STATE OF MAINE MAINE LABOR RELATIONS BOARD Case No. 94-UD-l2 Issued: November 9, 1995 ______________________________ ) AFSCME, COUNCIL 93, ) ) Petitioner, ) ) and ) ) O'CONNOR LEASING CO., II, ) UNIT DETERMINATION REPORT ) and ) ) AUGUSTA SCHOOL DEPARTMENT, ) ) Respondents. ) ______________________________) This unit determination proceeding was initiated on May 23, 1994, when AFSCME, Council 93 (hereinafter referred to as "Union") filed a petition for unit determination pursuant to Section 966(1) of the Municipal Public Employees Labor Relations Law ("Act"), 26 M.R.S.A. ch. 9-A.[fn]1 The Union's petition sought the creation of a bargaining unit consisting of the full-time Bus Drivers (defined as working between 25 and 40 hours per week) and excluding Spare Bus Drivers employed by the Augusta School Department ("School Department") "through its agent" O'Connor Leasing Co., II ("O'Connor"). The School Department filed its response to the petition on June 3, 1994. The response urged that the petition be denied and that it be dismissed as regards the School Department on the following grounds: (1) the School Department is not a public ____________________ 1 Although the petition was received on May 11, 1994, proof of service upon the respondents School Department and O'Connor was not filed until May 19, 1994, and it was not until May 23, 1994, that the Board was informed that the employee organization listed as representing the School Department Bus Drivers in the Board's files had no objection to the Union's pursuing the instant petition. In the circumstances, the executive director deemed that the Union's petition was filed on May 23, 1994. [-1-] __________________________________________________________________ employer with respect to the employees whose positions are at issue; therefore, the Department is not a proper party in this proceeding; (2) respondent O'Connor is not a public employer within the meaning of the Act and the individuals whose classifications are in contention are not public employees within the meaning of the Act; therefore, the executive director is without authority to grant the relief being sought through the petition; (3) the bargaining unit proposed in the petition may not be appropriate for purposes of collective bargaining; however, since the School Department is not the employer of the employees involved, it lacks sufficient information to suggest an appropriate unit; and (4) in the event that it is held to be the public employer of the employees involved herein, the School Department declines to voluntarily recognize the petitioner as the bargaining agent and believes that a majority of eligible unit employees should decide any question concerning representation through a Board-conducted, secret ballot election. The School Department's response moved that the proceeding be bifurcated, with the jurisdictional issues being decided first and the appropriate bargaining unit being determined later. On June 6, 1994, respondent O'Connor filed its response to the petition. O'Connor's response was plead in the alternative. First, O'Connor alleged that it is not a public employer within the meaning of the Act but, rather, is a private employer engaged in an independent contractor relationship with the School Department; therefore, the executive director has no jurisdiction to hear and decide this matter. Without waiving its jurisdic- tional defense, O'Connor responded to the merits of the petition, denying that the unit proposed in the petition is appropriate and asserting that the appropriate unit should consist of all 27 drivers employed by O'Connor, including 7 regular, part-time Drivers and the Assistant Manager/Occasional Bus Driver. -2- __________________________________________________________________ The undersigned hearing examiner met with representatives of the parties in an informal conference on June 20, 1994. The Union was represented by Staff Representative Beverly Bustin Hatheway, the School Department appeared through and was represented by Donald A. Kopp, Esq., and O'Connor appeared through and was represented by Marshall J. Tinkle, Esq. At the conference, proposed stipulations of relevant fact were developed. On June 24, 1994, the Union filed an amended petition for unit determination, seeking creation of a unit consisting of Bus Aides in addition to the positions sought to be included through the original petition. Both O'Connor and the School Department filed responses to the amended petition on July 11, 1994. The former again asserted that the executive director is without jurisdiction to fashion any bargaining unit consisting of O'Connor employees; averred that, if the executive director has such jurisdiction, the appropriate unit should include all of the O'Connor drivers; and contended that O'Connor does not employ any Bus Aides. In addition to reiterating the response to the original petition, the latter response averred that the "Bus Aides" referred to in the amended petition are employed by the School Department, are classified as Special Education Technician I's, and are currently included in a bargaining unit represented by the Maine Education Association. On August 2, 1994, the undersigned circulated proposed stipulations of relevant fact, which attempted to summarize the consensus among the parties reached at the June 20th meeting. The parties filed timely responses to the proposed stipulations, the last of which was received on August 25, 1994. The parties variously agreed with some of the proposed stipulations, reformulated others, and objected to some. On September 1, 1994, the undersigned convened a telephone conference among the representatives of the parties to receive -3- __________________________________________________________________ argument concerning the School Department's motion that it be dismissed as a party in this matter. The parties' representa- tives for the conference were the same as those who appeared at the June 20th conference. The Response to Motion to Dismiss of Augusta School Department was issued on September 1, 1994, and the contents of that interim order are incorporated herein by reference. On September 9, 1994, a telephone conference was convened among the parties for the purpose of attempting to finalize the stipulation of relevant facts herein. Mark G. Furey, Esq., represented O'Connor and the other two parties' representatives remained as before. The telephone conference was unsuccessful and a live conference was held on October 11, 1994. Union Staff Representative Hatheway continued to represent the petitioner, O'Connor was represented by Attorney Furey, and Sally J. Daggett, Esq., represented the School Department. A partial stipulation of relevant facts was reached at the conference, with the remaining factual issues in dispute being identified for purposes of the evidentiary hearing herein. An evidentiary hearing on the issue of whether the executive director has jurisdiction in this matter was held in the Labor Relations Board Conference Room, Room 714 of the State Office Building, Augusta, Maine, on January 13, 1995. The individuals who represented the parties at the October 11th conference continued in their respective capacities. At the outset of the proceeding, the parties reviewed and signed the partial Stipulation of Pertinent Facts. The hearing examiner granted the School Department's motion to bifurcate the proceeding, with the jurisdictional issues being heard and decided first. Thereafter, the parties were afforded full opportunity to examine and cross- examine witnesses, to present documents and other evidence, and to present argument during the course of the hearing. The parties filed post-hearing briefs on the jurisdictional issue, -4- __________________________________________________________________ the last of which was received on March 20, 1995. JURISDICTION The jurisdiction of the executive director to hear and decide the jurisdictional question presented herein lies in 26 M.R.S.A. 966(1). STIPULATION OF PERTINENT FACTS The parties have agreed to the following pertinent facts in this matter: 1. The petitioner, AFSCME, Council 93, is a public employee organization within the meaning of 26 M.R.S.A. 962(2). 2. The respondent, Augusta School Department (hereinafter referred to as "School Department"), is a duly constituted municipal school unit within the definition of 20-A M.R.S.A. 1(19). 3. The respondent, O'Connor Leasing Co., II ("O'Connor"), provides school bus transportation services to the School Department pursuant to a five-year contract executed on July 16, 1991, running from that date through June 30, 1996. 4. Prior to July 16, 1991, the School Department issued a public request for proposals for the purpose of contracting to meet its school bus transportation needs. 5. Three bidders responded to the School Department's request for proposals and O'Connor was awarded the contract mentioned in paragraph 3 hereof. 6. Pursuant to the contract, O'Connor was required to purchase at a minimum the following new vehicles: 5 72-passenger buses 18 66-passenger buses 2 buses for children with disabilities -5- __________________________________________________________________ 1 20-24-passenger Econoline bus 2 9-passenger vans These vehicles cost O'Connor between $900,000 and $1,000,000. 7. The contract requires that the buses be the standard yellow color, be numbered to coincide with the route to which each is assigned, and have the words "Augusta School Department" in clear lettering on the outside of each. 8. Although the written contract provides that the vehicles mentioned in Stipulation 6 hereof "shall be used exclusively for the Augusta School Department," that provision has been modified by the parties. With the School Department's knowledge and acquiescence, the buses have also been used to provide transpor- tation for the Augusta Recreation Department, an executive department of the City of Augusta, which is separate and distinct from the School Department and which pays O'Connor for such transportation services. 9. In addition to its transportation services, O'Connor engages in a variety of leasing operations. 