize and bargain with the union despite having received a letter from the union indicating that the new owner was a successor employer. The National Labor Relations Board’s (NLRB’s) Regional Director petitioned the district court for and was granted injunctive relief under the National Labor Relations Act (NLRA), resulting in an order for the company to cease and desist from refusing and failing to bargain in good faith. The U.S. Court of Appeals for the Ninth Circuit upheld the injunction, noting that the district court did not abuse its discretion. First, there was a likelihood of success on the merits of the underlying interference and failure-to-bargain allegations. The consistency in the staff before and after the sale created a continuity of operation that established that the successor employer had a duty to bargain. At the time that the new owner declared the hospital “fully staffed,” a majority of the nurses on staff were union incumbents. Second, absent injunctive relief, it was likely that the union would suffer irreparable harm because a delay in bargaining following such a transition in ownership threatens industrial peace and discredits the union in the eyes of employees. Third, these harms outweighed the financial and administrative costs the company would accrue if compelled to engage in good faith bargaining. Finally, the strong showing of likelihood of success on the merits and irreparable harm demonstrated that preliminary relief was in the public interest. Successor employers should carefully consider the number of employees necessary to conduct business operations in normal or substantially normal fashion upon acquiring a new business. This number, which should not be based on uncertain staff expansion contingent upon business growth, is critical to determining whether a union enjoys incumbent status following a change in ownership.

Small v. Avanti Health Systems LLC, No. 11-55563 (9th Cir. Oct. 31, 2011)