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Union strike threat following sale of business warrants preliminary injunction for employer

By Ronald Miller, J.D.

Following the sale of its business to a non-union purchaser, an employer obtained a preliminary injunction against a union’s strike threat, and the parties were ordered by a federal district court in New York to arbitrate proposed modifications to a collective bargaining agreement. After first finding that the dispute between the parties was subject to the mandatory grievance and arbitration provisions of the CBA, the court concluded that the preliminary injunction was warranted because the balance of equities fell on the side of the employer. If the union were permitted to strike, the company stood to lose not only customers, business reputation, and goodwill, but also the sale it had worked for three years to accomplish, and it risked a potential break-up of the company (Will Poultry, Inc v Teamsters Local 264, December 23, 2013, Arcara, R).

Sale of business. The employer was the largest locally owned meat distributor in Western New York and employed approximately 60 employees who were represented by a union. The employer and union were parties to a CBA effective through March 2015. However, at age 86, the company owner sought to sell his business, but he wanted the company to remain in the local area. After approximately a three-year search, he found a buyer who intended to keep the company in the area and retain some, if not all, of the current employees. On September 13, 2013, the employer entered into an asset purchase agreement with the potential buyer, which required the employer to terminate current employees prior to closing and gave the purchaser discretion whether to offer employment. Also, the agreement did not require the purchaser to recognize the union.

Union demands. On September 25, 2013, the employer sent WARN Act notices to its employees advising them that their employment would be terminated effective December 28, 2013. In response, the union filed a grievance stating that the layoffs violated the CBA. The union also demanded to engage in effects bargaining regarding the sale and layoffs. In the initial bargaining session, the union demanded that the employer include a successor provision in the existing CBA that would require the employer to assume the CBA, recognize the union, and retain all bargaining unit employees. The union also allegedly informed the employer at that time that it would strike the company if it did not add the requested language to the CBA.

Strike threat. In a series of correspondence following the meeting, the employer requested that the union withdraw its strike threat and instead comply with the grievance and arbitration procedure in the CBA. Instead, the employer received a leaflet indicating that the union intended to strike against the employer on November 18, 2013. It filed a lawsuit for breach of the CBA due to the union’s refusal to abide by the grievance and arbitration procedure. It also moved for a temporary restraining order and injunction prohibiting the union from striking and/or engaging in secondary activity.

Strike injunction. In a prior ruling, the court found that it had subject matter jurisdiction to enter an injunction in the dispute and that the employer had demonstrated a likelihood of success on the merits and a showing of irreparable harm. Now before the court was the question of whether the employer was entitled to a preliminary injunction.

In Boys Market Inc. v. Retail Clerks Union, Local 770, the Supreme Court set forth the specific circumstances in which a district court could enjoin a labor strike. Those circumstances include the following: (1) the collective bargaining agreement contains a mandatory grievance procedure; (2) the agreement contains a no-strike clause; (3) the underlying dispute or disputes involved are subject to the mandatory grievance procedure; and (4) the traditional requirements of equity — irreparable harm and balance of hardships — are satisfied. The court found that these circumstances were satisfied here.

Implied no-strike clause. While there was no express no-strike clause in the CBA between the employer and union, the contractual commitment to submit grievances to final and binding arbitration gave rise to an implied obligation not to strike over such disputes, observed the court. Here, the CBA provided that all grievances would be resolved through the grievance and arbitration procedure. It also specifically provided that “the decision of the Arbitrator shall be final and binding on the Union, the Company, and the associates in the bargaining unit.” Thus, in accordance to the Supreme Court’s findings in Gateway Coal Co v United Mine Workers of America and Teamsters Local v Lucas Flour Co, the CBA the contractual provision constituted an implied no-strike clause. Consequently, the court found that the first and second requirements of Boys Market were satisfied.

Nature of the dispute. The parties disagreed as to the nature of the underlying dispute. However, the court noted that two events arguably resulted in the threatened strike: (1) the WARN notices issued by the employer informing the employees that they would be laid off; and (2) the union’s demand that the employer modify the CBA to include a successor clause. The court found that both of these disputes were subject to the mandatory grievance and arbitration provision of the CBA.

First, because the union filed a grievance over the layoffs described in the WARN notices and referenced the specific clause of the CBA that it alleged to have been violated, it was clear that this dispute was arbitrable and subject to the mandatory grievance and arbitration procedure. Similarly, the court found that the dispute over modifying the CBA to include a successor clause was also arbitrable. A contractual provision in the CBA set forth the procedures for terminating or negotiating changes to the agreement. This provision plainly covered the union’s request to add the successor clause. Thus, the parties’ dispute over the addition of the successor clause should have been submitted to an arbitrator rather than becoming the subject of a threatened work stoppage. Because the dispute between the parties over modification of the CBA was covered by specific contractual provisions, the third requirement of Boys Market was met.

Traditionally requirements of equity. Finally, the court found that the traditional requirements of equity were satisfied here, so that the remaining conditions necessary for granting a preliminary injunction were present as well. The company owner submitted an affidavit discussing the significant time he spent building the company’s reputation and goodwill, and the purchase agreement specifically listed “goodwill” and “trade names” as assets the buyer was purchasing. In addition, after receiving flyers regarding the threatened strike, a number of customers expressed their concern that a strike would interfere with the delivery of orders. Thus, even the threat of strike may have already damaged the employer’s customer goodwill and business reputation. The loss of business, business reputation, and customer goodwill due to work stoppages constituted irreparable harm, and courts in the circuit have granted preliminary injunctions in similar situations.

Moreover, the employer was at significant risk of losing its potential buyer if the strike caused a loss of business reputation and goodwill. It had taken the employer three years to find a buyer that intended to keep the business as a local concern. If this sale fell through, it was unknown whether the owner could find a new buyer willing to keep the business intact. Thus, the loss of the sale might not be remedied by monetary damages. Further, because the parties might continue to engage in effects bargaining regarding the sale of the company, the public interest would not be disserved by a permanent injunction. As a consequence, the employer’s request for a preliminary injunction was granted.