10. O'Connor is associated with at least one other company, O'Connor GMC/Buick. 11. The School Department provides, and bears the cost of maintaining and repairing, a transportation office and a lot where the buses may be parked when not in use except that O'Connor pays the costs of electricity of the office, waste dumping, telephone, and all personnel costs. O'Connor has directed some bus drivers to park their buses at their residences, rather than to use the lot. 12. O'Connor evaluated whether to allow drivers to park buses at their homes on a case-by-case basis and has permitted the practice because it resulted in substantial mileage savings, compared with the mileage incurred when the same buses were -6- __________________________________________________________________ parked at the facility provided by the School Department. 13. O'Connor inspects the buses periodically. Except when it provided the heated outside mirrors referred to in Stipulation 16, the School Department has never checked the buses. 14. In the event that a bus breaks down or is otherwise temporarily out of service, O'Connor must supply a replacement vehicle. 15. If an expansion of the bus fleet is required (due to an increase in the student population or for some other reason) O'Connor is required to provide such additional vehicle(s) at a cost to be negotiated with the School Department. 16. By the terms of their agreement, O'Connor provides the two-way radios, engine heaters and tires for the buses and the School Department provides the heated outside mirrors. O'Connor is responsible for maintaining and, if necessary, replacing these items. 17. Because it enjoys sovereign immunity status, the School Department's exposure to potential liability and its liability insurance premiums are substantially lower than those of organi- zations who do not have such status. The School Department, therefore, provides the primary liability, comprehensive and collision coverage on the buses. In the event of a compensable loss, insurance proceeds would be allocated between the School Department and O'Connor to compensate each for their actual loss incurred, if any. O'Connor provides secondary coverage on the bus operation with much higher limits of liability through its umbrella policy. The transportation services agreement does not require O'Connor to secure such an umbrella policy. All liability claims and damage to the buses is handled by O'Connor and O'Connor pays the insurance deductible when there is damage to the buses such as through slashing of seats or other vandalism -7- __________________________________________________________________ or collision damage. 18. As a political subdivision of the State, the School Department is, in effect, exempt from the state gasoline tax. Therefore, in order to keep down its contract costs, the School Department purchases all of the fuel required for performance of the terms of the agreement. 19. As a political subdivision of the State, the School Department is, in effect, exempt from vehicle registration and license fees. Therefore, in order to keep down its contract costs, the School Department registers and licenses all vehicles. 20. O'Connor determines the frequency of bus servicing, maintains all of the buses at its expense at the service department of O'Connor GMC and is required by the contract to provide at its expense a garage for repairs, maintenance, and storage of all necessary parts. 21. The school transportation services agreement provides that the School Department retains the right to close a school, discontinue transportation for a school, open a new school; modify, combine or eliminate bus routes; change the school time schedule; and set the number of pupils, determine their destinations and the pick-up and unloading points. The School Department will give reasonable notice of these actions to 0'Connor. 22. Although the contract states that O'Connor would be required to comply with any written policies regarding bus transportation which it receives from the School Department, no such policies have ever been provided by the School Department. This provision does not give the School Department the power to unilaterally change the terms of the contract but, rather, because the School Department is statutorily responsible for providing school transportation (either directly or through an -8- __________________________________________________________________ independent contractor), the School Department must be able to insure compliance with any applicable laws or regulations. 23. The Coordinator for Transportation Services is an O'Connor employee, whose hiring the School Department reserves the right to approve. The Coordinator hires drivers, checks their credentials, sets bus routes, assigns buses, and determines the work schedule, rate of pay and benefits for the drivers. O'Connor is solely responsible for determining the number of drivers it hires, the hours which those drivers work, and negotiating with the drivers regarding such issues as holiday and summer pay, overtime and compensation for short-trips, and for all costs associated with recruiting drivers. 24. All drivers hired to provide services pursuant to the contract between O'Connor and the School Department must: (1) be trained in the operation of their assigned vehicle, (2) be of "good reputation, " and (3) not have any prior criminal convic- tions. In order to retain their employment to provide services pursuant to the contract, all drivers must meet statutory medical examination requirements, if any. 25. According to the contract, the School Department or its designee is the sole judge as to whether O'Connor has complied with the requirements mentioned in Stipulation 24. 26. Pursuant to the contract, O'Connor is required to notify the School Department of all charges pending against, or convictions incurred by, any driver for moving violations or crimes involving moral turpitude, or the use of alcoholic beverages or drugs. 27. Complaints concerning alleged driver misconduct received by the School Department are forwarded to the Coordinator for Transportation Services for investigation and, if necessary, for corrective action. -9- __________________________________________________________________ 28. The contract with the School Department provides that "[a]ll responsibility for hiring and firing of personnel subject to restrictions, if any, imposed by the Maine Labor Relations Board shall be that of [O'Connor]." 29. For purposes of calculating the School Department's payment obligations under the contract, O'Connor submits a statement to the School Department each month which details the number of hours each driver spent performing services pursuant to the School Department transportation contract. 30. As consideration for the services rendered pursuant to their transportation services agreement, the School Department pays O'Connor the following: A. The sum of $254,400 per year, payable at the rate of $21,200 per month, based on 84.8 cents per mile for the 300,000 miles per year guaranteed by the School Department; and B. The sum of seven cents per mile for all miles in excess of 300,000 miles per year, payable in June of each year; and C. The sum of $10.56 per hour for hours driven by the O'Connor drivers in satisfaction of the terms of the agreement; and D. The sum of $89,868 per year, payable at the rate of $7,489 per month, for O'Connor's fixed costs incurred in meeting its obligations pursuant to the contract; and E. The amount of any annual increase over the prior year's workers' compensation insurance costs for the drivers, after the first year of the agreement. 31. For the fifth year of the agreement, the School Department and O'Connor have agreed to renegotiate the hourly rate mentioned in paragraph 34(C) hereof. Said negotiations are to be completed by December 31, 1995. 32. O'Connor pays for a telephone at the transportation -10- __________________________________________________________________ office which is listed in the Augusta area telephone directory as "Augusta School Transportation." By agreement with the School Department, O'Connor covers the phone from 6:45 a.m. until all buses have returned from their regular bus routes, each school day. 33. The following letterhead has been used by the Coordinator for Transportation services: CITY of AUGUSTA, MAINE DEPARTMENT of SCHOOL TRANSPORTATION R.R. 7, BOX 2525 AUGUSTA, MAINE 04330 TEL. 622-3650 DAVID CHAPMAN ERNEST HEWETT TRANSPORTATION SUPERVISOR ASSISTANT SUPERVISOR The Coordinator used this letterhead in an effort to avoid confusion, since parents of students would not be expected to know that the School Department had contracted out the transportation services to a private company. 34. When the contract with O'Connor expires on June 30, 1996, the School Department will be required by 20-A M.R.S.A. 5401(13) to submit a new contract to competitive bidding which competitive bidding could replace O'Connor. O'Connor assumes the risk of not being the successful bidder when the contract is re- bid at the expiration of its five (5) year term. 35. Under the terms of the agreement, O'Connor bears the risk of having the contract terminated if it cannot recruit, train, and provide a sufficient number of drivers. 36. The financial risks which O'Connor assumed in bidding the contract included escalating costs for wages, benefits, and employment taxes over the five (5) years of the contract. -11- __________________________________________________________________ 37. O'Connor makes all decisions regarding which buses to buy, which buses to use on which runs, the terms of bus financing and the nature of bus warranties. 38. O'Connor assumes all risk as to the value of the buses at the end of the lease. 39. The contract with O'Connor does not obligate the School Department to use O'Connor in all situations involving the transportation of students. 40. O'Connor is a privately owned corporation, duly existing and constituted under the laws of the State of Maine. None of O'Connor's shareholders, officers, directors, agents or employees are members of the School Department. 