ALI-ABA Course of Study Airline and Railroad Labor and Employment Law October 30 - November 1, 2008 Washington, D.C.

Transcription

1 741 ALI-ABA Course of Study Airline and Railroad Labor and Employment Law October 30 - November 1, 2008 Washington, D.C. Labor Issues in Airline and Railroad Mergers and Acquisitions By John J. Gallagher Margaret H. Spurlin Paul, Hastings, Janofsky & Walker, LLP Washington, D.C.

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3 743 Labor Aspects of Airline and Railroad Mergers, Acquisitions, and Partial Sales By John J. Gallagher Margaret H. Spurlin TABLE OF CONTENTS Page I. CRITICAL DISTINCTION BETWEEN CONTRACT ISSUES AND REPRESENTATION ISSUES A. NMB Has Exclusive Jurisdiction Over Representation Issues B. Contract Issues Are Beyond NMB Jurisdiction C. Contract Issues Which Are Intertwined With Representation Issues Must Await Resolution of the Representation Issues II. PRE-TRANSACTION BARGAINING AND CONTRACT OBLIGATIONS A. Duty To Bargain About Total Sales and Mergers B. Duty to Bargain About Partial Sales C. Duty To Bargain About Effects On Employees D. Duty To Bargain About Post-Transaction Workforce Integration E. Union Participation in Transactions III. REPRESENTATION ISSUES A. NMB Merger Procedures: NMB Representation Manual B. Status of Minority Unions Post-Merger C. Comparability D. Single Carrier Criteria And Issues IV. CONTRACT ISSUES SEVERAL POSSIBLE SCENARIOS A. If Union is Extinguished In Merger And Entire Merged Craft or Class Becomes Unrepresented Contract Is No Longer Enforceable B. If Both Groups Are Represented Pre-Merger and Post Merger, Two Contracts Survive C. Effect Of Successorship Clauses i -

4 744 TABLE OF CONTENTS continued Page D. Railroad Labor Protections And Implementing Agreements May Resolve Contract Survival Issues V. LABOR PROTECTIVE PROVISIONS A. Labor Protective Conditions In Railroad Transactions B. Interplay of Railroad Regulation and RLA Bargaining and Status Quo Obligations C. Labor Protective Provisions In Airline Transactions VI. SENIORITY INTEGRATION AND UNION S DUTY OF FAIR REPRESENTATION A Legislation Requires Fair and Equitable Seniority Integration B. Seniority Integration Frequently Results in DFR Litigation C. Union May Have Merger Policy/Procedure D. Integrated List May Be Achieved Through Negotiation or Arbitration E. Preexisting Contract Rights May Govern Seniority Integration F. Various Methods Of Seniority Integration ii-

5 745 LABOR ISSUES IN AIRLINE AND RAILROAD MERGERS AND ACQUISITIONS John J. Gallagher Margaret H. Spurlin Paul, Hastings, Janofsky & Walker, LLP I. CRITICAL DISTINCTION BETWEEN CONTRACT ISSUES AND REPRESENTATION ISSUES A. NMB Has Exclusive Jurisdiction Over Representation Issues Courts have repeatedly held that National Mediation Board ( NMB ) jurisdiction over union representation issues under the Railway Labor Act ( RLA ) is mandatory and exclusive. NMB Merger Procedures address representation issues arising in mergers; discussed below in Section III. Because of the exclusive role of the NMB on representation issues, successorship law developed under the National Labor Relations Act ( NLRA ) is not applicable under RLA. RLEA v. Wheeling & Lake Erie Ry., 741 F. Supp. 595, 599 (E.D.Va.), aff d without discussion of issue, 914 F.2d 53 (4th Cir. 1990) (NLRA successorship doctrine does not apply to representation issues under RLA because transaction creates representation dispute for NMB); BMWE v. Fox Valley & Western, Ltd., 1995 U.S. Dist. LEXIS 14130, at *37 n.3 (N.D. Ill. 1995) (same). NMB will not necessarily adopt NLRB approaches. Air Florida, 7 N.M.B. 162 (1979). B. Contract Issues Are Beyond NMB Jurisdiction Contract issues, including the survival of the contract, are not within the authority of the NMB. Generally, contract issues are resolved by the federal courts and/or arbitration. AFA v. USAir, 807 F. Supp. 827 (D.D.C. 1992), aff d, 24 F.3d 1432 (D.C. Cir. 1994) (USAir union that supplants union at Shuttle must observe status quo established by prior Shuttle collective bargaining agreement; suggesting that contract question could be decided by arbitration if USAir scope clause were more explicit); see also AFA v. United Airlines, Inc., 71 F.3d 915 (D.C. Cir. 1995) (compelling arbitration whether United Airlines violated scope clause when its parent, UAL Corp., acquired

