Another risk that falls primarily on the private contractor is that the union will claim the automatic privilege to represent workers hired from the school district by the private contractor if those employees work in the same or a similar job. In such instances, the union effectively claims the right to move to the private company along with the employees.

The alleged basis of this argument is known as the “successorship doctrine,” a concept the U.S. Supreme Court has endorsed in cases involving the movement of employees from one private firm to another. In particular, the court has upheld the doctrine when, “The new employer makes a conscious decision to maintain generally the same business and to hire a majority of its employees from the predecessor.”[165] The courts look for a “substantial continuity” between the employers, considering such factors as “whether the business of both employers is essentially the same; whether the employees of the new company are doing the same jobs in the same working conditions under the same supervisors; and whether the new entity has the same production process, produces the same products, and basically has the same body of customers.”[166] This analysis is performed from the employees’ perspective.[167] Where such “successorship” is found, the union retains the right to collectively bargain on behalf of the employees. (The new employer, however, is not typically bound by the terms of the union’s collective bargaining agreement with the old employer.[168])

In the case of Dean Transportation, GRESPA filed a claim of an unfair labor practice on grounds that Dean refused to recognize GRESPA as the collective bargaining agent of those Dean employees that had formerly worked for the district. In a ruling by an administrative judge of the National Labor Relations Board, GRESPA’s claim was upheld. The judge ruled that since Dean Transportation hired a sufficient number of former district bus drivers, GRESPA still represented those workers.

This ruling is currently being reviewed by the NLRB. If affirmed, this ruling could negatively affect privatization efforts, since many private employers would not want to inherit a union.

Regardless, there are good reasons to believe that this ruling will be overturned on appeal to the federal courts. The Supreme Court has not sanctioned the use of the successorship doctrine when the former employer is a public employer and the new employer is a private employer. In fact, the court has noted that there are significant differences between public-sector unionism and private-sector unionism. Public-sector employers often have no competition for the service provided and thus lack the “important discipline” of market pressure.[169] Public-sector employees help decide the public-sector managers with whom they negotiate through their right to vote in school board elections.[170] In addition, many states, including Michigan, prohibit public-sector unions from striking,[171] while any private-sector union covered by the National Labor Relations Act has the legal right to strike.[lxiii][172]

Hence, joining a public-sector union entails less risk than joining a private-sector union. As noted above, many public-sector unions lack the ability to strike and avoid the subsequent risks of doing so. In addition, public-sector employees are largely immune to market pressures, meaning the risk that a generous union contract will price government workers out of their jobs is much less immediate. The risk of displacement can be further reduced by union power in the political realm.

In contrast, private-sector unions pose more risks for workers. Private-sector unions can strike, and they can also be locked out. If they raise labor costs so high that an employer is no longer competitive in the marketplace, workers can lose their jobs.

Given the lesser risk in public-sector unionism, it’s not surprising that 2006 figures from the U.S. Bureau of Labor Statistics show that the nationwide union membership rate is 7.4 percent for private-sector workers, but 36.2 percent for public-sector workers — nearly five times as high.[173] Aside from the distinctions detailed above, this gap alone suggests that many of those willing to join a union in the public sector might not join one in the private sector, particularly when a new right to strike is involved.

Federal courts therefore can (and should) find legal grounds for refusing to apply the successorship doctrine to Dean Transportation and GRESPA. GRESPA’s original certification as a union by Grand Rapids school district employees involved the understanding that the union could not legally strike and that Grand Rapids employees could not be legally locked out. Since GRESPA would have such powers and run such risks acting as a union at Dean Transportation, a court would have substantial grounds for concluding that GRESPA must first go through private-sector union certification process — usually a new certification vote by the employees — before representing any employees at Dean Transportation.

The NLRB administrative law judge did not address the union’s power to strike or similar issues in his decision that the successorship doctrine applied to the instant case. His decision is being appealed both on the technical application of the successorship doctrine and on the broad issue of whether the doctrine should ever apply where the union originally lacked the ability to strike under state law. The broad issue has never been addressed by the NLRB or the federal courts, so this case may eventually serve as a national precedent.

[lxiii] The National Labor Relations Act covers nearly all private-sector unions not involved in the railway or airline industries.