Dynaelectron Corp.

National Labor Relations Board - Board Decisions

Sep 30, 1987

286 N.L.R.B. 302 (N.L.R.B. 1987)

302 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
Dynaelectron Corporation , Aerospace Operations
Div. and International Union, United Automo-
bile, Aerospace & Agricultural Implement
Workers of America , UAW, Petitioner. Case
15-RC-7280
30 September 1987
DECISION ON REVIEW AND ORDER
BY CHAIRMAN DOTSON AND MEMBERS
JOHANSEN AND BABSON
On 3 October 1986 the Regional Director issued
a Decision and Order in which he dismissed the in-
stant petition and declined to assert jurisdiction
over the Employer, Dynaelectron Corporation,
under the test set forth in Res-Care, Inc., 280
NLRB 670 (1986), and Long Stretch Youth Home,
280 NLRB 678 (1986).
Thereafter, in accordance with Section 102.67 of
the National Labor Relations Board Rules and
Regulations, Petitioner filed a timely request for
review of the Regional Director's decision, in
which Petitioner contended that the Board should
assert jurisdiction. By unpublished order dated 6
January 1987, the Board granted the request for
review. Both parties filed briefs on 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, including the parties' briefs on review,
and concludes, for the reasons set forth below, that
it is appropriate for the Board to assert jurisdiction
over the Employer.
The Employer is engaged in performing organi-
zational level maintenance on T-2 aircraft for the
U.S. Navy at Naval Air Station (NAS), Meridian,
Mississippi; NAS Chase Field, Beeville, Texas; and
NAS Kingsville, Kingsville, Texas. Organizational
maintenance is maintenance performed at the site
where an aircraft is located, whether shore or air-
craft carrier based. Such services include inspec-
tion, service, lubrication, adjustment or replace-
ment of parts, and flight line services. The instant
contract between the Employer and the Navy is a
1-year fixed price contract with the option to
renew annually for a total duration not to exceed 5
years.
Petitioner seeks to represent all the Employer's
production and maintenance employees at NAS
Meridian. The Employer contends that the petition
should be dismissed under Res-Care, Inc., 280
NLRB 670 (1986), and Long Stretch Youth Home,
280 NLRB 678 (1986), because the Employer, as a
contractor subject to the terms of the Service Con-
tract Act of 1965, as amended, 41 U.S.C. § 351,
does not possess the ability to bargain meaningfully
with a labor organization.
The Service Contract Act applies to every con-
tract in excess of $2500 entered into by the Federal
Government, the principal purpose of which is to
provide services to the Federal Government.
Under the Service Contract Act, the Department
of Labor (DOL) issues area wage determinations
that set forth the minimum wages and fringe bene-
fits to be provided to service employees in a locali-
ty. There are two wage determinations for the T-2
contract; one covers the Meridian area and the
other the Texas locations at NAS Chase Field and
NAS Kingsville. The wage determination for the
Meridian area, established in 1984, sets the mini-
mum hourly wage rates for 23 job classifications.
In addition to setting minimum wages , the wage
determination also requires that the Employer pro-
vide fringe benefits with an average contribution of
$1.08 an hour. The Employer must provide em-
ployees with life, accident, and health insurance;
sick leave; pension and saving plans; personal
leave; and severance pay. The Employer must also
provide employees a specified amount of vacation
based on length of service and grant nine paid holi-
days each year. As long as it maintains benefits
valued at the minimum rate, the Employer may
provide these benefits in any form it chooses. The
Employer does not need the approval of the DOL
or the Navy to change the benefit package.
The Employer contends that the operation of the
Service Contract Act mandates that the Board de-
cline to assert jurisdiction. We disagree. In Res-
Care, the Board refined the basic test for whether
an employer shares a Government entity 's exemp-
tion from the Act that was enunciated in National
Transportation Service, 240 NLRB 565 (1979). The
Board explained in Res-Care that the decision to
assert jurisdiction will turn not only on the extent
of control retained by the employer over essential
terms and conditions of employment, but also on
the degree of control exercised by the exempt
entity over labor relations. Jurisdiction is not as-
serted if the employer does not have the "final say
on the entire package of employee compensation,
i.e., wages and fringe benefits . . . ." Res-Care.
