Correctional Medical Systems, Inc.

810 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Correctional Medical Systems, Inc. and Communica- tions Workers of America, AFL-CIO, Petition- er. Case 33-RC-3099 July 13, 1988 DECISION ON REVIEW AND ORDER TO DISMISS BY CHAIRMAN STEPHENS AND MEMBERS JOHANSEN AND BABSON On December 30, 1985, the Regional Director for Region 33 issued a Decision and Direction of Election in this proceeding in which he found, inter alia, that the Board had jurisdiction over the Employer under National Transportation Service, 240 NLRB 565 (1979), because the Employer re- tained sufficient control over its operations and labor relations to engage in meaningful bargaining with the Union. Thereafter, in accordance with Section 102.67 of the National Labor Relations Board Rules and Regulations, the Employer filed a request for review of the Regional Director's Decision and Di- rection of Election. The Employer contended, inter alia, that the Regional Director erred (1) in finding that the Employer retained sufficient authority and control over its operations and labor relations policy to engage in meaningful negotiations with the Union and (2) in finding that the public officials for the State of Iowa are not responsible for direct- ing and overseeing the Employer's contract at the Iowa State Penitentiary, which would preclude the Board from asserting jurisdiction over the Employ- er. By order dated January 28, 1986, the Board granted the Employer's request for review pending the Board's decisions in Res-Care, Inc., 280 NLRB 670 (1986), and Long Stretch Youth Home, 280 NLRB 678 (1986). The election scheduled for Jan- uary 28, 1986, was held, and the ballots cast in the election were impounded. By order dated June 30, 1986, the case was re- manded to the Regional Director for further con- sideration consistent with the Board's decisions in Res-Care, Inc. and Long Stretch Youth Home. The record was reopened and the parties were permit- ted to submit supplemental briefs in support of their respective positions. The Employer relied on the record as it existed and filed a supplemental brief reasserting its position that the Board does not have jurisdiction. The Union asserted no posi- tion regarding the reopening of the record and did not file a supplemental brief. The Regional Director issued a supplemental de- cision on August 4, 1986, reaffirming his prior con- clusion that the Employer retains sufficient control over its labor relations to engage in meaningful col- lective bargaining with the Union and directed that the impounded ballots be counted. The Employer filed a request for review of the Regional Direc- tor's Supplemental Decision and Order directing the counting of impounded ballots. By Order dated December 9, 1986, the Board granted the Employ- er's request for review. The National Labor Relations Board has delegat- ed its authority in this proceeding to a three- member panel. The Board has considered the entire record in this case with respect to the issues under review and has decided to dismiss the petition. The essential facts are as follows. The Employer, Correctional Medical Systems (CMS), provides onsite medical and health care services to inmates and preemployment exams to employees at the Iowa State Penitentiary (ISP). ISP is a maximum security prison, which houses approximately 800 inmates. In 1973 the inmates at ISP instituted a civil rights action against the prison officials. As a result of this action, a consent order was entered mandat- ing changes in the delivery of health care services to ISP inmates. McBride v. Farrier, No. 73-242-2 (S.D. Iowa 1981, amended consent order). The order required the Iowa State Department of Cor- rections to procure an independent contractor to provide quality health care services at the Peniten- tiary to begin on or before October 30, 1981. The order directed the State to solicit bids from poten- tial contract health care providers and submit those bids to the court-appointed monitors for review and approval. The consent order also required ISP to continue to employ an independent health care provider until the State is able to demonstrate to the court's satisfaction that the same level and qual- ity of health care can be provided to the inmates by ISP health care professionals. The consent order specifically set the initial parameters for staff- ing the infirmary facility, including job descriptions and classifications, the number of employees within each classification, the full-time or part-time status of employees, and the licensing and educational re- quirements for each of the individuals employed. The consent order required the establishment of a medical audit committee responsible for manag- ing and evaluating the delivery of health care serv- ices. This committee is composed of the ISP warden, the health care unit administrator, the di- rector of nurses, the chief of dental services, the