Target, Inc.

National Labor Relations Board - Board Decisions

Aug 30, 1982

263 N.L.R.B. 781 (N.L.R.B. 1982)

TARGET, INC.
Target, Inc. and American Federation of State,
County and Municipal Employees, Council 93,
AFL-CIO,1 Petitioner. Case 1-RC-17485
August 30, 1982
DECISION AND ORDER
BY MEMBERS FANNING, JENKINS, AND
ZIMMERMAN
Upon a petition duly filed under Section 9(c) of
the National Labor Relations Act, as amended, a
hearing was held before Hearing Officer Carol
Ann Sax of the National Labor Relations Board on
November 12, 18, and 23 and December 2, 1981.
Following the close of the hearing and pursuant to
Section 102.67 of the National Labor Relations
Board's Rules and Regulations, Series 8, as amend-
ed, the Regional Director for Region 1 transferred
this case to the Board for decision. Thereafter, the
Employer filed a brief in support of its position.
Pursuant to the provisions of Section 3(b) of the
National Labor Relations Act, as amended, the Na-
tional Labor Relations Board has delegated its au-
thority in this proceeding to a three-member panel.
The Board has reviewed the Hearing Officer's
rulings made at the hearing and finds they are free
from prejudicial error. They are hereby affirmed.
Upon the entire record in this proceeding, the
Board finds:
Target, Inc., the Employer, is a nonprofit Massa-
chusetts corporation engaged in providing residen-
tial mental health care and vocational day care for
adult mentally retarded individuals in Three Rivers
and Palmer, Massachusetts. American Federation
of State, County and Municipal Employees, Coun-
cil 93, AFL-CIO, the Petitioner herein, seeks to
represent certain of the Employer's employees.
The sole issue before us is whether the Board
may properly assert jurisdiction over Target's op-
erations. Target contends that the restrictive terms
and conditions of its contractual relationship with
the Commonwealth of Massachusetts preclude it
from exercising any appreciable control over the
working conditions of its employees, and that it
therefore shares the Commonwealth's exemption
from the Board's jurisdiction under Section 2(2) of
the Act. Conversely, the Petitioner asserts that the
Employer retains sufficient control over the work-
ing conditions of its employees to enable it to
engage in meaningful bargaining with a labor orga-
nization. Resolution of the jurisdictional issue turns
on application of the test articulated in National
Transportation Service, Inc.2 The Board there held
' The names of the Employer and the Petitioner appear as amended at
the hearing.
2 240 NLRB 565 (1979).
263 NLRB No. 101
that the test for asserting jurisdiction over an em-
ployer which has ties with an exempt entity is
whether the employer itself meets the definition of
an employer within the meaning of Section 2(2) of
the Act, and, if it does, whether the employer has
sufficient control over the employment conditions
of its employees to enable it to bargain with a labor
organization as their representative.
Applying these principles to this case, we find
the following:
Target was organized in 1977 as a private non-
profit corporation for the purpose of providing re-
habilitative counseling and training services to
handicapped individuals in Palmer, Massachusetts.
In 1979, 3 Target won residential care and voca-
tional day care contracts with the Commonwealth's
Department of Mental Health (DMH herein).
Under the residential contract, Target provides
residential services to 11 mentally retarded adults
who live in 5 apartments leased by Target in
Palmer and Three Rivers, and staffed 24 hours per
day by Target employees. Under the vocational
day care contract Target provides direct care vo-
cational services to 12 mentally retarded adults at
its Three Rivers headquarters. Target has operated
almost exclusively under these contracts, which are
renegotiated annually. In fiscal year 1981, 98 per-
cent of Target's total budget of $262,914 was de-
rived directly from the two DMH contracts. The
remaining income was derived from Target's oper-
ation of a print shop and a plant store and from
small private donations.
The two contracts are renegotiated annually and
are administered pursuant to DMH's established
procedures. Each annual negotiation commences
with a DMH-imposed bottom line figure. Thereaf-
ter the total budget is allocated among specific line
items set forth in DMH standardized contract
forms. With regard to employee salaries and fringe
benefits, DMH sets a dollar limit which Target is
not allowed to exceed. 4 The DMH-prescribed line
item figures may also be subsequently adjusted
downward by DMH. For example, in negotiating
the 1981 residential contract, DMH initially in-
formed Target that the maximum allocation for
employee fringe benefits was 15 percent of their
salaries. Thereafter, Target proposed the 15-per-
cent maximum, but DMH refused to accept the
contract until the figure was adjusted downward to
13.8 percent.
After local DMH officials and Target agree on
the proposed budget, it is reviewed by the DMH
3 The record does not reveal the Employer's activities of funding
sources between 1977 and 1979
' As discussed below employee salaries are also limited by the terms of
a consent decree.
781
DECISIONS OF NATIONAL LABOR RELATIONS BOARD
area, regional, and central offices. After receiving
DMH's final approval, the budget is forwarded to
the Commonwealth's Rate Setting Commission and
finally to the Comptroller's office. At any point
along this chain of review the budget may be dis-
approved in whole or in part, requiring repetition
of the entire process. Even after the budget has
been approved by each office in the chain of
review, it must be approved by the legislative and
executive branches of the Commonwealth who
may unilaterally reduce or terminate the funding of
Target. Both contracts are expressly conditioned
on the availability of appropriations.
Once the budget has been finally approved,
Target must operate strictly within the established
limits, and may not shift dollars among the line
items midcontract unless a formal amendment is
ratified by DMH and all the other agencies in the
chain of review. Further, any unexpended line item
funds revert to DMH on the expiration of the con-
tract term.
The property used or leased by Target is like-
