Res-Care, Inc.

670 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Res-Care, Inc. and Indiana Joint Board, Retail, Wholesale and Department Store Union, AFL- CIO, Petitioner. Case 25-RC-7917 24 June 1986 DECISION ON REVIEW AND ORDER BY CHAIRMAN DOTSON AND MEMBERS DENNIS, JOHANSEN, BABSON, AND STEPHENS On 23 May 1983 the Regional Director for Region 25 issued a Decision and Direction of Elec- tion in this proceeding, asserting jurisdiction over the Employer, Res-Care, Inc. (Res-Care) under the test set forth in National Transportation Service, 240 NLRB 565 (1979), and relying specifically on Singer Co., 240 NLRB 965 (1979). Thereafter, in accordance with Section 102.67 of the National Labor Relations Board Rules and Regulations, Res- Care filed a timely request for review of the Re- gional Director's decision, on the grounds that the Regional Director made findings of fact that are clearly erroneous, and that, alternatively, there are compelling reasons for reconsidering the Board's policy in National Transportation. Res-Care contends that its labor relations policy is controlled to such a degree by the United States Department of Labor (DOL) that effective collec- tive bargaining is precluded and that it should be exempt from our jurisdiction under Section 2(2) of the NLRA. We agree that we should decline to assert jurisdiction based on the principles of Na- tional Transportation.' On consideration of the entire record in this case, including the Employer's brief on review, we have decided to dismiss the pe- tition for the reasons stated below. Pursuant to the Board's procedures, an election was conducted as scheduled on 22 June 1983, and the ballots were impounded pending consideration of the Employer's request for review.2 By mail- ' Res-Care and our dissenting colleague both contend that we should base our determination on Sec 2(2) of the Act. We do not agree As the Board stated in National Transportation, our inquiry is twofold, i e, "whether the employer itself meets the definition of 'employer' in Section 2(2) of the Act and, if so . . whether the employer has sufficient con- trol over the employment conditions of its employees to enable it to bar- gain with a labor organization as their representative " Id at 565 It is clear, and no party contends otherwise, that Res-Care itself is not a Fed- eral Government agency, and is thus not exempt from our jurisdiction under Sec 2(2) of the Act It is also clear that Res-Care employs "em- ployees" as that term is defined in Sec 2(3) Our only inquiry, therefore, is whether, in exercising our discretion , we should decline to assert juris- diction because of the extent to which DOL, an entity exempt from our jurisdiction, controls the employment conditions of Res-Care' s employ- ees. We answer that question today in the affirmative on the ground that the policies of the Act would not be effectuated by our assertion of juns- diction in this case. See NLRB Y Denver Building Trades Council, 341 U.S. 675, 684 (1951) 8 The Petitioner had requested an election in a unit limited to the Em- ployer's food service employees, including cooks, a cafeteria warehouse- man, and cafeteria general utility workers The parties stipulated to the appropriate unit gram dated 26 August 1983, the Board granted the Employer's request for review. In asserting jurisdiction over Res-Care, the Re- gional Director found under National Transporta- tion, supra, that despite certain control by the U.S. Department of Labor over Res-Care's labor rela- tions, the Employer retains sufficient authority over its employees' terms and conditions of em- ployment such that meaningful bargaining is not precluded. Res-Care contends, on the other hand, that because its labor relations policy is controlled to such a degree by DOL, it is precluded from ex- ercising the discretion necessary to bargain effec- tively with the Petitioner. In this respect, Res-Care maintains this case is distinguishable from Singer Co., supra, in which the Board asserted jurisdiction over a job corps center similar to the facility oper- ated here. In the alternative, Res-Care contends that Singer should be overruled. We agree that Singer should be overruled and decline to assert ju- risdiction over Res-Care based on the principles set forth in National Transportation, as clarified below. Res-Care is a for-profit corporation organized under the laws of the State of Kentucky. It oper- ates residential job corps centers under a contract with DOL, including the facility involved here, the Camp Atterbury Center in Edinburgh , Indiana. When bidding on the contract for operation of the center, in response to DOL's Request for Proposal, Res-Care submits a Technical Proposal, which de- scribes the nonfinancial aspects of the proposed op- erations, and a Management Proposal, which in- cludes both a proposed line-by-line budget and a description of the financial aspects of the Employ- er's proposal. Included in these proposals, which constitute Res-Care's bid, are a Staff Manning Table, which lists Res-Care's job classifications; a Labor Grade Schedule; and a Salary Schedule, which sets wage ranges, including minimum and maximum wage rates, for each labor grade. In ad- dition, DOL asks the employer to submit its per- sonnel policies concerning compensatory time, overtime, severance pay, holidays, vacation, proba- tionary employment, sick leave, cost-of-living in- creases, incentives, and equal employment opportu- nity, which Res-Care describes in its Technical Proposal. DOL approves the Staff Manning Table, the Labor Grade Schedule, the Salary Schedule, the personnel policies, and the designated employee benefits when it awards the contract to the em- ployer. The contract specifically provides