MR. JUSTICE MARSHALL delivered the opinion of the Court.
Once again we are faced with the problem of defining the labor law obligations of a "successor" employer to the employees of its predecessors. In this case, petitioner Howard Johnson Co. is the bona fide purchaser of the assets of a restaurant and motor lodge. Respondent Union was the bargaining representative of the employees of the previous operators, and had successfully concluded collective-bargaining agreements with them. In commencing its operation of the restaurant, Howard Johnson hired only a small fraction of the predecessors' employees. The question presented in this case is whether the Union may compel Howard Johnson to arbitrate, under the arbitration provisions of the collective-bargaining agreements signed by its predecessors, the extent of its obligations under those agreements to the predecessors' employees.
Prior to the sale at issue here, the Grissoms—Charles T. Grissom, P. L. Grissom, Ben Bibb, P. L. Grissom & Son,
On June 16, 1972, the Grissoms entered into an agreement with Howard Johnson to sell it all of the personal property used in connection with operation of the restaurant and motor lodge. The Grissoms retained ownership of the real property, leasing both premises to Howard Johnson. Howard Johnson did not agree to assume any of the Grissoms' obligations, except for four specific contracts relating to operation of the restaurant and motor lodge. On June 28, Howard Johnson mailed the Grissoms a letter, which they later acknowledged and confirmed, clarifying that "[i]t was understood and agreed that the Purchaser . . . would not recognize and assume any labor agreements between the Sellers . . . and any
Transfer of operation of the restaurant and motor lodge was set for midnight, July 23, 1972. On July 9, the Grissoms notified all of their employees that their employment would terminate as of that time. The Union was also notified of the termination of the Grissoms' business. On July 11, Howard Johnson advised the Union that it would not recognize the Union or assume any obligations under the existing collective-bargaining agreements.
After reaching agreement with the Grissoms, Howard Johnson began hiring its own work force. It placed advertisements in local newspapers, and posted notices in various places, including the restaurant and motor lodge. It began interviewing prospective employees on July 10, hired its first employees on July 18, and began training them at a Howard Johnson facility in Ann Arbor on July 20. Prior to the sale, the Grissoms had 53 employees. Howard Johnson commenced operations with 45 employees, 33 engaged in the restaurant and 12 in the motor lodge. Of these, only nine of the restaurant employees and none of the motor lodge employees had previously been employed by the Grissoms. None of the supervisory personnel employed by the Grissoms were hired by Howard Johnson.
The Union filed this action in the state courts on July 21. Characterizing Howard Johnson's failure to hire all of the employees of the Grissoms as a "lockout" in violation of the collective-bargaining agreements, the Union sought a temporary restraining order enjoining this "lockout" and an order compelling Howard Johnson and the Grissoms to arbitrate the extent of their obligations
The defendants subsequently removed this action to the federal courts on the ground that it was brought under § 301 of the Labor Management Relations Act, 29 U. S. C. § 185. At a hearing before the District Court on August 7, the Grissoms admitted that they were required to arbitrate in accordance with the terms of the collective-bargaining agreements they had signed and that an order compelling arbitration should issue. On August 22, the District Court, in a memorandum opinion unofficially reported at 81 L. R. R. M. 2329 (ED Mich. 1972), held that Howard Johnson was also required to arbitrate the extent of its obligations to the former Grissom employees. The court denied, however, the Union's motion for a preliminary injunction requiring the Company to hire all the former Grissom employees, and granted a stay of its arbitration order pending appeal. Howard Johnson appealed the order compelling arbitration, but the Court of Appeals affirmed. 482 F.2d 489 (CA6 1973). We granted certiorari, 414 U.S. 1091 (1973), to consider the important labor law question presented. We reverse.
Both courts below relied heavily on this Court's decision in John Wiley & Sons v. Livingston, 376 U.S. 543 (1964). In Wiley, the union representing the employees of a corporation which had disappeared through a merger sought to compel the surviving corporation, which had hired all of the merged corporation's employees and continued to operate the enterprise in a substantially identical form after the merger, to arbitrate
Mr. Justice Harlan, writing for the Court, emphasized "the central role of arbitration in effectuating national labor policy" and preventing industrial strife, and the need to afford some protection to the interests of the employees during a change of corporate ownership. Id., at 549.