41. O'Connor decided to bid on the project because it saw the transportation services under the contract as fitting well with the existing vehicle sales, leasing, and service operations of its affiliated companies. 42. O'Connor employs approximately 29 drivers and a manager whose duties include acting as Coordinator for Transportation Services under the contract with the School Department. 43. O'Connor's drivers are permitted to apply for and obtain unemployment compensation benefits for periods when they are temporarily unemployed. FINDINGS OF FACT Upon review of the entire record, the hearing examiner finds: 1. The school transportation services agreement requires that the words "Augusta School Department" appear on the outside of each bus because, although the services are provided pursuant to a contract, they are funded through tax revenues and also to -12- __________________________________________________________________ facilitate Augusta students in locating their buses when they travel outside of the city for various activities. 2. The revenues generated by its transportation services contract with the School Department account for approximately 25 percent of O'Connor's total revenues. O'Connor and O'Connor GMC are related companies with a common ownership. The revenues generated by O'Connor's contract with the School Department account for approximately 1 percent of the total revenue of O'Connor and its related companies. 3. O'Connor's total capital investment in the Augusta school transportation services project is $1,139,000. 4. In addition to the motor vehicles listed in the equipment article, cited in paragraph 6 of the above stipulation of pertinent facts, O'Connor has purchased 3 vans and 1 bus to provide the contracted services. 5. The operating requirements article of the school transportation services agreement requires, in part, that "[O'Connor] shall provide at its expense a garage for repairs, maintenance, and storage of all necessary parts." The garage which O'Connor utilizes for these functions--the service department at O'Connor GMC on Riverside Drive in Augusta--is not used solely to perform work pursuant to the Augusta school transportation services contract; however, since the buses are generally not in use during evening hours, their availability for maintenance and repair during that time was a major factor in O'Connor's decision to institute an evening shift at the O'Connor GMC service department. 6. Although the School Department provides a lot where the buses may be parked when they are not in use, O'Connor retains and has exercised the discretion to permit individual drivers to park their buses at their residences rather than at the lot -13- __________________________________________________________________ provided by the School Department. 7. Pursuant to the maintenance and repairs article of the school transportation services agreement, O'Connor is responsible for assuring that all of the vehicles used in performirig the contracted services comply with Maine motor vehicle inspection standards. The School Department's only role in this regard is to hold O'Connor to the terms of the agreement. 8. None of the witnesses who testified had any direct knowledge as to how the various bus routes were first estab- lished; however, the general parameters of the routes pre-date O'Connor's contractual relationship with the School Department. The O'Connor coordinator for transportation services modifies the bus routes, including pick-up and unloading points, at the beginning of each school year to reflect changes in the student population. The coordinator then notifies the School Department of the changes and they are advertised in the local newspaper so that parents and students will know when to expect the buses. 9. Since the School Department compensates O'Connor on both a per-mile and a per-driver-hour basis as noted in Stipulation No. 30 above, the School Department expects the coordinator for transportation services to notify them if changes in bus routes will increase either the total distance or driver time required to complete performance under the contract. 10. The Augusta School Board Transportation Committee has established general policy guidelines concerning the maximum distances that elementary, middle school, and secondary students may be expected to walk either to school or to the nearest bus pick-up point. Occasionally, safety concerns based on the volume or nature of traffic on a particular road may motivate the Transportation Committee to create an exception to its general walking distance policy. Such exceptions are communicated to O'Connor and they may result in changes in individual routes or -14- __________________________________________________________________ in pick-up and drop-off points for particular students. 11. Although there was some testimony that the School Department may have been involved in driver hiring decisions when D and H Motors provided school transportation services pursuant to a contract with the School Department, no evidence of such involvement was presented in connection with the hiring of the O'Connor drivers. 12. The drivers article of the school transportation services agreement provides, in part, that: The Contractor agrees that character references on all bus drivers will be made available to the School Department, Superintendent of Schools or designated representative. The Contractor agrees that all conditions set forth in this agreement shall apply to all substitute drivers as well as regular drivers. In actual performance under the contract, O'Connor has never provided the list of names, dates of birth, or character references for its drivers to the School Department nor has the latter ever requested such information. The School Department does not maintain any personnel records on the O'Connor drivers. 13. As noted in paragraph 17 in the above stipulation, the School Department provides primary liability, comprehensive and collision insurance coverage on the buses. The School Department's insurance agent, Fairfields Insurance Agency, does receive the names, dates of birth, and motor vehicle operating records of the O'Connor drivers and uses such information for insurance premium rating purposes. 14. As noted in Stipulation No. 26, O'Connor is contractually obligated to notify the School Department if any driver is charged with, or has been convicted of, certain types of crimes or offenses. O'Connor has further agreed that, if requested to do so by the School Department, drivers charged with -15- __________________________________________________________________ any of the listed types of crimes or offenses will be suspended from all duties involving driving buses pursuant to the school transportation services agreement, until such charges are finally resolved. Again, if requested by the School Department, drivers convicted of such charges or those whose motor vehicle operator's license is otherwise suspended or revoked will be removed from all duties involving driving buses pursuant to the parties' agreement. In actual practice, because O'Connor does not have substantial alternative work to assign to them, employees suspended or removed from driving buses pursuant to the school transportation services agreement will, in all likelihood, be suspended or discharged respectively by O'Connor. 15. After being convicted of a speeding infraction, driver Carol Bernier was discharged by O'Connor. Shortly after being terminated, Ms. Bernier received a letter dated November 15, 1994, from the O'Connor coordinator for transportation services which stated: WHEN I WROTE TO YOU LAST WEEK, I FAILED TO MENTION THAT THE BASIS FOR TERMINATING YOUR EMPLOYMENT WAS OCCASIONED BY A FINDING OF THE MAINE DISTRICT COURT THAT YOU HAD VIOLATED THE SPEED LIMIT WHILE DRIVING YOUR BUS. ACCORDING TO COURT RECORDS, THE TRIAL WAS HELD ON NOVEMBER 08, 1994 AND THE CONVICTION REPORT WAS FILED WITH THE VIOLATIONS BUREAU ON NOVEMBER 09, 1994. PART OF THE CONTRACTUAL OBLIGATION BETWEEN O'CONNOR LEASING AND THE AUGUSTA SCHOOL DEPARTMENT REQUIRES TERMINATION OF YOUR EMPLOYMENT IN THE EVENT OF A FINDING AGAINST YOU FOR A MOVING MOTOR VEHICLE OFFENSE. YOU WERE AWARE THAT YOUR SUSPENSION WAS OCCASIONED BY YOUR BEING CHARGED WITH A MOVING VIOLATION. WHEN WE LEARNED OF YOUR CONVICTION, WE SIMPLY WERE FOLLOWING OUR CONTRACTUAL OBLIGATION. 16. Despite the contents of the letter quoted in the preceding paragraph, the School Department has never been involved in the discipline or discharge of any O'Connor driver. 17. A portion of the drivers article of the school -16- __________________________________________________________________ transportation services agreement states: The Contractor agrees to make its drivers, and transportation coordinator available on two (2) days each year for training and safety workshops. The Augusta School Department will pay for the cost of the training and workshop, however the Contractor shall pay the daily wage and benefits of the employees. In practice, the contract has been modified by the parties and the coordinator for transportation services puts on two 1-day training and safety workshops for the drivers each year. The workshops are available to all drivers who wish to attend. O'Connor pays all workshop expenses as well as paying the wages and benefits of all drivers who attend. 18. If the School Department receives any complaints about the manner in which a driver operates his or her bus, such complaints are relayed to the transportation coordinator and he investigates and resolves the matter as he deems appropriate. Parental complaints concerning bus routes, including particular pick-up and drop-off points, received by the School Department are referred to the transportation coordinator. If he is unable to resolve the complaint, the matter goes to the Superintendent of Schools and, ultimately, to the School Committee. 