ARA Services, Inc. v. N.L.R.B., AFL-CI

• Decision Date: 05 December 1995
• Docket Number: I,95-1332,AFL-CI,Nos. 95-1201,s. 95-1201
• Citation: 71 F.3d 129
• Parties: 150 L.R.R.M. (BNA) 2993, 64 USLW 2376, 131 Lab.Cas. P 11,470 ARA SERVICES, INCORPORATED, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent, Communications Workers of America,ntervenor. NATIONAL LABOR RELATIONS BOARD, Petitioner, v. ARA SERVICES, INCORPORATED, Respondent, Communications Workers of America,ntervenor.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 129

71 F.3d 129

150 L.R.R.M. (BNA) 2993, 64 USLW 2376,

131 Lab.Cas. P 11,470

ARA SERVICES, INCORPORATED, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent, Communications Workers of America, AFL-CIO, Intervenor.

NATIONAL LABOR RELATIONS BOARD, Petitioner, v. ARA SERVICES, INCORPORATED, Respondent, Communications Workers of America, AFL-CIO, Intervenor.

Nos. 95-1201, 95-1332.

United States Court of Appeals, Fourth Circuit.

Argued Sept. 29, 1995.

Decided Dec. 5, 1995.

ARGUED: David William Miller, Baker & Daniels, Indianapolis, Indiana, for Petitioner. David A. Seid, National Labor Relations Board, Washington, D.C., for Respondent. John David James, Smith, Follin & James, L.L.P., Greensboro, North Carolina, for Intervenor. ON BRIEF: Todd M. Nierman, Baker & Daniels, Indianapolis, Indiana, for Petitioner. Frederick L. Feinstein, General Counsel, Linda Sher, Acting Associate General Counsel, Aileen A. Armstrong, Deputy Associate General Counsel, Paul J. Spielberg, Deputy Assistant General Counsel, National Labor Relations Board, Washington, D.C., for Respondent.

Before WILKINSON, WILLIAMS, and MOTZ, Circuit Judges.

Enforcement denied by published opinion. Judge WILKINSON wrote the majority opinion, in which Judge WILLIAMS joined. Judge MOTZ wrote an opinion, concurring in part and dissenting in part.

OPINION

WILKINSON, Circuit Judge:

In this case we must decide whether the National Labor Relations Board ("the Board") properly asserted jurisdiction over petitioner ARA Services, Inc. ("ARA"). ARA provides food services at the University of North Carolina at Greensboro ("UNCG"), a "political subdivision" exempt from the Board's jurisdiction. 29 U.S.C. Sec. 152(2). ARA contends that under its contract with UNCG, UNCG regulates ARA's employment terms so extensively that ARA is unable to engage in meaningful collective bargaining, thus triggering the jurisdictional exception developed by the Board for employers whose employment conditions are substantially controlled by statutorily exempt entities. Res-Care, Inc., 280 N.L.R.B. 670 (1986).

We agree with ARA. The contract between ARA and UNCG grants UNCG veto authority over any modification of ARA's wages, fringe benefits, and staffing levels. The Board's exercise of jurisdiction over ARA thus forces collective bargaining where control over the basic subjects of negotiation lies not with the employer, but with a political subdivision statutorily exempt from the Board's jurisdiction. Accordingly, we deny enforcement of the Board's bargaining order.

I.

On March 1, 1993, the Communication Workers of America ("CWA") filed a petition with the NLRB seeking to represent certain of ARA's employees at UNCG. At the time, ARA's provision of food services at UNCG was governed by a five-year contract, covering 1989 to 1994 ("the 1989 agreement"). Under this agreement, ARA received a fixed fee for each student who purchased a meal plan, with the fee level set by a line-item budget that was negotiated annually between ARA and UNCG.

ARA opposed CWA's petition on jurisdictional grounds, contending that under the 1989 agreement UNCG controlled ARA's terms of employment. ARA urged the Board to decline jurisdiction based on its exception for private employers whose employment relations are substantially regulated by exempt entities. On April 2, 1993, the Regional Director of the NLRB rejected ARA's jurisdictional arguments. The Director ruled that UNCG did not control ARA's wages or staffing levels to the necessary degree, and that the annual budget renegotiation showed UNCG did not have "absolute veto power or final say-so" over ARA's employment terms. On September 29, 1993, a divided panel of the NLRB summarily affirmed the Regional Director's ruling and asserted jurisdiction over ARA.

ARA and UNCG executed a new five-year contract on June 24, 1994 ("the 1994 agreement"), the terms of which make up the substance of this appeal. The 1994 agreement took effect on August 1, 1994, following expiration of the 1989 contract. The current accord increases UNCG's control over ARA's employment terms by restricting ARA's ability to unilaterally alter its wages, fringe benefits, or staffing levels. In light of the changes effected by the 1994 agreement, ARA urged the Board to reconsider its decision asserting jurisdiction. On December 27, 1994, the Board granted ARA's motion to reopen the record, but summarily held that ARA could still engage in meaningful collective bargaining under the 1994 contract. ¹

By this time, CWA had prevailed in a representation election and had been certified as the bargaining representative. ARA, though, refused to bargain with CWA, based primarily on its view that the Board lacked jurisdiction. CWA filed a charge, and on January 27, 1995, the Board granted summary judgment against ARA, finding that it had violated the Act by refusing to negotiate. ARA appeals from the Board's bargaining order.

