F I L E D United States Court of Appeals Tenth Circuit PUBLISH MAY 28 1999 UNITED STATES COURT OF APPEALS PATRICK FISHER Clerk TENTH CIRCUIT

ARAMARK CORPORATION,

Petitioner,

v.

NATIONAL LABOR RELATIONS BOARD, No. 97-9535

Respondent, No. 97-9550

THE FLORIDA PUBLIC EMPLOYEES COUNCIL 79, AFSCME (UNION), INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL 465, AFL-CIO,

Intervenors.

ON PETITION FOR REVIEW AND CROSS-APPLICATION FOR ENFORCEMENT OF AN ORDER OF THE NATIONAL LABOR RELATIONS BOARD (Petition Nos. 12-CA-18704 and 11-CA-17497) David W. Miller, of Baker & Daniels, Indianapolis, Indiana, (Philip J. Gibbons, Jr. with him on the briefs), for Petitioner.

Howard E. Perlstein, Deputy assistant General Counsel, National Labor Relations Board, Washington, D.C., (Frederick L. Feinstein, General Counsel, Linda Sher, Associate General Counsel, and Aileen A. Armstrong, Deputy Associate General Counsel, with him on the briefs), for Respondent.

Marsha S. Berzon, Altshuler, Berzon, Nussbaum, Berzon & Rubin, San Francisco, California, (Jonathan P. Hiatt, AFL-CIO, Washington, D.C., John C. Dempsey, Larry P. Weinberg, and Margaret A. McCann, AFSCME, Washington, D. C., Richard Griffin and Helen L. Morgan, International Union of Operating Engineers, Washington, D.C., with her on the briefs), for Intervenors.

Before SEYMOUR, Chief Judge, PORFILIO, ANDERSON, TACHA, BALDOCK, BRORBY, EBEL, KELLY, HENRY, BRISCOE, LUCERO and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.

I. INTRODUCTION

These matters originally came before the court on the cross-petitions of

Aramark Corporation (Aramark) and the National Labor Relations Board (the

Board). The Board sought enforcement of two orders finding that Aramark had

committed unfair labor practices when it had refused to bargain with the Florida

Public Employees Council 79, AFSCME (Council 79) and the International Union

of Operating Engineers, Local 465, AFL-CIO (Local 465) (collectively, the

Unions). The Unions intervened to support the Board’s petition. Aramark, the

-2- employer, argued that the Board was without jurisdiction in these matters

because: (1) the operations at issue are exempt from Board jurisdiction under the

“political subdivision exemption” 1 to the National Labor Relations Act (the Act);

and (2) Aramark’s government contracts do not leave it sufficient control over its

labor relations to enable it to bargain meaningfully with a labor union.

A panel of this court denied enforcement of the Board’s orders. See

Aramark Corp. v. NLRB, 156 F.3d 1087, 1098 (10 th Cir. 1998). The panel began

by rejecting Aramark’s contention that it is an exempt political subdivision. See

id. at 1092-95. Nevertheless, concluding it was bound by the Memorial Hospital

line 2 of circuit precedent, the panel held that the Board lacked jurisdiction over an

employer operating under a government contract unless that employer retained

sufficient control over the employment relationship to engage in meaningful

collective bargaining (the so-called “governmental control test”). See id. at 1095-

98. Because the Board had not applied the governmental control test to the

operations at issue here, the panel denied enforcement of the Board’s orders and

remanded the case to the Board for further proceedings. See id. at 1098.

1 Section 2(2) of the Act exempts from the Act’s coverage “any State or political subdivision thereof.” 29 U.S.C. § 152(2). 2 See Board of Trustees of Mem’l Hosp. v. NLRB, 624 F.2d 177, 185 (10 th Cir. 1980); R.W. Harmon & Sons, Inc. v. NLRB, 664 F.2d 248, 251 (10 th Cir. 1981); Jefferson County Community Ctr. for Developmental Disabilities, Inc. v. NLRB, 732 F.2d 122, 126 (10 th Cir. 1984); Denver Post of Nat’l Soc’y of Volunteers of Am. v. NLRB, 732 F.2d 769, 774 (10 th Cir. 1984).

