August 18, 2014

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August 15, 2014

Determination of Joint-Employer Status of Educational Service Provider and Public School Academy

On March 28, 2014, the Michigan Alliance of Charter Teachers and Staff (“ACTS”) and the American Federation of Teachers (“AFT”) (collectively the “Union”) filed an election petition to organize a collective bargaining unit, naming both a public school academy (the “Academy”) and an educational service provider (an “ESP”) as employers. The petition was filed with the National Labor Relations Board (“NLRB”), and a four day hearing was held April 14 through 17 at the NLRB offices of Region 7 in Detroit, Michigan.  The Michigan Association of Charter Schools (“MAPSA”) sent a representative to the first day of hearings and was updated daily in preparation to file an amicus brief, if necessary at the close of the hearings.

The Petition Claimed What?

At issue was: (1) whether an educational service provider and a public school academy were joint-employers; and (2) whether a public school academy was a public entity exempt from the jurisdiction of the NLRB. In response, the ESP asserted that the Academy was the sole, or at least a joint, employer of the teachers and staff assigned to work at the Academy. The Union initially believed there was a joint-employer relationship. The Academy claimed that the ESP was the sole employer because the express terms of its ESP contract and the facts present in the case showed that only the ESP had the authority to hire, evaluate, discipline or terminate employees and furthermore set employee wages and benefits. The Academy also contended that because it was a public entity created by the state, it was not subject to the jurisdiction of NLRB.

During the first day of hearings, the ESP proffered several witnesses, including the human resources director, the former regional director responsible for overseeing the Academy, and the current school leader assigned to the Academy, among others. Counsel on behalf of the Academy obtained testimony from the ESP witnesses demonstrating that the relationship between the parties was governed by a Management Agreement, under which the Academy contracted to the ESP “all the management, operation, administration, and education at the Academy,” including “[m]anagement of all personnel function.” The testimony further showed that the ESP had the “sole” authority to determine staffing needs, hire employees, evaluate employees, and terminate employees without regard to the Academy Board’s input or desires. The ESP’s ability to unilaterally set wages, bonuses, employee benefits, and transfer employees without approval or even consultation with the Academy was also confirmed during cross-examination of the ESP witnesses.

Despite this record testimony, the ESP still asserted that the Academy was, at the very least, a joint-employer. To support its position, the ESP alleged that one Academy Board member attempted to assume a more direct role regarding supervision of the Academy’s performance and pointed to the fact that the Board hired an educational consultant as proof of joint-employer status. The testimony of both the ESP witnesses and the additional witnesses proffered by the Academy, however, confirmed that the role of the Academy Board was limited to governance, not management or operation of the school The testimony also established that the actual authority of the educational consultant was limited in scope to assessing student educational performance and improvement, and the consultant had no power of authority to undertake any personnel decisions.

With respect to the jurisdictional issue, the Academy provided expert testimony from one of the initial drafters of the charter school law in Michigan. Richard McClellan offered testimony regarding the legislative intent behind the statutory creation of public school academies as public entities in the state. This testimony was essential, given recent decisions by the NLRB that charter schools in other states, such as Illinois and Pennsylvania, were not political subdivisions of the state, and therefore, were not public entities exempt from NLRB jurisdiction.

On the fourth day of hearings, both the Union and the ESP changed their positions and agreed to stipulate on the record: (1) that the ESP was the sole employer; and (2) that the NLRB did not have jurisdiction over the Academy.

This outcome solidified that public school academies are public entities not subject to NLRB jurisdiction and was a significant victory for the Academy and the charter school movement. The parties’ stipulation also provides affirmative agreement that under the terms of the comprehensive management agreement between the parties, which is similar to most comprehensive agreements, the ESP was the “sole” employer. Because the parties stipulated and released the Academy from the proceedings, however, the NLRB will not issue a formal decision. Academy boards and ESPs should be aware of the employment structure established in their individual management agreement and operate according to those terms. There must be a clear demarcation between the Academy Board’s governance role and responsibilities and the management company’s management and operational role and responsibilities.

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