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Golden State Bottling Co. v. NLRB

Supreme Court of the United States
38 L. Ed. 2d 388, 94 S. Ct. 414 (1973)
ELI5:

Rule of Law:

A bona fide purchaser of a business who acquires and continues the business in a substantially unchanged form with knowledge of the predecessor's unresolved unfair labor practice can be ordered by the National Labor Relations Board (NLRB) to remedy that practice, including reinstating the employee with backpay.


Facts:

  • Golden State Bottling Co. employed Kenneth L. Baker as a driver-salesman.
  • On August 16, 1963, Golden State discharged Baker because of his activities related to union organizing.
  • All American Beverages, Inc. negotiated to purchase Golden State's soft drink bottling and distribution business.
  • A condition of the sale was that Eugene Schilling, the Golden State manager who had fired Baker and followed the subsequent litigation, would continue as general manager under All American.
  • All American purchased the business and continued its operations without substantial changes in business method, employee complement, or supervisory personnel.
  • At the time of the purchase, All American had knowledge of the pending unfair labor practice litigation involving Baker's discharge.

Procedural Posture:

  • The National Labor Relations Board (NLRB), in an initial proceeding, found that Golden State had committed an unfair labor practice by discharging Kenneth Baker and ordered his reinstatement with backpay.
  • The U.S. Court of Appeals for the Ninth Circuit (intermediate appellate court) enforced the Board's order against Golden State.
  • The NLRB then initiated a supplemental backpay proceeding, naming both Golden State and its purchaser, All American, as parties.
  • In the supplemental proceeding, the NLRB found All American to be a 'successor' employer and issued an order requiring All American to reinstate Baker and making both companies jointly and severally liable for his backpay.
  • Golden State and All American (petitioners) appealed the supplemental order to the U.S. Court of Appeals for the Ninth Circuit, which enforced the NLRB's order.
  • The U.S. Supreme Court (highest court) granted certiorari to review the decision of the Court of Appeals.

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Issue:

Does the National Labor Relations Board have the authority under the National Labor Relations Act to order a bona fide purchaser of a business, who acquired the business with knowledge of the predecessor's unfair labor practice, to reinstate a wrongfully discharged employee with backpay?


Opinions:

Majority - Mr. Justice Brennan

Yes. The National Labor Relations Board's remedial powers under § 10(c) of the Act are broad enough to impose reinstatement and backpay liability on a bona fide successor who acquires a business with knowledge of a predecessor's unfair labor practice. The court reasoned that § 10(c) authorizes the Board to take affirmative action that will 'effectuate the policies of this Act,' a power not limited to the actual perpetrator of the unlawful act. Citing precedent like Regal Knitwear Co. v. NLRB, the Court affirmed that Board orders can run to successors and assigns. The Court also held that Federal Rule of Civil Procedure 65(d) is not a bar, as a purchaser with knowledge of an unremedied wrong can be considered 'in privity' with its predecessor to effectuate public policy. The decision strikes a balance between protecting the victimized employee, avoiding labor strife, and the interests of the successor, who can account for potential liability in the purchase price or through an indemnity clause in the sales contract.



Analysis:

This decision solidifies the successorship doctrine in labor law, establishing that liability for a predecessor's unfair labor practices can pass to a new owner. It creates a clear two-part test based on continuity of the business and the successor's knowledge, placing a due diligence burden on companies acquiring assets. The ruling ensures that employees have a meaningful remedy even when a business changes hands and prevents violators from escaping liability simply by selling the business. Consequently, purchasers must carefully investigate potential labor law liabilities and negotiate contractual protections, such as indemnification clauses, to mitigate this risk.

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