The exempt entity in Res-Care placed direct
limits on employee compensation, and the employ-
er thus did not have the ability to bargain over
economic terms and conditions of employment.
There, the employer's salary ranges, specified bene-
fits, and personnel policies were subject to DOL
approval and became part of the reimbursable costs
under the contract; the exempt entity retained dis-
cretion to disapprove any proposed changes in
wages, benefits, or personnel policies. The Agency
286 NLRB No. 28
DYNAELECTRON CORP 303
did not merely set minimum standards; rather, it
approved wage ranges , which included a maximum
wage for each job classification.
In contrast to the employer in Res-Care, in Long
Stretch the employer was able to engage in mean-
ingful bargaining. Long Stretch held that a ceiling
on the employer's total budget, without specific
limits on employee compensation expenditures,
does not require declining jurisdiction. Id. The
exempt entity in Long Stretch reviewed the employ-
er's proposed budget and its allocation of revenues,
suggested salary ranges for each job classification,
and recommended that salaries comprise no more
than a certain percentage of the total budget.
Beyond setting minimum standards and qualifica-
tions, however, the exempt entity had little or no
control over wages and benefits.
Under the test applied in Res-Care and Long
Stretch, the Service Contract Act in itself does not
bar meaningful bargaining. On its face, the Service
Contract Act contemplates collective bargaining;
indeed, it expressly provides for substitution of col-
lectively bargained wages and benefits for the pre-
vailing compensation rates set forth in wage deter-
minations.1 The statute, as amended, requires that
I Chairman Dotson finds it unnecessary to adopt his colleagues' re-
marks that Congress, through its references to collective bargaining in
the Service Contract Act, thereby intended Board juiisdiction However,
Chairman Dotson agrees with his colleagues' conclusion that jurisdiction
should be asserted over this Employer because it retains the "ultimate au-
thority to determine the primary terms and conditions of employment
[and] the ability to engage in the necessary 'give and take' which is a
central requirement of good-faith bargaining and which makes bargaining
meaningful " Res-Care In his view, this case is distinguishable from Long
Stretch, supra , a case in which he disagreed with the Board 's assertion of
jurisdiction (see his dissenting opinion ) The Employer here is able to de-
termine its personnel and labor relations policies and to establish employ-
ees' wages and fringe benefits, and it has the ultimate responsibility to
make hiring and disciplinary decisions Although the setting of wage
rates is subject to payment of a minimum or prevailing wage determina-
tion set by the Department of Labor (DOL) and payment of a minimum
hourly fringe benefit rate, in addition to the provision of certain benefits
established by DOL, Dynaelectron is not prohibited from bargaining con-
cerning maximum wages or fringe benefits Whereas in Long Stretch, the
employer was required to submit a proposed annual line-item budget and
all of its personnel policies to MSSA for approval, including a list of all
staff positions and qualifications , Dynaelectron is not required to submit
such information to DOL for approval. It thus "retains the ultimate au-
thority to determine the primary terms and conditions of employment of
its employees " Although Sec 4(c) of the Service Contract Act contains
a proviso that the DOL will not adopt the rates furnished in the collec-
tive-bargaining agreement as the wage determination for the next fiscal
year if the Secretary of Labor finds, aftei a hearing that the wages and
benefits clearly are "substantially at variance" with, those prevailing in
the area, or if negotiations were not at arm's length , such action is taken
by DOL only under exceptional circumstances and does not negate Dyn-
aelectron 's ultimate authority to determine the primary terms and condi-
tions of employment of its employees The minimum wage provisions
under the Service Contract Act for service employees on Government
contracts, like similar minimum wage requirements imposed by Congress
under the Davis-Bacon Act, 40 U S C § 276a et seq (which governs
Federal construction contracts), and the Walsh Healey Public Contracts
Act, 41 U S C § 35 et seq (which governs Federal supply contracts), do
not preclude jurisdiction under the NLRA
every contract to furnish services to the Federal
Government shall contain minimum compensation
standards based on either prevailing wages and
benefits or, where a collective-bargaining agree-
ment exists, on the wages and benefits provided in
the collective-bargaining agreement. 41 U.S.C.