19. The final paragraph of the drivers article of the school transportation services agreement states: "All responsibility for hiring and firing of personnel subject to restrictions, if any, imposed by the Maine Labor Relations Board shall be that of the Contractor." The parties' intent in agreeing to this language was an explicit understanding that the School Department would not be involved in hiring or firing the personnel who would perform the services covered by the agreement. The reference to the Maine Labor Relations Board in this paragraph recognizes that O'Connor's discretion in hiring or firing drivers who provide services pursuant to the agreement may be limited by whatever collective bargaining obligations O'Connor may have pursuant to -17- __________________________________________________________________ the provisions of the Municipal Public Employees Labor Relations Law. 20. As noted in paragraph 9 hereof, the School Department compensates O'Connor on both a per-mile and a per-driver-hour basis. The operating requirements article of the school transportation services agreement requires O'Connor to maintain detailed mileage and maintenance records for each vehicle used in performance of the contract. The School Department has the right to audit such records as well as the work time records of the drivers engaged in performing the contracted services. Since the School Department is familiar with the school transportation mileage and work hour costs over the past several years and since there has been little variance in such factors over time, the School Department has never audited O'Connor's vehicle mileage, maintenance, or employee time records. 21. The compensation article of the school transportation services agreement sets forth the constituent components of the consideration paid by the School Department for the contracted services. The School Department guarantees that O'Connor will be compensated each year of the agreement for a minimum of 300,000 miles at the rate of 84.8 cents per mile. The 300,000 mile guarantee is intended to offset O'Connor's capital investment in the project. O'Connor is compensated at the rate of 7 cents per mile for all miles in excess of 300,000 each year driven in performance of the agreement. The per-mile cost drops substantially for all miles in excess of 300,000 each year because, beyond that point, O'Connor has received fair return on its investment and has less at risk. The flat hourly rate for driver time spent performing the contracted services is designed to defray O'Connor's personnel costs. Allocation of such rate among driver wages, benefits, and profit to O'Connor is solely within O'Connor's control; for example, if all of the drivers are given a wage increase, the hourly rate paid by the School -18- ____________________________________________________________________ Department does not increase except perhaps during the fifth year of the agreement, subject to reopener negotiations between O'Connor and the School Department. 22. In bidding on the Augusta school transportation services contract, O'Connor estimated the total mileage and personnel time required to complete performance under the contract, considered the initial capital outlay, and estimated the overall personnel, maintenance, and repair costs involved. All of these factors were evaluated in light of the compensation likely to result from the contract and the need to be the low bidder. 23. On his own initiative and without the authorization or knowledge of the School Department, the transportation coordinator created stationery with the letterhead noted in paragraph 33 of the above stipulation and used such stationery when communicating with parents, drivers, and members of the public. Subsequent to the June 20, 1994, informal conference in this matter, the transportation coordinator stopped using such stationery and replaced it with some that has the O'Connor Leasing Company logo, address, and telephone numbers as its letterhead. 24. As of January 13, 1995, the date of the evidentiary hearing in this matter, O'Connor had not recouped its capital investment in the Augusta school transportation services project. 25. Although the school transportation services agreement is silent on the subject, O'Connor has exercised the right to discipline its drivers. 26. The transportation coordinator created a set of school bus transportation rules for students riding on the bus. The first time that a student has a disciplinary problem on a bus, a copy of the rules is given to the student to take home to his or her parents. Should disciplinary problems recur, the transporta- -19- __________________________________________________________________ tion coordinator, the school principal and, on occasion, the Superintendent of Schools decide on an appropriate course of action. DISCUSSION The question presented in this, the jurisdictional phase of a bifurcated proceeding, is whether O'Connor Leasing Co., II, to the extent of its contractual obligation to provide school transportation services to the Augusta School Department, is a public employer within the definition of 26 M.R.S.A. 962(7). The relevant portions of the statute are as follows: 7. Public employer. "Public employer" means: A. Any officer, board, commission, council, committee or other persons or body acting on behalf of: . . . (2) Any school, water, sewer or other district; . . . or . . . B. Any employer not covered by any other state or federal collective bargaining law that is: (1) Established directly by the State or a political subdivision to constitute a department or administrative office of government; or (2) Administered by individuals responsible to public officials or to the general electorate. If any public employer, as defined in this or any other section, controls the operations of another employer to the extent that the public employer deprives that other employer of sufficient control over its own employees to enable it to bargain with a labor organization representing those employees, the public employer must be treated as the employer of those employees for the purposes of this chapter. At first blush, the question presented is one of first impression. Although the executive director and the Board have often been asked to determine whether an ostensibly private organization is a public employer within the meaning of the Act, -20- __________________________________________________________________ this is the first case to present the question since subsection 7 was repealed and replaced through enactment of Chapter 576 of the Public Laws of 1991. Former subsection 7 read as follows: 7. Public employer. "Public employer" means any officer, board, commission, council, committee or other persons or body acting on behalf of any municipality or town or any subdivision thereof, or of any school, water, sewer or other district, or of the Maine Turnpike Authority, or of the Child Development Services System, or of any county or any subdivisions thereof. The Board's interpretation of former subsection 7 was reviewed and approved by the Supreme Judicial Court in Baker Bus Service, Inc. v. Keith, 416 A.2d 727 (Me. 1980) and Lee Academy Education Association v. Lee Academy, 556 A.2d 218 (Me. 1989). In Lee Academy, the Court discussed the relevant legal standard as follows: As the MLRB and the hearing examiner both recognized, the starting point in any analysis of the "acting on behalf of" standard is our decision in Baker Bus Service, Inc. v. Keith, 416 A.2d 727 (Me. 1980), in which the City of Augusta, in the course of an ongoing labor dispute, attempted to privatize its school bus service. We held that an ostensibly private employer is "public for collective bargaining purposes if it is an "agent-servant" of a public entity rather than an "agent-independent contractor." Id. at 730. Employees whose work ultimately benefits the public are thus regarded as "public employees" under 26 M.R.S.A. 926(6) when their immediate employer, if a natural person, would itself be a common law employee of the public entity. The test we applied in determining that the employer in Baker Bus "actually was, for all practical purposes, the alter ego" of the City of Augusta was whether it was "subject to the City's control or right of control." 416 A.2d at 731. 556 A.2d at 220. Since the controlling statutory provision has been amended, the first question presented in the instant case is the extent to which Board and judicial decisions interpreting the earlier version of the statute continue to be relevant. -21- __________________________________________________________________ The legislative history of the bill whose enactment resulted in replacement of the prior language with the current provision in 1991 is helpful. The Statement of Fact attached to the Committee Amendment incorporated into the legislative document which became Chapter 576 stated: This amendment clarifies the last paragraph of the Maine Revised Statutes, Title 26, section 962, subsection 7, which is repealed and replaced in the bill. This paragraph is intended to prevent public employers from using paper corporations or employee leaseback arrangements or similar devices to avoid collective bargaining with employees that the public employer controls in the same way that it controls regular employees. This paragraph is not intended to interfere with a public employer's request to enter into legitimate contracts or subcontracts for the purpose of providing public services. This amendment also adds a fiscal note. This legislative history establishes that the "control or right to control" analysis, used in interpreting the earlier version of the statute, continues to be the controlling principle in determining whether private entities are public employers within the meaning of the Act. As noted above, the two pertinent lead decisions are Baker Bus Service and Lee Academy. In the former case, the Board held that a private employer that provided school transportation services to the Augusta School Committee, was an "agent-servant" of the public employer and therefore was itself a public employer within the meaning of the Act. The Board declined to conclude in the latter case that a private secondary school that provided high school instruction to all of the students of a particular school administrative district was a public employer. Not surprisingly, AFSCME contends that Baker Bus is controlling herein and O'Connor and the School Department aver that the circumstances of the