Aramark Corp. v. National Labor Relations Board

Citation: 156 F.3d 1087Docket: Nos. 97-9535, 97-9550

Court: Court of Appeals for the Tenth Circuit; September 22, 1998; Federal Appellate Court

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Aramark Corporation is challenging two orders from the National Labor Relations Board (NLRB) that assert jurisdiction over its operations and mandate collective bargaining with Florida Public Employees Council 79, AFSCME, and International Union of Operating Engineers, Local 465, AFL-CIO (the Unions). The NLRB has sought enforcement of its orders, with the Unions supporting this action. Aramark contends that the NLRB lacks jurisdiction due to its operations being covered by the political subdivision exemption and claims it does not maintain sufficient control over labor relations under its government contracts to engage in meaningful bargaining.

The court's jurisdiction to review the Board's orders is based on sections 10(e) and (f) of the National Labor Relations Act. It upholds the Board's determination that Aramark is not an exempt political subdivision but remands the case to the Board to further assess whether Aramark retains adequate control over labor relations for meaningful bargaining.

Aramark, a Delaware corporation, manages food service operations in the Duval County School District in Jacksonville, Florida, and The Citadel in South Carolina. The disputes arose after Aramark refused to recognize and negotiate with the Unions representing its food service employees. In July 1990, Aramark entered a contract with the Duval County School Board to manage food services, under which employees prior to the contract retained their civil service status and union representation. Employees hired afterward became Aramark employees and were not part of the public-sector bargaining unit.

The contract was renewed yearly until June 1995, when Aramark was awarded a new one-year contract. In December 1996, Council 79 petitioned the NLRB to represent Aramark’s food service employees, to which Aramark responded by arguing that the NLRB lacked jurisdiction due to insufficient control over employment conditions and the political subdivision exemption. The Board's Regional Director concluded that it had jurisdiction and ordered a representation election.

The Regional Director confirmed the Board's jurisdiction over Aramark, classifying it as an 'employer' under section 2(2) of the Act and determining its operations met the Board’s monetary jurisdictional standards per the Management Training Corp. precedent. Aramark's objections regarding the use of the Management Training standard and claims of a political subdivision exemption for its operations in Duval County schools were dismissed. The Board upheld the Regional Director’s Decision and Direction of Election, emphasizing that without asserting jurisdiction, Aramark's employees would lack union representation opportunities. After a union election on February 28, 1997, where a majority of Aramark's employees opted for union representation, Council 79 was certified as their exclusive bargaining representative. Aramark subsequently refused to negotiate with the union, leading the Board's General Counsel to issue a complaint for violating sections 8(a)(5) and (1) of the Act. Aramark admitted to its refusal but contested the Board's jurisdiction. On June 13, 1997, the Board ruled Aramark had committed unfair labor practices by not bargaining with Council 79 and ordered compliance. 

In related proceedings, Aramark, which has provided food services at The Citadel in South Carolina since the 1960s, opposed a petition by Local 465 to represent its roughly 100 food service employees, claiming lack of Board jurisdiction. Aramark argued it did not maintain sufficient control over employment terms per its state contract and cited a political subdivision exemption due to its Food Service Director's public official status. After a hearing, the Regional Director rejected Aramark's claims and mandated an election.

The Regional Director determined that the Board had jurisdiction over Aramark's operations, as Aramark acknowledged its status as an employer under section 2(2) of the Act and met the necessary monetary jurisdictional standards. The Board rejected Aramark's claim of being an exempt political subdivision, specifically noting that the selection of its Food Service Director with input from State officials did not qualify Aramark for the exemption. The Board ruled that Aramark did not meet the criteria for a political subdivision, as it was not managed by individuals accountable to public officials, and affirmed that Aramark is a private corporation, not a government subdivision. An election held on April 16, 1997, resulted in a majority vote for union representation, leading to the certification of Local 465 as the exclusive bargaining representative for Aramark's food service employees at The Citadel. Aramark's refusal to recognize or engage in bargaining with Local 465 prompted a complaint from the Board's General Counsel, alleging violations of sections 8(a)(5) and (1) of the Act. Aramark contested the union certification, claiming improper jurisdiction by the Board. On July 25, 1997, the Board concluded that Aramark had committed unfair labor practices and ordered it to bargain with Local 465. Aramark subsequently filed petitions for review of the Board's orders concerning its operations in Duval County and at The Citadel, arguing that it qualified for the political subdivision exemption and maintained insufficient control over labor relations under its contracts with the Duval County School Board and The Citadel. The Board has the authority to determine employer status under the Act, and its interpretations are afforded considerable deference.