§ 351(a)(1), (2).2
The legislative history of the Service Contract
Act provides further support for the conclusion
that Congress did not intend to exclude employees
fulfilling Government service contracts from the
Board's jurisdiction. The Service Contract Act was
enacted in 1965 to ensure that employees of service
contractors receive the prevailing wages and fringe
benefits paid other employees performing similar
work in the same locality. The statute was amend-
ed in 1972 to protect employees of successor con-
tractors. These amendments established procedures
to permit the Department of Labor to base the pre-
vailing rates on collectively bargained rates, there-
by preventing replacement contractors from under-
bidding incumbent contractors that have collective-
bargaining relationships with labor organizations.
S. Rep. No. 1131, 92d Cong., 2d Sess. 1, reprinted
in 1972 U.S. Code Cong. & Ad. News 3534. It was
the intent of the drafters "to provide a measure of
stability and dignity" to these employees. Id. at
3537. Hence, Section 2(a), 41 U.S.C. § 351(a), was
amended and Section 4(c), 41 U.S.C. § 353(c), was
added to ensure that the wages and benefits of em-
ployees working for service contractors under a
collective-bargaining agreement would not be re-
duced with a new service contract; the minimum
rates in such circumstances are to be in accordance
with the rates provided for in the collective-bar-
gaining agreement . As a result, the employees of a
successor contractor must be paid at minimum the
wages and benefits that they would have received
under a collective-bargaining agreement with the
predecessor contractor, and they must receive any
2 Concerning employee wage rates, the Service Contract Act provides
that each service contract must contain
A provision specifying the minimum monetary wages to be paid the
various classes of service employees as determined by the Secre-
tary in accordance with prevailing rates for such employees in
the locality, or, where a collective-bargaining agreement covers any
such service employees, in accordance with the rates for such em-
ployees provided for in such agreement, including prospective wage
increases provided for in such agreement as a result of arm 's-length
negotiations
41 US C § 351(a)(1)
With respect to employee fringe benefit levels, the Service Contract
Act provides that each contract must contain
A provision specifying the fringe benefits to be furnished as de-
termined by the Secretary to be prevailing for such employees
in the locality, or, where a collective-bargaining agreement covers
any such service employees, to be provided for in such agreement,
including prospective fringe benefit increases provided for in such
agreement as a result of arm's-length negotiations
41 US C § 351(a)(2)
304 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
prospective increases they would have received
were they employed by the employer who entered
into the collective-bargaining agreement. Id. at
3536.
The Employer asserts that when the DOL estab-
lishes a wage determination, competition ensures
that the wage determination in fact constitutes the
setting of actual wage rates. Even if this assertion
is true, the DOL does not thereby have ultimate
discretion and control over economic terms of em-
ployment. Rather, it is the marketplace that con-
trols such terms. The Service Contract Act does
not remove employers' control over essential terms
and conditions of employment by setting minimum
standards with which employers must comply. The
economic constraints within which employers sub-
ject to the Service Contract Act must operate are
no different from the economic restrictions placed
on any private contractor by the marketplace and
by the Fair Labor Standards Act, 29 U.S.C. § 206.3
The Employer argues that jurisdiction should
not be asserted because of the possibility that the
contract price may be insufficient to compensate it
for collectively bargained wages and benefits. The
Employer's contention fails because in essence it is
a claim that the DOL limits the Employer's total
budget. Long Stretch rejected the argument that an
employer lacks control over economic matters in
such a circumstance. The contract here may set
minimum wage and benefit requirements, but the
Employer is able to bargain with the employees
over the terms and conditions of employment and
is free to compensate its employees at more than
the minimum levels set by the DOL.4 Unlike Res-
Care, there are no restrictions on the maximum
wages and benefits, and the Employer determines
the compensation its individual employees will re-
ceive, subject only to the minimums specified in
the contract.