that any proposed changes in the approved wage ranges or fringe benefit plans must be submitted to DOL for approval. Proposed changes in the Staff Manning 280 NLRB No. 78 RES-CARE, INC. Table, Labor Grade Schedule, and Salary Schedule also must be approved by DOL.3 The contract between DOL and Res-Care also contains other limitations on the wages that Res- Care can pay its employees. In general, the con- tract requires wages to be no more than those paid to persons providing similar services in the area where the program is carried out, or in the area of the particular employee's immediately preceding employment, whichever is higher. In addition, Res- Care agrees in the contract not to hire any employ- ee at a wage that is 10 percent or more higher than the wages for his immediately preceding employ- ment. All wage increases, due to merit, change in position, or promotion, are limited to less than 10 percent. Any deviation from these contractual con- ditions requires a waiver from DOL in each in- stance. Although Res-Care conducts its own hiring, the contract requires Res-Care to submit its selection criteria and hiring procedure to DOL for approval. DOL must approve specifically the hiring of the center director, all senior staff, and supervisors, in- cluding all employees who make at least $15,000 a year, and who report directly to the center direc- tor. Res-Care must obtain the approval of DOL before it may hire a relative of a current employee. Res-Care also agrees, in its Technical Proposal, to set a hiring goal of 15 graduates of the Atterbury Center each contract year. The contract limits the number of full-time equivalent staff employed under its terms to 208. DOL compensates Res-Care on a cost-plus-fixed- fee basis. The total contract price, including the fixed fee, is derived from the line-by-line operating budget submitted by Res-Care and approved by DOL. Total staff salaries, wages, and benefits are also listed as a line item in the operating budget, and the figure is broken down in the budget by Res-Care's various operating divisions. The figure is further broken down in an attachment to the budget, which lists a yearly salary and benefit figure for each of Res-Care's job classifications. The totals for staff salaries and benefits are added to the other estimated costs in Res-Care's budget, and to Res-Care's proposed fixed fee, to constitute 8 The contract involved here was effective from 15 November 1981 through 14 November 1983 DOL approved revisions in the Employer's Staff Manning Table, Labor Grade Schedule, and Salary Schedule on 12 October 1982 Among other changes, these revisions moved the classifi- cation of "cook," one of the petitioned -for positions, from Labor Grade II to Labor Grade III, with a consequent increase in salary range The wage ranges for the petitioned -for employees, according to the Revised Labor Grade and Salary Schedules , are as follows general utility worker (Labor Grade II), from minimum of $3.54/hr. ($7363/yr.) to maximum of $4 55/hr ($9464/yr ), and cook and cafeteria warehouseman (Labor Grade III), from minimum of $4 04/hr ($8403/yr) to maximum of $5 25/hr ($10,920/yr) 671 the proposed contract price for each year of the 2- year contract. Once DOL accepts Res-Care's bid, the proposed figures become the contract price, and are set forth in the final contract. DOL is not obligated to reimburse Res-Care for costs incurred in excess of the estimated cost set forth in the contract. DOL agrees only to compen- sate Res-Care for "allowable costs," which are de- fined as costs allowable in accordance with Federal procurement regulations and the terms of the con- tract.4 Payment is made on a monthly basis, but Res-Care periodically submits vouchers to DOL for claimed "allowable costs," including labor costs. DOL has the authority to audit these vouch- ers, to rule that any cost claimed is "disallowable," and to reduce any monthly contract payment by the amount of the disallowed cost. DOL Job Corps regulations require contractors to establish labor-management relations in accord- ance with the National Labor Relations Act, and prohibit the Job Corps from conciliating, mediat- ing, or arbitrating labor disputes between center operators and labor organizations. 20 CFR § 684.120(b)(5). In addition, the contract between DOL and Res-Care requires Res-Care to notify DOL of any actual or potential labor dispute that is delaying or threatens to delay the timely per- formance of the contract. At the time of the hearing in this case, Res-Care had a collective-bargaining agreement with Local 512, Retail, Wholesale and Department Store Union, covering a unit of Res-Care's resident advi- sors and dorm attendants at Camp Atterbury. The collective-bargaining agreement contains a clause which subjects the entire agreement to DOL ap- proval, and which provides that if any item of wages or benefits is deemed not an allowable cost by DOL, then the agreement is automatically amended to conform to DOL requirements by de- leting those portions of wages or benefits that are disallowed by DOL. Notably, in response to an in- quiry by Res-Care concerning a wage grievance that was pending at the time of the hearing in this case, DOL's regional director, Office of Job Corps, ruled that any salary in excess of the maximum for any labor grade would be considered a disallowa- ble cost, unless DOL grants a specific waiver. In overseeing Res-Care's management of the job corps program, DOL exercises pervasive oper- ational control.5 DOL establishes standards and procedures for selection of applicants for corps- member slots. DOL requires Res-Care to provide 4 Reimbursement for costs in addition to those estimated is subject to DOL approval 5 The regulations for