-3- Both the Board and the Unions filed petitions for rehearing, requesting that

the en banc court repudiate the Memorial Hospital line of cases. The en banc

court ordered the cases reheard. Upon review of the Act and applicable

authorities, the en banc court holds that the Board need not apply the

governmental control test before exercising jurisdiction under § 2(2) of the Act.

Accordingly, we vacate sections II.B. and III. of the panel opinion and enforce

the Board’s orders. 3

II. BACKGROUND

A. The Evolution and Eventual Abandonment of the Governmental Control Test

Section 2(2) of the Act exempts from Board jurisdiction “the United States

or any wholly owned Government corporation, . . . or any State or political

subdivision thereof.” 29 U.S.C. § 152(2). By its plain terms, this exemption

applies only to governmental entities. See Teledyne Econ. Dev. v. NLRB, 108 F.3d 56, 59 (4 th Cir. 1997) (“There is nothing ambiguous about this language. By

its terms, section 2(2) exempts only government entities or wholly owned

government corporations from its coverage—not private entities acting as

3 The en banc court has not reconsidered section II.A. of the panel opinion, which rejects Aramark’s claim that it qualifies as a political subdivision under § 2(2) of the Act. See Aramark Corp. v. NLRB, 156 F.3d 1087, 1092-95 (10 th Cir. 1998). That section of the opinion thus remains in effect.

-4- contractors for the government.”). Nevertheless, the Board has historically

declined to assert jurisdiction over governmental contractors, if the contracting

governmental entity effectively controlled the basic terms of employment. See

infra pages 5-10 (discussing rise and fall of “intimate connection” and

“governmental control” tests).

For instance, prior to 1979, the Board utilized the intimate connection test

for deciding whether to assert jurisdiction over private employers who had

contracted with exempt governmental entities. See National Transp. Serv., Inc.,

240 N.L.R.B. 565, 1979 WL 8831, at *1-*2 (discussing and overruling intimate

connection test). The intimate connection test had two distinct aspects. First, the

Board queried whether an “exempt [governmental] employer exercises substantial

control over the services and labor relations of the nonexempt [private]

contractor, so that the latter is left without sufficient autonomy over working

conditions to enable it to bargain efficaciously with the union.” Rural Fire

Protection Co., 216 N.L.R.B. 584, 1975 WL 5421, at *3. If the answer to that

question was “yes,” the Board would decline jurisdiction. Id. If the answer was

“no,” however, the Board would move on to examine “the relationship of the

services performed [by the nonexempt private contractor] to the exempted

functions of the [governmental] institution to whom they were provided.” Id. at

*4; see also National Transportation, 240 N.L.R.B. 565, 1979 WL 8831, at *2

-5- (discussing Rural Fire Protection and describing it as a “leading case enunciating

the ‘intimate connection’ test”). If the nonexempt employer provided services to

the exempt entity which related directly to the entity’s governmental purpose, the

Board would decline to assert jurisdiction. See Rural Fire Protection, 216

N.L.R.B. 584, 1975 WL 5421, at *4 (holding that firefighting services provided

by nonexempt employer to exempt city were so intimately connected to city’s

“municipal purposes” as to justify declination of jurisdiction). As far back as

1969, the D.C. Circuit recognized that the Board considered the intimate

connection test a tool to help the Board exercise its discretion to decline

jurisdiction in cases where “it believes the policies of the Act will not be

effectuated by an exercise of its authority.” Herbert Harvey, Inc. v. NLRB, 424 F.2d 770, 773-74 (D.C. Cir. 1969).

In 1979, the Board jettisoned the intimate connection test in favor of the

governmental control test. See National Transportation, 240 N.L.R.B. 565, 1979

WL 8831, at *2. In so doing, the Board concluded that “the first aspect of the

[intimate connection] test—i.e., whether the employer would be able to bargain

effectively about the terms and conditions of employment of its employees—is by

itself the appropriate standard for determining whether to assert jurisdiction.” Id.

Significantly, the Board characterized the intimate connection test as a tool

created by the Board to help channel its discretion to decline jurisdiction under

-6- § 14(c)(1) of the Act. 4 Id. According to the Board, the intimate connection test

had failed miserably at achieving this function. See id. (“The test does not aid the

Board in determining whether the assertion of jurisdiction is appropriate in a

given situation; on the contrary, the attempts to define the criteria of ‘intimate

connection’ in cases subsequent to Rural Fire Protection . . . only indicate the

difficulties inherent in applying so vague a standard.”). In the view of the Board,

the governmental control test provided “a more objective, precise, and definitive

standard for determining discretionary jurisdictional issues” because it focused

solely on the utility of collective bargaining in a given employment environment.