instant case are analogous to those in Lee Academy. -22- __________________________________________________________________ The Board and the Law Court concluded that the following facts were relevant to the conclusion that the Augusta School Department retained "control or the right to control" the private company in Baker Bus. The school department's decision to contract out the school transportation operation occurred in the midst of an on-going labor dispute with the school bus drivers' bargaining agent. The "contractor" leased all of the buses required to perform the contracted services from the school department for a nominal sum and the buses could only be used for Augusta school transportation. The school department was required to furnish any additional or replacement buses required during the term of the contract and they also provided a parking lot for storage of the buses. The school department was respon- sible for compliance with all governmental safety regulations and they provided the comprehensive, collision and liability insurance on the leased buses. The school department furnished all of the gasoline required and paid all excise taxes and registration fees on the buses. Finally, the school department retained the right to modify, combine or eliminate bus routes and to veto the hiring of any driver. The only area where the "contractor" could exercise any discretion was in decisions concerning maintenance of the buses. In the totality of the circumstances, the Board held that the "contractor" could exercise little independent judgment in carrying out the contract and was an "agent-servant" of the school department. 416 A.2d at 729 and 731. The salient facts in Lee Academy were significantly different. Since its inception in 1963, M.S.A.D. 30 always contracted with the Academy for the latter to provide secondary education to all high school students from the school district. Of the Academy's 225 students at the time of the hearing in the case, 42 percent were from M.S.A.D. 30, 56 percent were from other towns surrounding the M.S.A.D. 30 area, and 2 percent were international students. The Academy's assets consisted of an -23- __________________________________________________________________ endowment fund of $1,141,000 in addition to land and buildings worth between $2.5 and $3.5 million. The Academy's physical plant consisted of ten buildings situated on 60 to 75 acres of land. The Academy's operating budget for one year was $941,645; 30 percent of its revenues came from M.S.A.D. 30, 42 percent came from other towns, and a total of 84.95 percent was derived from public sources. The Academy was organized as a private secondary school operated by a 30-person, self-perpetuating board of trustees. Between meetings of the board of trustees, the institution was managed by an 8-person board of directors, who were chosen by the board of trustees from among its members. The Academy's board of trustees had full authority to manage the institution's affairs, including the power to take the following actions: purchasing and selling real estate, incurring debt, hiring and firing all employees including the Headmaster and the faculty, managing endowment funds, approving the operating budget, determining personnel policies and staff salaries, determining curriculum offerings, establishing grade requirements, and maintaining the physical plant. The bylaws of the Academy's board of trustees provided that the Chair of the M.S.A.D. 30 Board of Directors was, by virtue of and co-terminus with service in that capacity, a trustee and a director of the Academy with full voting rights. The bylaws further provide that one other member of the M.S.A.D. 30 Board of Directors is a similar ex officio member of the Academy's board of trustees with full voting rights. Neither M.S.A.D. 30 representatives had, during the term of their ex officio membership thereon, served as an officer of either of the Academy boards. The influence exercised by the M.S.A.D. 30 ex officio members was not greater than that of any other individual Academy board member. See, Lee Academy Board of Trustees v. Lee Academy Education Association/MTA/NEA, No. 87-A-07, slip op. at 3-6 (Me.L.R.B. Aug. 17, 1987), adopting and supplementing facts reported in the Hearing Examiner's Jurisdictional Decision, No. -24- __________________________________________________________________ 87-UD-05, slip op. at 4-9 (Me.L.R.B. Apr. 14, 1987). Reviewing and affirming the Board's conclusion that Lee Academy was an "agent/independent contractor," the Law Court highlighted the critical distinctions between the factual scenarios in Lee Academy and Baker Bus as follows: The significance of "control or right to control" is illustrated by the sharp contrast between the relationship of private contractor to public entity in the case at bar and the relationship of private contractor to public entity in Baker Bus. The substantial resources and independent operations of Lee Academy clearly distinguish it from Baker Bus Service, Inc. SAD 30 has none of the elements of control that the City of Augusta retained and in fact exercised over Baker Bus: [Baker Bus Service, Inc.] was not required to furnish any of the necessary equipment, supplies, or materials when it agreed to operate the school bus system for Augusta. Nor was [it] required to make more than a minimal capital investment. The City's retained powers over routes and the hiring of personnel establishes that [Baker Bus] could exercise little independent judgment in carrying out the contract. Baker Bus Service, Inc. v. Keith, 416 A.2d at 731. The exercise of Lee Academy's independent educational judgment, on the other hand, is precisely what SAD 30 has contracted to obtain. The students from SAD 30 study with the same teachers, in the same classes, as do the other students. The operations of Lee Academy, unlike those of Baker Bus, can in no way be compartmen- talized into "public" and "private" components. It is true that most of the students at the Academy, even from outside SAD 30, have made arrangements for their home school districts to pay their tuition, but the Academy, far from being the "servant" or "alter ego" of those other districts, "competes" with the public high schools of those districts in the recruitment of students. The parties so stipulated before the MLRB. Lee Academy Education Association v. Lee Academy, 556 A.2d at 221-22. -25- __________________________________________________________________ Turning to the facts in the instant case, several appear to support the conclusion that, in providing school transportation services to the School Department, O'Connor is a "body acting on behalf of" the School Department, within the meaning of Section 962(7) of the Act. Pursuant to the school transportation services agreement, the School Department has the right to veto O'Connor's decision as to who should serve as the Coordinator for Transportation Services. The Coordinator functions as the manager of the transportation services provided pursuant to the contract and is the liaison between O'Connor and the School Department. The contract further provides that all persons O'Connor hires to drive buses transporting Augusta students must: (1) be trained in the operation of their assigned vehicle, (2) be of "good reputation," and (3) not have any prior criminal convictions and that the School Department is the sole judge of whether such qualifications have been met. In over four years' actual performance under the contract, O'Connor has never provided the names, dates of birth, or character references for its drivers to the School Department, nor has the latter ever requested such information. There was no evidence in the record that the School Department has ever been involved in any hiring decision in connection with any O'Connor driver and the School Department does not maintain any personnel records on the O'Connor drivers. Second, the Augusta school transportation services agreement provides that O'Connor must notify the School Department if any driver is charged with, or is convicted of, any motor vehicle moving violation or crimes involving moral turpitude or the use of alcoholic beverages or drugs. O'Connor has agreed that, upon request of the School Department, any driver charged with any of the listed types of crimes or offenses will be suspended from performing any driving duties pursuant to the parties' agreement, pending final disposition of such charges. The agreement further provides that drivers convicted of such charges or those whose -26- __________________________________________________________________ driver's license is otherwise suspended or revoked will, upon request by the School Department, be removed from all duties involving driving buses pursuant to the parties' agreement. For all practical purposes, O'Connor employees suspended or removed from driving buses pursuant to the school transportation services agreement will be suspended or discharged, respectively, from their employment because O'Connor does not have substantial alternative work to assign to them. Third, the School Department has retained substantial authority over the bus routes through the school transportation services agreement. No direct evidence was presented concerning the genesis of the bus routes; however, the agreement between O'Connor and the School Department provides that the latter may close a school; discontinue transportation for a school; open a new school; modify, combine, or eliminate bus routes; change the school time schedule; and set the number of pupils, determine their destinations and the pick-up and unloading points. The School Department may take any or all of these actions, after having given reasonable notice thereof to O'Connor. The Augusta School Board's Transportation Committee has established general policy guidelines concerning the maximum distances that elementary, middle school, and secondary students may be expected to walk either to school or to the nearest bus pick-up point. At the beginning of each school year and within the parameters of the established walking distance policy, the Coordinator for Transportation Services (an