The Employer next contends that its ability to
bargain is limited because if it enters into negotia-
3 We note that the Board in the past has asserted jurisdiction over em-
ployers subject to the Service Contract Act See Champlain Security Serv-
ices, 243 NLRB 755 (1979) (applying the National Transportation test),
Atlas Guard Service, 237 NLRB 1067 (1978) (applying the now-rejected
intimate connection test), and Pope Maintenance Corp, 228 NLRB 326,
328 (1977) (citing NLRB v E. C. Atkins & Co., 331 US 398 (1947)),
enfd 573 F.2d 898 (5th Cir 1978)
4 The Employer seeks to distinguish Pope Maintenance Corp, in which
the Board asserted jurisdiction over a service contractor, on the basis that
there the employer paid some of its employees within the same classifica-
tions different wages beyond the minimum levels, and under different
terms, while here the Employer limits its wages to those set in the wage
determinations. This argument fails . In Pope Maintenance, as here, the
DOL established minimum hourly wages and minimum fringe benefits as
well as the number of holidays and amount of vacation As in Pope Main-
tenance, nothing in the record shows that either the wage determination
mechanism or the Navy contract prevents the Employer from paying
higher wages or greater fringe benefits or providing more holidays and
vacation than the established floor Rather, as the Employer's witness tes-
tified, the labor market sets the maximum rates, not the DOL
tions with a labor organization during the term of
the contract, and a collective-bargaining agreement
results in a contract price higher than that for
which the Employer bid, the Employer would not
be able to recoup the difference until the next fiscal
year. At that time, those collectively bargained
wage and benefit rates would become the new
wage determination. Although it is true that the
Employer is unable to pass on to the Navy the cost
of increased wages and benefits, at least until the
next fiscal year, this also is true for any private em-
ployer that is a party to a fixed-price contract and
that agrees in collective-bargaining negotiations to
provide its employees increased wages and/or ben-
efits during the term of that contract. In addition,
the Service Contract Act does not require the em-
ployer to agree to provide higher wage rates or
benefit levels than those prevailing in the locality.
The Employer further contends that the DOL
controls wage rates because if the Employer agrees
in negotiations to wages higher than those con-
tained in the wage determination, which would
trigger a new wage determination at the next
option period, the DOL may reject the rate if it ex-
ceeds the prevailing rate. With the amendments to
the statute, Congress did include limited exceptions
to the rule that collectively bargained rates auto-
matically become the new wage determination for
the work covered by the contract. Section 4(c)
contains a proviso applicable to both Sections 2(a)
and 4(c). Under these provisions, the DOL will not
adopt the rates furnished in the collective-bargain-
ing agreement as the wage determination (for the
next fiscal year) if the Secretary of Labor finds,
after a hearing, that the wages and benefits clearly
are "substantially at variance" with those prevail-
ing in the area, or if negotiations were not at arm's
length. S. Rep. 1131, 92d Cong., 2d Sess. 1, reprint-
ed in 1972 U.S. Code Cong. & Ad. News at 3536-
3537.
The Employer argues that, under the above pro-
visions, the DOL possesses the authority to ap-
prove or disapprove any changes in wages . In sup-
port of this contention, the Employer states that it
has requested that the DOL raise the wage deter-
mination of certain classifications at Meridian to
match those at the two other locations that the
contract covers. The Employer assumes , however,
that the DOL will reject this request because the
two wage determinations reflect the prevailing
rates in the localities and, thus, the rates for some
classifications at Meridian cannot equal those at the
other locations. Therefore, the Employer concludes
that the DOL would reject any collectively bar-
gained rate because it would exceed the prevailing
rate.
