Opinion ID: 148119
Heading Depth: 1
Heading Rank: 1

Heading: context facts and legal background

Text: The words political subdivision appearing in section 652(5) are not defined in the Act. Similarly, the National Labor Relations Act (NLRA), which likewise covers employers and provides that the term `employer' shall not include any State or political subdivision thereof, 29 U.S.C. § 152(2), contains no definition of political subdivision. In N.L.R.B. v. Natural Gas Util. Dist. of Hawkins County, Tenn., 402 U.S. 600, 91 S.Ct. 1746, 29 L.Ed.2d 206 (1971), the Supreme Court considered whether the NLRB had correctly held that the utility district was not a political subdivision so as to be exempt from the NLRA under section 152(2). The Court noted that . . . the Board . . . `has limited the exemption for political subdivisions to entities that are either (1) created directly by the state, so as to constitute departments or administrative arms of the government, or (2) administered by individuals who are responsible to public officials or to the general electorate.' Id. at 1749. [1] In holding that the NLRB had erred in determining in light of the Board's own test that utility district was not a political subdivision, id. at 1749-50, the Court went on to say: The Board found that `the Employer in this case is neither created directly by the State, nor administered by State-appointed or elected officials.' 167 N.L.R.B., at 691-692 (footnotes omitted). But the Board test is not whether the entity is administered by `State-appointed or elected officials.' Rather, alternative (2) of the test is whether the entity is `administered by individuals who are responsible to public officials or to the general electorate' (emphasis added), and the Tennessee statute makes crystal clear that respondent [the district] is administered by a Board of Commissioners appointed by an elected county judge, and subject to removal proceedings at the instance of the Governor, the county prosecutor, or private citizens. Id. at 1750. [2] About seven months after the Supreme Court's decision in the Hawkins County case, the Secretary of Labor promulgated 29 C.F.R. § 1975.5, a new regulation interpreting, for the first time, the political subdivision exemption of section 652(2). 37 Fed.Reg., No. 14, at 630-31, January 21, 1972. That regulation has not since been amended. As the Secretary's brief herein correctly states: The regulation sets out the following two tests for a state political subdivision, which ask whether the entity `has been (1) created directly by the State so as to constitute a department or administrative arm of the state government; or (2) administered by individuals who are controlled by public officials and responsible to such officials or to the general electorate'. 29 U.S.C. § 1975.5(b). [3] The Secretary and StarTran treat the foregoing two alternative tests as being essentially the same as the above quoted test set out in the Hawkins County case, 81 S.Ct. at 1749, for the NLRA political subdivision exemption (§ 152(2)). In what appears to be the first reported judicial decision construing the section 1975.5, the Seventh Circuit in Brock v. Chicago Zoological Soc., 820 F.2d 909 (7th Cir.1987), stated: The Secretary of Labor's regulations set forth a two-part test for determining whether an entity is a state or political subdivision. Under this test, any entity that is `(1) created directly by the State, so as to constitute a department or administrative arm of the government, or (2) administered by individuals who are controlled by public officials and responsible to such officials or to the general public' will be deemed to be a state or political subdivision under § 625(5). 29 (c) Factors for meeting the tests. Various factors will be taken into consideration in determining whether an entity meets the test discussed above. Some examples of these factors are: [1] Are the individuals who administer the entity appointed by a public official or elected by the general electorate? [2] What are the terms and conditions of the appointment? [3] Who may dismiss such individuals and under what procedures? [4] What is the financial source of the salary of these individuals? [5] Does the entity earn a profit? are such profits treated as revenue? [6] How are the entity's functions financed? What are the powers of the entity and are they usually characteristic of a government rather than a private instrumentality like the power of eminent domain? [7] How is the entity regarded under State and local law as well as under other Federal laws? [8] Is the entity exempted from State and local tax laws? [9] Are the entity's bonds, if any, tax-exempt? As to the entity's employees, are they regarded like employees of other State and political subdivisions? [10] What is the financial source of the employee-payroll? [11] How do employee fringe benefits, rights, obligations, and restrictions of the entity's employees compare to those of the employees of other State and local departments and agencies? In evaluating these factors, due regard will be given to whether any occupational safety and health program exists to protect the entity's employees. [§ 1975.5(c); bracketed numbers inserted.] The regulation's next subdivision states that [t]he above list of factors is not exhaustive and no particular factor, isolated from the particular facts of a case, is assigned any particular weight. . . . Each case must be viewed on its merits; and whether a single factor will be decisive, or whether the factors must be viewed . . . as part of a sum total, also depends on the merits of each case. [§ 1975.5(d)]. The next subdivision [§ 1975.5(e)(1)] lists examples of types of entities which would normally be regarded as not being covered employers, including the State Department of Labor and industry; . . . . State, county, and municipal public school boards and commissions; and public libraries. Section 1975.5(e)(2) lists examples of types of entities that, [d]epending on the facts in the particular situation . . . would probably be excluded as employers under the Act, including irrigation districts, . . .; municipal transit entities; and State, county and local hospitals and