O'Connor employee) modifies the bus routes, including changing pick-up and unloading points, to reflect changes in the student population. Once the Coordinator has established the routes for the upcoming school year, he notifies the School Department and the routes are advertised in the local newspaper so that parents and students will know when to expect that the latter will be picked up and dropped off on school days. Due to safety concerns arising from the volume or nature of traffic on a particular road, the School Board's -27- __________________________________________________________________ Transportation Committee may occasionally create an exception to its general walking distance policy, resulting in changes in individual routes or in pick-up and drop-off points for particular students. When such exceptions are created, they are communicated to O'Connor, which then modifies the bus route involved to accommodate the new policy. Other relevant facts arguably suggest that the School Department controls or has a right to control O'Connor's performance of the school transportation services at issue. The School Department provides all of the fuel required for performance of the terms of the school transportation services agreement. They provide the primary liability, comprehensive, and collision insurance coverage on the buses. They register and license all of the vehicles involved. They provide both a lot where the buses may be parked when they are not in use and an office for the transportation operation, as well as bear the cost of maintaining and repairing the parking lot and the office. The words "Augusta School Department" appear on the outside of each bus. The listing for the number of the transportation office in the local telephone directory is "Augusta School Transportation." The Transportation Coordinator made up and used stationery whose letterhead read "City of Augusta, Maine, Department of School Transportation." Several other relevant facts tend to establish that the School Department does not have sufficient control or right to control over O'Connor's performance pursuant to the school transportation services agreement to make the latter an agent/servant of the former. Although the contract gives the School Department the authority to nullify O'Connor's hiring of any particular driver for not being of "good reputation," the School Department is not otherwise involved in the recruitment and hiring of the drivers. Once hired, O'Connor is solely responsible for determining the terms and conditions of the -28- __________________________________________________________________ drivers' employment, including their wages and rates of pay, employment benefits, and paid holidays. By determining the number of drivers hired and by assigning drivers to regular and extracurricular activities runs, O'Connor establishes the work load and the hours of work for each driver. O'Connor prescribes minimal performance expectations for the drivers and has enforced such standards by disciplining those drivers who have failed to meet them. O'Connor is a business corporation established under the laws of the State of Maine. None of O'Connor's shareholders, directors, or officers are employees or officials of the School Department. There was no evidence in the record that the School Department exerts any influence at all over the decisions made by the O'Connor directors or shareholders. Third, O'Connor is a substantial company, independent of its involvement in the contractual arrangement with the School Department. Providing the contracted services accounts for about 25 percent of O'Connor's gross revenues. O'Connor and O'Connor GMC/Buick are related companies with common ownership. The contract with the School Department generates only about one percent of the total revenues of O'Connor and its related companies. Furthermore, the buses owned by O'Connor are used for other purposes, in addition to being used in performance of the contracted services. O'Connor has made a substantial capital investment in the Augusta school transportation services venture. In addition to purchasing the minimum number of vehicles required by the contract--26 buses of various sizes and two vans--O'Connor has also acquired an additional bus and 3 vans to perform the contracted services. Under the terms of the school transporta- tion services agreement, O'Connor is required to provide any needed additional vehicles at a cost to be negotiated with the School Department. At the close of the evidentiary record in -29- __________________________________________________________________ this case, O'Connor's total capital investment in the Augusta school transportation operation was $1,139,000. In conformity with the terms of the contract, O'Connor provides, at its expense, a garage where all necessary bus maintenance and repairs are performed and where all necessary replacements parts are stored. O'Connor uses the service department at O'Connor GMC for these purposes. O'Connor already owned the garage at the time that it bid on the school transportation services agreement and did not have to make a capital investment in such a facility as a result of being awarded the contract. O'Connor GMC did implement a major personnel expansion in part in reliance on the added workload generated by the school transportation operation. Since school buses are generally not in use during evening hours, their availability for maintenance and repair at that time of day was a significant motivating factor in O'Connor's decision to inaugurate an evening shift at the O'Connor GMC service department. O'Connor's substantial capital investment in the school transportation venture is at risk. Several variables in the school transportation operation could, in certain circumstances, jeopardize O'Connor's investment in the project. While the per- driver-hour component of the compensation paid to O'Connor by the School Department remains fixed for the first four years of the contract, O'Connor faces variable, and possibly escalating, wage and benefit costs during that period. If O'Connor is unable to recruit and retain a sufficient number of drivers to perform the contracted services, its inability to provide the contracted transportation services constitutes adequate grounds for the School Department to terminate the contract. Second, since O'Connor owns the buses, it runs the risk that it may not be able to totally recoup its capital investment during the term of the contract. This risk is exacerbated by two provisions in the contract: (1) only buses with fewer than 150,000 miles on their odometers may be used to perform the contracted services and (2) -30- __________________________________________________________________ O'Connor bears the cost of providing replacement vehicles, should a vehicle suffer irreparable breakdown or exceed 150,000 odometer miles. As of the date of the evidentiary hearing herein in January, 1995, O'Connor had not recouped its capital investment in the project. O'Connor was awarded the school transportation services contract over the bids of two rival companies, including the incumbent contractor. At the conclusion of the current contract, the School Department will be statutorily required to solicit bids, through a competitive bid process, from persons or companies interested in providing it with school transportation services. 20-A M.R.S.A. 5401(13)(D). O'Connor runs the risk that it will not be the successful bidder for the successor school transportation services agreement at that time. Finally, O'Connor will have to dispose of the used vehicles, either when they exceed the contractual odometer maximum or in the event that O'Connor is not the successful bidder for the successor school transportation services agreement. Finally, the school transportation services agreement gives O'Connor discretion in making decisions in areas where O'Connor possesses special expertise. Among such decisions are those concerning: which buses to purchase, the terms of bus financing, the nature of bus warranties, the frequency of bus servicing, the nature of the mechanical work performed on the buses, and bus inspections and determination whether buses meet Maine State inspection standards. Pursuant to the agreement, O'Connor also determines the assignment of buses to particular runs and decides where buses will be parked when they are not in use--at the lot provided by the School Department or at the drivers' homes. When evaluating those facts that tend to establish that O'Connor is an agent/servant of the School Department within the meaning of the Baker Bus test, the inquiry is whether the School Department controls, or has the right to control, the substantial elements of O'Connor's performance of the school transportation -31- __________________________________________________________________ services functions. The School Department's contractual right to review the qualifications of the persons O'Connor hires as drivers is relevant to the School Department's "right to control." The hearing examiner notes that the School Department has not exercised this right during the three and one-half year period from the signing of the school transportation services agreement through the close of the evidentiary record in this proceeding. This fact seriously undermines the weight accorded to the School Department's de jure right to review and reverse hiring decisions in the relevant legal analysis. While important, employee hiring is only one element of control over personnel matters. The right to review hiring decisions is not tantamount to the authority to select employees. Only those individuals already selected by O'Connor would be subject to such review. The screening itself is limited to the grounds cited in the parties' agreement and like all contract provisions, this right can only be exercised in a reasonable manner. The provisions of the school transportation services agreement concerning O'Connor's obligations to notify the School Department if any driver is charged with and/or is convicted of any of the enumerated infractions or crimes and, upon the request of the School Department, to suspend any