Higher Bar, Same Risk: Second Circuit Orders Successor Employer to Hire Predecessor’s Union Workforce

Applying the Supreme Court’s new nationwide labor injunction standard, the Second Circuit Court of Appeals reversed a District Court and ordered a New York company to hire unionized parking valets that it declined to hire when it assumed a parking services contract from a former vendor. Poor v. Parking Systems Plus, Inc., case number 24-3324. In doing so, the Court sided with the National Labor Relations Board, which sought the injunction while an administrative trial process was ongoing. The Court also required the company to immediately bargain with the union that represented the valets. The case is significant in that the court granted the injunction notwithstanding that the Supreme Court set the bar higher for injunctions than the Second Circuit’s former standard.

Parking Systems won a contract in 2023 to provide valet parking for Stony Brook (NY) Hospital’s patients and visitors. The prior parking vendor’s employees were unionized under Local 1102 of the Retail, Wholesale & Department Store Union. Parking Systems hired none of the unionized employees. If it had done so and if at least half their valets were the former union employees, the company would have been obligated by law to bargain with the union. Companies are generally free to hire or not hire employees of a prior vendor so long as there is no discrimination based on union membership. The NLRB filed a Complaint based on a charge by the union that Parking Systems discriminated against the employees due to their union affiliation and to avoid the bargaining obligation.

In addition to filing an administrative complaint against the company to recover jobs for the valets and award backpay, the NLRB sought an injunction forcing Parking Systems to immediately hire the employees and bargain with the union.

The U.S. District Court denied the injunction in a terse order, stating that the Regional Director "failed to articulate any cognizable irreparable harm." The Court of Appeals reversed on procedural grounds, concluding that the District Court did not fully explain its decision and on substantive grounds that the injunction was warranted. Using the Supreme Court’s 2024 four-part standard for labor injunctions announced in Starbucks Corp. v. McKinney, the court stated: "[These] employees were deprived of their right to bargain through their chosen union and became disillusioned with the union as a result." Furthermore, the court said, "This is the exact kind of 'damage [to] employee confidence' that could render 'the board's determination of any violations … meaningless in the context of a new majority workforce committed to non-unionization.'" McKinney set a nationwide standard, requiring an agency seeking a preliminary injunction to show: (1) likelihood of success on the merits, (2) irreparable harm without the injunction, (3) the balance of equities favors the agency, and (4) the injunction serves the public interest.

Prior to McKinney, the Second Circuit and some other circuits used an easier to meet two-prong test to evaluate Section 10(j) petitions, asking only (1) whether there is "reasonable cause" to believe that an unfair labor practice was committed, and (2) whether injunctive relief is "just and proper." The Supreme Court’s McKinney holding makes the higher standard the same for all jurisdictions and makes it more challenging to obtain a labor injunction in federal court. However, this new ruling shows that even under the McKinney standard, injunctions remain a potent tool and employers must be mindful.

Should you have any questions, please contact Partners Edward J. Bonett, Jr., Esq. at 908.546.6991 or via email here, Patrick W. McGovern, Esq. at 973.535.7129 or via email here, or any Partner in our firm’s Labor Law Practice Group.