pharmacist, and the medical records administrator. The consent order prescribed that formal policy and procedures be developed internally for the communication and resolution of inmate and staff 289 NLRB No. 103 CORRECTIONAL MEDICAL SYSTEMS 811 complaints. It also details the types of duties to be performed by the health care unit employees and which employees should perform which duties. Pursuant to the McBride v. Farrier consent order, the State of Iowa issued a Request for Proposals (RFP) on July 1, 1981, to solicit bids for the provi- sion of comprehensive health care services by an independent= contractor for the inmates at the peni- tentiary. The RFP specified the job classifications, the hours of work per week for each classification, and the number of employees in each classification. The State 'reserved the right, in the RFP, to inter- view and approve the hiring of the medical direc- tor, nursing director, the pharmacist, and health care unit administrator. The RFP also required the successful contractor to retain and continue to employ all health care personnel that were current- ly employed by ISP for at least 1 month after re- ceiving the contract and thereafter to treat those employees in accordance with the Iowa Merit Em- ployment Department rules on employee transfer and/or reduction of work force. On July 1, 1981, CMS submitted a bid, which was accepted, and a 1-year renewable contract was executed on October 30, 1981 . The contract was thereafter renewed at 1-year intervals until June 30, 1985. The State of Iowa issued a second RFP in Feb- ruary 1985 soliciting new bids for the provision of health care services at the institution. On March 18, 1985, the State issued an addendum modifying the second RFP. The modification required all pro- spective bidders to submit a proposal consisting of technical and financial components and containing organizational charts, job descriptions, salary ranges for all staff positions, and a staff manning table including the required number of employees in each required position for certain specified hours per week. The addendum further required the sub- mission of a line-item budget showing the hourly pay rate and fringe benefit costs per hour for each job classification and the number of man -hours to be worked in each classification . The line-item budget is required to reveal all overhead, general, and administrative services, and all other direct costs. The budget must also show as separate line- items all other ancillary costs such as maintenance and repairs, office supplies, postage, uniform allow- ance, insurance, data processing, accounting, legal services, state and Federal taxes, and a set manage- ment fee. The RFP designates the warden as project man- ager to be responsible for the day-to-day adminis- tration of the contract and directs that the consult- ants for the Department of Corrections will pro- vide professional review and assessment of the pro- vider's operations within their area of expertise. The Department of Corrections consultants are em- ployed by the State of Iowa and are responsible for providing guidance and management oversight to the CMS staff. The RFP requires the contractor to prepare and submit to the Department of Corrections monthly reports that specify any deviation by position , title, or hours worked from the staffing requirements of the contract. If at any time the contractor fails to maintain qualified personnel in each of the 22 posi- tions as required by the consent decree for 30 con- secutive calendar days, the scheduled installment payment for that period will be reduced by one- twelfth of the annual salary and benefits of the pre- vious incumbent in the vacant position . The De- partment of Corrections and the warden exercise reviewing authority over the employment of the medical director, director of nursing , pharmacist, and administrator . The resumes of these individuals are forwarded to the warden for his approval, and he must interview them prior to their staff appoint- ment. The RFP requires that a list of all personnel assigned to the facility be submitted to the State for approval . In addition, the State has reserved the right to request the replacement of any CMS per- sonnel believed unable to carry out the responsibi- lites of the contract, or believed to present an un- acceptable breach of the legitimate security re- quirements at the institution. All contractor em- ployees must pass a background investigation con- ducted by ISP prior to their employment at the fa- cility. The RFP requires the contractor to submit to the warden for his approval a personnel manual applicable to all health care contract employees. The manual specifies the terms and conditions of employment, the employee probationary period, definition of seniority, rules of conduct, provision for progressive discipline and discharge, vacation and holiday benefits , and sick leave . CMS is