Php Healthcare Corp.

National Labor Relations Board - Board Decisions

Jul 31, 1987

285 N.L.R.B. 182 (N.L.R.B. 1987)

182 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
PHP Healthcare Corporation and Local 722, Hospi-
tal, Professional , Technical & Service Workers
Union, Service Employees International Union,
AFL-CIO, CLC, Petitioner. Case 5-RC-12699
31 July 1987
DECISION AND ORDER
BY MEMBERS JOHANSEN, BABSON, AND
STEPHENS
Upon a petition duly filed under Section 9(c) of
the National Labor Relations Act, a hearing was
held before Hearing Officer Steven L. Shuster.
Following the hearing, pursuant to Section 102.67
of the National Labor Relations Board Rules and
Regulations, the Regional Director for Region 5
transferred this case to the National Labor Rela-
tions Board for decision. Thereafter, all parties'
filed briefs in support of their positions.
The National Labor Relations Board has delegat-
ed its authority in this proceeding to a three-
member panel.
The Board has reviewed the hearing officer's
rulings made at the hearing and finds that no preju-
dicial error was committed.2 They are affirmed.
On the entire record in this case, including the
briefs filed by the parties, the Board finds:
1. The parties stipulated, and we find, that the
Employer, a Missouri corporation with an office
and place of business in Washington, D.C., has
been engaged in providing health care services at
the home and relief buildings at the St. Elizabeth's
Hospital complex pursuant to a contract with the
United States Department of Health and Human
Services (HHS). During the 12 months preceding
the hearing, a representative period, the Employer,
in the course and conduct of its operation, derived
gross revenues in excess of $250,000 and purchased
and received goods and materials and services
valued in excess of $1000 directly from points out-
side Washington, D.C. The parties stipulated, and
we find, that the Employer is an employer engaged
in commerce within the meaning of Section 2(2),
(6),, and (7) of the Act and a health care institution
within the meaning of Section 2(14) of the Act.3
I The United States Department of Health and Human Services filed a
memorandum as amicus curiae
2 At the hearing the Employer filed a motion seeking an order protect-
ing the confidentiality of certain exhibits The hearing officer denied the
motion and the Employer requested special permission to appeal The
Acting Regional Director granted the Employer's request for special per-
mission to appeal, but affirmed the hearing officer's denial of the motion
In its brief to the Board, the Employer appeals the decision of the Acting
Regional Director and the hearing officer to deny the Employer's
motion We find no prejudicial error in the denial of the motion
s The Employer's stipulation was with the reservation that the Board
should not assert jurisdiction under Res-Care, Inc, 280 NLRB 670 (1986)
2. The parties stipulated, and we find, that the
Petitioner is a labor organization within the mean-
ing of the Act.
3. The Petitioner seeks to represent a unit of pro-
fessional and a unit of nonprofessional employees
employed by PHP at St. Elizabeth's Hospital. The
Employer contends that jurisdiction should not be
asserted under Res-Care, supra, because the Em-
ployer is precluded from engaging in effective col-
lective bargaining due to its contract with HHS.
PHP is a health care management company
whose employees staff health care facilities in
Maryland, Texas, Virginia, Washington, and the
District of Columbia. The facility involved in this
case is located at St. Elizabeth's Hospital. PHP em-
ployees provide mental health care to Cuban en-
trants detained at St. Elizabeth's Hospital by the
Immigration and Naturalization Service (INS). The
facility is jointly operated by HHS through the
Public Health Service (PHS) and the Department
of Justice through INS. PHP provides this mental
health care pursuant to a cost-plus-fixed-fee con-
tract with HHS.
The current contract between HHS and PHP is
effective through October 1988. Following a re-
quest for proposal issued by HHS in 1985, PHP
submitted a technical proposal describing how it
would provide the psychiatric services for the
project' and a business proposal that contained,
inter alia, PHP's financial capacity, indirect cost
rate, and policies concerning personnel, travel, and
consultants. As part of the business proposal, PHP
submitted an SF-1411 that contained a line-by-line
budget of all direct costs, including labor costs.
The SF-1411 contains salary rates, labor
overhead/fringe benefit costs, proposed salary in-
creases, costs of transportation and per diem, num-
bers of employees in each job classification, and the
number of hours to be worked including overtime
by job classification. The proposal also contains the
Employer's salary justification scale.