Id. Accordingly, from that point forward, the Board would simply “determine

whether the employer itself meets the definition of ‘employer’ in Section 2(2) of

the Act and, if so, determine whether the employer has sufficient control over the

employment conditions of its employees to enable [the employer] to bargain with

a labor organization [acting] as [the employees’] representative.” Id. at *1.

4 Section 14(c)(1) provides as follows: “The Board, in its discretion, may, by rule of decision or by published rules . . ., decline to assert jurisdiction over any labor dispute involving any class or category of employers, where, in the opinion of the Board, the effect of such labor dispute on commerce is not sufficiently substantial to warrant the exercise of its jurisdiction.” 29 U.S.C. § 164(c)(1).

-7- The Board refined and reaffirmed the governmental control test in 1986.

See Res-Care, Inc., 280 N.L.R.B. 670, 1986 WL 53982, at *4-*6. The Board

began by noting that

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 meaningfully if the exempt entity removes or severely restricts the employer’s discretion, and (b) the circumstances under which the government entity will be deemed to have removed or severely restricted such discretion.

Id. at *4. Despite this lack of clarity, the Board concluded that the governmental

control test continued to provide the best guidepost for the Board’s discretionary

declinations of jurisdiction under § 14(c)(1). See id. at *1 n.1, *4. 5 Nevertheless,

5 In so doing, the Board once again affirmed that the governmental control test is not a jurisdictional element inherent in § 2(2) of the Act. According to the Board, 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 control over the employment conditions of its employees to enable it to bargain with a labor organization as their representative.” It is clear . . . that Res-Care itself is not a Federal 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 “employees” as that term is defined in Sec. 2(3). Our only inquiry, therefore, is whether, in exercising our discretion, we should decline to assert jurisdiction because of the extent to which DOL, an entity exempt (continued...)

-8- in an effort to refine the governmental control test, the Board held that it would

decline jurisdiction whenever an employer lacked ultimate authority over “a core

group of ‘basic bargaining subjects.’” Id. at *6. This core group specifically

included employee-compensation issues such as “wages and fringe benefits.” Id.

Thus, under Res-Care’s refined governmental control test, the Board continued to

decline jurisdiction over governmental contractors who lacked final authority over

wages and benefits, even if the contractors maintained exclusive power to hire,

fire, promote, and demote. See id.

In 1995, however, the Board overruled the governmental control test and, in

Management Training Corp., announced that “in determining whether the Board

should assert jurisdiction, the Board will only consider whether the employer

meets the definition of ‘employer’ under Section 2(2) of the Act, and whether

such employer meets the applicable monetary jurisdictional standards.” 317

N.L.R.B. 1355, 1995 WL 451936, at *6. The Board reasoned that focusing on

control over economic terms and conditions of employment under the

governmental control test oversimplified the bargaining process and improperly

(...continued) 5

from our jurisdiction, controls the employment conditions of Res-Care's employees. 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 jurisdiction in this case. Res-Care, Inc., 280 N.L.R.B. 670, 1986 WL 53982, at *1 n.1.

-9- involved the Board in the substantive aspects of that process. See id. at *4-*5. In

addition, the Board noted that the governmental control test led to lengthy

litigation. See id. at *5. The Board determined that it should not “be deciding as

a jurisdictional question which terms and conditions of employment are or are not

essential to the bargaining process,” and stated that “whether there are sufficient

employment matters over which unions and employers can bargain is a question

better left to the parties at the bargaining table and, ultimately, to the employee

voters in each case.” Id. at *3, *1. The Board further stated that meaningful

bargaining can occur even when

the employer’s ability to respond to union demands [is] restricted by its contract with the exempt entity. The fact that some matters have to be approved by the contracting government agency does not mean that bargaining is meaningless; there are, after all, proposals to be drafted—if not in the extant contract, then in future ones—as well as other matters to be negotiated which do not require contractual approval.

Id. at *4.