6 746 Air Wisconsin and Air Wisconsin flight attendants, also represented by AFA, were not on United seniority list). C. Contract Issues Which Are Intertwined With Representation Issues Must Await Resolution of the Representation Issues Federal courts have repeatedly held that disputes which are nominally about contract survival in a merger or other transactional context necessarily involve representation issues and are beyond the jurisdiction of the courts until the representation issues are resolved. ALEA v. Republic Airlines, Inc., 798 F.2d 967, 968, (7th Cir. 1986); Teamsters v. Texas Int l Airlines, Inc., 717 F.2d 157 (5th Cir. 1983) (merger); ALPA v. Texas Int l Airlines, 656 F.2d 16 (2d Cir. 1981); IAM v. Northeast Airlines, Inc., 536 F.2d 975 (1st Cir.), cert. denied, 429 U.S. 961 (1976); UTU v. Gateway Western Ry., 78 F.3d 1208 (7th Cir. 1996) (representation dispute exists where carrier s subsidiary began to operate a newly-acquired line without a union, under cost-saving crew consist rules); IUFA v. Pan American World Airways, Inc., 836 F.2d 130 (2d Cir. 1988) (application of Pan Am contract to newly acquired Pan Am Express is representation dispute); FEIA v. Pan American World Airways, Inc., 896 F.2d 672 (2d Cir. 1990) (same). Compare Teamsters Local 2707 v. Western Airlines, Inc., 813 F.2d 1359 (9th Cir. 1987), where the Ninth Circuit issued an injunction against Delta- Western merger pending arbitration under scope clause; the injunction was stayed, however, by Justice O Connor acting as Circuit Justice. Her opinion cited the authority listed above. Western Airlines, Inc. v. Teamsters, 480 U.S (1987) (O Connor, J.), 484 U.S. 806 (1987) (cert. granted; vacated; remanded to Ninth Circuit for consideration of mootness); 854 F.2d 1178 (9th Cir. 1988) (dismissed as moot). II. PRE-TRANSACTION BARGAINING AND CONTRACT OBLIGATIONS A. Duty To Bargain About Total Sales and Mergers 1. Pittsburgh & Lake Erie R.R. v. RLEA, 491 U.S. 490 (1989) ( P&LE ), established that a carrier selling its entire business is exercising managerial prerogative and has no duty to bargain under the RLA over the decision, i.e. decision bargaining is not required. While there may be a duty to bargain about the effects of the sale transaction upon employees ( effects bargaining ) such bargaining cannot prevent consummation of the transaction. 2. P&LE clarified the intersection of two longstanding Supreme Court decisions under the RLA. Telegraphers v. Chicago & North Western Ry., 362 U.S. 330 (1960) (union s request to bargain about job protection in the event of abandonment and consolidation of little used stations created a major dispute and was not a management prerogative); Detroit & Toledo - 2 -

7 747 Shore Line v. UTU, 396 U.S. 142 (1969) (carrier s establishment of work assignments away from principal yard created major dispute; carrier must maintain status quo pending bargaining even though nothing in agreement prohibited outlying assignments). See also First National Maintenance Corp. v. NLRB, 452 U.S. 666, 687 n.23 (1981). 3. Duty to bargain likely continues where transaction involves related companies trying to avoid contractual or bargaining obligations. BLE v. Springield Terminal Ry., 210 F.3d 18 (1st Cir. 2000) (affirming status quo injunction against nonunion wood products corporation that had common ownership and directors with carrier. Court pierced corporate veil and held that carrier was using controlled corporation to circumvent RLA prohibition on unilateral changes to agreement) Burlington N. R.R. v. UTU, 862 F.2d 1266 (7th Cir. 1988) (violation of status quo for BN to enter into trackage rights agreement with its subsidiary, Winona Bridge Ry., which would operate over BN s line but which would not be subject to BN agreements concerning number of required crew). Butte, Anaconda & P. Ry. v. BLFE, 268 F.2d 54 (9th Cir. 1959), cert. denied, 361 U.S. 864 (1960). B. Duty to Bargain About Partial Sales Although the P&LE case dealt with a carrier s quitting the railroad business altogether, lower courts have found that P&LE limits Telegraphers and Shore Line and have extended P&LE s reasoning to partial line sales. CSX Transp., Inc. v. UTU, 950 F.2d 872 (2d Cir. 1991). RLEA v. CSX Transp., 938 F.2d 224 (D.C. Cir. 1991) (RLA status quo obligation does not apply to a railroad s sale of some of its lines), cert. denied, 112 S. Ct (1992). RLEA v. Hotel & Restaurant Employees, 915 F.2d 116 (4th Cir. 1990). Chicago & NW T Co. v. RLEA, 908 F.2d 144 (7th Cir. 1990), cert. denied, 111 S. Ct (1991) (reasoning that management has fundamental prerogatives not subject to the RLA s status quo requirements). RLEA v. Chicago & NW T. Co., 890 F.2d 1024 (8th Cir. 1989), cert. denied, 497 U.S (1990) - 3 -