related institutions. (emphasis added). Finally, § 1975.5(e)(3) lists examples . . . of entities which would not normally be regarded as a `State or political subdivision of a State, but unusual factors to the contrary may indicate otherwise.' These are listed as follows: Public utility companies, merely regulated by State or local bodies; business, such as alcoholic beverage distributors, licensed under State or local law; other business entities which under agreement perform certain functions for the State, such as gasoline stations conducting automobile inspections for the State and county governments. C.F.R. § 1975.5(b). This test is identical to the formula the National Labor Relations Board has long used to determine whether an entity is a political subdivision exempt from the Board's jurisdiction under 29 U.S.C. § 152(2). Id. at 910 (citing Hawkins County ). [4] StarTran's claim of exemption as a political subdivision relies on the second alternative test of section 1975.5(b)namely that it is administered by individuals who are controlled by public officials and responsible to such officials or to the general electorateis grounded on its relationship to Capital Metropolitan Transit (Capital Metro) in Austin, Texas. Capital Metro was established in 1985 under Texas law (then TEX.REV.CIV. STAT. art. 1118x). It assumed the assets of the former City of Austin Transit System. Capital Metro operates under Chapter 451 of the Texas Transportation Code. See Tex. Transportation Code § 451.052(a)(1), and is a public political entity and corporate body that exercises public and essential governmental functions. Its board of directors is responsible for its management, operations and control, and employs a general manager or chief executive officer administering its daily operations (see id. §§ 451.053, 451.101, 451.106). The undisputed and unchallenged evidence is that Capital Metro's board of directors consists of seven members, five of whom are elected public officials. It is indisputably a political subdivision of the State of Texas, and its officers and directors are indisputably public officials. Prior to the creation of StarTran and its contract with Capital Metro effective January 1, 1992, Capital Metro (and before it, the City of Austin) contracted with Management Labor Services (MLS), an outside contractor, for labor (and possible other) services for operation of the Austin Transit System. With the 1991 ending of Capital Metro's relationship with MLS (the reasons for which are not reflected in the record), in order to continue to be eligible for federal financial assistance of certain kinds provided under the Federal Transit Act it was apparently necessary, inter alia, to preserve the collective bargaining rights of the MLS employees (covered by the then collective bargaining agreement between MLS and Amalgamated Transit Union Local 1091) who had been servicing the Capital Metro operations. See 49 U.S.C. § 5333(b). [5] However, Capital Metro, as a political subdivision of the State of Texas, is prohibited by Texas law from entering into a collective bargaining agreement with a labor union or recognizing a union as the bargaining agent for its employees. See Texas Government Code § 617.002. [6] In an effort to qualify for federal financial assistance under the Federal Transit Act, while not violating those prohibitions of Texas law, Capital Metro, by resolution of its board of directors in November 1991 formed StarTran as a nonprofit corporation under the Texas Non-Profit Corporation Act (Art. 1396-1.011-11.01, TEX.REV.CIV.STATS.), on December 6, 1991. Thereafter, on December 31, 1991, effective January 1, 1992, StarTran and Capital Metro entered into a contract by which StarTran generally agreed to employ and provide to Capital Metro the services of drivers and mechanics and others in Capital Metro's mass transit operations and agreed to be bound by the terms and conditions of the existing collective agreements with Unions. [7] The December 31, 1991 capital Metro-StarTran contract recites that: WHEREAS, to ensure compliance with both state and federal law, it is necessary for Capital Metro to obtain certain services from an independent entity which can recognize the collective bargaining rights of those persons who provide Mass Transit Service for Capital Metro; . . . [8] The contract between Capital Metro and StarTran, as amended in 1997, rewrites the original contract's article II status of StarTran to add, among other things, a provision, that: Capital Metro shall have no right to supervise or control the duties and activities of StarTran so as to cause a violation of the provisions of Chapter 617 of the Texas Government Code or 49 U.S.C. Section 5333. It is the intent of the parties that, for purposes of Collective Bargaining, StarTran is an independent corporate entity which shall in no way be deemed to be an affiliate, partner, subsidiary, joint venturer, or otherwise under the control of Capital Metro. The testimony of the president of the local union representing the StarTran bus drivers and mechanics, called as a witness by the Secretary, was that Capital Metro had to approve any proposed collective bargaining agreement. There was no evidence contrary to this testimony or to the witness's assertion that Capital Metro had never refused such approval. The union president likewise testified that he had discussed many personnel and collective bargaining issues [of concern to him as union president] with Mr. Gilliam [the general manager of Capital Metro] or his predecessor at Capital Metro, and that in the last three years he had had several meetings with Mr. Gilliam and also the board of directions [of Capital Metro] relating to the issues we've had to deal with. He further explained [w]hen we can't get something done by working at StarTran, we go on to the next step or we'll go to Mr. Gilliam. And then if we can't get it done there, we'll go to the [Capital Metro] board and we go public. Again, this testimony was not controverted. [9] There is no evidence of any ruling formal or informalby any official or agency under the NLRA, or by any court, that StarTran is (or is not) an employer covered by the NLRA or is (or