B. These Enforcement Proceedings

Aramark is a Delaware corporation providing food services nationwide. 6

Aramark manages food-service operations in the Duval County School District

(“School District”) in Jacksonville, Florida, and at The Citadel in Charleston,

For a detailed recitation of the facts leading up to these enforcement 6

proceedings, see Aramark, 156 F.3d at 1089-92.

-10- South Carolina. The challenged Board orders arose out of Aramark’s refusal to

recognize and bargain with the Unions who represent Aramark’s food service

employees in Duval County and at The Citadel. 7

In July 1990, Aramark contracted with the Duval County School Board to

manage all of the School District’s food-service operations. Prior to this time, the

School District had operated and managed its own food service program, which

was staffed solely by public employees. Under the parties’ contract, employees in

the food service operation as of the contract date, July 1, 1990, remained

employees of Duval County and retained civil-service status. The employees

were in a public-sector collective-bargaining unit represented by Council 79. All

food service employees hired after July 1, 1990, were Aramark employees and

were not members of the public-sector collective-bargaining unit.

Since the mid-1960s, Aramark and its predecessor, ARA Services, Inc.,

have contracted with the State of South Carolina to provide food services at The

Citadel in Charleston, South Carolina. The Citadel is a military college owned

and operated by the State of South Carolina.

7 This court’s jurisdiction to review the Board’s orders arises under subsections (e) and (f) of § 10 of the Act. See 29 U.S.C. § 160(e), (f) (providing that the Board may petition for enforcement, and any aggrieved person may petition for review, of any order of the Board to the court of appeals for any circuit wherein an aggrieved person resides or transacts business).

-11- Council 79 and Local 465 each filed separate petitions with the Board,

seeking to represent Aramark’s food-service employees in Duval County and at

The Citadel. Aramark resisted each petition, arguing that the Board lacked

jurisdiction because Aramark’s contracts with the School District and with The

Citadel, respectively, did not give it sufficient control over the essential terms and

conditions of employment to bargain meaningfully with a union. In each case,

however, the Board’s Regional Director concluded that the Board had jurisdiction

under the Management Training test, as Aramark was an “employer” with the

meaning of § 2(2) and met the Board’s own monetary jurisdictional requirements.

In each case, the Regional Director ordered an election, which both unions won.

The Board in each case rejected Aramark’s request to reverse the assumption of

jurisdiction and election order. After Aramark refused to bargain with the duly

elected unions, the Board issued an order in each case finding that Aramark had

committed an unfair labor practice and ordering it to bargain. See Aramark

Corp., 323 N.L.R.B. 256, 1997 WL 101268 (Duval County proceedings); Aramark

Corp., 324 N.L.R.B. No. 10, 1997 WL 422767 (The Citadel proceedings). The

cross-petitions to enforce and for review of those orders followed.

-12- III. ANALYSIS

This case presents the en banc court with a very narrow legal question: Is

the National Transportation/Res-Care governmental control test a jurisdictional

prerequisite mandated by § 2(2) of the Act? Based on the plain language of

§ 2(2) and the substantial deference due the Board’s determination of its own

statutory jurisdiction, 8 this court answers the question in the negative. In so

doing, we join the Fourth and Sixth Circuits in holding that the governmental

control test is not statutorily mandated 9 and repudiate contrary precedent from this

circuit. 10

In accordance with the first principle of statutory construction, this court

begins its analysis with the plain language of § 2(2). See Bailey v. United States,

516 U.S. 137, 144 (1995). Section 2(2) exempts from coverage of the Act “the

United States or any wholly owned Government corporation, . . . or any State or

“The Board has initial responsibility for determining who is an employer 8

for purposes of the Act . . . and its construction of its own statutory jurisdiction is entitled to great respect.” Jefferson County, 732 F.2d at 124 (citing, inter alia, NLRB v. E.C. Atkins & Co., 331 U.S. 398, 403 (1947) and NLRB v. Natural Gas Utility Dist., 402 U.S. 600, 605 (1971)).

See Pikeville United Methodist Hosp. of Ky., Inc. v. United Steelworkers of 9

Am., 109 F.3d 1146, 1152-53 (6 th Cir. 1997); Teledyne Econ. Dev. v. NLRB, 108 F.3d 56, 59 (4 th Cir. 1997). 10 See supra note 2 (setting forth Memorial Hospital line of cases).