8 748 C. Duty To Bargain About Effects On Employees 1. Even if a decision itself is not bargainable, the effects on employees may be bargainable. See P&LE, supra. Such effects could include provisions for the carryover of seniority and/or benefits, severance options, and similar matters. Effects bargaining arguably may not be used to delay transactions, however, because: 2. Effects of such transactions already may be dealt with in existing agreements, and disputes about the terms of existing agreements are minor disputes for arbitration. General Committee of Adjustment v. CSX Rail Corp., 893 F.2d 584 (3d Cir. 1990). Chicago & Northwestern v. RLEA, 855 F.2d 1277 (7th Cir.), cert. denied, 488 U.S. 966 (1988). 3. Even if effects bargaining is required, the status quo may permit the carrier to consummate the sale and abolish positions with effects bargaining to follow. RLEA v. CSX Transp., 938 F.2d 224 (D.C. Cir. 1991), cert. denied, 112 S. Ct (1992). RLEA v. Chicago & NW T. Co., 890 F.2d 1024 (8th Cir. 1989), cert. denied, 497 U.S (1990). See also CSX Transp., Inc. v. UTU, 765 F. Supp. 79 (W.D.N.Y.), rev d, 950 F.2d 872 (2d Cir. 1991) (district court upholds arbitrator s decision that the carrier did not have the unilateral right under the contract to abolish positions in a line sale without first negotiating with the unions as to affected employees and remands to arbitrator for remedy; circuit court reverses because line sale was management prerogative). D. Duty To Bargain About Post-Transaction Workforce Integration 1. Where a transaction includes the transfer of employees, the terms under which such employees will be merged with a preexisting workforce clearly are bargainable between the acquiring carrier and its incumbent unions. American Airlines, Inc. v. APA, 160 LRRM (BNA) 2459 (N.D. Tex. 1999). It is unlawful for the new employer to decide which employees to hire based on their union affiliation. Adler v. I&M Rail Link, 13 F.Supp.2d 912 (N.D. Iowa 1998)

9 Fence Agreements. In the airline industry, parties historically have negotiated a transition agreement initially to fence the two merging groups pending arrangements to integrate more fully over time. 3. Treating New Arrivals By Merger As New Hires. Absent agreement on alternate arrangements, incumbent unions may contend that transferees arriving by merger must be treated as new hires under preexisting agreements. Union s merger policies, and the union s duty of fair representation, may have an impact, although these doctrines may not apply until after the transaction is effectuated. Empire/Piedmont Merger, D.O.T. Order (1986) (approving merger despite Empire pilots claim that ALPA and Piedmont resolved their seniority before ALPA represented Empire pilots). Gvozdenovic v. United Air Lines, Inc., 933 F.2d 1100 (2d Cir. 1991) (former Pan Am flight attendants who transferred when United purchased Pan Am s Pacific division are bound by arbitration award resolving their seniority, notwithstanding claim that they were not party to agreement between AFA and United providing for arbitration), cert. denied, 112 S. Ct. 305 (1991). TWU v. Eastern Air Lines, Inc., 695 F.2d 668 (2d Cir. 1982) (union s claim that flight attendants hired by Eastern to fly newly-acquired Braniff South American routes must come from Eastern seniority list is major dispute). E. Union Participation in Transactions 1. During collective bargaining for concessions during times of economic distress, unions have frequently sought a seat at the table for any future transaction which might impact their members. Union support and participation was critical to transaction which took Conrail private. 2. Unions have become active as financial players in airline acquisitions and similar transactions. Several pilot scope clauses require that the airline give the union an opportunity to make a competing offer before the company can be sold. After prior unsuccessful attempts, United employees finally gained control of the company in 1994; that control was wiped out in subsequent bankruptcy proceedings ( )

10 750 In 1993, Northwest employees gained a substantial equity interest in the company, and seats on the Board of Directors, in exchange for labor cost concessions that averted bankruptcy. TWA unions actively supported proposed takeover by Carl Icahn because of their hostility to a rival bidder. Unions entered a concessionary agreement with Icahn prior to his gaining control of the company, and he agreed to pay their investment banking fees. These pre-acquisition dealings did not violate the RLA. Barthelemy v. ALPA, 897 F.2d 999 (9th Cir. 1990). In contrast, when the IAM negotiated poison pill provisions with United management to prevent an earlier takeover attempt by ALPA, the Seventh Circuit held that certain of these provisions violated both the RLA and state law. ALPA v. UAL Corp., 874 F.2d 439 (7th Cir. 1989), after remand, 897 F.2d 1394 (7th Cir. 1990). III. REPRESENTATION ISSUES A. NMB Merger Procedures: NMB Representation Manual Notice To NMB. While a carrier cannot initiate NMB representation proceedings, 1 the NMB merger procedures require the carrier to notify the NMB of intent to merge at same time the carrier files with STB or DOT for approval of the transaction, and to notify the Board of the merger completion date Single Carrier Determination. ( ) Any organization or individual that represents any employees involved in the merger may seek NMB determination that single transportation system exists Applicant invoking NMB services must meet the following requirements: Incumbents must furnish evidence of current representation, such as a seniority or dues check-off list. Nonincumbents must furnish authorization cards from 50% of the employees in the craft or class (if employees are represented) or 35% (if employees are unrepresented) The NMB s previous Merger Procedures For Railroads, 17 N.M.B. 44 (1989), were ruled invalid by the D.C. Circuit because they permitted the carrier to initiate representation proceedings, which the court found to violate a clear command of Section 2, Ninth of the Railway Labor Act. RLEA v. NMB, 29 F.3d 655 (D.C. Cir. 1994) (en banc), cert. denied, 115 S. Ct (1995)