the operation of job corps centers are contained to 20 CFR Part 684 672 DECISIONS OF NATIONAL LABOR RELATIONS BOARD residential supervision, counseling, and support staff for the corpsmembers on a 24-hour-a-day, 7- day-a-week basis. In connection with the work of the petitioned-for food service employees, Res- Care is required by DOL regulations to provide nutritionally well-balanced, good-quality meals in sanitary facilities, using military master menus as guides.6 Each of Res-Care's operating divisions must submit proposed standard operating proce- dures, which are reviewed and approved by DOL. DOL's project manager performs an annual onsite review of Res-Care's operations, as well as random onsite inspections.' After such reviews and inspections, Res-Care is given a period of time, typically 60 days, in which to correct a finding of "non-compliance." In National Transportation Service, supra, 240 NLRB 565, the Board abandoned the "intimate connection" test for determining whether to assert jurisdiction over an employer with close ties to an exempt government entity. The Board held that it no longer would examine the relationship between the purposes of the exempt institution and the serv- ices provided by the nonexempt employer to deter- mine whether the employer's operations are inti- mately related to an exempt government function.8 Instead, the inquiry would be whether the employ- er itself met the definition of an "employer" in Sec- tion 2(2) of the Act and, if so, whether the employ- er retained sufficient control over the employment conditions of its employees to enable it to engage in "effective" or "meaningful" bargaining with a labor organization. In reviewing National Transportation and its progeny, we find that the Board has not set forth a clear or consistent explanation of the elements of effective or meaningful bargaining. In particular, the decisions have failed to define (a) those areas of an employer's labor relations that are sufficiently important that the employer cannot bargain mean- ingfully if the exempt entity removes or severely restricts the employer's discretion, and (b) the cir- cumstances under which the government entity will be deemed to have removed or severely re- stricted such discretion. Since we perceive a lack of clarity in National Transportation, and since parties in numerous other cases now pending have urged the Board to over- rule National Transportation and to return to an 6 See20CFR§68481 The project manager conducted 10-12 such onsite inspections during a 12-month period between 1982 and 1983 a We concluded that there was nothing in the legislative history of Sec 14(c)(1) of the Act disclosing "any congressional intent that the Board decline to assert jurisdiction over any employer solely because of the relationship between services it provides to an exempt entity and the purposes of such entity " 240 NLRB at 565 "intimate connection" standard or to adopt other tests, we have chosen to reexamine the issue. After careful consideration, the Board has decided to re- affirm the basic test set forth in National Transpor- tation for determining whether assertion of jurisdic- tion over an employer providing services to or for an exempt entity is warranted. In applying that test, however, we will examine closely not only the control over essential terms and conditions of em- ployment retained by the employer, but also the scope and degree of control exercised by the exempt entity over the employer's labor relations, to determine whether the employer in issue is capa- ble of engaging in meaningful collective bargain- ing. In reaffirming the National Transportation test, we again reject the "intimate connection" standard, under which jurisdiction was withheld if the pri- vate employer performed functions that were inti- mately related to allegedly traditional government functions of the exempt entity.9 As we stated in National Transportation, the "intimate connection" standard was without basis in the statute or its leg- islative history, and proved to be vague because it was difficult to determine with confidence or cer- tainty precisely what activities constituted tradi- tional government functions.' o In asserting jurisdiction over Res-Care, the Re- gional Director relied on Singer Co., supra, 240 NLRB 965, in which the Board took jurisdiction over a job corps center operated under contract with DOL virtually identical to the one here. II It is our view, however, that in Singer, the Board did not give adequate weight to the scope and degree of control exercised by DOL over the employer's labor relations. Singer relied on three major factors in finding that the employer could engage in meaningful bar- gaining : (1) the employer could negotiate with a labor organization regarding its bid proposals; (2) the employer alone was responsible for hiring, firing, promotions, demotions, and transfers; and (3) the employer actually established the terms and conditions of employment for its employees, sub- ject to "outer boundaries" regarding wages and See, e g, Rural Fire Protection Co, 216 NLRB 584 (1975) 1s In an entirely different context, the Supreme Court recently ex- pressed similar concern with the difficulties inherent in determining tradi- tional government functions Garcia v San Antonio Metropolitan Transit Authority, 105 S Ct 1005 (1985) Member Dennis finds it unnecessary to rely on Garcia She would not in any way link the Board's National Transportation doctrine with a diffi. cult issue of federalism that has sharply split the Supreme Court twice in the last decade and may well do so again, according to the Garcia dis. senters 11 Singer was reaffirmed in Management & Training Corp, 265 NLRB 1152 (1982), and Teledyne Economic