By: Louis Cannon, Carlos Torrejon and Cassandra Horton

On July 21, 2026, a divided D.C. Circuit panel ruled that a longstanding doctrine created by the National Labor Relations Board (the “NLRB”), the “successor bar,” is invalid because it exceeds the agency’s authority under the National Labor Relations Act (the “NLRA”). The case is Hospital Menonita de Guayama, Inc. v. NLRB (Hospital Menonita); in it, the court applied the U.S. Supreme Court’s 2024 ruling in Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024), which ended so-called Chevron deference to federal agencies (Chevron, U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984)). This decision is important for companies purchasing or selling unionized businesses, as well as investors, lenders, and other stakeholders involved in such transactions.

Background: The Successor Bar

According to the NLRB’s successor bar, a new owner of a unionized business must recognize and bargain with an incumbent union for up to a year (if the new employer exercises its right to establish initial terms and conditions of employment that differ from what was in place under the predecessor employer). This rule means that employees are deprived of their right to decertify an incumbent union for up to a full year after their employer gets sold to a new owner, even if it is clear that the union has lost majority support.

The Facts of the Case and NLRB’s Decision

Hospital Menonita began as a run-of-the-mill successor bar case. There, the unionized employer was purchased by another company. The incumbent union represented employees across five bargaining units at the hospital but had never even negotiated a collective bargaining agreement for two of the units. Moreover, its agreements for the other three units had expired more than four years earlier. After the new employer received evidence that a majority of employees in each unit no longer wanted the union to represent them, it withdrew recognition from the union. Under normal circumstances, an employer that receives evidence that a majority of its employees have rejected their union may withdraw recognition from the union. However, in a June 2022 decision, the NLRB applied the successor bar and found that the new employer had committed unfair labor practices on that basis.

In February 2024, a unanimous D.C. Circuit panel upheld the NLRB’s order and afforded the agency Chevron deference. Soon thereafter, the U.S. Supreme Court decided Loper Bright, which overruled Chevron and held that courts must independently interpret statutes rather than defer to an agency’s view of its own authority. Then, the Supreme Court vacated the judgment and remanded the case to the D.C. Circuit.

The D.C. Circuit’s Decision on Remand Effectively Eliminates the NLRB’s Successor Bar and Puts Other Agency-Created Bars Into Question

On remand, the majority of a new D.C. Circuit panel reviewed the question of the successor bar de novo, as Loper Bright instructs. The panel concluded that the successor bar violates the Act by depriving employees of their right under federal labor law to choose whether to be represented by a particular union. Specifically, the majority noted, the successor bar prevents, for up to a year, employees from decertifying their union or a rival union from filing a petition for an election to represent those employees. The majority noted that the NLRA contains one express bar: the so-called “election bar.” The election bar states that a second election cannot be held among a group of employees if an election has been held within the year prior. This bar is spelled out in the text of Section 9(c)(3) of the NLRA. The court majority noted that where Congress provides a rule in a statute and explicitly carves out an exception, an agency does not have the authority to create additional exceptions. Put another way, according to the majority, Congress thought there should be only one exception to the general rule that employees, employers, or rival unions should be able to petition the NLRB to oust an incumbent union, and that is the election bar. The NLRB isn’t permitted to create others.

Other NLRB-created bars include: (1) the contract bar, which holds that if an employer and union finalize a collective bargaining agreement, there can be no petition for the duration of that agreement (up to a maximum of three years); and (2) the voluntary recognition bar, which provides that there cannot be a petition for up to one year after an employer voluntarily recognizes a union. The D.C. Circuit’s decision squarely places these bars in question and may invite future challenges.

Why This Case Is Important

The panel’s decision in this case may not be the final word. The NLRB might seek en banc reconsideration. Moreover, the agency could petition the U.S. Supreme Court for review. However, if this case stands, it has consequences that spread far and wide.

If Hospital Menonita remains in place, it is a substantial development for employers buying or selling unionized businesses, as well as others involved in evaluating, financing, or structuring such deals. While a federal appellate decision does not automatically change NLRB precedent nationwide, it is worth noting that any employer subject to the NLRB’s jurisdiction has the option of seeking review in (i.e., appealing to) the D.C. Circuit after an adverse finding from the NLRB. So if a successor employer learns shortly after purchasing a unionized business that a majority of the employees no longer want to be represented by the union and the employer withdraws recognition and is found guilty of an unfair labor practice by the NLRB on that basis, the employer can appeal that finding to the D.C. Circuit, which could likely vacate the NLRB’s decision based on the Hospital Menonita decision . While the successor bar continues to survive at the agency level, this case may provide a practical path for employers to challenge that rule. The decision also places in serious question any other NLRB-created bars (most notably the contract bar) and strongly suggests that, at least in the D.C. Circuit, such bars may be found invalid as well.

We will continue to monitor this situation and provide updates as they unfold.