driver so charged and to terminate any driver convicted of such transgressions appears to give the School Department substantial control over the discipline and discharge of the drivers. The Coordinator for Transportation Services' November 15, 1995, letter to former driver Carol Bernier, purporting to explain the reason for her termination, implies that the School Department was involved in that process. On the other hand, the School Department's Business Manager testified that the department has never been involved in the discipline or discharge of any driver. The Coordinator's letter does not directly contradict the Business Manager's testimony. Given the potential liability inherent in its involvement in the school transportation services venture, -32- __________________________________________________________________ O'Connor has ample legitimate business reasons to suspend drivers charged with any of the offenses enumerated in the agreement and to discharge those convicted thereof, independent of any School Department involvement. As was the case in relation to driver hiring decisions, the School Department's non-exercise of its contractual right to be involved in driver discipline and discharge over the first three and one-half years of the contractual relationship lessens the weight accorded to its de jure right to participate in such decisions. The third major element tending to establish the School Department's control or right to control the O'Connor operation is the degree of authority that the department exercises in adjusting the bus routes and in effectively determining the times when such routes will be driven. While the degree of such involvement appears substantial at first blush, one must consider it in light of the nature of school transportation operations. Like municipal or interstate bus lines, school transportation services drive fixed routes on a set schedule; however, unlike the former where the passengers select their own destinations and travel according to their needs and at their convenience, the mission of school transportation operations is to convey students from their homes to their school buildings for the purpose of attending school. The days of the year and the hours of each day on which school transportation services will be required are contingent upon the school committee's determination of the length of the student school day and the student school year. The latter decisions are matters of educational policy. Saco Valley Teachers Association v. M.S.A.D. No. 6 Board of Directors, Nos. 85-07 & -09, slip op. at 13-15, 8 NPER ME-16013 (Mar. 14, 1985). Furthermore, the bus routes themselves are dependent upon the location of the students' homes and of the various schools in a school district. A school committee's decision to build a new school or to close an existing school will have a definite effect on the school bus routes. The various examples cited in this -33- __________________________________________________________________ paragraph are illustrative of school committee decisions that have an impact on the school transportation operation, but which are primarily aimed at management of other aspects of the educational establishment. On closer examination, such decisions do not implicate the School Department's control or right to control the school transportation services provider. On the other hand, the School Department in the instant case has retained and exercised more direct control over the transpor- tation services operation. At the beginning of each academic year, O'Connor's Coordinator for Transportation Services adjusts the bus routes, including the pick-up and drop-off points, to reflect changes in the student population. The Coordinator's route modifications are consistent with the maximum walking distance policy established by the Augusta School Board's Transportation Committee. Such general policy guidelines, created by elected officials and reflecting local concerns, are not sufficiently specific to constitute evidence of control; however, the School Board's involvement in this case goes beyond setting general guidelines for the transportation service provider. When parents want a pick-up or drop-off point closer to their homes than would be indicated by the established walking distance policy, they can appeal to the Transportation Committee. Considering the attendant circumstances, the Committee may grant an exception to the general policy which will result in route, drop-off or pick-up point changes. This School Department involvement in the details of the school transportation operation is evidence of control or right to control within the meaning of the Baker Bus test. The factors mentioned in the only full paragraph on page 28 herein might support the conclusion that O'Connor is the agent- servant of the School Department in the school transportation services venture. Several of these factors were cited by the Board, Baker Bus Service and Teamsters Local Union Local 48, -34- __________________________________________________________________ No. 78-A-05, slip op. at 6 (Me.L.R.B. Oct. 6, 1978), and the Law Court, Baker Bus Service, Inc. v. Keith, 416 A.2d, at 731, together with other factors, as substantiating the agent-servant relationship between the public entity and the private contractor in that case. While pertinent to the instant inquiry concerning the nature of the relationship between the School Department and O'Connor, the factors cited in this paragraph are less compelling here than they were in Baker Bus because numerous other factors present in the earlier case are absent here. In the instant case, O'Connor owns all of the buses required for the transportation operation, the buses are not used exclusively for School Department operations, O'Connor is responsible for ensuring that the vehicles comply with applicable governmental safety regulations, O'Connor provides two-way radios and other equipment for the buses that the School Department provided in Baker Bus, O'Connor must provide any additional or replacement buses required, and, as noted above, the School Department has never exercised its right to veto the hiring of any driver. Second, ample legitimate business justification was established in the record for the conditions noted in the preceding paragraph. Title 20-A M.R.S.A. 5401(14), a portion of the statute regulating the transportation of public school students, provides as follows: Cost of service and equipment. Transportation services and the purchase of new buses shall be accomplished in the most economical manner consistent with the welfare and safety of students. The School Department's furnishing of all the fuel required for the transportation operation, registering and licensing the vehicles, purchasing the casualty insurance on the buses, and providing a lot where the buses may be parked when they are not in use are all in accord with the above statutory directive. As a political subdivision of the State, the School Department is, in effect, exempt from the State gasoline tax and motor vehicle -35- __________________________________________________________________ registration and license fees. The School Department's sovereign immunity status results in its having a substantially lower exposure to potential liability and, therefore, it pays a significantly lower insurance premium for the same coverage than would be assessed against an organization which does not enjoy sovereign immunity. The buses must be parked somewhere when they are not in use and the School Department already owned the parking lot which it provided to O'Connor. In each of these cases, the School Department's action results in lowering O'Connor's overhead costs for the school transportation services venture and, hence, lowers the cost which the School Department pays for such services. The School Department Business Manager testified that it offered to provide the fuel, insurance, and parking lot, and to register and license the vehicles in the request for proposals that resulted in the award of the school transportation services contract to O'Connor so that all bidders could rely on such overhead cost savings in calculating their bids, reducing the cost of transportation services for the School Department. The school bus markings and the telephone directory listing are required by separate provisions of the school transportation services agreement, the equipment and operating requirements articles respectively. At most, the use of the School Department name in these contexts gives the appearance to the public that the school transportation operation is a division of the School Department. These representations do not in any way implicate School Department control or right to control the school transportation services operation. The reasons proffered by the School Department for the inclusion of these requirements in the school transportation services agreement--facilitating the identification of the "Augusta" buses by students traveling to events outside of the district and enabling parents and members of the public to readily contact the transportation services provider by phone--are reasonable on their face. The same is -36- __________________________________________________________________ true of the stationery designed and used by the O'Connor Coordinator for Transportation Services--the stationery clearly identified the nature of the operation and parents, receiving letters from the Coordinator concerning the transportation operation, might not know that the School Department had contracted it out to a private provider. Furthermore, any possible inference of control or right to control that might have been drawn from the use of such stationery was rebutted by the School Department Business Manager's testimony that the department was not even aware of the existence of such stationery, prior to an informal conference in the instant matter. Turning to the factual considerations which support the conclusion that the School Department does not sufficiently control, or have the right to control, O'Connor's performance in the school transportation services venture, the first such finding is that, with the exception of the School Department's de jure right to veto driver hiring decisions, determination of the drivers' wages, hours, and terms and conditions of employment is exclusively within O'Connor's discretion. The degree of judgment that O'Connor exercises over these subjects is highly relevant in the Baker Bus analysis. In Lee Academy, the Law Court discussed the import of the Baker Bus standard as follows: We believe the Baker Bus test draws the proper line as well as it can be drawn. The test looks beyond the legal form of the employer-employee relationship to its real substance. It requires a determination whether a municipal entity exercises or has the legal right to exercise such control over the private contractor that the latter's employees are in practical reality public employees. Only then is there a clear policy reason for the legislature to step in with special regulation for the labor relations of that employee group. 