-13- political subdivisions thereof.” 29 U.S.C. § 152(2). As aptly noted by the Fourth

Circuit,

There is nothing ambiguous about this language. By its terms, section 2(2) exempts only government entities or wholly owned government corporations from its coverage—not private entities acting as contractors for the government. When enacting section 2(2), Congress was surely aware that private employers contracted with government entities to provide needed goods and services. Congress could not have intended to compel the Board to decline jurisdiction over private employers based upon constraints that their government contracts might impose upon the collective bargaining process. If it had so intended, it would have exempted private contractors as well as governmental entities from the Act.

Teledyne, 108 F.3d at 59; see also Pikeville United Methodist Hosp. of Ky., Inc. v.

United Steelworkers of Am., 109 F.3d 1146, 1152 (6 th Cir. 1997) (“[Section] 2(2)

simply and straightforwardly exempts only certain named governmental units and

other organizations from the reach of the NLRB.”).

This court agrees with the Fourth and Sixth Circuits that the meaning of

§ 2(2) is plain and unambiguous. Accordingly, both the Board and this court

“‘must give effect to the unambiguously expressed intent of Congress.’” Holly

Farms Corp. v. NLRB, 517 U.S. 392, 398 (1996) (quoting Chevron, U.S.A., Inc. v.

Natural Resources Defense Council, Inc., 467 U.S. 837, 843 (1984)). Thus,

because Congress has unambiguously limited the reach of the exemption in § 2(2)

to governmental entities and wholly owned government corporations, this court

will not extend the exemption to government contractors. See id. at 1401-02

-14- (holding that exemptions from jurisdiction contained in the Act should not be “so

expansively interpreted as to deny protection to workers the Act was designed to

reach”).

This reading of § 2(2) is entirely consistent with the Board’s interpretation

of the Act. As noted at length above, although the Board has historically declined

to assert jurisdiction over the employees of governmental contractors, it has

consistently maintained that such declinations of jurisdiction were undertaken

solely as a matter of Board discretion pursuant to § 14(c)(1) of the Act. 11 See

11 The Unions agree that, prior to Management Training, the Board purported to exercise its discretionary powers under § 14(c)(1) when it declined to assert jurisdiction over government contractors under the governmental control test. They vigorously contest, however, whether § 14(c)(1) actually empowers the Board to decline jurisdiction in such cases. Nevertheless, as conceded by the Unions, the resolution of that question is unnecessary to the determination of this case. Aramark also asserts that § 14(c)(1) does not vest in the Board a grand reservoir of discretion to decline to exercise its statutory jurisdiction. Instead, according to Aramark, the legislative history of § 14(c)(1) “‘establishes that the purpose of that section was to eliminate the so-called “no man’s land,” that category of cases involving employers doing less than a certain volume of business and over which the Board had refused to exercise jurisdiction.’” Appellant’s Supplemental en banc Br. at 13 (quoting National Transportation, 240 N.L.R.B. 565, 1979 WL 8831, at *2 n.6). Thus, according to Aramark, the governmental control test could not have been based on § 14(c)(1). As the final piece of this syllogism, Aramark asserts that because the governmental control test could not legitimately be based upon § 14(c)(1), it must have been based on § 2(2) all along. Even assuming the merits of Aramark’s contentions regarding the extent of the discretion granted the Board in § 14(c)(1), Aramark’s ultimate conclusion simply does not follow. In such an assumed state of affairs, it would be equally (continued...)

-15- supra Section II.A. (discussing evolution and eventual demise of governmental

control test and noting Board’s position that test was purely discretionary). 12 The

