Php Healthcare Corp.

182 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD PHP Healthcare Corporation and Local 722, Hospi- tal, Professional, Technical & Service Workers Union, Service Employees International Union, AFL-CIO, CLC, Petitioner. Case 5-RC-12699 31 July 1987 DECISION AND ORDER BY MEMBERS JOHANSEN, BABSON, AND STEPHENS Upon a petition duly filed under Section 9(c) of the National Labor Relations Act, a hearing was held before Hearing Officer Steven L. Shuster. Following the hearing, pursuant to Section 102.67 of the National Labor Relations Board Rules and Regulations, the Regional Director for Region 5 transferred this case to the National Labor Rela- tions Board for decision. Thereafter, all parties' filed briefs in support of their positions. The National Labor Relations Board has delegat- ed its authority in this proceeding to a three- member panel. The Board has reviewed the hearing officer's rulings made at the hearing and finds that no preju- dicial error was committed.2 They are affirmed. On the entire record in this case, including the briefs filed by the parties, the Board finds: 1. The parties stipulated, and we find, that the Employer, a Missouri corporation with an office and place of business in Washington, D.C., has been engaged in providing health care services at the home and relief buildings at the St. Elizabeth's Hospital complex pursuant to a contract with the United States Department of Health and Human Services (HHS). During the 12 months preceding the hearing, a representative period, the Employer, in the course and conduct of its operation, derived gross revenues in excess of $250,000 and purchased and received goods and materials and services valued in excess of $1000 directly from points out- side Washington, D.C. The parties stipulated, and we find, that the Employer is an employer engaged in commerce within the meaning of Section 2(2), (6),, and (7) of the Act and a health care institution within the meaning of Section 2(14) of the Act.3 I The United States Department of Health and Human Services filed a memorandum as amicus curiae 2 At the hearing the Employer filed a motion seeking an order protect- ing the confidentiality of certain exhibits The hearing officer denied the motion and the Employer requested special permission to appeal The Acting Regional Director granted the Employer's request for special per- mission to appeal, but affirmed the hearing officer's denial of the motion In its brief to the Board, the Employer appeals the decision of the Acting Regional Director and the hearing officer to deny the Employer's motion We find no prejudicial error in the denial of the motion s The Employer's stipulation was with the reservation that the Board should not assert jurisdiction under Res-Care, Inc, 280 NLRB 670 (1986) 2. The parties stipulated, and we find, that the Petitioner is a labor organization within the mean- ing of the Act. 3. The Petitioner seeks to represent a unit of pro- fessional and a unit of nonprofessional employees employed by PHP at St. Elizabeth's Hospital. The Employer contends that jurisdiction should not be asserted under Res-Care, supra, because the Em- ployer is precluded from engaging in effective col- lective bargaining due to its contract with HHS. PHP is a health care management company whose employees staff health care facilities in Maryland, Texas, Virginia, Washington, and the District of Columbia. The facility involved in this case is located at St. Elizabeth's Hospital. PHP em- ployees provide mental health care to Cuban en- trants detained at St. Elizabeth's Hospital by the Immigration and Naturalization Service (INS). The facility is jointly operated by HHS through the Public Health Service (PHS) and the Department of Justice through INS. PHP provides this mental health care pursuant to a cost-plus-fixed-fee con- tract with HHS. The current contract between HHS and PHP is effective through October 1988. Following a re- quest for proposal issued by HHS in 1985, PHP submitted a technical proposal describing how it would provide the psychiatric services for the project' and a business proposal that contained, inter alia, PHP's financial capacity, indirect cost rate, and policies concerning personnel, travel, and consultants. As part of the business proposal, PHP submitted an SF-1411 that contained a line-by-line budget of all direct costs, including labor costs. The SF-1411 contains salary rates, labor overhead/fringe benefit costs, proposed salary in- creases, costs of transportation and per diem, num- bers of employees in each job classification, and the number of hours to be worked including overtime by job classification. The proposal also contains the Employer's salary justification scale. HHS and PHP then held negotiations, during which HHS sought reductions in certain line by line costs such as labor overhead, salary justifica- tions, and salary increases. PHP submitted a modi- fied