Development Co, 265 NLRB 1216 (1982), decided the same day RES-CARE, INC. other matters set by DOL in the contract between DOL and the employer. Id. at 966. This analysis, however, assessed the extent of control retained by the employer in isolation, placed no weight on the job corps employer's lack of a final say concerning the primary economic aspects of its relationship with its employees-the setting of wages and bene- fits-and understated the degree of economic con- trol possessed by DOL. The DOL provisions under which Res-Care's wages and benefits are set establish to our satisfac- tion that DOL controls the primary economic terms and conditions of employment. Thus, al- though wage and benefit levels for each job classi- fication are set initially in the Employer's operating budget, the budget must be approved by DOL and, once approved, becomes the basis for the contract price. DOL must approve wage ranges, including a maximum wage for each job classification, as well as the substantive terms of several employee bene- fits, including sick leave pay, vacation accrual, and the number of paid holidays. The Employer also must obtain DOL's approval before making changes in these approved wage and benefit levels. If the Employer attempts to pay a higher wage than the maximum approved by DOL, or attempts to grant a benefit that is more costly than the one approved by DOL, DOL retains the discretion to reject the added expenditure as a "disallowable cost" and to reduce the Employer's monthly con- tract payment. In every sense, it is DOL, not Res- Care, which retains ultimate discretion for setting wage and benefit levels of the job corps center,12 and thus effectively precludes Res-Care from en- gaging in meaningful collective bargaining. In NLRB v. Chicago Youth Centers, 616 F.2d 1028 (1980), and Lutheran Welfare Services v. NLRB, 607 F.2d 777 (1979), the Seventh Circuit Court of Appeals refused to uphold the Board's as- sertion of jurisdiction over employers that operated child care facilities under the Federal Day Care and Headstart programs. The court noted in Lu- theran Welfare Services that the Federal Govern- ment empowered the city agency that contracted for the administration of these programs to estab- lish standards governing salaries, salary increases, travel and per diem allowances, and other employ- 12 The Board has held that a requirement of government approval for payment of wages beyond a specified maximum, or for changes in agreed-upon employee benefit plans is an indication of substantial control of labor relations by an exempt entity ARA Services, 221 NLRB 64 at fn 7 and 65 fn It (1975) Although the Board there concluded that the em- ployer shared the statutory exemption of the county because the county was a point employer of the employer's employees, we do not rely on the Board's point employer analysis We do not require a finding that the exempt entity is a joint employer in order to withhold the assertion of jurisdiction 673 ee benefits.13 All the employees were classified and their salaries set according to local agency policy. In addition, the employers were required to obtain agency approval before hiring or promoting em- ployees, granting wage or merit increases, paying fringe benefits, or setting working hours. We agree with the Seventh Circuit that the setting of wage and benefit standards by the exempt entity is the type of control over essential economic terms of employment that precludes meaningful bargain- ing.14 The Tenth Circuit also reversed the Board's as- sertion of jurisdiction in Board of Trustees of Memo- rial Hospital v. NLRB, 624 F.2d 177 (1980), based largely on the fact that the exempt entity retained discretion to approve specific wage and benefit levels. The employer submitted to the board of trustees, an exempt political subdivision, semiannual reports regarding salary ranges for each job classi- fication and annual recommendations on wage rates and fringe benefits for each position. The exempt entity approved the employer's proposed wage rates, fringe benefits, and staffing levels. In addi- tion, the employer certified that it would not devi- ate from the authorized wage and benefit ranges without the exempt entity's approval. Id. at 181. In these circumstances, the court found that the exempt entity retained such control over employ- ment relations that the employer could not engage in meaningful collective bargaining. As in Singer Co., supra, 240 NLRB 965, in this case the Employer alone is responsible for hiring,"' firing, promotions, 16 demotions, and transfers. In addition, the Employer in this case has final au- 18 Id at 778 14 Although both Lutheran Welfare Services and Chicago Youth Centers held that the Board should not have asserted jurisdiction because the exempt entity was a point employer , we do not adopt that analysis See In 12, supra. The process by which the city agency controlled wages in Chicago Youth Centers differs from the control exercised by DOL in this case in one main respect As described in the Board's decision in Catholic Bishop of Chicago, 235 NLRB 776 (1978), involving the same Model Cities agency and the same programs as Chicago Youth Centers, the city agency set the salary and benefit guidelines itself before the employers drew up their budgets The employers then submitted proposed wage and benefit packages for agency approval, and the agency would generally only ap- prove the employers' proposals if they came within the agency guide- lines In this case , on the other hand, DOL approves wage ranges and benefit levels that are proposed by Res-Care In all the cases, however, the government entity ultimately approves wage and benefit levels pro- posed by the private employer, and thus