is not) a political subdivision under section 152(2). However, StarTran does not, and apparently has never, taken the position that it is not covered by the NLRA. There does not appear to be any ruling by any Texas court or agency, or by the Texas Attorney General, respecting whether or not StarTran is a political subdivision of the state of Texas within the meaning of section 617.002 of the Texas Government Code (see note 6, supra ). StarTran has claimed it is entitled to governmental immunity under the Texas Tort Claims Act ( see TEX. CIV. PRAC. & REM.CODE, Ch. 101, § 101.101(3)(B)) and apparently one or two trial courts have agreed (in unpublished orders); and it is insured through the Texas Municipal League Intergovernmental Risk Pool, which insures only governmental entities. As amended in 1993 the Capital Metro-StarTran agreement provided that StarTran would [p]rovide safety and other training (the original agreement included safety and other training among the matters to be provided by Capital Metro). The undisputed evidence is that an employee of Capital Metro, its safety director who reported to Capital Metro's risk manager (also a Capital Metro employee), established and from time to time amended the safety program and the safety training program which were applicable and applied to StarTran and Capital Metro and their employees, and conducted and supervised training exercises thereunder. However, discipline of bargaining unit employees for safety violations, or otherwise, was handled by StarTran and the union under the collective bargaining agreement. The evidence also established that StarTran and Capital Metro are both subject to (and in compliance with) the Federal Transit Administration requirement to have a safety program which that agency reviews every three years, as well as to state law safety program requirements. The Capital Metro-StarTran agreement has always contained the provision that the services [to be] provided by Capital Metro shall be ministerial only, and that StarTran shall retain absolute and real day-to-day control over all matters relating to the terms and conditions of employment, supervision, and control of its employees. The undisputed evidence is that at all times Capital Metro has furnished all the buses (which are all marked as being Capital metro buses; the drivers wear StarTran or StarTran in Service to Capital Metro uniform shirts), and other equipment, facilities and office space, and has determined the fares, routes and schedules for the bus service, as well as furnished all insurance and all clerical, budgeting and accounting services, and all funds to StarTran. StarTran has no source of funds or revenue other than Capital Metro. Any StarTran expenditure must be approved by Capital Metro. StarTran has at no time had any assets other than its employees. [10] The Capital Metro-StarTran contract has never had any fixed term and has always been expressly terminable by either party giving 180 days written notice of its intent to do so. StarTran does not have, and has never had, any business relationship with any other party other than Capital Metro (or the union) and does not, and has never, furnished employees or services to any entity other than Capital Metro. It does not and could not exist or function apart from its relationship with Capital Metro. The StarTran board of directors consists of the five persons who hold specified executive positions with StarTran (director of transportation, superintendent of maintenance, director of maintenance, director of special transit services, and manager of labor relations). The persons holding those positions are each StarTran employees who are selected by the president and general manager of Capital Metro (Fred Gilliam, elected to that position by the Capital Metro board). If and when any such StarTran employee ceases to hold such specified StarTran executive position, he or she ceases to be a member of the StarTran board of directors, and his or her successor in that executive position assumes that place on the StarTran board. The president of Capital Metro hires these StarTran executives, fixes their compensation (which is funded by Capital Metro) and has the power to transfer them to other StarTran positions (and hence to remove them from the StarTran board) and to appoint another StarTran employee to that specified executive position (and hence to that place on the StarTran board). Those StarTran executives are at will employees who may be terminated by the president of Capital Metro. All this is according to the by-laws of StarTran, as testified to without objection by its president and manager of labor relations, Ken McCulloch (who had the StarTran by-laws with him while testifying) and is unquestioned. [11] Further, McCulloch testified that Gilliam, as CEO of Capital Metro, is his (McCulloch's) boss as president and labor relations manager of StarTran. Similarly, Dan Peabody, StarTran board member and director of transportation, testified that his boss as director of transportation is Fred Gilliam, the CEO of Capital Metro. Peabody, as StarTran director of transportation, and Steve Herrera, the StarTran director of maintenance, each have scheduled biweekly meetings with Gilliam, Capital Metro CEO, as transportation and maintenance are the two largest components of StarTran. Peabody further testified: And then on a monthly basis Mr. Gilliam meets with the StarTran board of directors. And then for me, I usually have a phone conversation with Mr. Gilliam on a daily basis or I have scheduled meetings with him to where I bring him up to speed on some of the things that we're doing. Q. Again, he is your boss; is that correct? A. That's correct, he works on developing my PMP, which is your evaluation system, through which we receive our raises on an annual basis. Peabody specifically testified that McCulloch (StarTran president and director of labor relations) was not his boss and that he did not report to Mr. McCulloch at all. Finally, Peabody explained that when an ice storm hit the area he made recommendations to Gilliam, and Gilliam made the final decision, as to what levels of bus service, if any, would be provided throughout that day.