11 751 Factors Indicating a Single Transportation System: published combined schedules or combined routes; (2) standardized uniforms; (3) common marketing, markings or insignia; (4) integrated essential operations such as scheduling or dispatching; (5) centralized labor and personnel operations; (6) combined or common management, corporate officers, and board of directors; (7) combined workforce; and (8) common or overlapping ownership If the Board determines that a single transportation system exists, it will then address any craft or class issues and proceed to determine the representation choice of the employees of the single carrier If an incumbent representative is not already a party, once the single carrier determination is issued, the incumbent then has 14 days to file an application supported by 35% showing of interest Existing certifications remain in effect until the Board issues a new certification or dismissal B. Status of Minority Unions Post-Merger. 1. The NMB has not addressed the apparent tension between its longstanding view that the RLA requires that certifications be systemwide for each craft or class, and the statement in the Representation Manual that all union certificates on the pre-merger carrier continue until the NMB says otherwise. While the NMB has receded from its prior statement that certifications on the disappearing carrier are terminated by operation of law as soon as the merger of operations takes place, it is not clear what effect will be given to the statement in the Representation Manual that existing certifications remain in place. Republic/Hughes Airwest, 8 N.M.B. 49 (1980). Southern Pacific Lines, 21 N.M.B. at 172 (1994); TransWorld Airlines/Ozark Airlines, 14 N.M.B. 218 (1987). The NMB decision in Fox Valley & Western, Ltd., 21 N.M.B. 112, (1994) implies that the statement in the Representation Manual is intended to apply only for a short transition period until the post-merger representation issues are resolved. 2. Voluntary Recognition. The NMB has stated that even voluntary recognitions remain in effect until the Board determines the new representation pattern. Fox Valley & Western, Ltd., 21 N.M.B. 112, (1994). See also BMWE v. Fox Valley & Western, Ltd., 1995 U.S. Dist. LEXIS 14130, at *

12 752 C. Comparability. (N.D. Ill. 1995) (court cannot force merged carrier to treat with voluntarily-recognized representative, where NMB held that union s recognition in place only until NMB determined single carrier issue and union then chose not to file petition to attempt to represent merged craft or class. Elections Where Pre-Merger Groups Are Comparable In Size. Where the size of merged employee groups is comparable, the NMB holds premerger representation certificates in place pending the result of an election. Pennsylvania/Allegheny Commuter, 19 N.M.B. 362, (1992) Federal Express/Flying Tiger, 16 N.M.B. 433 (1989); USAir/Piedmont, 16 N.M.B. 412 (1989). See also Union Pacific Railroad, 15 N.M.B. 95, 247 (1988) (NMB holds in place certificate of two rail unions after single carrier determination has been made, even though one of unions is as a practical matter defunct). The Board has not issued a precise definition of comparability, but review of Board decisions places the dividing line at approximately 35%, i.e. if the smaller union has at least 35% of the combined group, the Board will conduct an election. It is undoubtedly no coincidence that this is the same level of showing of interest that a new applicant must provide in order to secure an election. No Election Where Pre-Merger Groups Not Comparable In Size. Where the craft or class of employees is not comparably sized at the two carriers involved in the merger, the Board will fold the smaller group into the representation pattern of the larger group. Air Tran Airways, 25 N.M.B. 429 (1998); Southern Pacific Lines, 21 N.M.B. at 173. Optional Election Upon Showing of Interest. Incumbent pre-merger unions which do not automatically have a 35% showing of interest as a result of incumbency can still secure an election if they supplement their showing of interest with authorization cards sufficient to show an aggregate 35% showing of interest (which included automatically all those it represented prior to the merger, as shown by dues check off authorizations or seniority lists). National Railroad Passenger Corp., 21 N.M.B. 301 (1994). D. Single Carrier Criteria And Issues 1. The NMB s list at of the Factors Indicating a Single Transportation System are similar to those set forth in the often-quoted case Trans World Airlines/Ozark Airlines, 14 N.M.B. 218, 236 (1987): whether the two systems are held out to the public as a single carrier.... whether a combined schedule is published, how the carrier advertises its services; whether reservation systems are combined; whether - 8 -

13 753 tickets are issued on one carrier s stock; if signs, logos and other publicly visible indicia have been changed to indicate only one carrier s existence; whether personnel with public contact were held out as employees of one carrier; and whether the process of repainting planes and other equipment, to eliminate indications of separate existence, has been progressed. Other factors investigated by the Board seek to determine if the carriers have combined their operations from a managerial and labor relations perspective. Here the Board investigates whether labor relations and personnel functions are handled by one carrier; whether there are a common management, common corporate officers and interlocking Boards of Directors; whether there is a combined workforce; and whether separate identities are maintained for corporate and other purposes. 2. Application of Single Carrier Criteria: LACSA/TACA, 28 NMB 418 (2001) American Eagle Airlines, 28 NMB 371 (2001) (applying single carrier test where one union wished to define system to include a separatelyincorporated heavy maintenance base, and the other union wished to exclude it) Arrow Air/Fine Air Services, 28 NMB 13 (2000) Offshore Logistics, Inc., 27 NMB 178 (2000) (finding that Offshore is not a carrier under the RLA but that AirLog and Air Logistics Alaska are separate carriers, and splitting union s representation application into separate dockets. American Airlines & Reno, 26 N.M.B. 467 (1999) (single carrier status resulted only after operations were integrated in August 1999: The Board finds no persuasive evidence that an operational merger was consummated between American and Reno on December 23, While American did acquire ownership and control on that date, the integration of operations progressively has taken place over a several month period since that time. ) AirTran Airways, 25 N.M.B. 429 (1998). Fox Valley & Western, Ltd., 21 N.M.B. 112 (1994). Consolidated Rail Corp./Monongahela Ry., 20 N.M.B. 56 (1992)

