S & F Market Street Healthcare LLC v. N.L.R.B.

• Decision Date: 30 June 2009
• Docket Number: No. 07-1502.,No. 07-1439.,07-1439.,07-1502.
• Citation: 570 F.3d 354
• Parties: S & F MARKET STREET HEALTHCARE LLC, d/b/a Windsor Convalescent Center of Long Beach, Petitioner v. NATIONAL LABOR RELATIONS BOARD, Respondent.
• Court: U.S. Court of Appeals — District of Columbia Circuit

570 F.3d 354 S & F MARKET STREET HEALTHCARE LLC, d/b/a Windsor Convalescent Center of Long Beach, Petitioner
v.
NATIONAL LABOR RELATIONS BOARD, Respondent. No. 07-1439. No. 07-1502. United States Court of Appeals, District of Columbia Circuit. Argued November 17, 2008. Decided June 30, 2009.

[570 F.3d 355]

John H. Douglas argued the cause and filed the briefs for petitioner.

Amy H. Ginn, Attorney, National Labor Relations Board, argued the cause for respondent. With her on the brief were Ronald E. Meisburg, General Counsel, John H. Ferguson, Associate General Counsel, Linda Dreeben, Deputy Associate General Counsel, and Jill A. Griffin, Supervisory Attorney. Meredith L. Jason and Jason Walta, Attorneys, entered appearances.

Before: GINSBURG and HENDERSON, Circuit Judges, and RANDOLPH, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge GINSBURG.

GINSBURG, Circuit Judge:

When S & F Market Street Healthcare LLC acquired a nursing home previously operated by a different company, it decided to meet its immediate staffing needs in part by offering temporary employment to employees of the prior operator. S & F informed the employees it would consider hiring those who met S & F's "operational needs" and it would hire them on an at-will basis, subject to a probationary period, to various drug and background checks, and to their signing an arbitration agreement. When it began operations, S & F implemented these and other new terms and conditions of employment.

The National Labor Relations Board later held that, because S & F failed to notify the employees that the terms and conditions of their employment would change, S & F was a "perfectly clear" successor within the meaning of NLRB v. Burns International Security Services, 406 U.S. 272, 92 S.Ct. 1571, 32 L.Ed.2d 61 (1972). As such, S & F was bound by the collective bargaining agreement (CBA) between its predecessor and the Service Employees International Union and had violated § 8(a)(1) and (5) of the National Labor Relations Act, 29 U.S.C. § 158(a)(1) and (5), by unilaterally changing the terms and conditions of employment prescribed in that CBA. Consequently, the Board ordered S & F to restore the preexisting terms of employment and to make the employees whole with back pay. S & F petitions for review, and the Board cross-appeals for enforcement, of that order.

We hold the Board erred in concluding S & F was a "perfectly clear" successor and was not entitled to implement new terms and conditions of employment. We therefore grant in part the petition for review and deny in part enforcement of the

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Board's order. We enforce the Board's order as it relates to matters S & F does not contest.

I. Background

S & F Market Street Healthcare LLC (d/b/a Windsor Convalescent Center of North Long Beach) is affiliated with a chain of nursing and assisted living facilities managed by SnF Management and operated under the Windsor name. In 2004 S & F purchased Candlewood Care Center from Covenant Care Orange Inc. Covenant Care had collective bargaining agreements with the SEIU, Local 434B, covering two different bargaining units at Candlewood.

Prior to assuming control of the Candlewood facility, S & F concluded it would need to increase the level of care, replace the staff, and renovate the building. Closer to taking over on July 1, 2004 S & F decided it could not replace the entire staff at once because the turnover would be too disruptive to the residents. Instead, S & F decided to hire some of Candlewood's employees for up to 90 days while it continued to recruit new employees.

In June 2004 S & F caused applications for employment to be distributed to the existing staff. A cover sheet informed the employees that S & F "intends to implement significant operational changes" and "[c]urrent Candlewood employees interested in positions with [S & F] must submit the attached application for employment." Further, it advised, only "[a]pplicants who meet the [Company's] operational needs will be interviewed," and any offer of employment "will be contingent on your passing a pre-employment physical, drug test and acceptable reference and background checks." The job application itself required the applicant to affirm his or her understanding that successfully passing the tests and checks was a condition of employment, that any employment would be at will, and that S & F "can change benefits, policies and conditions at any time."