proposal, a best and final offer (BFO) in which PHP changed some of its proposed costs. It, inter alia, eliminated eight attendant positions, switched from semiannual to annual wage increases, and modified the labor overhead rate. Following a review of PHP's BFO, HHS awarded PHP a 3- year, $22 million, cost-plus-fixed-fee contract. Ac- * The table of contents to the technical proposal indicates that the pro- posal contained , inter alia, information about PHP's approach to clinical care, its organization and management , its staffing, and its corporate ex- perience 285 NLRB No. 25 PHP HEALTHCARE CORP. 183 cording to PHP Project Manager John Johnston and HHS Contracting Specialist Arthur Storey, PHP was bound by the terms of its proposals and the SF-1411 submitted with the BFO. The BFO's yearly estimates of the number of employees, the average hourly wages by job classification, the wage progression by job classification, and the an- ticipated fringe benefit costs constitute PHP's oper- ating budget, which can only be exceeded with HHS' approval. The total contract price is derived from the line-by-line operating budget submitted by PHP. HHS is not obligated to reimburse PHP for costs incurred in excess of the estimated costs in the budget. The BFO sets limits on wage rates, salary steps, and percentages of salary increases that the Em- ployer may offer. The SF-1411 sets forth a six-step salary scale established for each job category. The Employer is bound by the minimum and maximum wage rate for each category. Once an employee reaches the maximum salary step, his salary cannot be further increased. The Employer cannot raise wages more than the percentage increase estab- lished for each step of the scale.5 The BFO also establishes limits on fringe bene- fits. Sick and personal leave, holidays, vacation, and insurance benefits are all set by the BFO. Overtime is also limited by the BFO, which sets a specific number of overtime hours available for each job category. The Employer must request and HHS must authorize any overtime in excess of that established in the budget. The BFO lists all job categories with the number of employees budgeted for each category. The Em- ployer cannot unilaterally modify this number, al- though temporary vacancies may exist at any given time. 6 The contract gives HHS the right to review the credentials of all PHP staff members and to inter- view, approve, or disapprove any individual's em- ployment. Government Project Officer Bornemann has reviewed the resumes of applicants for physi- cian and psychologist positions, but does not gener- ally get involved in the hiring of the majority of employees. 5 At the hearing the Petitioner raised as an issue the applicability of the Service Contract Act, 41 US C § 351 et seq to the contract between PHP and HHS If applied to this contract, the Service Contract Act would require a minimum wage rate determined by the Secretary of Labor or a collectively bargained wage rate In its brief, however, the Petitioner abandoned this issue We therefore find it unnecessary to pass on whether the Service Contract Act applies to the contract between PHP and HHS, and what effect, if any, it would have on the issue of whether to assert jurisdiction over the Employer 9 The Government project officer's objection to PHP's proposal to delete a job category resulted in that category's being retained by PHP PHP is responsible for training of employees, but the Government project officer may direct that employees be given specific training.' HHS does not dictate PHP's grievance proce- dures, promotion standards, or other personnel policies, although a copy of PHP's personnel poli- cies are submitted with PHP's bid. INS can become involved in employee discipline for viola- tion of INS rules. INS can also deny access to the facility to PHP employees for security reasons. HHS may audit the Employer's compliance with the contract and may disallow payment if the costs are not permitted under the contract. According to PHP Project Manager John Johnston, all direct costs that differ from the direct costs presented in the budget must be approved in advance by the contracting office. HHS may terminate the con- tract at any time when it determines that the con- tract is no longer in the Government's interest. In Res-Care, supra, 280 NLRB 670, the Board reaffirmed the basic test set forth in National Trans- portation Service, 240 NLRB 565 (1979), for deter- mining whether assertion of jurisdiction over an employer providing services to or for an exempt entity is warranted." The Board in Res-Care held, however, that in determining whether the employ- er is capable of engaging in meaningful collective bargaining the Board would examine 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. (280 NLRB at 671.) The Board held that when 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 meaningful bargaining. Applying Res-Care to the instant case, we