How to Address Union Issues Arising from the Consolidation of Two or More Facilities

Author: Jed L. Marcus, Bressler, Amery & Ross, P.C.

Employers must constantly adapt to a rapidly changing economy. Often this means that, for many different reasons, they are forced to reorganize their business, which may involve the consolidation of two or more facilities to achieve certain economies, increase profits or cut costs to reduce losses. Most consolidations affect employees and their unions in many different ways. For example, many employees lose their jobs as part of a reduction in force (RIF) often accompanying a consolidation. Also, unions who represent employees will demand that they be permitted to bargain with the employer over the decision to, and the effects of, a plant relocation. Employers may be required to provide advanced notice to employees of layoffs attendant to the consolidation.

There are, in fact, many different labor and employment laws that influence an employer's actions when deciding to shut down one facility and consolidate the work into another facility. For example, an employer with a collective bargaining agreement (CBA) will have certain obligations under the National Labor Relations Act (NLRA) to bargain with the union over the impact of the consolidation. If an employer that employs at least 100 employees intends to close its facility, thereby laying off all employees, or, if the consolidation results in an employment loss of either: (1) 33 percent or more of the site's "active employees," but (2) at least 50 employees, it will be required to give advanced notice to its employees, or if unionized to the employees' union under The Worker Adjustment and Retraining Notification Act (WARN). Laying off employees will also expose the employer to potential discrimination lawsuits under such laws as the Age Discrimination in Employment Act (ADEA) and Title VII of the Civil Rights Act of 1964 (Title VII), which prohibits discrimination based on race, color, sex, religion and national origin, among other things.

Accordingly, an employer must be fully prepared when implementing a consolidation to ensure that it is done in such a way as to avoid unnecessary claims by unions and employees. These risks may be avoided with advance planning and appropriate process.

Step 1: Define and Document Need for Consolidation

Before beginning an actual consolidation of facilities, define and document the need to do so from a financial, business, and/or operational perspective. Once the need is established, the organization can articulate the objectives, evaluate the options, and develop a comprehensive strategic process for reaching the desired outcome. This should all take place before the consolidation and possible RIF. The following are some things to consider:

Develop a justification. The first thing the employer should do is document that there are valid business reasons for the consolidation. This documentation is useful to rebut any claim that the move was a pretext for terminating employees or avoiding unions or a CBA.

Produce proper documentation. Develop a file with documentation showing or describing: the workforce before the consolidation or reduction (the jobs that will be affected); the change in business conditions that makes the consolidation or loss of jobs necessary; what the workforce will look like after the consolidation of loss of jobs (including number of affected employees or jobs); the selection factors for determining who may be terminated; and timing of notification.

Articulate the reasons for the consolidation. Be prepared to articulate the specific reasons for the RIF before you implement it and consolidate the facilities. Give detailed explanation for the reasons and provide economic data to support the consolidation, elimination of positions or RIF.

Explain changes in the workforce. Some jobs will be transferred to the new facility. Some jobs will be eliminated. Summarize what the jobs were before the elimination, including the number of incumbents and a brief summary of what the jobs accomplished.

Document specific details. Include the dates that employees and their unions will be notified, and the dates that the transfer of work and potential layoffs will become effective.

Decide which employees will be offered a transfer to a new facility and who will be subject to the RIF. This is not a simple problem, nor is it a trivial concern. Identify the business goals which must be accomplished following the consolidation. Prior to any review of individual employee skills, identify the positions and skills which must be retained to accomplish the business goals. The remaining positions which are not essential (or less essential) to the accomplishment of the business goals may be subject to elimination or reduction. Also, if the employees already working at the other facility are sufficient to accomplish the business goals, an employer may find it necessary to layoff all employees at the closing facility.

Step 2: Review Union Obligations

The employer may have contractual and statutory obligations to employees under applicable CBAs, the NLRA and, it if contributes to a multi-employer pension plan, the Multi-employer Pension Plan Amendment Act of 1980 (MPPAA). It is, therefore, imperative that the following steps are taken:

Review relevant CBAs. HR should carefully review applicable CBAs to determine what rights and obligations the employer has. For example, the CBA may limit the employer's unilateral right to close the facility or transfer work absent bargaining with the union. The CBA will almost certainly contain seniority provisions that will require the employer to layoff employees in a certain order, most typically in reverse order of hire, and provide for severance pay. The CBA may also include provisions that require the employer to negotiate with the Union over the ability of employees to transfer to the new facility as part of the consolidation in the event of a plant closure or RIF.

Determine whether the consolidation and transfer of work will result in withdrawal liability under the MPPAA. When an employer withdraws from a multi-employer defined benefit pension plan which has unfunded vested benefits, the employer is generally liable to the pension plan for a share of the unfunded vested benefits in an amount determined under MPPAA. Liability may be triggered by a complete or partial withdrawal without regard to the reason for the withdrawal. Thus, employers may incur liability for reasons beyond their control, e.g., decertification of the union or economic circumstances requiring the closing of a facility.