HHS and PHP then held negotiations, during
which HHS sought reductions in certain line by
line costs such as labor overhead, salary justifica-
tions, and salary increases. PHP submitted a modi-
fied proposal, a best and final offer (BFO) in which
PHP changed some of its proposed costs. It, inter
alia, eliminated eight attendant positions, switched
from semiannual to annual wage increases, and
modified the labor overhead rate. Following a
review of PHP's BFO, HHS awarded PHP a 3-
year, $22 million, cost-plus-fixed-fee contract. Ac-
* The table of contents to the technical proposal indicates that the pro-
posal contained , inter alia , information about PHP's approach to clinical
care, its organization and management , its staffing , and its corporate ex-
perience
285 NLRB No. 25
PHP HEALTHCARE CORP. 183
cording to PHP Project Manager John Johnston
and HHS Contracting Specialist Arthur Storey,
PHP was bound by the terms of its proposals and
the SF-1411 submitted with the BFO. The BFO's
yearly estimates of the number of employees, the
average hourly wages by job classification, the
wage progression by job classification, and the an-
ticipated fringe benefit costs constitute PHP's oper-
ating budget, which can only be exceeded with
HHS' approval. The total contract price is derived
from the line-by-line operating budget submitted by
PHP. HHS is not obligated to reimburse PHP for
costs incurred in excess of the estimated costs in
the budget.
The BFO sets limits on wage rates, salary steps,
and percentages of salary increases that the Em-
ployer may offer. The SF-1411 sets forth a six-step
salary scale established for each job category. The
Employer is bound by the minimum and maximum
wage rate for each category. Once an employee
reaches the maximum salary step, his salary cannot
be further increased. The Employer cannot raise
wages more than the percentage increase estab-
lished for each step of the scale.5
The BFO also establishes limits on fringe bene-
fits. Sick and personal leave, holidays, vacation,
and insurance benefits are all set by the BFO.
Overtime is also limited by the BFO, which sets a
specific number of overtime hours available for
each job category. The Employer must request and
HHS must authorize any overtime in excess of that
established in the budget.
The BFO lists all job categories with the number
of employees budgeted for each category. The Em-
ployer cannot unilaterally modify this number, al-
though temporary vacancies may exist at any given
time. 6
The contract gives HHS the right to review the
credentials of all PHP staff members and to inter-
view, approve, or disapprove any individual's em-
ployment. Government Project Officer Bornemann
has reviewed the resumes of applicants for physi-
cian and psychologist positions, but does not gener-
ally get involved in the hiring of the majority of
employees.
5 At the hearing the Petitioner raised as an issue the applicability of the
Service Contract Act, 41 US C § 351 et seq to the contract between
PHP and HHS If applied to this contract, the Service Contract Act
would require a minimum wage rate determined by the Secretary of
Labor or a collectively bargained wage rate In its brief, however, the
Petitioner abandoned this issue We therefore find it unnecessary to pass
on whether the Service Contract Act applies to the contract between
PHP and HHS, and what effect, if any, it would have on the issue of
whether to assert jurisdiction over the Employer
9 The Government project officer's objection to PHP's proposal to
delete a job category resulted in that category's being retained by PHP
PHP is responsible for training of employees, but
the Government project officer may direct that
employees be given specific training.'
HHS does not dictate PHP's grievance proce-
dures, promotion standards, or other personnel
policies, although a copy of PHP's personnel poli-
cies are submitted with PHP's bid. INS can
become involved in employee discipline for viola-
tion of INS rules. INS can also deny access to the
facility to PHP employees for security reasons.
HHS may audit the Employer's compliance with
the contract and may disallow payment if the costs
are not permitted under the contract. According to
PHP Project Manager John Johnston, all direct
costs that differ from the direct costs presented in
the budget must be approved in advance by the
contracting office. HHS may terminate the con-
tract at any time when it determines that the con-
tract is no longer in the Government's interest.
In Res-Care, supra, 280 NLRB 670, the Board
reaffirmed the basic test set forth in National Trans-
portation Service, 240 NLRB 565 (1979), for deter-
mining whether assertion of jurisdiction over an
employer providing services to or for an exempt
entity is warranted." The Board in Res-Care held,
however, that in determining whether the employ-
er is capable of engaging in meaningful collective
bargaining the Board would examine not only the
control over essential terms and conditions of em-
ployment retained by the employer, but also the
scope and degree of control exercised by the
exempt entity over the employer's labor relations.