The courts below recognized that the reasoning of Wiley was to some extent inconsistent with our more recent decision in NLRB v. Burns International Security Services, 406 U.S. 272 (1972). Burns was the successful bidder on a contract to provide security services at a Lockheed Aircraft plant, and took a majority of its employees from the ranks of the guards employed at the plant by the previous contractor, Wackenhut. In refusing to enforce the Board's order finding that Burns' failure to honor the substantive provisions of the collective-bargaining agreement negotiated with Wackenhut was an unfair labor practice, we emphasized that freedom of collective bargaining—" `private bargaining under governmental supervision of the procedure alone, without any official compulsion over the actual terms of the contract' " —was a " `fundamental premise' " of the federal labor laws, id., at 287, quoting H. K. Porter Co. v. NLRB,
The courts below held that Wiley rather than Burns was controlling here on the ground that Burns involved an NLRB order holding the employer bound by the substantive terms of the collective-bargaining agreement, whereas this case, like Wiley, involved a § 301 suit to compel arbitration. Although this distinction was in fact suggested by the Court's opinion in Burns, see id., at 285-286, we do not believe that the fundamental policies outlined in Burns can be so lightly disregarded. In Textile Workers v. Lincoln Mills, 353 U.S. 448 (1957), this Court held that § 301 of the Labor Management Relations Act authorized the federal courts to develop a federal common law regarding enforcement of collective-bargaining agreements. But Lincoln Mills did not envision any freewheeling inquiry into what the federal courts might find to be the most desirable rule, irrespective of congressional pronouncements. Rather, Lincoln Mills makes clear that this federal common law must be "fashion[ed] from the policy of our national labor laws." Id., at 456. MR. JUSTICE DOUGLAS described the process of analysis to be employed:
It would be plainly inconsistent with this view to say that the basic policies found controlling in an unfair labor practice context may be disregarded by the courts in a suit under § 301, and thus to permit the rights enjoyed by the new employer in a successorship context to depend upon the forum in which the union presses its claims.
We find it unnecessary, however, to decide in the circumstances of this case whether there is any irreconcilable conflict between Wiley and Burns. We believe that even on its own terms, Wiley does not support the decision of the courts below. The Court in Burns recognized that its decision "turn[ed] to a great extent on the precise facts involved here." 406 U. S., at 274. The same observation could have been made in Wiley, as indeed it could be made in this case. In our development of the federal common law under § 301, we must necessarily proceed cautiously, in the traditional case-by-case approach of the common law. Particularly in light of the difficulty of the successorship question, the myriad factual circumstances and legal contexts in which it can arise, and the absence of congressional guidance as to its resolution, emphasis on the facts of each case as it arises is especially appropriate. The Court was obviously well aware of this in Wiley, as its guarded, almost tentative statement of its holding amply demonstrates.
When the focus is placed on the facts of these cases, it
Even more important, in Wiley the surviving corporation hired all of the employees of the disappearing corporation. Although, under Burns, the surviving corporation may have been entitled to make substantial changes in its operation of the enterprise, the plain fact is that it did not. As the arbitrator in Wiley subsequently stated:
Here, however, Howard Johnson decided to select and hire its own independent work force to commence its operation of the restaurant and motor lodge.
What the Union seeks here is completely at odds with the basic principles this Court elaborated in Burns. We found there that nothing in the federal labor laws "requires that an employer . . . who purchases the assets of a business be obligated to hire all of the employees of the predecessor though it is possible that such an obligation might be assumed by the employer." 406 U. S., at 280 n. 5. See also Golden State Bottling Co. v. NLRB, 414 U. S., at 184 n. 6. Burns emphasized that "[a] potential employer may be willing to take over a moribund business only if he can make changes in corporate structure, composition of the labor force, . . . and nature of supervision." 406 U. S., at 287-288. We rejected the Board's position in part because "[i]t would seemingly follow that employees of the predecessor would be deemed employees of the successor, dischargeable only in accordance with provisions of the contract and subject to the grievance and arbitration provisions thereof. Burns would not have been free to replace Wackenhut's
We do not believe that Wiley requires a successor employer to arbitrate in the circumstances of this case.
Since there was plainly no substantial continuity of identity in the work force hired by Howard Johnson with that of the Grissoms, and no express or implied assumption of the agreement to arbitrate, the courts below erred in compelling the Company to arbitrate the extent of its
MR. JUSTICE DOUGLAS, dissenting.
