MTL, Inc.

National Labor Relations Board - Board Decisions

Apr 26, 1976

223 N.L.R.B. 1071 (N.L.R.B. 1976)

MTL, INC. 1071
MTL, Inc . and Hawaii Teamsters & Allied Workers,
Local 996,' Petitioner. Case 37-RC-2114
April 26, 1976
DECISION AND ORDER
BY MEMBERS FANNING, PENELLO, AND WALTHER
Upon a petition filed under Section 9(c) of the Na-
tional Labor Relations Act, as amended, a hearing
was held before Hearing Officer Dennis R. MacCar-
thy of the National Labor Relations Board on Au-
gust 20, 22, and 23 and September 1, 2, and 3, 1975.
Following the hearing and pursuant to Section
102.67 of the National Labor Relations Board Rules
and Regulations, Series 8, as amended, and by direc-
tion of the Acting Regional Director for Region 37,
this proceeding was transferred to the Board for deci-
sion. Thereafter, briefs were filed by the Employer,
hereinafter also referred to as MTL; Petitioner, here-
inafter also referred to as Local 996; and the follow-
ing Intervenors: City and County of Honolulu, here-
inafter also referred to as the City; Hawaii
Government Employees Association, Local 152,
ACSC&E, hereinafter referred to as HGEA; and
United Public Workers, Local 646, ACSC&E, herein-
after referred to as UPW.
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 rul-
ings made at the hearing and finds that they are free
from prejudicial error. They are hereby affirmed.
Upon the entire record in this proceeding, the
Board finds:
Petitioner seeks certification as the exclusive col-
lective-bargaining representative of all employees of
the Employer employed on the Island of Oahu, ex-
cluding confidential and professional employees,
guards and supervisors as defined in the Act. The
question presented concerns the MTL-City relation-
ship and whether such relationship places the Em-
ployer within the exclusionary provisions of Section
2(2) of the Act as a political subdivision of a State.
The Employer operates and manages the bus sys-
tem for Honolulu, Hawaii. On February 25, 1971, the
Employer and the City signed an interim agreement
1 Hawaii Government Employees Association , Local 152, ACSC&E and
United Public Workers , Local 646, ACSC&E were permitted to intervene at
the hearing on the basis that they represented Government employees and,
accordingly , have a potential interest in representing the employees herein
in the event that the Board finds they are public employees . The City and
County of Honolulu was also permitted to intervene.
which provided that MTL would operate and man-
age the public transportation system for the City
since the current strike by Local 996 against the Ho-
nolulu Rapid Transit Company, or HRT, had creat-
ed "an immediate need for transportation on an in-
terim basis." The interim agreement was to remain in
effect until the resolution of the strike against HRT,
the acquisition of the HRT facilities by the City, or
until the expiration of 1 year from the effective date
of the contract. Subsequently, the interim agreement
has been extended.
Local 996 or its predecessor (the Transit Workers
Union) had been certified as the collective-bargain-
ing representative for all operating and maintenance
employees of HRT since 1949 and had been certified
as the representative for the office clerical employees
since 1963. Pursuant to the interim agreement, the
Employer is required to enter into a labor agreement
with Petitioner.
As a result, MTL entered into an interim labor
agreement with Petitioner and has continued to rec-
ognize Petitioner as the representative of its employ-
ees since that time.
The Employer, Petitioner, and City all contend
that the Employer is a private corporation, the City
does not possess or exercise substantial control over
the labor relations of the Employer, there is no joint-
employer relationship existing between the City and
the Employer, and, accordingly, ask that the Board
direct an election in the unit sought.
Intervenors HGEA and UPW contend that close
control over the Employer's operations exercised by
the City is so substantial that the City is the real
Employer and that under State of Hawaii law they
have the collective-bargaining right for the "public"
employees of the Employer?
The Employer was incorporated on September 4,
1970, pursuant to the laws of the State of Hawaii.
