First Circuit: NLRA Doesn't Preempt Rhode Island Retention Ordinance

The First Circuit Court of Appeals rejected a challenge to a Rhode Island ordinance requiring new hospitality employers to retain their predecessor’s employees for three months.

The challenger, Rhode Island Hospitality Association’s, primary argument was that the National Labor Relations Act preempted the ordinance. The trade group also argued that the ordinance violated the Equal Protection Clause and Contract Clause, but the First Circuit quickly dismissed both as non-serious and focused on its preemption clams.

Under the NLRA's Machinists preemption doctrine, pre-emption is exercised when "the exercise of plenary state authority to curtail or entirely prohibit self-help would frustrate effective implementation of the Act's processes." One of the arguments the plaintiffs advanced was that the ordinance, in requiring retention of employees, created a risk that businesses would be considered a successor under the National Labor Relations Board's successorship doctrine and would be bound by its collective bargaining requirements.

The First Circuit disagreed, however, and affirmed a lower court's decision rejecting the plaintiff's claims. In regards to its Machinists preemption claim, the court found that the NLRB had not even considered whether an employer can become a successor under the NLRA just because it complied with state or municipal law.

The First Circuit's holding reemphasizes the care that companies should take with employment considerations of employees gained through business acquisitions. The court left it up to the NLRB to decide whether an acquiring company obligates itself to collectively bargain with unions of acquired employees.

Under the First Circuit's holding, local mandatory retention laws rule so you will most likely have to deal with the consequences of retaining those employees for the statutorily-mandated time.

Related Resources:

• National Labor Relations Act (National Labor Relations Board)
• Rhode Island Hospitality Ass'n v. City of Providence (FindLaw's CaseLaw)
• Not Just Another Brick: Banquet Sales Managers Have Discretion (FindLaw's First Circuit blog)