The petitioner, Howard Johnson, in 1959 and 1960 entered into franchise agreements with P. L. Grissom, P. L. Grissom & Son, Charles T. Grissom, Ben Bibb, and the Belleville Restaurant Company (hereinafter collectively the Grissoms) under which the franchise operated a Howard Johnson Restaurant and Motor Lodge. In 1968 the Grissoms entered into collective-bargaining agreements with the respondent Union affecting both their restaurant and motel employees. On June 16, 1972, the Grissoms sold the business to Howard Johnson, the transfer of management to take place on July 24, 1972. On June 28, Howard Johnson notified the Grissoms that it would not recognize or assume their labor agreements and on July 9, 1972, the Grissoms gave notice to their employees that they would be terminated at midnight, July 23. Howard Johnson began interviewing prospective employees in early July, and when it took over the operation on July 24 it retained only nine of the Grissoms' employees; at least 40 were permanently replaced. The Union brought this action under § 301 of the Labor Management Relations Act, and the District Court issued an order compelling petitioner to arbitrate. The Court of Appeals affirmed, but today this Court reverses, holding that Howard Johnson was not a successor employer. I believe that the principles of successorship laid down in John Wiley & Sons v. Livingston, 376 U.S. 543, and NLRB v. Burns International Security Services, 406 U.S. 272, require affirmance, and thus I dissent.
Wiley was also a § 301 suit, to compel arbitration. There the company had merged with Interscience,
It must follow a fortiori that it is also not the case here. The contract between the Grissoms and the Union explicitly provided that successors of the Grissoms would be bound,
As we said in Wiley, "[i]t would derogate from `the federal policy of settling labor disputes by arbitration,' . . . if a change in the corporate structure or ownership of a business enterprise had the automatic consequence of removing a duty to arbitrate previously established . . . ." 376 U. S., at 549.
NLRB v. Burns International Security Services, supra, does not require any different result. There the
All of the factors distinguishing Burns and Wiley call here for affirmance of the order to arbitrate. This is a § 301 suit, and Howard Johnson did purchase the assets from the Grissoms. As a matter of federal labor law, when Howard Johnson took over the operation that had been conducted by its franchisee, it seems clear that it also took over the duty to arbitrate under the collective-bargaining agreements which expressly bound the Grissoms' successors. Any other result makes nonsense of the principles laid down in Wiley. The majority, by making the number of prior employees retained by the successor the sole determinative factor, accepts petitioner's
Thomas E. Harris filed a brief for the American Federation of Labor and Congress of Industrial Organizations as amicus curiae urging affirmance.
There is not the slightest suggestion in this case that the sale of the restaurant and motor lodge by the Grissoms to Howard Johnson was in any sense a paper transaction without meaningful impact on the ownership or operation of the enterprise. Howard Johnson had no ownership interest in the restaurant or motor lodge prior to this transaction. Although the Grissoms' operation of the enterprise as Howard Johnson's franchisee was subject to substantial restraints imposed by the franchise agreements on some aspects of the business, the franchise agreements imposed no restrictions on the Grissoms' hiring or labor relations policies. There is nothing in the record to indicate that Howard Johnson had had any previous dealings with the Union, or had participated in any way in negotiating or approving the collective-bargaining agreements.
"Mr. Gold [for the Union]: Well, that's right. I think our first duty is to show that there is a continuity of the business enterprise which makes it proper to say that the second employer is a successor.
"Where there isn't a continuity, then he is not a successor and he is not bound by the arbitration clause or any of the other potential obligations which are in the agreement.
"Question: But in deciding successorship, I take it you put aside the fact that he may not have hired any of the old employees?
"Mr. Gold: Yes, Your Honor . . . ." Tr. of Oral Arg. 37-38 (emphasis added).
"Mr. Gold: Yes, Your Honor.
"Question: Which means that the successor does not have the right not to hire, that he must perhaps take over the old employees?
"Mr. Gold: Yes, Your Honor.
"Question: . . . [Y]ou still say that he may bring his own employees along.
"Mr. Gold: Well, no, one of the rules is that the just cause and seniority provisions of the agreement apply. That is probably the most important aspect of the bargain from the union and the employees' standpoint. And if___
"Question: You certainly are taking quite a bite out of Burns, I suppose, in these cases." Tr. of Oral Arg. 27, 33.
Thus, our holding today is that Howard Johnson was not required to arbitrate with the Union representing the former Grissom employees in the circumstances of this case. We necessarily do not decide whether Howard Johnson is or is not a "successor employer" for any other purpose.