SERVICE EMP. INTERN., ETC. v. GEN. SER. ADMIN., Civ. A. No. 77-920.

• Decision Date: 31 October 1977
• Docket Number: Civ. A. No. 77-920.
• Citation: 443 F. Supp. 575
• Parties: SERVICE EMPLOYEES' INTERNATIONAL UNION, LOCAL UNION NO. 36 v. GENERAL SERVICES ADMINISTRATION and Ken-Rich Services, Inc. t/a Task Force Services Corporation.
• Court: U.S. District Court — Eastern District of Pennsylvania

443 F. Supp. 575

SERVICE EMPLOYEES' INTERNATIONAL UNION, LOCAL UNION NO. 36 v. GENERAL SERVICES ADMINISTRATION and Ken-Rich Services, Inc. t/a Task Force Services Corporation.

Civ. A. No. 77-920.

United States District Court, E. D. Pennsylvania.

October 31, 1977.

Ira Silverstein, Philadelphia, Pa., for plaintiff.

J. Freedley Hunsicker, Jr., Philadelphia, Pa., for defendant.

OPINION

DITTER, District Judge.

The issue in this case is whether or not the Service Contract Act of 1965, as amended, 41 U.S.C. § 351 et seq., requires that an employer which has received a government contract to do maintenance work must retain its predecessor's employees and submit disputes to arbitration under the predecessor's collective bargaining agreement. For the reasons which follow, I conclude the Act imposes no such obligations.

I. Factual and Procedural Background

This controversy stems from an award by the General Services Administration (GSA) of a one year contract commencing February 1, 1977, to Ken-Rich Services, Inc. (Ken-Rich) for the cleaning of a Philadelphia Social Security building (SSA Building).¹ At a meeting on January 10, 1977, with GSA and Ken-Rich officials, a representative of Prudential Building Maintenance Corporation (Prudential), the contractor Ken-Rich was replacing, stated his belief that Ken-Rich had an obligation to hire the then current Prudential employees. Ken-Rich's stance on this issue was to the contrary and GSA spokesmen confirmed that defendant could hire its own employees so long as the new employees were to be paid at levels established by the Secretary of Labor and set out in the contract.² Prudential was informed that its employees would be considered prospective employees and interviewed if a list of their names was provided. Kocher affidavit at paragraph 10.

On January 27, 1977, Ken-Rich hired a full complement of new employees, 40 in all. By letter dated January 28, 1977, there was forwarded to Ken-Rich a petition signed by 24 Prudential employees who desired to continue work at the SSA Building. In response, Ken-Rich stated that hiring had been completed, but eventually 11 former Prudential employees were interviewed and one was engaged as a replacement on an as-needed basis. Kocher affidavit at paragraphs 11-14.

Local 36, the union local which represented Prudential's employees, instituted this action on March 14, 1977, seeking an injunction to prevent Ken-Rich's not hiring the former Prudential employees, to keep it from paying wages below those provided in the collective bargaining agreement with Prudential, and to recover lost wages and benefits. Plaintiff has also requested leave to amend its complaint to: 1) compel arbitration under § 301 of the Labor Management Relations Act, 29 U.S.C. § 185,³ and 2) add the Secretary of Labor as an additional defendant in order to compel him to enforce the provisions of the Service Contract Act.⁴

Plaintiff's basic theory is that the Service Contract Act obligated Ken-Rich to hire Prudential's former employees. Since Ken-Rich failed to do so, plaintiff asserts it has a labor dispute with Ken-Rich, a dispute which is subject to arbitration under the terms of plaintiff's collective bargaining agreement with Prudential. Ken-Rich refused to arbitrate; therefore, plaintiff seeks to enforce the collective bargaining agreement through § 301 of the Labor Management Relations Act.⁵ Ken-Rich denies any responsibility under Prudential's contract and asserts plaintiff has no standing to bring this suit. Both plaintiff and Ken-Rich⁶ have moved for summary judgment. Because I find no factually disputed issues which are material,⁷ I shall resolve the instant motions solely on questions of law.

II. Existing case law does not require Ken-Rich to comply with its predecessor's collective bargaining agreement

At the outset, it is clear that under the case law interpreting successor⁸ relationships prior to the 1972 amendment of the Service Contract Act, Ken-Rich would not be bound by Local 36's collective bargaining agreement with Prudential. Boeing v. International Association of Machinists & Aerospace Workers, AFL-CIO, 504 F.2d 307 (5th Cir. 1974), the only case plaintiff has cited which deals with the particular issue involved here, states that a successor employer's obligation depends on an analysis of the reference points established in three Supreme Court cases: John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964); NLRB v. Burns Int. Security Service, Inc., 406 U.S. 272, 92 S.Ct. 1571, 32 L.Ed.2d 61 (1972); and Howard Johnson Co. v. Detroit Local Joint Exec. Bd., 417 U.S. 249, 94 S.Ct. 2236, 41 L.Ed.2d 46 (1974).