14 The form of the transaction does not defeat single carrier status. Guliford Transp. Indus., Inc., 18 N.M.B. 413 (1991) (lease and contract). Fox Valley & Western, Ltd., 21 N.M.B. 112 (1994) (one corporation acquires assets of two others). Illinois Midland R.R., 25 N.M.B. 57, 25 N.M.B. 154 (1997) (acquisition of assets). 4. Common Ownership Not Required USAir/Shuttle, 19 N.M.B. 388 (1992) (Shuttle, under separate ownership with own employees and labor contracts, is single carrier with USAir which manages Shuttle as part of USAir system). See also SAPADO I, 19 N.M.B. 198 (1992) (partnership between Dobbs House and Singapore International Airlines is a carrier and facilities in Honolulu and Los Angeles constitute single system). 5. Application To Regional Commuter Airlines Allegheny/Piedmont/PSA, 29 NMB 160 (2002) (commonly owned commuters not a single carrier). Precision/Northeast, 20 N.M.B. 619 (1993) (single carrier found where two commuter airlines have substantially overlapping ownership, and are held out to the public as Northwest Air Link, because both have code-sharing agreements with Northwest). Flagship/Executive/Wings West/ Simmons/Metroflight/AMR Eagle etc., 22 N.M.B. 331 (1995) (four commuters under common ownership of AMR Eagle Corp., each code-sharing with American Airlines, found to be a single carrier with each other, based on substantial control by American Eagle). Continental Airlines/Continental Express, 20 N.M.B. 326 (1993) (commuter and major found to be single carrier, where commuter pilots were on seniority list of major). IV. CONTRACT ISSUES SEVERAL POSSIBLE SCENARIOS A. If Union is Extinguished In Merger And Entire Merged Craft or Class Becomes Unrepresented Contract Is No Longer Enforceable 1. Teamsters v. Texas Int l Airlines, Inc., 717 F.2d 157 (5th Cir. 1983)

15 Under the NLRA, John Wiley & Sons v. Livingston, 376 U.S. 543 (1964), would seem to allow an arbitrator to decide whether any aspect of the contract survives. Wiley has rarely been applied to reach that result under the NLRA, although several courts have indicated in dicta that Wiley might be applied under the RLA in appropriate circumstances. In re Chicago, Milwaukee, St. Paul & Pacific R.R., 658 F.2d 1149 (7th Cir. 1981), cert. denied, 455 U.S (1982); IAM v. Northeast Airlines, Inc., 536 F.2d 975 (1st Cir.), cert. denied, 429 U.S. 961 (1976); Fitzsimmons v. Western Airlines, Inc., 290 A 2d 682 (Del. Ch. 1972). Compare BMWE v. St. Johnsbury & Lamoille County R.R., 512 F. Supp. 1079, 1084 (D. Vt. 1981) (overturning arbitration award that successors are bound as a matter of law to compensate their employees for vacation benefits which accrued... by some other [predecessor] carrier. ). See also AFA v. Delta, supra, 879 F.2d 906, where D.C. Circuit held that after employees become nonunion in a merger, the ousted union nonetheless may obtain arbitration of damages issues under its successorship clause. B. If Both Groups Are Represented Pre-Merger and Post Merger, Two Contracts Survive 1. Two Contracts Administered By One Union. AFA v. USAir, Inc., 807 F. Supp. 827 (D.D.C. 1992), aff d, 24 F.3d 1432 (D.C. Cir. 1994) (terms under former Shuttle contract remain the status quo for Shuttle employees who come to be represented by USAir union). BMWE v. Guilford Transp. Indus., Inc., 808 F. Supp. 46 (D. Me. 1992) (moratorium clauses in predecessor union s contract may bar successor unions from immediately negotiating new terms). IAM v. Northwest Airlines, Inc., 843 F.2d 1119, 1123 n.5 (8th Cir. 1988) (change in representation does not cancel contract rights), vacated as moot, 854 F.2d 1088 (8th Cir. 1988). Arguable, however, depending on language of surviving carrier s scope or successor clauses, that all employees are covered by terms of surviving carrier s contract. See AFA v. USAir, supra, 24 F.3d Duty To Bargain Re Changes And/Or Integration of Agreements. In AFA v. USAir, Inc., 807 F. Supp. 827 (D.D.C. 1992), aff d, 24 F.3d 1432 (D.C. Cir. 1994), the D.C. Circuit held that when AFA became the representative of the former Shuttle employees, the terms of the pre-existing contract continue as status quo pending bargaining. In that case, the previous Shuttle contract had become amendable by its terms and was in the status quo period pending negotiations for a new

