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. )
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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.
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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.
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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
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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,
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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
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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
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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
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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
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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.
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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-
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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,
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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.
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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.
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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
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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.
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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.
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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
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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
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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
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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
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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)
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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
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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,
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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
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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,
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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
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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
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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
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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-
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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
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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
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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
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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.
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