Circuit upholds NLRB ruling against health-care employer

The Court of Appeals has upheld a ruling from the National Labor Relations Board that found that a health services company violated the labor laws in hiring employees without seniority and other union protections after they worked for a management company affiliated with the employer.

The case is HealthBridge Management v. National Labor Relations Board, decided on August 23. In 2006, HealthBridge subcontracted the supervision of its housekeeping workers to Healthcare Services Group. The employees did the same work for HSG that they did for HealthBridge and remained on HealthBridge's payroll. When the subcontracting relationship ended a few years later, the 48 employees who "worked" for HSG had to apply to work for HealthBridge again but they would lose certain union benefits, like job security and health insurance. Most of them were rehired by HealthBridge, but the rehiring interviews were really shams, i.e., "non-existent, perfunctory or cursory."

The Court of Appeals reviews NLRB rulings if the decision is "reasonably based" in the National Labor Relations Act. "It is settled law in this circuit that an employer may not 'avoid the obligations of a collective bargaining agreement through a sham transaction or technical change in operations' that amounts to a 'disguised continuance.'" In addition, "other circuits have recognized that temporary shutdowns in business operations do not terminate unionized employees’ rights under a CBA." That is what happened here, the Court of Appeals (Jacobs, Droney and Underhill [D.J.]) says,

"[T]he record,” as the Board pointed out, is “even more indicative of unlawful conduct than [the record] presented in many [comparable] cases” of NLRA violations. In such comparable cases, an employer terminates its employees, dissolves, reconstitutes itself as an alter ego entity, and rehires its old employees without the contractual entitlements of their prior positions. Here, the entity bound by the CBAs -- HealthBridge -- did much the same thing without the hassle of a metamorphosis. HealthBridge effected its scheme by temporarily loaning its employees to a third-party subcontractor; but in no material way does that differentiate this case from our line of alter ego cases or the case law of other circuits holding that CBAs survive brief, manufactured breaks in direct employment. As in those cases, the employees here were off-loaded and then rehired (without their contractual rights) to perform the same work, at the same site, for the same ultimate beneficiary. Insofar as there are distinctions, they do not assist HealthBridge: the third-party transactions through which HealthBridge (as it were) laundered its employees had the chief practical effect of divesting those employees of their contractual rights. Indeed, the record supports the conclusion that the dominant (if not sole) purpose of HealthBridge’s use of the subcontractor was to disguise what amounts to a quasi alter-ego scheme.

The employer committed some other NLRA violations. It did not hire two of the employees through the sham process, and it even threatened to call the police on workers who would not vacate the premises or accede to the unlawful elimination of their bargained-for security. This threat had the potential to coerce the employees into giving up their collective bargaining rights.