Board’s consistent view that governmental contractors fall outside § 2(2)’s

political subdivision exemption and inside that provision’s definition of an

11 (...continued) logical to conclude that the Board’s promulgation of the governmental control test was an ultra vires act rather than an implicit agency interpretation of the contours of § 2(2). This is especially true given the Board’s consistent statements during the relevant period that the governmental control test was discretionary, rather than statutory, in nature. See supra Section II.A. 12 See also Pikeville, 109 F.3d at 1152 (“[T]he ‘control’ test elucidated in Res-Care, Inc. is only a tool previously used by the Board to define the parameters of the agency’s discretionary, as opposed to statutory, jurisdiction. Only after jurisdiction pursuant to § 2(2) was established would the Board examine the control exercised by the employer over aspects of employment conditions to determine whether the NLRB would nevertheless choose to forego examination of alleged labor law violations.”); Teledyne, 108 F.3d at 59 (“Other courts have recognized that the Res-Care governmental control test . . . was an exercise of the Board’s discretion.”); Human Dev. Ass’n v. NLRB, 937 F.2d 657, 660-61 (D.C. Cir. 1991) (“[The government contractor] is unquestionably an ‘employer’ within the statutory jurisdiction of the Board. Based upon the exclusion of ‘any State or political subdivision thereof’ from the definition of an employer, however, the Board may exercise its discretion, with respect to a particular bargaining unit, not to assert jurisdiction over a statutory employer that provides services exclusively to an exempt government entity.” (citation omitted)); NLRB v. Kemmerer Village, Inc., 907 F.2d 661, 663, 664 (7 th Cir. 1990) (describing governmental control test as “a reasonable systematization of the Board’s inherent discretion to allocate its limited resources efficiently” and as a discretionary “doctrine of prioritization” rather than a “rule of law”); Herbert Harvey, Inc. v. NLRB, 424 F.2d 770, 773-74 (D.C. Cir. 1969) (holding that Board clearly had statutory jurisdiction over government contractor qua government contractor, but noting that Board “has traditionally reserved a discretion to decline jurisdiction in particular cases where it believes the policies of the Act will not be effectuated by an exercise of its authority”).

-16- employer “is entitled to great respect.” NLRB v. Natural Gas Utility Dist., 402 U.S. 600, 605 (1971). 13 Based on the Act’s plain language and the Board’s

consistent view of its statutory jurisdiction, 14 this court concludes that the

governmental control test is not a prerequisite to the Board’s exercise of

jurisdiction over a governmental contractor pursuant to § 2(2).

The plain language of § 2(2) aside, Aramark argues that the Supreme Court

incorporated the governmental control test into the Act in its decision in NLRB v.

E.C. Atkins & Co., 331 U.S. 398 (1947). Aramark reads far too much into the

E.C. Atkins opinion. See Teledyne, 108 F.3d at 59 n.2 (rejecting notion that E.C.

Atkins mandated governmental control test and noting that opinion instead

13 See also NLRB v. Town & Country Elec., Inc., 516 U.S. 85, 89-90 (1995) (holding that “the Board often possesses a degree of legal leeway when it interprets its governing statute, particularly where Congress likely intended an understanding of labor relations to guide the Act’s application”); NLRB v. Curtin Matheson Scientific, Inc., 494 U.S. 775, 786 (1990) (holding that Congress delegated to Board “primary responsibility for developing and applying national labor policy”); E.C. Atkins, 331 U.S. at 414 (holding, in statutory jurisdiction case, that the “responsibility for representing the public interest in [labor] matters and of reaching a judgment after giving due weight to all the relevant factors lay[s] primarily with the Board”). 14 Because the Board has not altered its view of its statutory jurisdiction under § 2(2), but has instead reconsidered the efficacy and wisdom of declining jurisdiction over governmental contractors under § 14(c)(1), this court need not consider the amount of deference due under Chevron when an administrative agency alters its interpretation of a statute. See National Fed’n of Fed. Employees v. Department of Interior, 119 S. Ct. 1003, 1015-16 (1999) (O’Connor, J., dissenting) (arguing that agency interpretation is entitled to less deference in such situations).

-17- “emphasized that the Board has considerable discretion in deciding whether to

exercise jurisdiction over non-exempt private entities”).

In E.C. Atkins, the Supreme Court analyzed whether the Board could

validly assert jurisdiction over a bargaining unit of private guards who were

employees of a governmental defense contractor, when the guards were required

to be civilian auxiliaries to the United States Army military police. See 331 U.S. at 399. Military authorities reserved the right to veto the hiring and firing of

individual guards and “were authorized to take appropriate action through the

plant management to correct conditions which might result in defective or

inadequate performance by the guard forces of its ordinary protective duties.” Id. at 407 (quotations omitted).