16 756 agreement. The Court did not indicate whether the result would have been different if the duration of the Shuttle contract had not already expired. Whether to continue with two agreements, or to integrate into one agreement, would seem to be bargainable subjects. Where both employee groups were represented prior to the merger, Fence agreements were historical answer pending seniority integration and negotiation of combined contract.. C. Effect Of Successorship Clauses 1. After a transaction such as a merger is completed, a successorship clause in the predecessor s collective bargaining agreement cannot be the basis to require the successor to recognize the predecessor s union. ALEA v. Republic Airlines, Inc., 798 F.2d 967, 968, (7th Cir. 1986); ALPA v. Texas Int l Airlines, 656 F.2d 16 (2d Cir. 1981); IAM v. Northeast Airlines, Inc., 536 F.2d 975 (1st Cir.), cert. denied, 429 U.S. 961 (1976). 2. In AFA v. Delta Air Lines, Inc., 879 F.2d 906 (D.C. Cir. 1989), cert. denied, 494 U.S (1990), however, the D.C. Circuit held that an ousted union may, in arbitration, seek damages for violation of its successorship clause. See also AFA v. United Airlines, Inc., 71 F.3d 915 (D.C. Cir. 1995) (AFA obtains arbitration of question whether Air Wisconsin transaction violated United scope clause). 3. It has been argued that successorship clauses may provide the basis for a union to enjoin mergers, partial sales, and similar transactions. Teamsters Local 2707 v. Western Airlines, Inc., 813 F.2d 1359 (9th Cir. 1987) (issuing injunction against merger pending arbitration under scope clause); stayed, Western Airlines, Inc. v. Teamsters, 480 U.S (1987) (O Connor, J.), 484 U.S. 806 (1987) (cert. granted; vacated; remanded to Ninth Circuit for consideration of mootness); 854 F.2d 1178 (9th Cir. 1988) (dismissed as moot). IAM v. Panoramic Corp., 668 F.2d 276 (7th Cir. 1981) (NLRA case; injunction pending arbitration of successorship clause). Fitzsimmons v. American Airlines, Inc., 82 L.R.R.M. (BNA) 2670 (D.C. Cir. 1972) (System Board finds that proposed merger into American violates successorship clause of TransCaribbean contract and enjoins merger unless TCA posts bond to reimburse TCA employees harmed by merger; court injunction action moot because American substituted its bond for TCA s)

17 Successorship and similar clauses also may be the basis for a union to obtain bargaining or arbitration, or other covenants, prior to a merger. AFA v. Republic Airlines, Inc., No (N.D. Ill. June 11, 1986); No. 86-C-5058 (N.D. Ill. July 14, 1986). AFA obtained expedited arbitration of a Republic successorship clause. Arbitrator held that Republic could not merge until Northwest assumed the Republic LPPs. Northwest agreed to comply with the arbitration award. Later, following merger, former Republic flight attendants argued that Northwest could not negotiate with the Teamsters, who now represented merged employees, to change the level of labor protection. Court ruled that pre-merger rights could be changed in subsequent bargaining. Western Airlines, Inc. v. Teamsters, No EC (C.D. Cal. 1971) (court ordered Western, prior to planned merger with American, to arbitrate under successorship clause). 5. Arbitrators Interpretation of Successorship Language A general, but not invariable, rule has emerged finding that a seller must honor clear contractual language imposing a duty on the seller to obtain the assumption of the labor agreement as a condition of a transaction. In contrast, arbitrators generally refuse to enforce upon an acquiror a passive successor clause which merely states that the contract is binding on successors but not specifying a particular duty on the seller s part to obtain compliance by the buyer. Gallivan s Inc., 78 Lab. Arb. (BNA) 253 (1982). Martin Podany Associates, 80 Lab. Arb. (BNA) 658 (1983). But see: Marley-Wylain Co., 88 Lab. Arb. (BNA) 978 (1987) (passive successorship language created affirmative obligation on Seller to require buyer s assumption of contract). Zady Natey, Inc. v. UFCW, 826 F. Supp. 142 (D. Md. 1992) (passive clause required some good faith on part of seller to require buyer to honor contract). D. Railroad Labor Protections And Implementing Agreements May Resolve Contract Survival Issues. Norfolk & Western v. ATDA, 499 U.S. 117 (1991)

18 758 V. LABOR PROTECTIVE PROVISIONS A. Labor Protective Conditions In Railroad Transactions For many years, Labor Protective Conditions have been imposed upon railroad transactions by statute and administrative action. Such conditions are commonly referred to as Labor Protective Provisions ( LPPs ). LPPs may include protection against furlough or decreases in rates of pay or benefits, or losses incurred in moving. They may provide for negotiation or arbitration of matters like seniority integration or integration of terms and conditions of employment. The ICC Termination Act of 1995, Pub. L. No , 109 Stat. 803, abolished the Interstate Commerce Commission and transferred its responsibilities regarding LPPs to the newly created Surface Transportation Board in DOT. The Termination Act wrought minor changes in substantive labor protection, some of which are noted below. Labor protection for transactions under 49 U.S.C [formerly 11343], such as merger or consolidation of two carriers or purchase, lease or acquisition of one carrier by another, is set forth in a new section, 49 U.S.C Six Year Protection Continues For Larger Railroads. Subsection (a) is basically unchanged from the former Although the statute states an employee will not be in a worse position for 4 years, the length of the protective period is actually 6 years, because 11326(a) incorporates by reference the protections created under 405 of the Amtrak Act, 49 U.S.C , (known as the C-1 conditions) provided 6 years protection. See New York Dock Protective Conditions, 360 I.C.C. 60 (1974), aff d, 609 F.2d 83 (2d Cir. 1979); Wilmington Terminal, 6 I.C.C.2d 799 (1990), aff d, 930 F.2d 511 (6th Cir. 1991). Relief for Smaller Railroads. Subsections (b) and (c) contain significant changes for smaller railroads, limiting protection to one year severance pay for Class II/Class III transactions, and totally abolishing labor protection for Class III/Class III transactions. (Note, however, that new 11324(e) provides that no transaction in 11326(b) may have the effect of avoiding a collective bargaining agreement or shifting work to a carrier without an agreement.) Short line acquisitions by Class II and III railroads are subject to the same LPP requirements as under 11326(b) and (c), per new Line Sales to Noncarriers. In transactions, such as the sale of a short line to an acquiror that is not a rail carrier, the ICC typically did not impose LPPs, but had the authority to do so in extraordinary