reserves to itself the ultimate discretion to determine these economic terms of employment 15 Although Res-Care has the final authority on hiring for all nonsu- pervisory positions , it must submit its selection criteria and hiring proce- dure to DOL for approval, and DOL must approve Res-Care's selections for center director, senior staff, and supervisors 16 The Employer's authority is somewhat restricted with regard to promotions, since DOL must approve any wage increase of 10 percent or more 674 DECISIONS OF NATIONAL LABOR RELATIONS BOARD thority over grievances.17 We agree with those cir- cuit court decisions, however, that have recognized the existence of a core group of "basic bargaining subjects," and have held that if an employer retains control over decisions affecting those subjects, meaningful bargaining is possible.18 Conversely, therefore, if the employer does not have ultimate authority over these subjects, we would find that meaningful bargaining is precluded. Without deni- grating the importance of other personnel-related issues, we hold that if an employer does not have the final say on the entire package of employee compensation, i.e., wages and fringe benefits, mean- ingful bargaining is not possible.19 We view our differences with our dissenting colleague as being more of degree than of substance. All agree that bargaining can occur within a corridor of bargain- ing subjects, but one's view of whether that bar- gaining is meaningful under the National Labor Relations Act turns, in part at least, on the narrow- ness of the corridor. In our view the ability of an employer to have the final, practical say regarding wages and benefits, and the union's practical ability to affect the employer's decision by resort to eco- nomic action is fundamental. Our view of this record convinces us that this fundamental require- ment for meaningful bargaining is lacking here. We find that the facts in this case warrant declin- ing to assert jurisdiction. Thus, DOL must approve the initial amounts for wages and benefits that Res- Care proposes in its budget, as well as wage ranges and benefit levels proposed by Res-Care; Z° and re- tains ultimate discretion to approve or disapprove any change in wage rates, benefit levels, or person- nel policies.21 17 Although the Employer claims that its employees have the right to appeal discharges and disciplinary actions to DOL, the Employer's per- sonnel handbook makes clear that the final decision on grievances rests with the Employer's center director The only appeal the employees have to DOL is for equal employment opportunity (EEO) complaints is Jefferson County Community Center v NLRB, 732 F.2d 122, 127 (10th Cir 1984), R W. Harmon & Sons, Inc v. NLRB, 664 F 2d 248, 251 (10th Cir 1981). See also NLRB v E C. Atkins & Co, 331 U S 398, 413 (1947), finding that collective bargaining was possible between an em- ployer and its employee guards despite the Federal militarization of the guards, on the grounds that the employer retained final authority to de- termine the "most important incidents of the employer-employees [sic] re- lationship " 19 Cf Jefferson County Community Center v NLRB, supra, 732 F 2d at 127 (jurisdiction asserted where employer concedes that employer has "final decision-making authority" over essential terms and conditions of employment, including wages and fringe benefits), NLRB Y Austin Devel- opmental Center, 606 F 2d 785, 789 fn 8 (7th Cir 1979) (jurisdiction as- serted where neither exempt government entity "specifically limits [em- ployer's] employee compensation expenditures.") 20 Res-Care is even limited in the wage rates it may initially propose by DOL's requirements that wages be based on area standards and not exceed by 10 percent or more what the employees received in their former positions 21 Although theoretically Res-Care could increase the compensation of employees from its own funds, it has chosen not to do so . As a practical matter DOL provides all the funds for the job corps program, including funds for employee compensation, through its cost reimbursement pay- When an employer like Res-Care lacks the ulti- mate authority to determine primary terms and conditions of employment, such as wage and bene- fit levels, it lacks the ability to engage in the neces- sary "give and take" which is a central requirement of good-faith bargaining, and which makes bargain- ing meaningful .22 In view of the above, we find that Res-Care does not possess sufficient control over the employment conditions of its employees to enable it to engage in meaningful collective bargaining with a labor or- ganization . Accordingly, we conclude that it would not effectuate the purposes and policies of the Act to assert jurisdiction, and we shall dismiss the peti- tion.23 ments to Res-Care As DOL retains the ultimate discretion to determine wages and benefits, Res-Care's theoretical ability to absorb increases that are not approved by DOL does not affect our determination See NLRB P. Chicago Youth Centers, 616 F 2d 1028, 1029 (7th Cir 1980). 