Step 3: Notify and Discuss the Consolidation With the Union

Under the NLRA, it is an unfair labor practice for an employer to refuse to bargain collectively with the union representatives of its employees. An employer and the representative of the employees are required to meet at reasonable times and confer in good faith with respect to wages, hours, and terms and conditions of employment. In the context of a consolidation or transfer of work, this means that the employer may have an obligation to notify the union of its decision and be prepared to bargain with the union over the effects of the decision. Notice must be given sufficiently in advance of any final decision or implementation of the plan so that the union can inquire in detail about the proposed plan and possibly formulate alternatives.

The employer must properly communicate its decision to the union and:

Do give the union an opportunity to bargain before the decision becomes final and the effects of the plan are implemented. This is important even if there is a clause in the CBA that discusses possible rights and obligations of the parties relative to a consolidation, plant closing or RIF.

Don't wait to give notice until after the employer commits enough money or resources to the plan that it could not feasibly abandon it.

Do be prepared to bargain over the effects of its decision, which might include such items as severance benefits, transfer rights, recall rights, and similar matters.

Don't unilaterally implement severance benefits or transfer rights that conflict with the terms of the CBA.

Step 4: Notify Employees

There should be a well considered communications strategy. The first step is to inform the union about the consolidation, plant closing and/or RIF. Some employers send letters first and others announce the decision in person. If possible, the announcement should be made in person.

Once that it done, plan on speaking to employee about the consolidation of facilities and work, the transfer and layoff of employees. Union representatives should attend the meeting so that they can answer any questions their members may have. It is also important that high ranking members of management be present. This is important for several reasons. First, they will be in a position to answer employees' questions. Second, their presence will show that management understands that the employer's decision will have a serious impact on their lives.

During these meetings, stay with the following guidelines:

  • Be direct.
  • Don't be vague.
  • Stay on message. During meetings with affected employees, the employer or its representative should avoid getting drawn into a discussion about the merits of the business decision that led to the consolidation or about how the criteria used was applied.
  • Comply with notification laws. There are federal and state laws that may require advance notification to employees at their unions. On the federal level, make sure to comply, if necessary, with WARN, which requires employers with at least 100 employees to provide 60 days notice prior to a plant closing or a mass layoff. Notices satisfying specific requirements must be provided to affected employees, the authorized union representative (where applicable), and certain state and local government officials. Where the employees are represented by the union, notice need only be sent to the union, thus eliminating the need to send "WARN" notices to all employees. However, this does not mean that the employer cannot or should not communicate the decision in writing if that is the best way to do so. It is just that WARN is satisfied with one writing to the union.

Step 5: Determine Whether the Union Will Follow the Employees

A consolidation often involves merging employees from one facility into another employee complement in another facility. When one or both of the employee complements are represented by a union, this can raise important questions as to whether the union can continue representing those employees or even whether the union will end up representing the newly formed complement of employees.

For example, where the transferring employees are union but the employees at the consolidated facility are not, the union may end up following the transferred employees if the distance between the old facility and the new facility is minimal and the type of work that the employees will do is the same as before, the union may still be entitled to represent the transferred employees where the group retains its separate identity. If so, the employer must continue to recognize the union and honor the CBA. Therefore, in order to increase chances of avoiding unionization at the surviving facility, follow these guidelines:

Functionally integrate transferred employees with the larger group of employees. The transferred employees should share the same terms and conditions of employment, and same job skills and functions as the nonunion employees. This is important if you do not wish to have the union follow the employees. As indicated above, if the transferred employees are kept apart from the new employees, do different work than the new employees, and do not share supervisors, the union will argue that the employees from the old facility remain a discrete unit that are still represented by the Union.

Don't segregate the transferred employees under separate supervisors. Have them share the same supervisors. For the reasons discussed above, the best way to keep the old union out of the new facility is to fully integrate the transferred employees into the new employee group.

Train all supervisors and the new, consolidated facility about the possibility of unionization at the facility, including the signs of union organizing and what they can and cannot do. Management should know that even if the union does not retain representative status, nothing prevents the transferred employees and their union from trying to organize the full complement of employees at the new, consolidated facility.

However, the situation may arise where the transferred employees are represented by one union and the employees at the new, combined facility are represented by a different union. In that case, the same issues will arise, but in a different context. If, for example, the transferred employees are segregated to themselves, have different terms and conditions of employment, and have their own supervisors, the employer could end up with two unions - one for the transferred employees and the other for the employees currently working in the consolidated facility.

On the other hand, if the transferred employees are integrated into with the larger group of employees, sharing the same terms and conditions of employment, supervisors, job skills and functions as current employees, either the union with the larger complement of employees will survive, or, if needed, the NLRB will hold an election to determine which union, if any, will prevail and the collective bargaining representative of all employees.