Vigilant Blog

News, trends and analysis in employment law, HR, safety & workers' comp

Nov 17, 2010

Union successorship clause must be honored by seller


Question: Our union wants a successorship clause written into our union contract so that if we ever sell the business, the purchaser must assume our collective bargaining agreement. Should we be concerned about this? After all, wouldnt the union contract then be the buyers problem and not ours?

Answer: These types of successorship clauses are a common union demand and if you agree to one, you should be prepared to take it seriously in the event you ever decide to sell your business. A recent court case shows that the union and the courts will take the clause seriously and force you to comply with it. The employer in that case had agreed to a clause that provided that any sale or transfer of the company would be contingent on the buyer assuming the sellers collective bargaining agreement. The companys parent began a restructuring that eliminated the company and merged its operations and employees into the parent company. While completing the restructuring, the company made no effort to secure agreement from its parent to honor the successorship clause. The union sued and the court ordered the company to comply with the successorship clause, reasoning that because it had negotiated and agreed to the clause, it had to abide by it (Equitable Resources, Inc. v. United Steel, 6th Cir, Sept. 2010). Need help responding to union demands? Contact your Vigilant staff representative.

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