22 In declining to assert jurisdiction, we specifically do not rely on the pervasive operational controls exerted by DOL over Res-Care in matters other than those pertaining to labor relations Many agencies perform a general review of the budgets of the private employers with whom they contract for services in order to assure that expenditures allocated to the required services are reasonable See, e g, Long Stretch Youth Home, 280 NLRB 678 (Chairman Dotson dissenting on other grounds), D. T Watson Home for Crippled Children, 242 NLRB 1368, 1369 (1979) Such a review, however, without more, does not sufficiently deprive the employer of ul- timate control over essential terms and conditions of employment to pre- clude it from engaging in meaningful bargaining Id at 1369-1370, see Golden Day Schools v NLRB, 644 F 2d 834, 836 (9th Cir 1981) In this case, unlike in Long Stretch Youth Home, supra, the Employer's proposed budget, including the projected figures for employee compensa- tion expenses, is the basis for the compcasation Res-Care receives from DOL Thus, DOL's review and approval of Res-Care's budget does have an impact on the economic terms and conditions of Res-Care's employees to the extent that the budget, in conjunction with the wage ranges and benefit levels approved by DOL, helps to determine the maximum amounts DOL will reimburse Res-Care for employee compensation It is these direct limits on employee compensation that constitute control of employment relations, and not the fact that DOL places an effective ceil- ing on such expenditures by limiting Res-Care's total budget Cf Long Stretch Youth Home, supra, fn 14, see also Truman Medical Center Y. NLRB, 641 F 2d 570, 574 (8th Cir 1981), NLRB v Austin Developmental Center, 606 F 2d 785, 789 in 8 (7th Cir 1979) For reasons stated in the Long Stretch dissent, Chairman Dotson does not view the differences be- tween that case and this with respect to budget and compensation as jus- tifying the assertion of jurisdiction in Long Stretch We do not give weight to DOL's control over such items as the nature of the services to be performed by Res-Care, eligibility requirements for service recipients, procedures and standards for serving foods, the stand- ard operating procedures of each operating division, or other operational matters relating to management of the job corps program See Denver Volunteers of America v NLRB, 732 F 2d 769, 774 (10th Cir 1984) Moreover, the fact that Res-Care already has a collective-bargaining relationship with a labor organization representing another unit is not de- terminative of the jurisdictional issue Indeed,,this bargaining relationship underscores DOL's control, and Res-Care's limited authority to bargain in this case the collective-bargaining agreement by its terms subjects the entire agreement to DOL approval Wages and benefits negotiated in the agreement remain subject to the levels established by DOL, and the agreement specifically provides that it shall be amended automatically re- garding wages or benefits disallowed by DOL See Board of Trustees of Memorial Hospital v NLRB, 624 F 2d 177, 186-187 (10th Cir 1980), Ohio Inns, 205 NLRB 528, 529 fn 3 (1973) 23 We overrule, to the extent they are inconsistent with today's deci- sion, Management & Training Corp, supra, 265 NLRB 1152, Teledyne Economic Development Co, supra, 265 NLRB 1216, and Singer Co, supra, 240 NLRB 965 RES-CARE, INC. ORDER The petition is dismissed. MEMBER STEPHENS, concurring and dissenting. I agree with the majority that the basic "con- trol" test of National Transportation Service, 240 NLRB 565 (1979), and not the "intimate connec- tion" test, is the proper standard for determining whether we have jurisdiction over a particular em- ployment relationship in cases in which the puta- tive employer and employees are working under a contract with an entity that is exempt pursuant to Section 2(2) of the Act. I also agree that in making this determination, we should not focus entirely on the relationship between the contractor-employer and its employees and ignore the control over labor relations matters that is retained and exer- cised by the exempt entity. I disagree, however, with the manner in which the majority has refined and applied the test here. In my view, the majority has exaggerated the significance of powers pos- sessed by the Department of Labor (DOL)-the exempt entity in this case-and it has thereby cre- ated a precedent for permitting government author- ity that is purely theoretical and unlikely to be ex- ercised to compel the exclusion from our processes of employment relationships in which meaningful collective bargaining could take place. To begin with, I believe that we are presented with a question of our jurisdiction under the statute and not simply a question whether, in the exercise of our unquestioned statutory authority, we choose either to exert or to decline jurisdiction. This has not always been clear, and the confusion over whether statutory or discretionary standards were in issue has perhaps impeded analysis.' Like the ' In National Transportation Service, the Board described the "control" test as a standard for determining "discretionary jurisdictional issues" (240 NLRB at 566), and it thereby echoed the court in Herbert Harvey, Inc. Y. NLRB, 424 F 2d 770, 773-774 (D.C. Cir 1969), a case decided a decade earlier But others have viewed the control test as an essentially statutory standard E g , Denver Volunteers of America v NLRB, 732 F 2d 769, 774 (10th Cir 1984), NLRB v. Austin Developmental Center, 606 F 2d 785, 789 (7th Cir 1979), NLRB v Pope Maintenance Corp, 573 F 2d 898, 902 (5th Cir 1978), Kiss, The Effect of National League of Cities on the Political Subdivision Exemption of the NLRA, 32 Lab L J 786, 792-793 (1981) The latter seems the better view, although I do not agree with those courts that a joint employer analysis is mandatory As explained below, it is consistent with the Supreme Court's approach in NLRB v E. C. Atkins & Co, 331 US 398 (1947) Furthermore, as the dissenters in National Transportation Service correctly pointed out (240 NLRB at 567 fn 12), the attempt by the majority in that case to suggest that past refus- als to assert jurisdiction had been based on the Board's authority under Sec 14(c)(1) to decline jurisdiction in certain cases over employers who meet the Act's broad Commerce Clause standard (id at 565) rather than on the