The Board's findings are upheld if they are backed by substantial evidence from the overall record. Aramark does not claim exemption under the first prong of the Board's political subdivision test but argues for exemption based on the second prong. This prong requires entities to show that their policy-making officials are directly accountable to public officials or the public. Courts and the Board assess whether a majority of the entity's governing body and executive officers are appointed by or removable by public officials, as well as whether the entity exhibits characteristics typical of public entities.

In a precedent case, Hawkins County, a nonprofit utility district was deemed a political subdivision due to its powers, nonprofit operation, and public oversight. Conversely, Aramark's argument for exemption relies on asserted control by public officials over its food service contracts in Duval County and at The Citadel. However, Aramark does not argue that its governing board is appointed by public officials and is a private corporation with no evidence of public official oversight over its governing body or any attributes of public status.

The Regional Director found no support for Aramark's political subdivision exemption claim in the Duval County case. The Board affirmed this decision without addressing Aramark's exemption argument in detail. In the Citadel case, the Board noted Aramark's significant corporate size and reiterated that even with state officials' participation in selecting its Food Service Director, Aramark is not administered by individuals accountable to public officials, confirming its status as a private corporation.

The Board concluded that Aramark failed to demonstrate that its classification as non-exempt from the Act's coverage was unreasonable or inconsistent with the law, focusing on Aramark's status as a national corporation rather than its specific operations in the two locations. This approach aligns with established legal criteria for determining political subdivision status.

The Board evaluates whether an entity exhibits characteristics typical of public entities, such as sovereign powers or tax-exempt status, when applying the political subdivision exemption. An entity is not classified as a political subdivision solely due to government involvement in specific operations of a private corporation. In Spectrum Healthcare Services, the Board reaffirmed that its political subdivision test assesses the entire entity rather than individual operations. It rejected Aramark's argument that its jurisdiction was lacking because employees managing a healthcare unit were from the Illinois Department of Corrections, emphasizing the court's deference to the Board's jurisdictional determinations. Aramark did not demonstrate that the Board's interpretation of the political subdivision exemption was unsupported or unlawful, leading to the conclusion that Aramark's operations were not exempt.

Regarding the Governmental Control Test, Aramark contended that the Board incorrectly asserted jurisdiction over its operations due to insufficient control over labor relations for meaningful collective bargaining under its contracts with exempt governmental entities. The Board had previously established a governmental control test in 1986, which focused on the control retained over essential employment terms. However, in 1995, the Board overruled this test, stating that jurisdiction should be based on whether an employer meets the definition under Section 2(2) of the Act and the monetary jurisdictional standards. The Board argued that meaningful bargaining could still occur even with contract restrictions, as there are negotiable matters beyond immediate contractual approval. Ultimately, the Board concluded it had jurisdiction over Aramark based solely on the Management Training standard, confirming that Aramark satisfied the employer definition and applicable monetary thresholds.

Aramark acknowledges compliance with the Management Training standard but argues that due to government control over its labor relations in Duval County and Citadel operations, this standard is inappropriate for assessing the Board's jurisdiction. Citing the Board of Trustees of Memorial Hospital v. NLRB, Aramark asserts that if a private employer lacks adequate control over labor relations to allow for meaningful collective bargaining, the Board lacks jurisdiction since the governmental entity is deemed the true employer. The court has upheld this view in subsequent cases, emphasizing the need to evaluate who possesses final decision-making authority over key employment terms, such as wages and personnel policies. While the court notes that total control over all employment conditions is not necessary, sufficient control for effective bargaining is required. The Board’s reliance solely on the Management Training standard without applying the Res-Care governmental control test is argued by Aramark to undermine the jurisdictional findings. Conversely, the Board defends its jurisdiction based on the Management Training standard, claiming that its previous application of the Res-Care test was a discretionary choice rather than a statutory requirement. The Board contends that its current approach aligns with Section 2(2) of the Act and is supported by statutory policies. However, if the Management Training standard allows the Board to overlook whether an employer maintains adequate control for meaningful bargaining, it conflicts with existing circuit precedent. The Board requests that the court reevaluate and potentially overturn prior decisions, asserting that the governmental control test is not a mandated condition for jurisdiction. However, the panel recognizes it cannot overrule the Memorial Hospital line of cases established by another panel.

The circuit court is bound by the precedent established in Memorial Hospital and subsequent cases, which can only be altered by an en banc reconsideration or a conflicting Supreme Court decision. In this case, the Board failed to assess whether Aramark maintains adequate control over essential employment terms for effective collective bargaining. Consequently, the court remands the matter to the Board for further findings on its jurisdiction over Aramark's operations, in line with circuit precedent. 