not permitted to make any changes in these conditions of employment without the express written approv- al of the warden. The Employer submitted a bid and proposal in response to the State's second RFP and on June 3, 1985, a new 1-year contract was executed and made effective through June 30, 1986 . The new contract incorporates the State's RFP and adden- dum, the Employer's proposal, and the McBride v. Farrier consent order . The contract specifically prohibits the Employer from making any changes in the agreement without the State's consent. As mandated by the consent order, a medical audit committee monitors the day-to-day operations of the health care unit. The medical audit committee now comprises the warden, the court-appointed 812 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD monitors, and several other employees and supervi- sors of the Employer, all of whom must approve of any policy and/or operational changes at the insti- tution. The Regional Director in his original Decision and Direction of Election concluded that the Board should assert jurisdiction because the Em- ployer retained the necessary degree of independ- ence from the State of Iowa in setting its overall labor-relations policy, which enables the Employer to effectively bargain with the Union within the meaning of the "right of control" test as set forth in National Transportation, supra.I The Regional Director reconsidered his original conclusion in light of the Board's recent decisions in Res-Care, Inc., supra, and Long Stretch Youth Home, supra, and reaffirmed his decision that the Employer re- tains sufficient control over the essential terms and conditions of employment to enable it to engage in meaningful collective bargaining with a labor orga- nization. We disagree. In Res-Care, Inc., supra, and Long Stretch Youth Home, supra, 678 the Board reaffirmed the basic "right of control" test enunciated in National Transportation Service, 240 NLRB 565 (1979), for determining when it is appropriate to assert juris- diction over an employer providing services to or for an exempt entity. In applying the test, the Board stated in Res-Care that the examination would not be limited to the control over the essen- tial terms and conditions of employment retained by the employer, but would also extend to an ex- amination of the "scope and degree of control exer- cised by the exempt entity over the employer's labor relations, to determine whether the employer in issue is capable of engaging in meaningful collec- tive bargaining." 280 NLRB at 672. The Board held that "meaningful bargaining" cannot be ac- complished unless the employer has "the final, practical say regarding wages and benefits" afford- ed its employees. Id. at 674. Applying these princi- ples, the Board reached different results in Res- Care and Long Stretch Youth Home. In Long Stretch Youth Home, supra, the Board concluded that it was proper to assert jurisdiction because the control retained by the employer over the essential terms and conditions of employment of its employees was sufficient to enable it to engage in meaningful collective bargaining with a i In National Transportation , the Board rejected the "intimate connec- tion" test and adopted a twofold approach to determining when assertion of jurisdiction over an employer providing services to or for an exempt entity is appropriate The approach set forth in National Transportation examines whether (1) the employer itself meets the definition of "employ- er" within the meaning of Sec 2(2) of the Act and, if so, (2) the employ- er has sufficient control over the employment conditions of its employees to enable it to bargain with a labor organization as their representative labor organization. The exempt entity in Long Stretch reviewed the annual proposed budget for the youth home's functions and services. The agency did not issue any minimum-maximum salary ranges, but suggested some cost guidelines for each job classification, and also suggested that no more than 65 percent of its gross operating budget be al- located for salaries. The employer was responsible, however, for setting its own minimum standards and qualifications for employees, and the exempt entity had little or no control over the determina- tion of employees' wages, vacation, sick leave, or other benefits. In Res-Care, the Board reached the contrary conclusion and refused to assert jurisdiction. In that case, the employer operated a job corps center pursuant to a contract with the United States De- partment of Labor (DOL). The contract mandated that DOL review and approve the minimum/- maximum wage ranges, as well as the specific levels of various employee benefit packages. The contract prevented the employer from independ- ently setting initial wages, granting a wage increase higher than the approved maximum, or providing benefits greater than those contained in the ap- proved benefit package. The exempt