construction and application of the Sec 2(2) exemption is not sup- ported by an examination of the cases See, e g., Teledyne Economic De- velopment Co, 223 NLRB 1040 (1976), Ohio Inns, 205 NLRB 528 (1973); Servomation Mathias Pa., Inc, 200 NLRB 1063 (1972) It may be, however, that my dispute with my colleagues is little more than semantic I do not presume to deny that, as the Supreme Court stated in NLRB v Denver Building Trades Council, 341 U S. 675, 684 675 Supreme Court in NLRB v. E. C. Atkins & Co., 331 U.S. 398, 403-404 (1947), we are construing the definitions of "employer" and "employee" in Sec- tion 2(2) and (3) of the Act (id. at 403-404), but this comes down to a judgment whether the "em- ployment situation" is such that, notwithstanding certain constraints imposed by an entity exempt from the category of covered employers, the "situ- ation" is amenable to "the process of collective bargaining" as "contemplated by the Act" (id. at 413-414). If we conclude that Congress did not intend to withhold the Act's statutory protections from a given employment relationship, it is not for us to impose any additional discretionary test re- flecting a higher standard for "meaningful bargain- ing" under which the parties enjoy an ideal free- dom from third-party economic constraints.2 In making the inquiry, the majority has properly considered both the phase in which the collective- bargaining agreement is negotiated and the subse- quent phase in which it is administered, since con- tract administration and labor-management rela- tions during the term of an agreement are as much a matter of collective bargaining as the initial nego- tiation. NLRB v. Acme Industrial Co., 385 U.S. 432, 436 (1967); Conley v. Gibson, 355 U.S. 41, 46 (1957). In each case, however, the majority has exaggerat- ed the degree to which DOL stands as an impedi- ment to real bargaining. To be sure, DOL, as a government contracting agency, reviews and ap- proves the operations of the contractor, including aspects of its employment practices. But, in my view, that reservation of authority, without more, is an insufficient basis for denying jurisciction.3 (1951) (dictum) "Even when the effect of activities on interstate com- merce is sufficient to enable the Board to take jurisdiction of a complaint, the Board sometimes properly declines to do so, stating that the policies of the Act would not be effectuated by its assertion of jurisdiction in that case " It is simply that, in my view, a decision-under the control test- that bargaining between employees and an employer under contract with an exempt entity is not "meaningful" reflects a judgment either that the putative employer is little more than an agent of the entity exempt under Sec 2(2) (and, hence, exempt itself) or that, given the insubstantial con- trol over labor relations left in the nonexempt entity, "the process of col- lective bargaining . as contemplated by the Act" is inappropriate and the necessary employee-employer relationship is not present NLRB v E. C Atkins & Co, supra, 331 U S at 413-414. To my mind, these are judg- ments concerning the reach of the Act in light of its policies-judgments that will be binding on the courts so long as they are reasonable. See Bayside Enterprises Y NLRB, 429 U S 298, 303-304 and fn 14 (1977) (Board's construction of the term "agr :ultural laborer" accepted as a reasonable interpretation of the statute) 2 This is not to say that a different oasis for declining jurisdiction in certain cases could never exist a In early decisions, the Board confirmed its jurisdiction over govern- ment contractors See, e g , Great Southern Chemical Corp , 96 NLRB 1013, 1014 (1951), American Smelting & Refining Co, 92 NLRB 1451, 1452 (1951), National Food Corp, 88 NLRB 1500, 1501 (1950), Monsanto Chemical Co., 76 NLRB 767, 769 (1948) In each case, the fact that the employer's authority over working conditions was subject to review and approval by the Federal Government did not defeat the employer's effec- tive control over the day-to-day employment practices See also NLRB v Pope Maintenance Corp., supra, 573 F 2d 898 676 DECISIONS OF NATIONAL LABOR RELATIONS BOARD The job corps program involved in the present case exists by virtue of a Federal program that originated in 1964 and is currently conducted under the authority of the Job Training Partnership Act, Pub. L. 97-300, 96 Stat. 1322, 29 U.S.C. § 1501, 1691 et seq.4 That program contemplates that job corps centers may be run either by the Federal Government directly or by private contractors. 29 U.S.C. § 1697. Although general goals are specified concerning what is to be achieved in training the clients (enrollees) served by the program, the stat- ute does not address the standards to govern the working conditions of a private contractor's em- ployees. Thus, there is no counterpart of the provi- sion in Model Cities legislation that troubled the Seventh Circuit in Lutheran Welfare Services v. NLRB, 607 F.2d 777, 778 (7th Cir. 1979), a provi- sion in which Congress required the government agency charged with administering Headstart pro- grams to adopt both for itself and others running Headstart centers "rules designed to establish spe- cific standards governing salaries, salary increases, travel and per diem allowances, and other employ- ee benefits." 