find that PHP's contract with HHS controls the pri- mary economic terms and conditions of employ-, ment. As in Res-Care, although the wage and bene- fit levels for each job classification are set initially by the Employer in its proposals, once the Em- ployer's bid is accepted by HHS and the contract awarded, the Employer's proposals become the basis for the contract price and constitute the Em- ployer's operating budget. The Employer's propos- als contained a line-by-line budget of all direct costs including labor costs. The proposals con- For example, Government Project Officer Bornemann required staff training on the treatment of a patient diagnosed as having the AIDS virus 8 In National Transportation, supra, the Board held that the inquiry is whether the employer itself met the definition of an "employer" in Sec 2(2) of the Act and, if so, whether the employer retained sufficient con- trol over the employment conditions of its employees to enable it to engage in effective or meaningful bargaining with a labor organization 184 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD tained estimates of the number of employees, the average hourly wages by job classification, the wage progression by job classification, fringe bene- fit costs, and overtime costs. This operating budget can only be exceeded with HHS approval. HHS is not obligated to reimburse PHP for costs incurred in excess of the estimated costs in the budget. Thus, HHS, not PHP, retains ultimate discretion for setting wage and benefit levels. As in Res-Care, we find that because of this restriction the Employ- er is effectively precluded from engaging in mean- ingful collective bargaining. In the instant case, as in Res-Care but unlike Long Stretch Youth Home, 280 NLRB 678 (1986), the Employer's proposed budget, including the projected figures for employee compensation ex- penses, is the basis for the compensation PHP re- ceives from HHS. Thus, HHS' approval of PHP's budget affects the economic terms and conditions of PHP's employees to the extent that the budget determines the maximum amounts HHS will reim- burse PHP for employee compensation. As we noted in Res-Care, it is these direct limits on em- ployees' compensation that constitute control of employment relations, and not the fact that the exempt entity places an effective ceiling on such expenditures by limiting the Employer's total budget. Although the Employer here retains some con- trol over hiring, training, discipline, promotion standards, and grievances, we held in Res-Care that while other personnel-related issues are important, "if an employer does not have the final say on the entire package of employee compensation, i.e., wages and fringe benefits, meaningful bargaining is not possible." (280 NLRB at 674.) We find that the facts in this case warrant declin- ing to assert jurisdiction. We believe that PHP "lacks the ability to engage in the necessary `give and take' which is a central requirement of good- faith bargaining, and which makes bargaining meaningful." (Res-Care, 280 NLRB 670, 674.) Ac- cordingly, we conclude that it would not effectuate the purposes of the Act to assert jurisdiction in this case, and we shall dismiss the petition.9 The petition is dismissed. MEMBER STEPHENS, concurring. It is still my view, as stated in my dissent in Res- Care, Inc., 280 NLRB 670 (1986), that even in the absence of final control by a Government contrac- tor over wages and benefits, meaningful bargaining may occur where, as in this case for example, the employer substantially controls "grievance proce- dures, promotion standards, or other personnel policies." Further, it is not clear to me that where, as here, the employer is constrained with respect to wages only insofar as it would be required to fund any extra-budget labor costs out of its profits on the contract, that restriction on wages is any great- er than the restriction on any contractor operating under a cost-plus-fixed-fee Government contract. I recognize, however, that this case is controlled by the majority opinion in Res-Care, supra, and for institutional reasons I concur in the dismissal of the petition. 9 In so doing, we do not rely on the Employer's alternative argument that the Board lacks ,jurisdiction over it because it shares the Govern- ment's statutory exemption as a joint employer See Res-Care, supra, at 673 fn 14 In view of our disposition of this case, we find it unnecessary to pass on the Employer's alternative contentions that the petition should be dismissed because of a forthcoming reduction in the size of the units, and that if the Board exercises ,jurisdiction, the ward nurses must be ex- cluded from the units because they are supervisors We also find it unnec- essary to pass on the Employer's request to reopen the hearing for the submission of an additional exhibit because that exhibit is relevant only to the issue of the anticipated reduction in the size of the unit