556 A.2d at 221. In the instant case, O'Connor determines the aspects of the drivers' employment which are mandatorily negotiable under the Act for covered employees. The evidence -37- __________________________________________________________________ establishes that O'Connor could effectively negotiate with any bargaining agent selected by the drivers over the mandatory subjects of bargaining, without any involvement whatsoever by the School Department. Second, O'Connor's corporate structure and the fact that no School Department officials are shareholders, directors, or officers of the corporation support the conclusion that the School Department does not control or have a right to control O'Connor operations. In Lee Academy, the Board examined the relationship between a private secondary school and the local school district to determine whether the former was an agent- servant of the latter. Among the relevant factors in that inquiry were the membership of two of the school district directors on the academy's thirty-person board of trustees and the membership of the chair of the school district on the academy's eight-person board of directors. Lee Academy Education Association/MTA/NEA and Lee Academy Board of Trustees, No. 87-UD- 05, slip op. at 5, 7-8 (Me.L.R.B. Apr. 14, 1987). While relevant to the issue of control or right to control, the Board held that such participation on the two academy boards by members of the school district's board of directors was not dispositive and created at most a potential for control because there was no evidence that the school district representatives exercised any greater influence or control than any other members of such boards and that all of the academy panel members exercised "their own personal judgment and not the judgment of any public employer constituency in the conduct of [the academy's] affairs." Lee Academy Board of Trustees v. Lee Academy Education Association/ MTA/NEA, No. 87-A-07, slip op. at 8, 10 NPER ME-l8016 (Me.L.R.B. Aug. 17, 1987) , aff'd, 556 A.2d 218 (Me. 1989). The lack of School Department participation in the management of O'Connor is evidence that the latter is not an agent-servant of the former. The third factor militating against a conclusion of agent- -38- __________________________________________________________________ servant status in this case is O'Connor's substantial capital investment in the Augusta school transportation venture. The degree of capital investment by the ostensibly private contractor in the undertaking involved has been cited as an important factor in resolving the agent-servant/agent-independent contractor dichotomy. In Baker Bus, the company held to be an agent-servant of the municipal school department "was not required to furnish any of the necessary equipment, supplies, or materials required" for the venture "[n]or was [it] required to make more than a minimal capital investment." 416 A.2d at 731. In a different case, the Portland Public Library was determined to be an agent- servant of the City of Portland in part because "the Library has a relatively minimal capital investment in the Library operation." While the Library owned books, artwork, and furnishings (some of which had been purchased with City funds), the City provided all of the buildings used by the Library and provided approximately 80 percent of the Library's annual operating budget. Portland Public Library and Portland Teachers Association, No. 81-A-02, slip op. at 7, 4 NPER 20-12025 (Me.L.R.B. June 18, 1981), aff'd, No. CV-81-884 (Me. Super. Ct., Cum. Cty., Aug. 22, 1983). On the other hand, Lee Academy, which owned its own land and buildings valued at $2.5 to $3 million and had a $1.4 million endowment, was held to be the agent- independent contractor of the local school district. See Lee Academy Education Association/MTA/NEA and Lee Academy Board of Trustees, No. 87-UD-05, slip op. at 5 and 556 A.2d at 221. Implicit in all of these decisions is recognition of the fact that any business corporation or governmental entity that makes a substantial capital investment in a venture is unlikely to cede control of that operation to another organization. Corporations or other private entities that do not make the significant capital investments that may be required in the services that they provide pursuant to contracts with governmental units are far more likely to be the sort of "paper corporations" targeted by the Legislature through L.D. 828, the initiative that amended -39- __________________________________________________________________ the definition of "public employer" in the Act and resulted in the current statutory language. The next relevant factor in the control or right to control analysis is the fact that the substantial capital investment that O'Connor made in the Augusta school transportation venture is at risk. As discussed previously, O'Connor could lose some of the money that it has invested in the school transportation services operation in any one of several possible factual scenarios. In fact, had it been unable to provide the contracted services early during the term of the agreement, O'Connor could have lost most of its capital investment. A private corporation with in excess of $1 million at risk has a very powerful incentive in maintaining effective control over its investment. The last pertinent consideration is that the school transportation services agreement gives O'Connor discretion in several areas where it possesses special expertise, in addition to the discretion over personnel matters discussed above. The specific areas of discretion are discussed at page 31 above. Although the analogy is somewhat limited, O'Connor's expertise and independent judgement in these areas are similar to the broader range of professional discretion which the public entity contracted for in Lee Academy. 556 A.2d at 221. The relevant factual considerations have been evaluated and analyzed separately and together. The question presented is a relatively close one, with several factors militating for each result; however, many of those tending to establish control or right to control merely result from the School Committee's determination of educational policy matters or are designed to reduce the School Department's transportation costs and were available to all who bid on the school transportation services agreement. On balance, those factors tending to establish that O'Connor is an agent-independent contractor of the Augusta School Department in the school transportation services operation are -40- __________________________________________________________________ more compelling. The most persuasive single factor was that O'Connor has sufficient control over the selection and continued employment of its drivers and in determining their wages, hours, and terms and conditions of employment to negotiate thereon with any bargaining agent who may represent the drivers. This situation is the converse of that described in the last paragraph of Section 962(7)(B)(2) of the Act and that alone may warrant the result reached herein. For the above reasons, the hearing examiner concludes that O'Connor Leasing II is not a public employer within the meaning of the Act. While the question need not be reached in the circumstances of this case, the hearing examiner offers the following as guidance to future petitioners who are urging that an ostensibly private entity is a public employer within the meaning of Section 962(7)(B). A prerequisite to a determination of public employer status pursuant to sub-paragraph B is a determination that the employer in the particular case "is not covered by any other state or federal collective bargaining law." In the overwhelming majority of cases the other state or federal law involved will be the National Labor Relations Act, as amended, which is administered by the National Labor Relations Board ("NLRB"). The MLRB has no special expertise in applying the myriad dollar- volume standards applied in determining the NLRB's jurisdiction over a particular employer. Where jurisdiction under the NLRA is at issue, a determination of non-jurisdiction by the Regional Director of the NLRB is a condition precedent to proof of public employer status pursuant to Section 962(7)(B). ORDER On the basis of the foregoing stipulations, findings of fact, and discussion and pursuant to the provisions of 26 M.R.S.A. 966(1) (1988), it is hereby ORDERED that the -41- __________________________________________________________________ Petition for Unit Determination filed by AFSCME, Council 93 in Case No. 94-UD-12, on May 23, 1994, is hereby dismissed. Dated at Augusta, Maine, this 9th day of November, 1995. MAINE LABOR RELATIONS BOARD /s/_______________________________ Marc P. Ayotte Executive Director The parties are hereby advised of their right, pursuant to 26 M.R.S.A. 968(4) (Supp. 1994), to appeal this report to the Maine Labor Relations Board. To initiate such an appeal, the party seeking appellate review must file a notice of appeal with the Board within fifteen (15) days of the date of the issuance of this report. See Board Rules 1.12 and 7.03 for full requirements. -42- __________________________________________________________________