42 U.S.C. § 2928f(a) (1976). Neither is there any such provision in the imple- menting regulations issued by the Secretary of Labor. Rather, it appears that DOL contemplated that a unionized employer would establish employ- ee compensation and other working conditions through the normal process of collective bargain- ing and, after an agreement was reached, that agreement would be submitted as part of the tech- nical and management proposals that constitute the would-be contractor's bid. This is the only sense one can make out of the "Administrative Provi- sions" of the regulations, which call upon a private contractor's "Center Director" to "develop and maintain personnel management policies, including plans for hiring, supervision, and evaluation of staff' and to establish "labor management relations in accordance with . . . the provisions of the Na- tional Labor Relations Act." 20 C.F.R. §§ 684.120(bX3) and (5). Cf. NLRB v. E. C. Atkins & Co., supra, 331 U.S. 398, 415 (noting that the War Department's regulations "acknowledged the feasi- bility of recognizing collective bargaining rights" of the guards). That DOL has authority to scruti- nize the terms of the bargaining agreement in de- ciding whether to accept the bid proposals no more renders the prior bargaining meaningless than the authority of a bankruptcy court to scrutinize an 4 The same program was previously authorized under the Economic Opportunity Act of 1964, Pub L. 88-452, §§ 101-109, 78 Stat 508, 508- 511 (repealed 1981) and the Comprehensive Employment and Training Act of 1973, Pub L. 93-203, Title IV, 87 Stat 839, 863-874 (repealed 1982). agreement reached by a debtor-in-possession and a labor organization places that bargaining beyond the pale of the Act.5 Of course, if there were evi- dence that DOL was an active presence at the bar- gaining table, intruding itself into the bargaining process, a different conclusion should be drawn. But I see no evidence in this case that that has oc- curred or that it is contemplated by the statutory scheme. Indeed, the evidence does not even indi- cate that DOL customarily requires significant changes in the agreement the parties have reached. 6 As for the majority's reliance on certain stand- ards applicable to initial wage levels (supra at 13 fn. 20), the standards referred to are not significant- ly different from the comparability standards that the court in NLRB v. St. Louis Comprehensive Neighborhood Health Center, 633 F.2d 1268, 1271 (8th Cir. 1980), found inadequate as a basis for es- tablishing that meaningful bargaining was impossi- ble. In this regard, we should not lose sight of the fact that Government contractors typically feel the pinch of cost thresholds imposed by the prevailing wage laws7 and the cost ceilings imposed by the Government's desire to obtain goods and services at a competitive price. Within the range set by these economic forces, bargaining is possible. Finally, concerning the bargaining process during the administration of the contract, the ma- jority concedes that Res-Care "has final authority over grievances"; but it makes much of the fact that if the parties contemplate departing from the agreed-upon wage and benefit levels, they need a "waiver" from DOL in order for the additional ex- pense to be regarded as an "allowable cost," i.e., one that DOL itself will pay as part of the contract price. This surely cannot bear the weight the ma- jority assigns to it. First, even in a bargaining rela- tionship with no link at all to the Government or another exempt entity, Section 8(d) of the Act pro- vides that neither party need consent to-or even consider-any modification of the agreement, so L See NLRB v Bildisco & Bildisco, 465 U S. 513, 534 ( 1984) (debtor-in- possession in a Chapter 11 reorganization proceeding remains obligated to bargain over a contract with unit employees) See also 11 U S.C. § 1113 (Congress' response to Bddisco), specifying procedural requirements for modifying a collective-bargaining agreement to which a debtor-in- possession is a party 9 For example, Ralph S Coffman, Res-Care's vice president of admin- istration, testified that , as part of the bidding process to obtain the job corps contract, Res-Care would have to submit the collective-bargaining agreement to DOL for review. Coffman conceded on cross-examination, however, that he had no knowledge as to whether DOL had ever partici- pated in the negotiations of the collective-bargaining agreement (Tr 83). Moreover, he conceded that he had no knowledge as to whether DOL had "ever overruled anything within the confines of [the] labor agree- ment" (Tr 99) 7 Davis-Bacon Act, 40 U S.C §§ 276a-276a-5, Service Contract Act, 41 U S C §§ 351-358 RES-CARE, INC 677 bargaining on changes in the contract is hardly es- sential to meaningful bargaining under the Act. Second, if a contractor wishes to hire an employee at a wage above the contract level and the collec- tive-bargaining representative agrees to it, the fact that DOL would not pay the additional expense does not bar the contractor from going ahead at its own cost. Undoubtedly Government agencies scru- tinize cost increases under most cost-plus-fixed-fee contracts to determine whether they will bear the expense, yet the majority does not suggest that it is reading all employees working under such con- tracts out of the Act. In sum, even assuming that collective bargaining can never be meaningful if wages and benefits are not on the table-a proposition I am not entirely convinced is correct-the record here simply does not establish that DOL exerted such control over the wages and benefits of the Res-Care employees represented by the Petitioner that no meaningful bargaining can take place. Res-Care has successful- ly negotiated two collective-bargaining agreements already and, if the employees in the appropriate unit select the Petitioner as their representative, I see no reason why Res-Care should not be obligat- ed to bargain for another agreement. Accordingly, I would find that the Section 2(2) exemption for the United States does not bar our exercise of juris- diction and would affirm the decision of the Re- gional Director.