entity, DOL, exercised ultimate discretion over the basic eco- nomic terms and conditions of employment. Res- Care was compensated by DOL on a cost-plus- fixed-fee basis, i.e., the total of all line items as listed in the operating budget including wage and benefit levels proposed by the employer and ap- proved by the exempt entity, plus the employer's proposed fixed fee and other "allowable costs" as defined by DOL. Upon DOL' s acceptance and ap- proval of Res-Care's bid, the proposed figures became the contract price and were set forth in the final contract. Res-Care was not permitted to pay wages or benefits to employees above the approved maximums and to do so would result in a determi- nation by DOL that the increase was a "disallowa- ble cost" that would reduce Res-Care's installment payment under the contract. On these facts, the Board concluded that the employer was precluded from engaging in meaningful bargaining because it did not have sufficient discretion to set wages and benefits for its employees. In asserting jurisdiction over CMS, the Regional Director drew upon comparisons with the facts of Long Stretch Youth Home and sought to distinguish Res-Care from the case before us. We find, howev- er, that the Employer's situation here more closely parallels that of the employer in Res-Care. Thus, the contract between ISP and CMS incorporates the McBride v. Farrier consent decree, the State's Request for Proposals, the addendum requiring a CORRECTIONAL MEDICAL SYSTEMS 813 line-item budget, and the Employer's proposal, with the provision that no contractual changes can be made without written approval and permission of the State. As described earlier, these documents leave very little to CMS's discretion. The wage and benefit levels for CMS employees are specifi- cally identified in the contract for each job classifi- cation. The cost for each position is dictated by the wage ranges, the wage rates, the hours of work per week for each position, the hourly costs for fringe benefits, and the resulting total for all compensa- tion costs. Final approval for the proposed levels of employee compensation rests with the State and ISP has the authority not only to limit the total budget, but also to limit the maximum amount which is paid to CMS for employee compensation. CMS cannot change the fringe benefit package for employees, nor can it implement new benefits. While CMS can increase the wages, ' its increases cannot exceed the total amounts prescribed for wages in the contract. Any moneys not expended on wages and benefits as allocated must be re- turned to the State. The Regional Director, while noting the exist- ence of a line-item budget, concluded that the State, by limiting the total budget, does not exert control over labor relations. In so doing, the Re- gional Director failed to make the distinction drawn by the Board between placing an "effective ceiling on [employee compensation] expenditures by limiting the private employer's total budget" as in Long Stretch Youth Home, supra, 280 NLRB at 682 fn. 14, and "direct limits on employee compen- sation" by means of a budget that specifies maxi- mum amounts for employee compensation," as in Res-Care, supra, 280 NLRB 670 at 674 fn. 22. The Regional Director's conclusion that employee com- pensation here is not tied to the budget is, there- fore, incorrect, as is his conclusion that the Em- ployer has control over its employees' wages. Further, the consent decree specifies the mini- mum standard operating procedures and staff re- quirements for the ISP health care unit. The State's RFP sets forth the necessary staffing requirements and descriptions of the job classifications along with what would constitute certain full-time equiv- alent positions. The job classifications, the number of employees in each classification, and the hours of work for each employee are effectively con- trolled and limited by ISP through its control of the budget. Unlike in Long Stretch Youth Home, in which the level of control exercised by the exempt entity over the staffing component did not require that the employer fill certain positions, and the contract price had no direct relation to salaries, CMS must adhere strictly to the staffing require- ments of the contract. The Regional Director concluded that the con- trol ISP exerts over the terms and conditions of the CMS employees is limited primarily to its concerns about security, and ISP is not directly involved in the hiring, management, or discipline of the health care unit employees. The Regional Director found that ISP would become involved only in the dis- charge of an employee who presented a security risk to the institution. The record reveals, however, that on two occasions the warden requested that certain CMS personnel be discharged and his mere request was honored without question or reference to a 'legitimate breach of prison security. With regard to benefits, the Regional