19 759 circumstances. ICC Ex Parte No New section 10901(c) now removes the ICC s discretionary authority to impose LPPs in these transactions. B. Interplay of Railroad Regulation and RLA Bargaining and Status Quo Obligations. Railroads prefer the streamlined labor negotiating procedures provided by the ICA for railroad transactions, as opposed to lengthy negotiations under RLA 6, because they wish to avoid the delay and risk of strikes that could derail a pending transaction. In Norfolk & Western Ry. v. American Train Dispatchers Ass n, 499 U.S. 117 (1991), the Court held that a transaction is immune from all obstacles imposed by the RLA, including collective bargaining agreements, as necessary to permit the transaction to go forward. In a New York Dock implementing agreement, an arbitrator might change certain contract terms of employees who are merged; the unions cannot delay the transaction by arguing that the old contract terms must remain in effect unless changed by collective bargaining. In Norfolk & W. Ry. v. Brotherhood of R.R. Signalmen, 164 F.3d 847 (4th Cir. 1998), unions attempted to use RLA bargaining procedures, and announced that they would strike if bargaining were unsuccessful, to resolve issues resulting from the NS and CSX acquisition of Conrail. The court ruled that the union s section 6 notice was ineffective because labor issues related to the merger were exclusively for the STB. Strikes Precluded See CSX Transportation, Inc. v. UTU, 86 F.3d 346 (4th Cir. 1996) (Norris-LaGuardia Act does not bar injunction of strike to protest arbitration award under former 11347). C. Labor Protective Provisions In Airline Transactions 1. CAB LPPs Allegheny-Mohawk During the era of regulation by the Civil Aeronautics Board, merger LPPs were commonly imposed as a condition of CAB approval of a transaction. The CAB evolved a standard set of LPPs, which came to be known as the Allegheny-Mohawk LPPs, a modified version of railroad LPPs limited to 4 years protection. Allegheny-Mohawk Merger, 59 C.A.B. 22 (1972); United Capital Merger, 33 C.A.B. 307, (1961). When deregulation was imminent, however, the CAB adopted a policy of deferring the subject of labor protection to collective bargaining

20 760 After airline deregulation, DOT declined to impose LPPs; courts affirmed DOT s position that LPPs no longer would be imposed unless necessary to avoid labor strife capable of causing disruption of the nation s airways. The DOT viewed LPPs as a matter to be negotiated through collective bargaining. Air Line Pilots Association v. DOT, 791 F.2d 172 (D.C. Cir. 1986) (affirming DOT refusal to impose LPPs). Air Line Pilots Association v. DOT, 838 F.2d 563 (D.C. Cir. 1988) (remanding for consideration of possibility that merger could render unenforceable LPPs obtained through collective bargaining). 2. New Statutory LPPs Require Fair and Equitable Seniority Integration In December 2007, Congress imposed by statute, 49 U.S.C , note, the provisions of the Allegheny-Mohawk LPPs which relate to seniority integration (Sections 3 and 13) to apply to airline mergers, i.e. any transaction involving two or more covered air carriers that results in the combination of crafts or classes that are subject to the Railway Labor Act... The new statute does not apply if the same union represents employees in the same craft or class on both carriers involved in the merger. In that event, seniority integration is determined by the union s merger policy. Section 3 provides that if the transaction affects seniority rights provisions shall be made for the integration of seniority lists in a fair and equitable manner, including, where applicable, agreement through collective bargaining between the carriers and the representatives of the employees affected. In the event of failure to agree, the dispute may be submitted by either party for adjustment in accordance with section 13. Section 13 requires arbitration before a neutral arbitrator. If the same union represents the combining crafts at each carrier, however, the new law provides that the union s internal Merger Policy will provide the mechanism for seniority integration. 3. Contractual LPPs. Today, many airline collective bargaining agreements include negotiated LPPs. Some contracts adopt by reference most or all of the Allegheny-Mohawk LPPs, while others adopt only Sections 3 and