(280 NLRB at 671.) The Board held that when an
Employer lacks the ultimate authority to determine
primary terms and conditions of employment such
as wage and benefit levels, it lacks the ability to
engage in meaningful bargaining.
Applying Res-Care to the instant case, we find
that PHP's contract with HHS controls the pri-
mary economic terms and conditions of employ-,
ment. As in Res-Care, although the wage and bene-
fit levels for each job classification are set initially
by the Employer in its proposals, once the Em-
ployer's bid is accepted by HHS and the contract
awarded, the Employer's proposals become the
basis for the contract price and constitute the Em-
ployer's operating budget. The Employer's propos-
als contained a line-by-line budget of all direct
costs including labor costs. The proposals con-
For example, Government Project Officer Bornemann required staff
training on the treatment of a patient diagnosed as having the AIDS
virus
8 In National Transportation, supra, the Board held that the inquiry is
whether the employer itself met the definition of an "employer" in Sec
2(2) of the Act and, if so, whether the employer retained sufficient con-
trol over the employment conditions of its employees to enable it to
engage in effective or meaningful bargaining with a labor organization
184 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
tained estimates of the number of employees, the
average hourly wages by job classification, the
wage progression by job classification, fringe bene-
fit costs, and overtime costs. This operating budget
can only be exceeded with HHS approval. HHS is
not obligated to reimburse PHP for costs incurred
in excess of the estimated costs in the budget.
Thus, HHS, not PHP, retains ultimate discretion
for setting wage and benefit levels. As in Res-Care,
we find that because of this restriction the Employ-
er is effectively precluded from engaging in mean-
ingful collective bargaining.
In the instant case, as in Res-Care but unlike
Long Stretch Youth Home, 280 NLRB 678 (1986),
the Employer's proposed budget, including the
projected figures for employee compensation ex-
penses, is the basis for the compensation PHP re-
ceives from HHS. Thus, HHS' approval of PHP's
budget affects the economic terms and conditions
of PHP's employees to the extent that the budget
determines the maximum amounts HHS will reim-
burse PHP for employee compensation. As we
noted in Res-Care, it is these direct limits on em-
ployees' compensation that constitute control of
employment relations, and not the fact that the
exempt entity places an effective ceiling on such
expenditures by limiting the Employer's total
budget.
Although the Employer here retains some con-
trol over hiring, training, discipline, promotion
standards, and grievances, we held in Res-Care that
while other personnel-related issues are important,
"if an employer does not have the final say on the
entire package of employee compensation, i.e.,
wages and fringe benefits, meaningful bargaining is
not possible." (280 NLRB at 674.)
We find that the facts in this case warrant declin-
ing to assert jurisdiction. We believe that PHP
"lacks 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, 280 NLRB 670, 674.) Ac-
cordingly, we conclude that it would not effectuate
the purposes of the Act to assert jurisdiction in this
case, and we shall dismiss the petition.9
The petition is dismissed.
MEMBER STEPHENS, concurring.
It is still my view, as stated in my dissent in Res-
Care, Inc., 280 NLRB 670 (1986), that even in the
absence of final control by a Government contrac-
tor over wages and benefits, meaningful bargaining
may occur where, as in this case for example, the
employer substantially controls "grievance proce-
dures, promotion standards, or other personnel
policies." Further, it is not clear to me that where,
as here, the employer is constrained with respect to
wages only insofar as it would be required to fund
any extra-budget labor costs out of its profits on
the contract, that restriction on wages is any great-
er than the restriction on any contractor operating
under a cost-plus-fixed-fee Government contract.
I recognize, however, that this case is controlled
by the majority opinion in Res-Care, supra, and for
institutional reasons I concur in the dismissal of the
petition.
9 In so doing, we do not rely on the Employer 's alternative argument
that the Board lacks ,jurisdiction over it because it shares the Govern-
ment's statutory exemption as a joint employer See Res-Care, supra, at
673 fn 14 In view of our disposition of this case, we find it unnecessary
to pass on the Employer's alternative contentions that the petition should
be dismissed because of a forthcoming reduction in the size of the units,
and that if the Board exercises ,jurisdiction, the ward nurses must be ex-
cluded from the units because they are supervisors We also find it unnec-
essary to pass on the Employer's request to reopen the hearing for the
submission of an additional exhibit because that exhibit is relevant only to
the issue of the anticipated reduction in the size of the unit