Pursuant to its bylaws, the Employer holds stock-
holders' meetings and board of directors' meetings
on a regular basis. There are two stockholders who
elect the directors who, in turn, appoint the officers
of the Employer. An annual operating and financial
report and monthly financial reports are submitted
by the Employer to the City. Supplies or equipment
are requisitioned from the City subject to approval of
the bus division and finance department. On approv-
al, a purchase order is made out in the name of the
City which pays the bill after receiving a voucher that
the material has been delivered to the Employer.
None of the Employers' employees is a civil service
2 The intervening unions assert an interest in the instant dispute since
they have been certified by the Hawaii Public Employment Relations Board
(HPERB) as the exclusive bargaining agents of certain units of public em-
ployees which, they assert , cover employees within the unit for which Peti-
tioner seeks certification.
223 NLRB No. 157
1072 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
employee and no notice is given by the Employer to
the director of civil service for the City and County
of Honolulu when an employee is hired or fired.
The Employer submits a certified payroll to the
Bank of Hawaii for computerized payroll prepara-
tion. The bank prepares the payroll record and pay-
checks which are drawn against the Employer's ac-
count in the bank . The city treasurer is then notified
by the bank of the total amount required for the pay-
roll. The treasurer of the City draws on its account a
check for the required amount payable to the Em-
ployer. This check is delivered by a messenger of the
Employer and deposited in the Employer 's account
simultaneously with the release of the payroll checks.
The City and County of Honolulu is a political
subdivision of the State of Hawaii . It is empowered
by provisions of Hawaii Revised Statutes, Chapter
51, to purchase , construct , and operate a mass trans-
portation system within the City and County of Ho-
nolulu . The City owns all of the properties and facili-
ties of the transit system-buses, real estate , parking
garage , fuel pumps , dispatching office, machinery for
maintaining the buses, office supplies, etc. The Em-
ployer pays no fees to the City for the use of the
facilities, the buses, or any other assets owned by the
City. Fares, charter and advertising fees, and all reve-
nues become the property of the City at the time of
their receipt. The interim agreement provides that the
rates of fare are to be prescribed by the City, and the
City and the Employer work in conjunction in estab-
lishing new routes and schedules . There are three dif-
ferent types of bus stops on the Island of Oahu-bus
stops under the jurisdiction of the State Highway De-
partment; official bus stops approved by the city
council; and the majority of bus stops which are es-
tablished by the Employer. Apparently, MTL bus
stops cannot be exclusively reserved for buses since
they lack the official sanction of the City or State.
Complaints about the bus service may be registered
with the mass transit division of the City which inves-
tigates the problem and works out the solution with
the Employer. The Employer does not show a profit
or loss since all money received or disbursed is city
money. The gross receipts listed by the Employer on
its corporate tax return includes the amounts paid as
wages, salaries, fringe benefits , attorney fees, etc. No
revenue from the operation of the buses is listed as a
receipt by the Employer since all such revenues are
exclusively the property of the City. In the event
there is a negative difference between the profits and
the expenses incurred in operating the bus system,
the City underwrites the loss. In the past, this operat-
ing deficit has run into several million dollars.
The Employer alone hires , fires, assigns , recruits,
trains, classifies , and supervises the employees.
Moreover, wages, rates of pay, and grievances are
governed by the collective-bargaining agreement be-
tween the Employer and Petitioner. However, al-
though the collective bargaining takes place between
the Employer and Petitioner and no member or em-
ployee of the City is present, it is clear that the City
plays an important role in the negotiations between
the Employer and Petitioner. The City requires that
MTL enter into collective-bargaining agreements
with the Petitioner. The City must approve any tenta-
tive agreement . Moreover, it appears that the City
must approve any recommendations made by the
Employer for counterproposals to be submitted to
the Petitioner; the entire spectrum of various propos-
als is first cleared with the city authorities; and the
City must approve any cost items negotiated during
the course of the agreement.
Based on the above, it is clear that, although the
Employer directly manages and operates the transit
system, the City plays a very substantial role in its
operation. As the Employer concedes in its brief,
"the City and MTL must, of necessity, maintain a
close relationship. Indeed, such a relationship is re-
quired by the Interim Agreement in order to insure a
smooth running of the bus operations."
