United States: Developments Under The Displaced Building Service Worker Protection Act

The New York City Displaced Building Service Worker Protection Act (DBSWA), NYC Administrative Code §22-505 (DBSWA or the Act), which was signed into law in November 2002, significantly changed the landscape in connection with labor and employment issues upon sales or transfers of real property in New York City, or changes in building service contractors.

While before the Act's enactment, purchasers or replacement managing agents or contractors could not refuse to hire persons because of their union status or to avoid union obligations, purchasers and replacement contractors had no statutory obligation¹to offer to hire a predecessor's employees, and thus there was no presumptive continuance of representation of the employees by the predecessor's union.

The DBSWA requires that any buyer, transferee, or successor employer of most New York City commercial and residential properties offer the incumbent employees jobs after the change in ownership or change in employer for as many jobs as the new employer will have at the property,² and to keep those employees in employ for at least 90 days unless it has cause for discharge during that "probationary" period. However, it is important to note that the law does not require a buyer or new employer to maintain the existing terms and conditions of employment (e.g., wage rates, benefits, seniority), nor to assume an existing collective bargaining agreement.

The law itself excludes: (1) commercial office buildings of less than 100,000 square feet, (2) residential buildings with fewer than 50 units, and (3) any building in which New York City or any New York City governmental agency occupies 50 percent or more of the rentable square footage. The statute defines "building service employees," that is, those protected by the law, to include janitorial and security employees but not engineering employees, and excludes any person being paid more than $25 per hour, persons working fewer than eight hours per week at the building and persons who have been employed in the building for less than three months.³

This law, although applicable in both union and nonunion properties, was strongly supported during the enactment process by Local 32BJ, Service Employees International Union (Local 32BJ), which represents a large number of employees at such properties in New York City. Although not limited to union buildings, or to those whose employees who are represented by Local 32BJ, the law generally was considered to have the effect of keeping Local 32BJ in place when a building changed ownership or control, or there was a change in the contractor providing building services, because under federal labor law's so-called "successorship" doctrine, if a majority of the workforce of a successor employer is composed of employees of the predecessor, there is a legal presumption that those employees still wish to be represented by the incumbent union.

New York City is not the only jurisdiction to have such a law in the building service industry. The first such law was passed in Washington, D.C. in 1994. There are now similar laws in a number of counties and cities, such as: Westchester County, N.Y.; Montgomery County, Md.; Philadelphia, Pa.; Providence, R.I.; St. Louis, Mo.; and Los Angeles and San Francisco, Calif., among others. The laws vary in applicability in regard to those protected in terms of length of employment, size, and nature of the building and particular wage levels and scheduled hours.

Two of these statutes were challenged on the basis of federal preemption. Specifically, employers urged that laws requiring that employers maintain a predecessor's workforce were preempted by federal laws providing that "successorship" obligations should be left to the free play of market forces. As stated above, under federal labor law, if a majority of a successor employer's workforce is composed of persons who worked for the predecessor, there is a legal presumption that the union which represented the predecessor's employees remains the collective bargaining representative of the successor's employees. Both the District of Columbia Circuit Court of Appeals, reviewing the D.C. law, and the First Circuit Court of Appeals, reviewing the Providence, R.I. statute,⁴ rejected the preemption arguments and upheld the statutes. See Washington Service Contractors Coalition v. District of Columbia, 54 F.3d 811 (D.C. Cir. 1995)and Rhode Island Hospitality Association v. City of Providence, 667 F.3d 17 (1st Cir. 2011).

The New York City DBSWPA was challenged on preemption grounds in 2004 in Alcantara v. Allied Properties, 334 F. Supp.2d 336 (E.D.N.Y. 2004). InAlcantara, a number of employees sued in New York state court⁵to enforce their right to be offered continued employment under the DBSWPA when the residential buildings in which they were employed were sold and the purchaser failed to offer them employment. The building owner removed the case to federal court, but the federal court, while expressing some concerns about preemption, remanded the case to state court. The state court later rejected the preemption arguments, and held that the purchasers had violated the law. However, given that the 90-day probationary period had passed, the court did not order reinstatement of the employees.

More recently, employers have challenged not the DBSWPA itself, but the impact that the statute has in determining a union's continued representation status with a successor employer. As indicated above, the statute requires a successor employer (whether a building purchaser or replacement manager or contractor) to offer employment to the incumbent employees. Given that federal labor law deems as a "successor" with a duty to bargain with the predecessor's union any employer a majority of whose workforce is composed of the predecessor employees, the New York City law would seem to guarantee such a finding of successorship.⁶However, in several recent cases, employers have argued (with mixed results, as discussed below) that no successorship finding can be made until the 91st day after the closing or change in employer, inasmuch as the employer did not "voluntarily" or "consciously" choose to retain a majority until the 90-day probationary period ended.