Despite the substantial control exercised by the military over the guards,

the Court affirmed the Board’s exercise of jurisdiction. See id. As a general

matter, it noted that

[T]he terms “employee” and “employer” in this statute carry with them more than the technical and traditional common law definitions. They also draw substance from the policy and purposes of the Act, the circumstances and background of particular employment relationships, and all the hard facts of industrial life. And so the Board, in performing its delegated function of defining and applying these terms, must bring to its task an appreciation of economic realities, as well as a recognition of the aims which Congress sought to achieve by this statute. This does not mean that it should disregard the technical and traditional concepts of “employee” and “employer.” But it is not confined to those concepts. It is free to take account of the more relevant economic

-18- and statutory considerations. And a determination by the Board based in whole or in part upon those considerations is entitled to great respect by a reviewing court, due to the Board’s familiarity with the problems and its experience in the administration of the Act.

Id. at 403-04. Applying these general precepts to the facts before it, the Court

concluded that jurisdiction was appropriate even though the military, an exempt

governmental entity, controlled many functions of the employment relationship.

According to the Court,

In this setting, it matters not that respondent was deprived of some of the usual powers of an employer, such as the absolute power to hire and fire the guards and the absolute power to control their physical activities in the performance of their service. Those are relevant but not exclusive indicia of an employer-employee relationship under this statute. As we have seen, judgment as to the existence of such a relationship for purposes of this Act must be made with more than the common law concepts in mind. That relationship may spring as readily from the power to determine the wages and hours of another, coupled with the obligation to bear the financial burden of those wages and the receipt of the benefits of the hours worked, as from the absolute power to hire and fire or the power to control all the activities of the worker. In other words, where the conditions of the relation are such that the process of collective bargaining may appropriately be utilized as contemplated by the Act, the necessary relationship may be found to be present.

Id. at 413-14.

Consistent with E.C. Atkins, the Board’s decision to abandon the

governmental control test was made based on the “hard facts of [modern]

industrial life” and with reference to the question whether “the process of

-19- collective bargaining may appropriately be utilized as contemplated by the Act.”

Id. at 403, 414. As noted by the Board,

In retrospect, we think the emphasis in Res-Care on control of economic terms and conditions was an over-simplification of the bargaining process. While economic terms are certainly important aspects of the employment relationship, they are not the only subjects sought to be negotiated at the bargaining table. . . . In times of downsizing, recession, low profits, or when economic growth is uncertain or doubtful, economic gains at the bargaining table are minimal at best. Here the focus of negotiations may be upon such matters as job security, job classifications, employer flexibility in assignments, employee involvement or participation and the like.

Management Training, 317 N.L.R.B. 1355, 1995 WL 451936, at *4; see also

Pikeville, 109 F.3d at 1153 (“In today’s labor market, the economic packages

offered to employees are no longer the sole prizes of a bargaining event.”). 15 We

find no support in E.C. Atkins for the proposition that the National

Transportation/Res-Care governmental control test is a prerequisite to the

Board’s exercise of jurisdiction under § 2(2).

15 For exactly these reasons, this court rejects Aramark’s claim that the Board’s Management Training test constitutes an arbitrary and capricious exercise of the Board’s jurisdiction. In particular, we agree with the Fourth Circuit that for each policy argument advanced by employers in opposition to Management Training, there is a corresponding policy argument in favor of the approach offered by the Board. See Teledyne, 108 F.3d at 60. Congress left the resolution of these policy disputes to the Board, not the courts. See Charles D. Bonanno Linen Serv., Inc. v. NLRB, 454 U.S. 404, 418 (1982) (holding that courts must not “substitute [their] judgment for those of the Board with respect to the issues that Congress intended the Board should resolve”).

-20- As a final matter, Aramark contends that this court’s Memorial Hospital

line of cases, see supra note 2, was soundly decided and should guide our

resolution of this appeal. As set out at some length in the panel opinion, the

Memorial Hospital line clearly held that the governmental control test was a

jurisdictional element inherent in § 2(2) of the Act. See Aramark, 156 F.3d at

-21- 1096-97. 16 For those reasons set out above, this court concludes that the

Memorial Hospital line of cases was wrongly decided.

