Third Circuit Finds Private Healthcare Facility and Its Operator to be Single Employer for Liability Under the NLRA
In a recent decision, Grane Health Care v. NLRB, the Third Circuit ruled that a private healthcare facility and its operator – in which it has a 99.5% ownership stake and a near complete overlap of company officers – are a single employer subject to the National Labor Relations Act (the “Act” or “NLRA”). Accordingly, the two entities were found to be jointly and severally liable for remedying unfair labor practices committed by either of them.
Grane Health Care (“Grane”) purchased the Laurel Crest Nursing and Rehabilitation Center from Cambria County, Pennsylvania. Then Grane transferred the property to a newly-established entity it formed to operate the property, Cambria Care Center. Prior to the sale, Laurel Crest was subject to Pennsylvania’s Public Employees Relations Act (“PERA”) and had two unions – Local Union No. 1035 (“Local 1035”), which represented the nonprofessional employees, and the Service Employees International Union (“SEIU”), which represented the nursing employees. After the sale, employees had to reapply for their positions with the new operating company, Cambria Care. Though a majority of the previous employees were hired by Cambria Care, five represented employees were not. Further, both Grane and Cambria Care refused to bargain with the two incumbent unions. The unions then filed unfair labor practice charges against Grane and Cambria Care.
An Administrative Law Judge held that Grane and Cambria Care were a single employer (the “Company”) subject to the NLRA, that the Company violated Local 1035’s bargaining rights and that the Company violated the Act by not hiring the five employees based on their union affiliations. The National Labor Relations Board (the “Board”) affirmed the ALJ’s findings, adopted its decision, and ordered the Company to recognize and bargain with Local 1035 and to hire the five employees to the positions for which they applied. The Company then appealed to the Third Circuit.
The Third Circuit’s Decision
In affirming the Board’s determination that Grane and Cambria are a single employer subject to liability under the Act, the three-judge panel noted that the Board appropriately made detailed factual findings related to each of the four factors normally implemented to determine single employer status: (1) functional integration of operations; (2) centralized control of labor relations; (3) common management; and (4) common ownership. The Court also noted that the Board’s findings “describe two deeply integrated companies with centralized control emanating from Grane.”
The Court also affirmed the Board’s decision that the Company had a duty to bargain with Local 1035 and explained that the successorship doctrine requires a new employer to bargain with an incumbent union that represented the predecessor’s employees when there is substantial continuity between the predecessor and successor enterprises. The Court rejected the Company’s argument that the successorship doctrine cannot be applied as a matter of law where the predecessor employer is a state entity not subject to the Act. The Court held that the successorship doctrine applied because the doctrine’s purpose is to encourage stability at a time of transition, and there is nothing in the Act precluding the Board from finding that union certification under the Pennsylvania law is sufficient to establish a presumption of majority support under federal law consistent with the Act. Accordingly, the Company had a duty to bargain with Local 1035. Finally, the Court affirmed the Board’s decision that the Company had engaged in unfair labor practices by refusing to hire the five employees based on antiunion animus. The panel found the Board’s credibility determinations as to the testimony of two Grane representatives was not patently unreasonable and supported the view that the justifications for not hiring the five employees were pretextual, and therefore, the Court declined to disturb the Board’s decision.
The Third Circuit’s opinion in Crane Health Care should remind employers (1) when acquiring businesses subject to collective bargaining agreements, they have a duty to bargain in good faith with the pertinent unions, and (2) there are circumstances in which they will be liable under the NLRA for the actions of their affiliated companies which are otherwise distinct corporate entities.
For questions regarding the National Labor Relations Act, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.