The court affirms that Aramark's operations in Duval County and at The Citadel do not fall under the political subdivision exemption of the Act. However, it denies enforcement of the Board's orders, instructing the Board to reevaluate its jurisdiction based on the need to determine Aramark's control over labor relations. Aramark argued that its District Manager, responsible for daily operations, is appointed by public officials, and that food service managers are county public employees. The Regional Director noted that Aramark retains authority over hiring, discipline, and other employment decisions.

Previously, the Board applied a governmental control test, established in Res-Care, to decide jurisdiction over private employers providing services to exempt entities, which required a showing of control by the governmental entity over employment terms. However, this test was abandoned in 1995, with the Board asserting jurisdiction based solely on meeting the statutory definition of "employer" and monetary standards, notwithstanding governmental control.

Before the current proceedings, there were two unsuccessful attempts to certify Aramark's employees in Duval County for collective bargaining. In 1994, a petition was filed by Council 79, but the Regional Director concluded that the School District's control hindered meaningful bargaining, leading to the dismissal of the petition without a request for Board review. Subsequently, Council 79 sought relief from the Florida Public Employees Relations Commission.

Aramark seeks to include its food service employees in the same public-sector bargaining unit as Duval County food service employees. In 1995, the Public Employees Relations Commission (PERC) dismissed Council 79's petition, determining that Aramark was the employer of the employees involved due to its significant control over discipline, hiring, and daily operations, despite the School District's fiscal control. PERC concluded it lacked jurisdiction since Aramark is not a public employer. This decision was upheld by state court in May 1996. 

Prior to the current certification proceedings, labor unions had also attempted to certify Aramark's employees at The Citadel. In 1991, the Hotel Employees and Restaurant Employees International Union filed a petition, which was dismissed by the Board's Regional Director under the Res-Care test, citing that Aramark could not engage meaningfully in bargaining due to The Citadel's ultimate authority over employment matters. The Regional Director noted that Aramark controlled various employment aspects, but did not address Local 465's argument regarding Aramark's bargaining capacity under the former Res-Care governmental control test.

Legislative history indicates that Congress exempted governmental employees from the Board’s jurisdiction due to their lack of right to strike. Courts have suggested that this political subdivision exemption is rooted in Tenth and Eleventh Amendment considerations regarding state sovereignty and judicial immunity. Aramark argues its exemption in Duval County is justified because its District Manager is appointed by the School Board, and its employees are supervised by Duval County staff. Similarly, at The Citadel, Aramark claims exemption as its Food Service Director is appointed by Citadel officials, who also have authority over other managerial positions. The Supreme Court in Hawkins County clarified that state law does not dictate whether an entity qualifies as an exempt political subdivision.

The Court mandated that a federal examination of an employing entity's "actual operations and characteristics" is necessary to determine its status as a political subdivision, rather than relying solely on its state designation. This approach does not imply that the political subdivision test should focus exclusively on the specific employer's operations but rather on the entity as a whole. The Board dismissed Aramark's argument that "administered" pertains only to daily operations or personnel policies, clarifying that previous references to "administration" were context-specific and dependent on the degree of control exercised by governmental bodies over employment conditions.

The Board had previously shifted from a governmental control analysis to a new jurisdictional standard that assesses whether an employer qualifies as an "employer" under § 2(2) and meets monetary jurisdictional criteria. Thus, the extent of governmental control over day-to-day operations is relevant for a separate "governmental control" analysis, which determines the true employer under the Act. Section 14(c) of the Act allows the Board to decline jurisdiction over labor disputes deemed not substantially affecting commerce. Two appellate circuits have upheld the Board's Management Training jurisdictional standard, affirming that the governmental control test was not statutorily required but rather a discretionary tool for jurisdictional definition.

Section 2(2) necessitates an assessment of control over labor relations by both the employer and the governmental entity. The Memorial Hospital court was seen as deferring to the jurisdictional test being applied by the Board without asserting that its ruling on the Board's jurisdiction was based solely on the Board's interpretation. Although the court referenced a Board decision, it primarily supported its position with circuit case law. Subsequent cases have not indicated reliance on the Board's interpretation, and courts have interpreted section 2(2) to restrict the Board from asserting jurisdiction over private employers unless the employer has sufficient control to engage in meaningful collective bargaining. The court declined to consider Aramark’s alternate argument regarding the Board's jurisdiction, emphasizing that the determination of an employer's control over labor relations is a factual one that necessitates examining both the agreements and actual practices involved. Such factual determinations are under the Board's jurisdiction to decide initially, as established by previous case law.