Vanderbilt Law Review

First Page



Mergers, consolidations, and purchases of assets are important and frequent business transactions in our economy' and involve a great deal of planning and negotiating by the enterprises concerned. Until recently,the rights of employees and their representative labor unions generally were not considered to be a factor in these plans. In 1964, however, the Supreme Court, in John Wiley & Sons, Inc. v. Livingston, held that common law privity-of-contract principles, which lower courts traditionally had invoked to preclude survival of employees' rights, did not necessarily apply to collective bargaining agreements. Wiley was a nonunion corporation that had merged with a smaller unionized firm whose collective bargaining agreement contained a broad arbitration clause. The Court required Wiley to arbitrate the extent to which the agreement governed its responsibilities to the smaller company's employees whom Wiley had hired. This decision was soon extended by lower federal courts to situations involving purchases of assets. The effect of Wiley and subsequent related cases has been to make the obligations of employers vis-a-vis their employees a significant consideration in planning business combinations and purchases. This article will examine the uncertain status of a new employer's obligation to his employees after a change in business ownership and will analyze the impact that recent decisions will have on these important transactions.