II.

The National Labor Relations Act exempts from its coverage "State[s] or political subdivision[s] thereof." 29 U.S.C. Sec. 152(2). The Board has long extended this exemption to private employers providing services for exempt political subdivisions, where the exempt entity effectively controls the primary employment terms. See NLRB v. Princeton Memorial Hosp., 939 F.2d 174, 177 n. 3 (4th Cir.1991); National Transp. Serv., Inc., 240 N.L.R.B. 565 (1979). In such situations "any apparent collective bargaining by the employer would in substance be with the (supposedly) exempt entity," Hicks v. NLRB, 880 F.2d 1396, 1397 (D.C.Cir.1989); see NLRB v. Kemmerer Village, Inc., 907 F.2d 661, 663 (7th Cir.1990), and the same considerations underlying the statutory exemption of the public entity should also apply to the private employer. The Board's exemption thus "picks up where the political subdivision exemption leaves off." Kemmerer Village, 907 F.2d at 663.

In Res-Care, Inc., 280 N.L.R.B. 670 (1986), the Board set forth the analysis used to determine whether it should exercise jurisdiction over private employers contracting with exempt public entities. The question under Res-Care is "whether the employer retain[s] sufficient control over the employment conditions of its employees to enable it to engage in ... 'meaningful' bargaining with a labor organization." Id. at 672. Critical to this inquiry is whether the exempt entity's controls over the employer's terms of employment are "direct" restrictions, the kind that specifically reserve to the exempt entity the final authority to determine wages, benefits, and other economic conditions of employment, or are merely "effective" restrictions, the kind that allow the employer to adjust wages and benefits as long as it remains within some general budgetary constraint. Id. at 674 n. 22; Human Development Ass'n v. NLRB, 937 F.2d 657, 662 (D.C.Cir.1991), cert. denied, 503 U.S. 950, 112 S.Ct. 1512, 1513, 117 L.Ed.2d 649 (1992).

When the exempt subdivision directly controls wage and benefit levels and other employment terms, the Board has declined to assert jurisdiction. NLRB v. Career Systems Development Corp., 975 F.2d 99, 101 (3d Cir.1992) ("Where 'ultimate discretion' in the setting of wage rates and fringe benefits rests with the government agency rather than the employer under contract to the agency, the Board will not assert jurisdiction."); Human Development Ass'n, 937 F.2d at 662. This was the case in Res-Care, where the employer submitted a detailed budget for the Department of Labor's approval that set forth wage ranges by classification, fringe benefits, and various employment policies, and the employer could not adjust its wages or benefits without the Department's permission. The Board declined to assert jurisdiction, holding that "[w]hen an employer ... lacks the ultimate authority to determine primary terms and conditions of employment, such as wage and benefit levels, it lacks the ability to engage in the necessary 'give and take' which ... makes bargaining meaningful." Res-Care, 280 N.L.R.B. at 674. See also Southwest Ambulance of California, Inc., 295 N.L.R.B. 125, 126 n. 8 (1989) (refusing jurisdiction where "the exempt entity sets the exact wage and benefit levels"); PHP Healthcare Corp., 285 N.L.R.B. 182, 184 (1987) (refusing jurisdiction where the exempt entity "retains ultimate discretion for setting wage and benefit levels").

By contrast, when the exempt subdivision's controls over the employment terms are only of the effective variety, involving overall budgetary restrictions within which the employer can adjust individual salary and benefit levels, the Board has exercised jurisdiction. Career Systems, 975 F.2d at 101 ("[W]here the government agency merely establishes an overall level of compensation ... but not the wage rates and fringe benefits, the Board will assert jurisdiction."); Human Development Ass'n, 937 F.2d at 663 ("Board precedent makes clear that an effective ceiling imposed by a public funding scheme does not deprive an employer of the ability to bargain if the employer can set wages at different levels beneath that ceiling"); e.g., Long Stretch Youth Home, Inc., 280 N.L.R.B. 678, 682 n. 14 (1986) ("[A]n effective ceiling ... limiting the private employer's total budget is not the type of control over labor relations that would cause us to decline to assert jurisdiction."). Presumably, the Board's approach reflects the fact that general budgetary constraints of this sort ultimately differ little from the market pressures that every employer must face. See Kemmerer Village, 907 F.2d at 664.

Whether a given case involves direct or effective restrictions by an exempt entity may be a close call. One thing, however, seems clear. The Board has declined jurisdiction where the exempt subdivision possessed a right of approval over any change in individual wages and benefits. In cases where the Board assumed jurisdiction, the employer retained some discretion over wages, and also...