In Wiley, the Court held that where a predecessor company has disappeared as a result of a merger, the successor employer will be bound to arbitrate under an existing collective bargaining agreement in those cases where there is a "substantial continuity of identity in the business enterprise before and after a change." 376 U.S. at 551, 84 S.Ct. at 915. The Court in Burns held that a successor employer, which had hired a majority of its predecessor's work force and preserved substantially intact its predecessor's operational structures and practices, would have to recognize a union previously certified as the employees' bargaining unit.⁹ However, the Court went on to hold the successor employer was not bound by the contract between the union and the predecessor employer. The source of the duty to bargain was not the agreement but the fact that the successor voluntarily took over a bargaining unit that was largely intact and recently certified. In Howard Johnson, of the successor's 45 employees, only 9 had worked for the predecessor. The Court rejected the union's argument that the successor was in any way obligated under the predecessor's bargaining agreement.

Here, even if it would be determined that Prudential's structure and practices remained substantially intact, the presence of one former Prudential employee as an "as-needed" replacement in Ken-Rich's employ hardly can be said to keep the bargaining unit unchanged or maintain a continuity of identity in the business enterprise. It is evident, therefore, that so far as the teachings set forth in Wiley, Burns, or Howard Johnson are concerned, Ken-Rich has no obligation to hire or arbitrate under the terms of Local 36's contract with Prudential.

III. The 1972 Amendments to the Service Contract Act do not require Ken-Rich to comply with its predecessor's collective bargaining agreement

While recognizing that it would normally be foreclosed by this Supreme Court trilogy, plaintiff argues that the 1972 amendments to the Service Contract Act, specifically, 41 U.S.C. § 353(c), alter the application of successorship law in the instant matter to require Ken-Rich to arbitrate or hire Local 36 members. The union points to dicta present in Boeing and the legislative history and language of the amendments themselves to support its position. I can not agree.

Section 353(c) imposes upon a successor employer the duty to pay the wages and fringe benefits agreed to in a predecessor's collective bargaining agreement.¹⁰ There is no language in the Act which explicitly creates the affirmative duties which plaintiff seeks to impose on Ken-Rich, i. e., retain Local 36's members and arbitrate. The union asserts that such duties should be read into the section since the legislative history shows that Congress intended not only to protect wage and benefit levels but also to guarantee service employees' continuity of employment. Although plaintiff cites some broad statements in the history of the legislation which could, arguably, support its position.¹¹ I find that the legislative history leads to the opposite conclusion: the Service Contract Act was designed to protect only wage and benefit levels.

The Senate Report on the 1972 amendments states:

The Service Contract Act was enacted to provide wage and safety protection for employees working under Government service contracts. It makes the Department of Labor responsible for assuring that service employees are paid at least the prevailing wages and fringe benefits for the same work in their locality as others are paid, so that his sic is simply a wage standards protection statute.

The purpose of this bill is to bring about more equitable and more efficient administration of the Service Contract Act of 1965. 1972 U.S.Code Cong. & Admin.News p. 3534.

In explaining the provisions of § 353(c) the Senate Report continued:

353(c) deals with contracts, under which substantially the same services are furnished, which succeed contracts subject to the Service Contract Act. Contractors or subcontractors under such contracts must pay service employees at least the wages and fringe benefits . . . to which the service employees would have been entitled had they been employed under the predecessor contract . . . (emphasis added). Id. at 3536.

The phrase emphasized above clearly shows Congress anticipated that successor contractors would not always retain the employees of their predecessors. The purpose of § 353(c) was to guarantee a wage base for employees which all contractors would have to honor, not to guarantee continuation of the employment of service workers.¹²

This conclusion is reinforced by the statements of Representative Frank Thompson, Jr., chairman of the House subcommittee which held hearings on the bill, outlining the inequities which were to be remedied by the committee's proposed amendments.¹³ His explanations show Congress enacted § 353(c) to insure that the Secretary of Labor would take into account existing collective bargaining agreements in determining prevailing wages, thus putting an end to competitive bidding at the expense of employee salaries. While this amendment modified existing successorship law, it did so only to the extent that a successor employer is required to adopt the wage and benefit...