DYNAELECTRON CORP. 305
We do not agree. First, the legislative history in-
dicates that Congress considered such circum-
stances unusual ; there must be a clear showing that
the wages and benefits are substantially at variance
before the DOL rejects collectively bargained rates
as the applicable wage determination. S. Rep. No.
1131, 92d Cong., 2d Sess. 1, reprinted in 1972 U.S.
Code Cong. & Ad. News at 3537-3538. Further-
more , even if the DOL were to find the rates sub-
stantially at variance and if the Employer were
forced to absorb collectively bargained wage in-
creases , as noted above, this situation would be no
different from that facing all private companies
working on fixed-price contracts at the time a new
collective-bargaining agreement is negotiated. In
any event, as the Employer acknowledged at the
hearing, an employer may bargain for language in
the collective-bargaining agreement to protect it
should the bargained-for rates not be incorporated
into a revised wage determination.
Thus, the Employer, as in Long Stretch, does not
operate under any specific limits on employee com-
pensation expenditures beyond adhering to the min-
imum standards required under the statute. Unlike
Res-Care, the contract here does not specify wage
ranges and does not place any maximum limit on
employees' compensation. As noted above, regard-
ing benefits, the Employer is limited only by the
minimum hourly rate and by the requirement to
provide certain benefits. Beyond those specifica-
tions, the Employer is free to offer any benefit
package it deems appropriate.
Finally, the Employer also asserts that the Navy
exercises control over labor-management relations
between the Employer and the employees. Under
the contract, the Employer must maintain an effi-
cient organization , provide effective quality assur-
ance, and establish a system for inspection. The
Navy employs a monitoring team to maintain qual-
ity in the Employer's operations, and this team op-
erates out of the same facility as does the Employ-
er. Employees must adhere to Navy standards of
dress and appearance and wear uniforms that iden-
tify them as the contractor's employees. The Em-
ployer's employees are subject to Navy regulations
and directives, and the contracting officer may re-
quest that the Employer remove personnel from
contract work for unethical conduct, violation of
Navy regulations, breach of security, or miscon-
duct. The contract, however, also provides that the
Employer's employees remain employees of the
contractor and not of the Navy. The Employer re-
mains responsible for hiring, supervision, discipline,
and terminations. The Navy's contractual right to
request dismissal of an employee in the event of
misconduct or for security reasons does not, alone,
preclude the assertion of jurisdiction over the Em-
ployer. See Rustman Bus Co., 282 NLRB 152
(1986). Similarly, the Navy's maintenance of oper-
ational controls does not circumscribe the Employ-
er's ability to bargain over essential terms and con-
ditions of employment, but merely serves to moni-
tor contract compliance. Long Stretch, see Res-
Care, see also Champlain Security Services, 243
NLRB 755 (1979), and Atlas Guard Service, 237
NLRB 1067 (1978). The relevant consideration is
whether the employer has final say on wages and
benefits, and the exempt entity' s maintenance of
these operational controls does not limit bargaining
over employee compensation. See Rustman Bus.
In sum , we find that the Employer retains suffi-
cient control over its employees' terms and condi-
tions of employment to engage in meaningful col-
lective bargaining, and that neither the Navy nor
the DOL exercises any controls that significantly
affect the Employer's ultimate discretion over
wage and benefit levels. ARA Services, 283 NLRB
602 (1987), Long Stretch. We therefore conclude
that it will effectuate the purposes and policies of
the Act to assert jurisdiction over the Employer.
Accordingly, the Regional Director's Decision and
Order is reversed, and we shall reinstate the peti-
tion and remand the proceeding to the Regional
Director for further appropriate action.
ORDER
The petition in Case 15-RC-7280 is reinstated
and remanded to the Regional Director for further
appropriate action.