Director stated that as with wages, "total compensation costs" are identified in the bid. However, the Re- gional Director concluded that the exempt entity does not possess the "final, practical say" regarding benefits because there was no evidence that the warden exercised his authority to veto changes in the Employer's personnel manual. This finding is in error. The Board stated in Long Stretch Youth Home, that its decision to assert jurisdiction was not based on the failure of the exempt entity to ex- ercise its authority to disapprove the employer's wage/benefit proposals, but on the absence of any such authority. Long Stretch Youth Home, supra, 280 NLRB at 681 fn. 12. In that case, the exempt entity required only that the employer have per- sonnel policies and that certain benefits be provid- ed; it did not specify their content, and thus did not retain authority to disapprove benefit proposals. Here, by contrast, the costs of benefits is included as a line item in the budget, and the personnel manual, which includes provisions for vacation and holiday benefits, leaves of absence, sick days, and tuition reimbursement, must be approved by the warden. Accordingly, we find, contrary to the Re- gional Director, that there are significant limita- tions imposed by ISP on the Employer's control over its labor relations. Considering all the foregoing factors, we con- clude that the Employer does not possess sufficient control over the employment terms and conditions of its employees to enable it to engage in meaning- ful collective bargaining with a labor organization. Accordingly, we conclude that it would not effec- tuate the purposes and policies of the Act to assert jurisdiction over the Employer, and we shall dis- miss the petition.2 2 The Employer attempted to establish that CMS is a political subdivi- sion of the State and shares ISP's Sec. 2(2) statutory exemption. The Re- gional Director did not consider this issue nor the cases cited in support Continued 814 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD ORDER The petition is dismissed. CHAIRMAN STEPHENS, concurring. Because of the unique circumstances brought about by the inmates' civil rights action against Iowa State Penitentiary (ISP) officials, I agree with of this position . We find that the Employer is not a political subdivision of the State. The Board has long extended the exemption for political subdivisions to entities that are, inter aba, administered by individuals who are respon- sible to public officials or to the general electorate . NLRB v. Natural Gas Utility District, 402 U.S. 600 (1971). "Administration" in this context is construed as responsibility for day -to-day operations. Resident Home for the Mentally Retarded, 239 NLRB 3 (1978). The Employer argues that it meets this test because its operations are controlled by the warden, who is appointed by the commissioner for the Iowa State Department of Cor- rections, who is appointed by the Governor. We find no merit in the Employer's argument. The record shows that the health care unit administrator who is employed by CMS has responsi- bility for the day-to-day operations . While the warden's involvement with CMS is such as to constitute one of the factors supporting our con- clusion that the Employer lacks sufficient control to engage in meaning- ful bargaining, there is no indication that the health care unit administra- tor is directly appointed by the warden or fully responsible to the warden for day-to-day administrative matters . Finally, the record does not sup- port a conclusion that the warden administers the health care unit. Ac- cordingly, we conclude that the Employer is not entitled to the exemp- tion for political subdivisions my colleagues that jurisdiction should not be as- serted over the Employer and that the petition in this case should be dismissed. In contrast to the sit- uation presented in Res-Care, Inc., 280 NLRB 670 (1986), the government authority involved here is not purely theoretical and unlikely to be exercised. To the contrary, the consent order in McBride v. Farrier, No. 73-242-2 (S.D. Iowa 1981, amended consent order), sets specific requirements for all as- pects of the delivery of health care services to prison inmates. The consent order further requires, among other things, that a medical audit committee comprised of the warden of ISP, court-appointed monitors, and several employees and supervisors of the Employer oversee the day-to-day operations of the health care unit. Any change in policy or oper- ations must be approved by the committee. It is clear that, at the present time, the delivery of health care to the inmates of ISP by any Employer is subject to strict supervision by the court and, pursuant to the court's order, ISP officials. Given this close and comprehensive involvement of exempt entities in labor relations matters I agree that we should not assert jurisdiction over the Em- ployer.