D.C. Circuit Rejects NLRB’s Post-Merger Bargaining Rule

Quick Hits

• The D.C. Circuit ruled that the NLRB’s “successor bar” rule violates the NLRA when it forces employers to recognize unions despite evidence of lack of majority support.
• The ruling reinforces employees’ rights to choose their representatives or to be union-free and challenges the NLRB’s authority to create additional barriers to change or remove union representation.
• This decision signals increased judicial scrutiny of NLRB decision-making, following the Supreme Court’s shift away from Chevron deference.

The 2–1 decision in Hospital Menonita de Guayama, Inc. v. NLRB, No. 22-1163, held that the “successor bar” is “inconsistent” with the NLRA because it effectively requires “successor employers to recognize and bargain with an incumbent union, regardless of whether that union enjoys the support of a majority of employees.”

The decision comes after the Supreme Court of the United States vacated a ruling by a separate D.C. Circuit panel upholding the successor bar and remanded the case for further consideration in light of the Supreme Court’s 2024 decision in Loper Bright Enterprises v. Raimondo. That Supreme Court decision overturned the longstanding Chevron deference to agency interpretations of statutory ambiguities, holding instead that federal courts must exercise independent judgment in deciding whether an agency acted within its statutory authority.

The Successor Bar Rule

The NLRB’s successor bar rule, last upheld by the Board in a 2011 decision, effectively compels a successor employer—one that acquires a business and hires a majority of its workforce from the predecessor’s employees—to recognize and bargain with the incumbent union for up to one year. The rule creates an irrebuttable presumption of majority support, barring any challenge to the union’s status by the employer, the employees, or even a rival union. Under the rule, no amount of evidence that employees have actually abandoned the union can overcome the bar.

Successor Bar Violates NLRA

Writing for the D.C. Circuit majority, Judge Neomi Rao found that the D.C. Circuit’s prior ruling had deferred to the NLRB’s conclusion that the successor bar was consistent with the NLRA. Following Loper Bright, the court “must independently assess the [employer’s] legal claim that the successor bar contravenes the Act.”

Under that analysis, the court held that the successor bar is “inconsistent” with the NLRA because it suspends two core statutory protections: employees’ Section 7 right to choose their own representative and Section 9’s requirement that a union hold majority support to serve as the exclusive bargaining agent.

The successor bar effectively “nullifies” those protections because it requires a successor employer to bargain with a union “even if the union indisputably lacks majority support.” The court noted that in the case at issue, the NLRB had refused to consider the hospital employer’s evidence that most of its employees had rejected the union, with one bargaining unit unanimously denouncing it as its representative.

Central to the court’s reasoning was the statutory structure itself. The NLRA “generally requires majority representation” and allows employees, employers, and other unions to test a union’s majority support through an election petition, except when a valid election has been held in the preceding twelve months. Since the U.S. Congress provided only a single time bar to challenging a union’s majority support (the twelve-month limitation), the NLRB lacks authority to create additional irrebuttable bars.

The court also rejected the NLRB’s policy justifications. The NLRB had argued the rule promoted industrial peace and stability, but the court found these general purposes could not override the NLRA’s specific protections. Instead, the court found that the successor bar favors incumbent unions over employees and employers. The court stated, “[g]eneral concerns for industrial stability cannot save the lawfulness of the successor bar, which is really a rule of union stability that comes at the expense of employee freedom of association and self-organization.”

Post-Loper Bright Scrutiny of NLRB Rules

The decision confirms that courts will independently assess whether Board-created policy rules exceed statutory authority, rather than deferring to the NLRB’s policy rationale, considering Loper Bright. Other NLRB doctrines built on similar “reasonable policymaking” foundations may face fresh challenges.

Notably, the “successor bar” rule at issue in this case was adopted through the NLRB’s adjudicative process (i.e., a 2011 NLRB decision), not through formal notice-and-comment rulemaking under the Administrative Procedure Act (APA). Thus, the decision could influence how courts assess NLRB decisions and the amount of deference they give to the Board’s rationale as to its decisions.

However, Senior Circuit Judge A. Raymond Randolph dissented, arguing the D.C. Circuit’s prior decision did not rest on Chevron deference since it did not defer to NLRB’s interpretation of a statutory ambiguity. Instead, the NLRB’s decision relied on the NLRA-specific principle that the NLRB possesses primary responsibility for developing national labor policy—a principle he contended survives Loper Bright.

Key Takeaways

The D.C. Circuit’s ruling invalidating the successor bar rule significantly shifts the dynamic for initial negotiations for a collective bargaining agreement (CBA) following an asset acquisition or service-contract takeover. Following these changeovers,  incumbent unions, at least those in the D.C. Circuit, will no longer be protected with an irrebuttable presumption of majority support for a year following an acquisition, and the employees or the new employer may question whether the incumbent union truly has majority support. More broadly, the ruling indicates how courts may scrutinize NLRB rules adopted through the Board’s adjudicatory authority following Loper Bright. Employers can expect additional challenges arguing that the NLRB lacks legal authority to impose certain Board-created policy rules.

Ogletree Deakins’ Traditional Labor Relations Practice Group will continue to monitor developments and will provide updates on the Traditional Labor Relations blog as additional information becomes available.

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