At the end of June, S & F interviewed all the Candlewood employees who had submitted applications. In each interview, the applicant was informed that any possible employment would be temporary and would last no more than 90 days.

S & F's director of human resources sent to each employee who was selected a letter dated June 30 with the subject line "OFFER OF TEMPORARY EMPLOYMENT." The letter explained, "As a temporary employee of Windsor, you are not eligible for company benefits.... Other terms and conditions of your employment will be set forth in Windsor's personnel policies and its employee handbook." The letter further stated the employment was temporary because S & F had not yet been able to assess the employee's "skills and abilities" or "the building's ongoing operational and staffing needs." It also noted that employment was at will and that "[n]o later than the expiration of the 90-day period, which ends on September 29th, your employment with Windsor will end, unless you are selected for regular employment." In order to accept the offer the addressee was required to sign and date the letter. Those hired also had to sign an "Agreement to be Bound by Alternative Dispute Resolution Policy," which provided that arbitration would be the exclusive means of resolving all disputes relating to termination of employment, unlawful discrimination, and sexual harassment.

S & F began operations on July 1 with approximately 120 employees. Most were former Candlewood employees newly employed on a temporary basis; 10 to 12 had not been employed by Candlewood. Seventeen Candlewood employees were not

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employed either because they had not applied or because they were not chosen.

At a staff meeting on July 9, S & F distributed to the employees handbooks describing Windsor's policies and its terms and conditions of employment. The temporary employees received a handbook dated July 1, 2004 that did not include information about employer-provided benefits. The "regular" employees (i.e., those who had not worked for Candlewood) received a handbook dated January 1, 2004, reflecting the most recent revision of Windsor's system-wide policies; this version did include information about employer-provided benefits.

S & F continued over the next three months to replace former Candlewood employees with new employees. By October 1 a majority of the company's employees had been hired from outside the Candlewood staff; some 30-40 of the Candlewood employees hired initially as temporary employees had been hired for regular employment and given the January 1 version of the handbook.

Also following the takeover, S & F invested about $500,000 to renovate the facility. Among other changes, S & F repainted the employee lounge and the hallway where Candlewood had hung a bulletin board for the use of the Union, at which time S & F removed the bulletin board.

Meanwhile, on July 1 the Union requested bargaining with S & F. The Company responded on July 7 that it had not yet hired a representative complement of employees, so the Union's demand for bargaining was premature. The Union filed unfair labor practice charges, and the Board General Counsel issued a complaint alleging that when S & F began operating the facility on July 1, 2004, it became "a successor to Candlewood" but refused to bargain with the Union, in violation of § 8(a)(1) and (5) of the Act. The complaint further alleged that since July 1, 2004 S & F had made unilateral changes at the former Candlewood facility—removing union-related materials from a bulletin board, prohibiting the posting of union materials, and implementing new employment policies—again in violation of § 8(a)(1) and (5), and had violated § 8(a)(3) in several ways unrelated to the issue of successorship.

Following a hearing, an Administrative Law Judge found S & F was a successor to Candlewood. According to the ALJ, the "temporary" employees were actually akin to probationary employees because their work was to be evaluated during the period of temporary employment and they did not have a definite anticipated termination date. Therefore the temporary employees could be counted in determining whether S & F had a substantial and representative complement of employees, and whether a majority of that complement were from Candlewood, when S & F began operations on July 1. Having answered both questions in the affirmative, the ALJ concluded S & F was obligated to recognize and to bargain with the Union as of July 1.

At the same time, the ALJ found S & F, although a successor to Candlewood, was not a "perfectly clear" successor because S & F's pre-employment communications to the Candlewood employees put them on notice that the terms and conditions of their employment would change. Accordingly, although S & F was obliged to recognize and to bargain with the Union, it was entitled first to establish the initial terms and conditions of employment.

The Board affirmed the ALJ's finding that S & F was a successor to Candlewood but went on, with Member Schaumber dissenting, to hold (1) as a matter of law, S & F was a "perfectly clear" successor and, (2) as a matter of fact, had "failed to clearly announce its intent to establish a

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new set of conditions prior to inviting former [Candlewood] employees to accept employment." Windsor Convalescent Ctr. of N. Long Beach, 351 N.L.R.B. 975, 980 (2007). The Board concluded, therefore, that S & F did not have the right unilaterally to set the initial...