When is collective bargaining appropriate?

The following issue was raised by a contractor's representative: In many companies, employees are allowed to form unions and bargain collectively with management. However, union organizing is uncommon in the government contracting community. Why is that? When, if ever, are government contractor employees allowed to bargain collectively?

The National Labor Relations Act (29 U.S.C. & Sect;& Sect; 151-169) was passed in 1935 as the primary law governing relations between employee unions and employers in the private sector. The law created the National Labor Relations Board and gave the board two separate powers. First, the NLRB determines through secret ballot elections whether a group of employees wishes to be represented by a union in dealing with their employers and, if so, by which union. Second, the NLRB attempts to prevent and remedy unfair labor practices by either employers or unions.

By its own terms, the National Labor Relations Act exempts certain employers, including federal, state and local governmental units. Although other federal statutes give many federal employees the right to bargain collectively—and most states have similar statutes for state and local government employees—the NLRB does not enforce those statutes.

The applicability of the National Labor Relations Act to government contractor employees has been the subject of considerable debate and litigation. For some time, the NLRB applied an "intimate connection" test to these cases. Under the test, the NLRB would decline jurisdiction over a contractor's employees when the contractor's work was connected intimately to the operations of the exempt governmental unit. But the NLRB would accept jurisdiction when the contractor's work was incidental to the exempt unit's operations. (Compare, for example, Herbert Harvey Inc. [171 NLRB 238 (1967)], in which jurisdiction over the employees of a janitorial contractor at the World Bank was asserted because the services were incidental to the World Bank's operations; also Rural Fire Protection Co. [216 NLRB 584 (1975)], in which the NLRB declined jurisdiction over the employees of a firefighting services contractor hired by Scottsdale, Ariz., because firefighting is an essential municipal service.) The intimate-connection test focused on the relationship between the exempt organization and the employer, without much regard to the employees.

In National Transportation Service Inc. [240 NLRB 565 (1979)], the NLRB jettisoned the intimate-connection test in favor of a new "right of control" test. Under the new test, the NLRB would accept jurisdiction whenever the nonexempt employer retained sufficient control over the employment conditions of its employees to enable the NLRB to bargain effectively with a labor organization as their representative. Thus, in the National Transportation Service case, which involved a school bus service contractor, the NLRB asserted jurisdiction because the contractor controlled the hiring, firing, supervision and compensation of the employees. Although the school district dictated the arrival and departure times for the buses, it otherwise exerted no appreciable control over the contractor's employees.

In Res-Care Inc. [280 NLRB 670 (1986)], the NLRB applied the right-of-control test to a case involving a contractor operating Labor Department residential Job Corps centers. According to the NLRB, the contractor had insufficient control over its employees' working conditions to allow it to bargain effectively because Labor had the right to approve the contractor's staffing, salary schedules and other details of the working environment. In Dynaelectron Corp. [286 NLRB 302 (1987)], the NLRB applied the same test to assert jurisdiction over the employees of a Navy aircraft maintenance contractor even though the government had established minimum wages and benefits in accordance with the Service Contract Act. According to the NLRB, the contractor retained control over working conditions and might even pay employees more than the minimum, although doing so could reduce the contract's profitability.

However, in Management Training Corp. [317 NLRB 1355 (1995)], the NLRB threw out the right-of-control test as unworkable and unrealistic. In its place, the NLRB established a new, employer-focused test. Under the new test, the NLRB would assert jurisdiction any time the employer was within the statutory definition as nonexempt, regardless of any other factors. In Management Training, the NLRB took jurisdiction over a case with facts identical to those in Res-Care.

Of all the tests used by the NLRB, the employer-focused test is the closest to the actual language of the National Labor Relations Act. Moreover, it has been found reasonable by several courts.

Obviously, the history of collective bargaining for government contractor employees has been complicated by the NLRB's periodic policy changes. Even so, it is common to see government contractor employees unionize in certain industries, especially in those industries that are heavily unionized in the private sector. If the NLRB does not change its current jurisdictional test for government contractor employees, it seems likely that the level of union representation among these employees will evolve to resemble even more of those other businesses.

--Peckinpaugh is a member of the government contracts section of the law firm Winston & Strawn, Washington, D.C.