21 761 of the Allegheny Mohawk LPPs (which govern seniority integration) or set forth ad hoc provisions negotiated locally. The new (December, 2007) legislation provides that such contractual provisions shall not be affected by the requirements of this section as to the employees covered by that agreement, so long as those provisions allow for the protections afforded by section 3 and VI. SENIORITY INTEGRATION AND UNION S DUTY OF FAIR REPRESENTATION A Legislation Requires Fair and Equitable Seniority Integration. HR 2764, section 117, to be codified at 49 USC 42112, note, requires that seniority integration in an airline merger be conducted pursuant to Sections 3 and 13 of the CAB s Allegheny-Mohawk Labor Protective Provisions. See Section V.C.2. above. The only exception is where the same union represents the same craft or class of employees on both sides of the merger, in which event union policy controls. Union policy, however, is subject to the union s duty of fair representation. B. Seniority Integration Frequently Results in DFR Litigation. Ford Motor Co. v. Huffman, 345 U.S. 330, 337 (1953) (that union action in seniority integration has disadvantaged one group, without more, does not establish breach of DFR). McNamara-Blad v. APFA, 275 F.3d 1165 (9th Cir. 2002) (American and APFA agreed to place Reno flight attendants at bottom of combined seniority list before operational merger; no breach of DFR because APFA did not yet represent them). Allen v. American Airlines, CV-N DWH (D.Nev. 2001) (APA owed Reno pilots no DFR prior to date it became their representative). Rakestraw v. United Airlines, Inc., Hammond v. ALPA, 981 F.2d 1524 (7th Cir. 1992) (date of hire seniority integration in TWA/Ozark merger did not breach DFR, despite fact that Ozark was vital growing carrier and its pilots generally had lower seniority than TWA pilots, and that ALPA departed from normal merger policy, because Ozark MEC approved seniority agreement). Gvozdenovic v. United Airlines, Inc., 933 F.2d 1100 (2d Cir.), cert. denied, 112 S. Ct. 305 (1991) (AFA did not violate DFR in integrating seniority of former Pan Am flight attendants)

22 762 Air Wisconsin Pilots Protection Comm. v. Sanderson, 909 F.2d 213, 216 (7th Cir. 1990), cert. denied, 111 S. Ct. 958 (1991) (ALPA s compliance with its Merger Procedures helps to establish it did not violate DFR). Addison v. Piedmont Aviation, Inc., 745 F. Supp. 343 (M.D.N.C. 1990) (former employees of Piedmont s fixed base operation, who became mechanics at Piedmont cannot rekindle stale grievances in DFR suit alleging improper placement on USAir-Piedmont integrated seniority list). Haerum v. ALPA, 892 F.2d 216 (2d Cir. 1989) (no DFR violation in Piedmont-USAir merger, despite ALPA s refusal to reconsider placement of Empire pilots vis-à-vis Piedmont pilots). Beardsly v. Chicago & N.W.T. Co., 850 F.2d 1255 (8th Cir. 1988), cert. denied, 489 U.S (1989) (union violated DFR when it executed implementing agreement establishing seniority of former Rock Island RR employees without their involvement, despite their repeated requests and protests). Dement v. Richmond, F&P R.R., 845 F.2d 451, (4th Cir. 1988) (no discrimination is proved simply because agreement disadvantaged one group of consolidated employees, but factual issues remained whether union made good faith effort to rectify disparities when carrier allegedly was willing to negotiate a new agreement). Barton Brands Ltd. v. NLRB, 529 F.2d 793 (7th Cir. 1976), on remand, 228 N.L.R.B. 889 (1977) (decision to endtail one group of employees, rather than dovetail them, violated labor law). Frandsen v. BRAC, 782 F.2d 674 (7th Cir. 1986) ( entailing did not violate DFR). C. Union May Have Merger Policy/Procedure Air Wisconsin Pilots Protection Comm. v. Sanderson, supra, 909 F.2d 213 (ALPA merger policy takes into account not only seniority, but also type of equipment flown and route structure). Hammond v. ALPA, supra, 981 F.2d 1584 (ALPA s failure to follow its merger policy does not necessarily constitute a breach of DFR). Jet America Pilots Committee v. Alaska Airlines & ALPA, 873 F.2d 213 (9th Cir. 1989) (ALPA commenced representation of previously unrepresented Jet America pilots a few days before it put Jet America pilots at bottom of Alaska seniority list; ALPA violated DFR by not following its own merger procedures)

23 763 D. Integrated List May Be Achieved Through Negotiation or Arbitration Herring v. Delta Air Lines, Inc., 894 F.2d 1020 (9th Cir. 1989), cert. denied, 494 U.S (1990) (former Western pilots dissatisfied by seniority integration negotiated between ALPA and Delta could not obtain arbitration under Delta s voluntarily assumed LPPs, because individuals lacked standing to challenge a union-approved seniority list). E. Preexisting Contract Rights May Govern Seniority Integration Sowers v. Federal Express, Nos & (D. Nev.) (Federal Express pilot cannot maintain action protesting that seniority integration of Flying Tiger pilots breached personnel manual, since Federal Express revised manual to permit dovetailing), aff d, 953 F.2d 1388 (9th Cir. 1992), cert. denied, 113 S. Ct. 74 (1992). People Express Pilot Merger Committee v. Continental Air Lines, Inc., 127 L.R.R.M (D.N.J. 1987) (merger agreement between Texas Air Corp. and People Express held to be a promise to integrate seniority through arbitration). F. Various Methods Of Seniority Integration 1. Date of hire 2. Ratio 3. Protection of status 4. Protecting expectations of employees based on relative economic health of merger partners

24 764 2