Attention companies and private equity buyers evaluating unionized asset acquisition targets. If you buy a unionized business, you may no longer be locked into a mandatory one-year period of bargaining with a union your employees have already rejected — at least in the D.C. Circuit. In Hospital Menonita de Guayama, Inc. v. NLRB, a divided federal appeals court struck down the National Labor Relations Board’s “successor bar,” ruling the Board never had the authority to impose it. Hosp. Menonita De Guayama, Inc. v. Nat’l Lab. Rels. Bd., No. 22-1163, 2026 WL 2093902 (D.C. Cir. July 21, 2026). The ruling is relevant to asset purchasers and is not applicable to stock deals.

Since 2011, the NLRB’s successor bar forced the new owner of a business to recognize and bargain with the incumbent union for up to a year after a change in ownership — regardless of whether that union still had majority support. It was an irrebuttable rule: for that period, neither the employer, the employees, nor a rival union could challenge the union’s status, even with hard evidence that most workers no longer wanted the union. In practice, that meant a buyer could inherit — and be legally required to bargain with — a union its own workforce had abandoned, on pain of an unfair labor practice charge.

Reviewing the rule fresh after the Supreme Court’s Loper Bright decision (which ended judicial deference to agency interpretations of their own authority), the D.C. Circuit held the successor bar conflicts with the core of the National Labor Relations Act. The Circuit Court noted that the National Labor Relations Act (the “Act”) guarantees employees the right to choose — or reject — a union, and lets a union serve as exclusive representative only with majority support. As a result, the Court held that by artificially/automatically deeming a union the majority representative “by Board decree” and blocking any challenge, the successor bar overrode both guarantees

The court rejected each of the Board’s justifications — general policymaking authority, promoting labor “stability,” and saving litigation time — holding that policy goals, however reasonable, cannot substitute for statutory authority the Board simply does not have. A successor employer defending against charges, the court concluded, is entitled to put forward evidence that the union lacks majority support.

It is important to note that several fundamental obligations of purchasers did not change as a result of the Court’s ruling. While the decision removes the automatic one-year shield, it does not eliminate a buyer’s underlying labor obligations. Traditional successorship rules still apply:

• You may still have to bargain. Under long-standing Supreme Court precedent, a buyer that continues essentially the same business and hires a majority of its workforce from the seller’s represented employees generally must recognize and bargain with the incumbent union.  N. L. R. B. v. Burns Int’l Sec. Servs., Inc., 406 U.S. 272, 92 S. Ct. 1571, 32 L. Ed. 2d 61 (1972); Fall River Dyeing & Finishing Corp. v. N.L.R.B., 482 U.S. 27, 107 S. Ct. 2225, 96 L. Ed. 2d 22 (1987).
• You are not bound by the seller’s union contract. A successor is ordinarily free to set its own initial terms and conditions of employment and is not stuck with the predecessor’s collective bargaining agreement. N. L. R. B. v. Burns Int’l Sec. Servs., Inc., 406 U.S. 272, 92 S. Ct. 1571, 32 L. Ed. 2d 61 (1972).
• You generally need not hire the seller’s workforce — but you cannot refuse to hire employees because they are union members, which is its own violation. N. L. R. B. v. Burns Int’l Sec. Servs., Inc., 406 U.S. 272, 92 S. Ct. 1571, 32 L. Ed. 2d 61 (1972). 

What the ruling changes is narrow but valuable: the union’s majority status is once again open to challenge where the evidence supports it, rather than automatically frozen for a year.

This matters for dealmaking. For buyers of unionized targets, union exposure has always been a diligence and integration issue. This decision turns the automatic one-year recognition period from a fixed cost into a variable — one you can actually assess and, where the facts support it, contest.

Some practical takeaways:

1. Make union support part of diligence from day one. Don’t assume a mandatory one-year bargaining period. Assess the incumbent union’s actual standing — expired or never-negotiated contracts, low participation, and any signs employees no longer support representation.
2. Preserve and document the evidence. The court’s holding turns on the buyer’s right to show the union lacks majority support. Employee petitions, disaffection evidence, and clear records are now usable tools rather than irrelevant during a locked period.
3. Set your initial terms deliberately. You retain the right to set initial terms of employment — but be careful how you communicate hiring intentions, because telling the workforce nothing will change can trigger a narrower “perfectly clear successor” obligation to bargain before setting terms.
4. Structure hiring with the successorship test in mind. Whether you cross the “substantial continuity” and majority-of-workforce thresholds drives whether the bargaining duty attaches at all.

For now, at least, this is a D.C. Circuit decision, and it is the first federal appeals court to reach the successor bar after Loper Bright. Other circuits are not bound by it and may not follow suit, so the mandatory recognition period could still apply depending on where a target operates. As a result, before closing any deal involving a unionized workforce, involve experienced labor counsel early. The rules now turn on jurisdiction, facts and evidence you can develop during diligence — and getting the analysis right up front can materially change the labor cost and risk you take on at closing.

If you have any questions about this issue or labor and employment topics, please contact our Traditional Labor Law Team:
Kevin Carr, Chair - kcarr@spilmanlaw.com
Mitch Rhein - mrhein@spilmanlaw.com
Pete Rich - prich@spilmanlaw.com
Nelson McKown - nmckown@spilmanlaw.com