In Paulsen v. GVS Properties, 904 F. Supp. 2d 282 (E.D.N.Y. 2012), a U.S. district judge in the Eastern District of New York denied a request for injunctive relief sought by the National Labor Relations Board (NLRB) seeking to compel a buyer to recognize the incumbent union (not Local 32BJ), holding that, because hiring pursuant to the DBSWA is not "voluntary" but mandatory, and that the federal labor law "successorship" doctrine is based on "voluntary" hiring of a majority by the successor, the fact that a buyer hired the seller's contractor's employees did not require the buyer to recognize and bargain with the union until the buyer made hiring decisions after the 90-day probationary period. Because the buyer's workforce of eight employees after 90 days included only four of the seller's contractor's employees, there was no majority and the judge denied the NLRB's request for a preliminary injunction.

Nonetheless, the NLRB proceeded with a hearing on the merits. Contrary to the District Court, the NLRB found that GVS (the buyer)wasa successor employer.GVS Properties, 362 NLRB No. 194 (Aug. 27, 2015). The Board ruled that by complying with the New York City DBSWPA, the buyer made a "conscious decision" to be a "perfectly clear" successor obligated to bargain with the incumbent union.⁷ GVS has appealed the NLRB's decision to the District of Columbia Circuit.

Interestingly though, counsel for the general counsel of the NLRB conceded on two occasions prior to the Board's decision in GVS that majority status cannot be determined until the 91st day. InM&M Parkside Towers (Local 670, Retail Wholesale and Dept. Store Union), 2007 WL 313429. (Jan. 30, 2007), an NLRB administrative law judge held that the general counsel of the NLRB had conceded that under the DBSWPA, successorship cannot be determined until the employees are offered permanent employment after the 90-day probationary period or until a reasonable time after the 90 days. InNovel Service Group, (Local 32BJ SEIU), 02-CA-113834 and 02-CA-11838602 (Jan. 15, 2015), an ALJ also ruled that majority status (and thus the successorship obligation to bargain) can only be determined after the 90-day period has expired. It is of course highly possible that the general counsel will retreat from this position in light of the Board's decision inGVS.

In November 2015, the New York City Council's Committee on Civil Service and Labor began consideration of a bill to amend the DBSWPA so as to extend its coverage. Intro. No. 1004-2015. The most significant change would be having the law apply to commercial tenants with 10,000 square feet or more who employ building service employees. Further it would enlarge the remedies available in the event of a violation (the present law provides only for reinstatement and backpay) so as to provide for "double damages" (double back pay). Finally the amendment would eliminate the exemption for City and City agency occupied buildings, and also eliminate the exclusion of workers making more than $25 per hour (given that most union cleaners will approach or exceed the $25 per hour rate in the next several years). The bill is currently pending consideration.

Footnotes:

1 Purchasers of real property could,by contract, agree to assume a seller's labor agreement, and/or offer to hire the incumbent building service employees. However, there was no statutory obligation for purchasers to do so.

2 To the extent that the new employer will staff the building with fewer employees, offers must be made in order of length of service in each classification.

3 The City Council has proposed a bill to eliminate the exclusion for New York City/City agency occupied buildings and the $25 per hour cap. See infra.

4 The Providence law at issue in the case applied specifically to hospitality industry properties.

5 The employer thereafter also filed an unfair labor practice charge alleging that the suit itself violated §8(b) of the Act. The charge was dismissed upon advice of the NLRB's General Counsel, Advice Memo, Case No. 29-CB-12639, Oct. 14, 2004.

6 After the law was passed, and since that time, employers have tried to avoid the applicability of the law by offering minimal wages and benefits in the hopes that employees would reject positions even if offered, or by offering severance packages to induce employees to leave employment prior to the closing or change in employer. However, at least in unionized buildings, this strategy has had minimal impact primarily because the incumbent union must be given 15 days' notice of the closing or change in contractor, and has utilized that time to persuade employees not to be induced to leave the job under these circumstances.

7 In dicta the Board suggested that a buyer/new employer could avoid a finding of "perfectly clear" successorship, even under the New York City law, by announcing its intent to establish new and different terms and conditions of employment before or simultaneously with its offer to employ the existing workers in compliance with the DBSWPA.

Originally published February 29, 2016 - New York Law Journal

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