Furthermore, as persuasively argued by the Board, we conclude that the

Memorial Hospital line is founded on a mistaken failure to distinguish between

the Board’s statutory and discretionary jurisdiction. The Board is bound by its

16 In its separate petition for rehearing en banc, the Unions argue that the panel erred when it concluded that it was bound by the Memorial Hospital line. According to the Unions, the panel should have applied a special rule of relaxed stare decisis applicable only in the administrative law context. Under this special rule, “where an agency has articulated a new statutory interpretation, that interpretation should ordinarily be reviewed on its merits, even where the circuit has previously applied a different construction of the statute.” Intervenor’s Pet. for Reh’g at 5 (citing NLRB v. Viola Indus.-Elevator Div., Inc., 979 F.2d 1384, 1394 (10 th Cir. 1992) (en banc); Mesa Verde Constr. Co. v. Northern Cal. Dist. Council of Laborers, 861 F.2d 1124, 1134-36 (9 th Cir. 1988) (en banc)). Whatever the merits of such a special rule of administrative stare decisis, a question we need not and do not resolve here, it is inapplicable given the particular facts of this case. As the panel noted at some length, see Aramark, 156 F.3d at 1096-98 & n. 15, and as conceded by the Board in its petition for rehearing en banc, the Memorial Hospital line of cases cannot reasonably be read as merely deferring to the governmental control test as simply one of a series of reasonable interpretations to which § 2(2) was susceptible. Instead, those opinions squarely, though erroneously, hold that § 2(2) mandates the governmental control test as a prerequisite to the Board’s statutory jurisdiction. See, e.g., Memorial Hospital, 624 F.2d at 185 (holding that when a “private employer who has contracted to provide services to an exempt political subdivision does not retain sufficient control over the employment relationship to engage in meaningful collective bargaining, § 2(2) deprives the Board of jurisdiction”); R.W. Harmon, 664 F.2d at 251 (“Courts have interpreted section 2(2) to prohibit the Board from asserting jurisdiction over private employers . . . if the employer does not ‘retain sufficient control over the employment relationship to engage in meaningful collective bargaining.’” (quoting Memorial Hospital, 624 F.2d at 185)).

-22- own rules until it changes them, “including the rules that it has adopted in order

to channel what would otherwise be an essentially unreviewable discretion in the

deployment of its limited prosecutorial resources.” Kemmerer Village, Inc. v.

NLRB, 907 F.2d 661, 663 (7 th Cir. 1990); see also Burinskas v. NLRB, 357 F.2d

822, 827 (D.C. Cir. 1966) (holding that Board cannot “act arbitrarily nor can it

treat similar situations in dissimilar ways”). Because it had embraced the

governmental control test for several decades prior to the advent of the Memorial

Hospital line, the Board had no reason to object to the applicability of the test in

any of the cases in that lineage. Accordingly, it appears that both the Board and

this court focused on the applicability of the test to the facts of each particular

case without repeatedly intoning the test’s discretionary and potentially transitory

nature. The result appears to have been a blurring of the distinction in this

court’s opinions.

For instance, in Memorial Hospital, the court held that “[t]he governmental

subdivision’s substantial control over the labor relations policies of the party

contracting with the governmental agency requires the Board to decline to

assert jurisdiction.” 624 F.2d at 185 (emphasis added). While the word

“requires” implies a lack of statutory jurisdiction, the term “decline to assert”

implies an act of discretion. Similarly, in R.W. Harmon, the court cast the

petitioner’s claim in discretionary terms (“Petitioner . . . argues that the Board

-23- should decline to exercise jurisdiction . . . .”), yet decided the case in terms of a

statutory-jurisdictional bar (“Courts have interpreted section 2(2) to prohibit the

Board from asserting jurisdiction . . . .”). 664 F.2d at 248 (emphasis added)

(citing Memorial Hospital). By the time Jefferson County was decided, this court

recognized a distinction between the Board’s discretionary and statutory

jurisdiction, but concluded that the distinction had been rendered meaningless by

the decision in Memorial Hospital. See Jefferson County, 732 F.2d at 126.

Whatever the genesis of the Memorial Hospital line, this court is convinced

that the entire pedigree is faulty. Accordingly, those portions of each decision in

the Memorial Hospital line, see supra note 2, inconsistent with this opinion are

hereby overruled.

IV. CONCLUSION

The orders of the Board are hereby ENFORCED. Aramark’s petition for

review is DENIED. Sections II.B. and III. of the panel opinion are VACATED.

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