Local 35 of the United Food and Commercial Workers Union was certified by the NLRB as bargaining representative of the employees of Fountainhead Development Corporation in July. Fountainhead operated the Blu-Fountain Manor Nursing Home. Immediately after certification, the union began collective bargaining negotiations with Fountainhead.

The negotiations were not fruitful, and in October the employees began an economic strike against Fountainhead. The union filed unfair labor practice charges against Fountainhead in February relating to access to Fountainhead's financial records. Fountainhead hired strike replacements.

On May 1, Jarm Enterprises purchased the Blu-Fountain Manor Nursing Home. Jarm immediately retracted the employee benefits package extended by Fountainhead and rehired, under new terms, all Fountainhead employees who had been working at the time of the transfer of ownership, including the striker replacements. In addition, Jarm did the following: instituted new personnel policies, eliminated certain supervisory positions and job classifications, introduced a new computerized billing system, and initiated $60,000 worth of repairs to the nursing home.

On May 8, the union contacted Jarm with an unconditional offer to return to work and a request to commence collective bargaining. Jarm refused both offers, claiming that it was a new employer that was not subject to labor relationships established with Fountainhead. Furthermore, Jarm asserted that the union did not represent its current employees. Jarm could have rehired the striking union members because in the months following May 8, the company hired a number of employees that exceeded the number of striking employees. The union filed an unfair labor practice charge against Jarm, claiming that the company was obligated to bargain. Jarm contended that it was a radically different enterprise and was in no way bound to deal with the union and its strikers. Should the union's charge be upheld? Decide.