wise subject to DMH control. All purchases and
leases are line items subject to the DMH-imposed
ceilings, and Target has no authority to exceed the
designated amount. Further, the title of any proper-
ty purchased by Target with DMH contract funds
which costs more than $100 and has a useful life of
more than I year vests with DMH. With regard to
the apartments leased under the residential con-
tract, DMH-site approval is required before rent
negotiations begin, and Target consults with DMH
concerning any rental increase.
In addition to the above, Target's contracts with
DMH specifically require compliance with all the
relevant terms of the Brewster v. Dukakis consent
decree s entered into by DMH in 1978. This decree
mandates the systematic deinstitutionalization of
mentally ill and retarded persons and to this end
requires DMH to contract with direct care provid-
ers such as Target. In order to implement this plan,
the consent decree delineates operating guidelines
for direct care providers, including specific job de-
scriptions, staffing and training requirements, pro-
gram review standards, staff/client ratio, and staff
salary schedules.
Target may accept as clients only those individ-
uals referred to it by DMH, and may remove cli-
ents from programs only with DMH approval.
Each client's treatment program is established in
conjunction with DMH, is strictly monitored by
DMH officials, and may not be modified without
DMH approval. DMH closely monitors all aspects
of Target's programs by requiring monthly written
reports and notice of staff changes and by making
i Brewster v. Dukakis, CA 76-4423-F (D.C. Mass. Dec. 7, 1978).
site visits and audits. Further, DMH requires
Target to comply with DMH-determined staff ori-
entation and training programs and staff licensing
requirements. The Commonwealth's mental health
regulations, which are incorporated by reference
into Target's contracts with DMH, even specify
the number of members on Target's board of direc-
tors, their geographic location, and their education-
al and experiential background, and preclude any
director ownership interest in the program.
DMH is directly involved in setting the stand-
ards for hiring Target's employees. All Target staff
vacancies must be posted pursuant to DMH proce-
dures. Further, the DMH-Target contracts specifi-
cally require Target to give hiring preference to
state employees who apply for a Target staff posi-
tion so long as this policy of preference does not
interfere with the DMH-imposed affirmative action
requirements. Target's discretion in hiring is also
limited by the minimum qualifications for each staff
position set by DMH pursuant to the consent
decree.
DMH's guidelines for investigations establish a
procedure for a formal DMH investigation of "any
complaint concerning allegations of actions or con-
ditions posing or constituting a danger to the
health or safety of a client or a violation of a cli-
ent's rights." Under these guidelines, DMH is em-
powered to take whatever action it deems neces-
sary, including staffing changes, and may fashion
preventative measures including employee disci-
pline and discharge. At the time of the hearing,
DMH had in fact invoked this power and has con-
ducted four investigations of Target employees. In
the instance of a complaint filed against a Target
employee in July 1981, the DMH official investi-
gating the complaint initially ordered Target's pro-
gram director, Thomas Coakley, to suspend the
employee pending the investigation. Coakley com-
plied with the investigation, but did not suspend
the employee. Although the employee resigned
prior to the completion of the investigation, the
DMH investigator issued findings of fact and rec-
ommendations in which she recommended, in the
language of a directive, that Coakley include an
unsatisfactory performance evaluation in the em-
ployee's file, that the employee not be reinstated
under any circumstances, and that the employee re-
ceive negative references if any were requested.
Moreover, as a result of Coakley's failure to sus-
pend the employee, the DMH area director sent
Coakley a formal reprimand which stated that any
further action of that type would not be tolerated,
and that another occurrence would result in a re-
quest for Coakley's termination or cancellation of
Target's contracts with DMH.
782
TARGET, INC.
Based on the foregoing evidence, we conclude
that the Commonwealth retains such substantial
control over the wages, benefits, and other work-
ing conditions of Target's employees that Target
cannot engage in meaningful collective bargaining
with a labor organization with respect to such con-
ditions. Target receives virtually all of its funds
from DMH; the amount and specific use of those
funds is controlled by DMH and other governmen-
tal entities; and any unexpended funds revert to the
Commonwealth. The employees' salaries, benefits,
job classifications, client/staff ratio, staff training,
licensing, client selection, and client treatment are
specified in Target's contract with DMH and in
the consent decree to which Target is bound. In
addition, DMH closely monitors all aspects of Tar-
get's operations, sets binding hiring guidelines, has
the contractual authority to investigate complaints
filed against Target employees and to discipline
them, and has in fact invoked this authority. Ac-
cordingly, we find that Target shares with the
Commonwealth the exemption from Board jurisdic-
tion under Section 2(2) of the Act." We, therefore,
shall dismiss the petition.
ORDER
It is hereby ordered that the petition filed in
Case 1-RC-17485 be, and it hereby is, dismissed.
* Compare Northampton Center for Children and Families. Inc., 257
NLRB 870 (1981), where the Board found that it had no jurisdiction over
an employer similarly bound by DMH contract provisions and by the
consent decree, with The Mental Health Asociation of North Central Mas-
sachusets Inc., d/b/la Herbert Lipton Community Mental Health Center,
258 NLRB 38 (1981), where the Board asserted jurisdiction over an em-
ployer which, although engaged in a partnership contractual relationship
with DMH, retained independent authority to determine its employees
wages and working conditions and was not subject to the consent decree.
783