As noted above, the State of Hawaii has author-
ized every county to own and operate a mass transit
system. The Employer is performing this exempt
function for the City and is therefore intimately con-
nected with the exempted operations of a govern-
mental entity. In such circumstances, the Board has
found that the employers share the governmental ex-
emption from coverage under the Act?
Moreover, it is clear from the record that the Em-
ployer is neither an independent contractor nor a
separate entity from the City. It is also clear that the
City owns the entire assets of the bus operation. The
sole contribution made by the Employer consists of
the services it renders in operating the bus line.
Clearly, these services are subject to close scrutiny by
the City. Although Petitioner negotiates these collec-
tive-bargaining agreements with the Employer, the
City plays a significant role in this negotiation as the
contract must first be cleared with the City. MTL is
required by the City to enter into collective-bargain-
ing agreement with Petitioner.
In addition, the Employer has not retained suffi-
cient control over the employment conditions of the
employees to enable it to bargain effectively with the
Union .4
The Employer cannot freely negotiate with Peti-
3 Transit Systems, Inc., 221 NLRB No. 53 (1975); Rural Fire Protection
Company, 216 NLRB 584 (1975).
4 Herbert Harvey, Inc., 171 NLRB 238, 239 ( 1968), enfd . 424 F.2d 770
(C.A.D.C., 1969).
MTL, INC. 1073
tioner without consulting with the City. The Employ-
er cannot make a counterproposal to Petitioner with-
out first receiving approval from the City. Moreover,
the Employer's relationship with the City is so depen-
dent that a question exists whether MTL is, in fact,
an independent employer or is, in reality, an agency
or instrumentality of the City engaged in the opera-
tion of a public transit system. In our view, MTL
cannot be considered an independent contractor. In
determining the status of entities alleged to be inde-
pendent, the Board applies the right-of-control test,
which turns essentially on whether the entity for
whom the services are performed retains the right to
control the manner and means by which the result is
to be accomplished, or whether it controls only the
results. In the latter situation, the status is that of
independent contractor.' Herein, the Employer
makes no profit and suffers no losses. Its only in-
come is in form of salaries paid to the officers of the
corporation out of city revenues in amounts de-
termined by negotiations with the City. Since it must
subsidize MTL for all losses, the City is particularly
careful to closely audit monthly and annual reports
submitted to it by MTL and very carefully consults
with MTL on the budget of the transit system. The
City receives all revenues, owns the land, equipment,
facilities , and supplies used in operation of the sys-
tem, and provides them without charge to MTL.
'A. S. Abel! Company, 185 NLRB 144 (1970).
Complaints about the transit system may be filed
with the City and the City has a large part in de-
termining routes and schedules. The gross receipts
listed by MTL on its corporation tax return consist
of money given to it by the City for wages , salaries,
fringe benefits, etc. MTL receives no income from
the operation of the buses.
Inasmuch as the City owns all equipment, exercis-
es significant managerial control, plays an important
role in the negotiation process, and is involved with
MTL in operation, management, and function, we
find that MTL is an instrumentality of the City. Ac-
cordingly, since the City is an exempt employer un-
der Section 2(2) of the Act, we shall dismiss the peti-
tion.6
ORDER
It is hereby ordered that the petition filed herein
be, and it hereby is, dismissed.
6 Member Fanning joins his colleagues in the result because he believes
that MTL is not an independent contractor or a separate entity of the City,
but is an instrumentality of the City which plays an essential role in the
negotiation process and effectively controls the manner and means by
which MTL performs its services . He does not rely on Transit Systems, Inc.,
221 NLRB No. 53, or Rural Fire Protection Company, 216 NLRB 584, to
reach this result because he believes that the degree of control asserted by
an exempt institution over a nonexempt employer's operations is an impor-
tant and necessary factor in establishing "intimate connection ." (See his
dissent in Rural Fire, supra.) Inasmuch as MTL does not possess sufficient
power to exercise control over the working conditions of its employees or,
consequently , possess the capability of bargaining effectively with a labor
organization over conditions of employment, Member Fanning joins his
colleagues in dismissing the petition.