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Reason Foundation

What a Recent Labor-Relations Decision Teaches Us About the Meaning of “Public” and “Private”

Alexander Volokh
March 21, 2013

In June 2010, the Chicago Alliance of Charter Teachers & Staff filed a petition to be certified as the exclusive bargaining representative of teachers at the Chicago Mathematics & Science Academy (CMSA), a charter school. The petition was filed with a specialized state agency—the Illinois Educational Labor Relations Board (IELRB)—presumably because that’s the agency that enforces the Illinois Educational Labor Relations Act (IELRA), which, by its terms, extends to “educational employer[s],” a term defined to include charter schools as well as public schools.

The charter school, though, thought otherwise. The school’s position was that it was subject to federal, not state, labor law—specifically, that it was governed by the National Labor Relations Act (NLRA), enforced by the National Labor Relations Board (NLRB). The NLRA, after all, extends to all “employer[s]” with a handful of exceptions. The only arguably relevant exception is the NLRA doesn’t cover “a political subdivision” of a state; but the charter school argued that, unlike a public school, it isn’t a political subdivision, so the only labor law that applies is the federal NLRA. Because of federal supremacy, anything in the IELRA to the contrary is preempted, and IELRB jurisdiction is inappropriate.

Why should a school care whether it’s under the jurisdiction of a state or a federal agency? Federal and state labor law differ in various ways, but one relevant consideration is possibly that federal law requires secret ballots when an employer doesn't recognize the union voluntarily, while state law also allows for union recognition using the non-secret "card-check" method. And employers are far more enamored of secret ballots than are unions. In any event, on December 14, 2012—after initially losing before the NLRB’s Acting Regional Director—the school won before the full NLRB. CMSA isn’t a political subdivision of a state, the NLRB held, so the school is indeed subject to the NLRA.

To decide this, the NLRB applied its longstanding test that “an entity may be considered a political subdivision if it is either (1) created directly by the state so as to constitute a department or administrative arm of the government, or (2) administered by individuals who are responsible to public officials or to the general electorate.” As far back as 1967, the NLRB applied this test to conclude that a local natural gas utility in Tennessee wasn’t a political subdivision because (1) it was privately incorporated and (2) its officials were neither state-appointed nor elected. The Supreme Court decided in 1971 that the NLRB had misapplied its own test and that the natural gas utility was a political subdivision: on prong 2, though the officials weren’t appointed by the state, they could be removed by the governor, which made them “responsible to public officials.” But the Supreme Court didn’t question the correctness or reasonableness of the NLRB’s test itself, and the NLRB has continued to apply the test in the four decades since.

Applying this test to the Chicago charter school, the NLRB held that, though the state of Illinois created the category of “charter schools” and chooses whether to charter any particular school, the school itself is incorporated by private individuals under the state nonprofit law and exists prior to the grant of the charter. Thus, on prong 1, the school wasn’t created directly by the state. On prong 2, the NLRB held that being “responsible to public officials” means being “appointed by or subject to removal by public officials.” (Note how the addition of “removal” fixes the mistake identified by the Supreme Court in 1971.) And while charter schools are regulated by the state according to the terms of their contract (the charter) and the charter school law, the school is run by a board whose members are appointed and removed purely privately. The school, the NLRB held, is thus an “employer” under the terms of the NLRA and is thus subject to federal, not state, labor law. (One dissenting board member suggested that the NLRB should nonetheless have used its discretion and chosen to decline jurisdiction, leaving the matter to the state of Illinois for the sake of federal-state comity; but the NLRB majority decided not to pursue this course.)

* * *

School reformer and charter-school critic Diane Ravitch proclaimed on her blog that the NLRB ruling was part of a trend of rulings showing that “Charters Are Not Public Schools.” Washington Post education blogger Valerie Strauss likewise discussed the ruling under the headline “Charter school ruled private entity for labor relations,” and concluded her post: “The evidence that public education is being privatized keeps mounting.”

Clearly, the NLRB ruling itself doesn’t privatize education: the charter school’s labor-management relations were going to be regulated by some government agency, and that someone turns out to be the federal labor board rather than the state educational labor board. True, the NLRB is mostly thought of as the agency for private employers, but that’s never been the formal legal test. The NLRA exempts not just states and their political subdivisions, but also the federal government, wholly owned government corporations, federal reserve banks . . . and even the railroads and airlines subject to the Railway Labor Act, which are generally private-sector but have their own special statutory scheme. The question here wasn’t whether charter schools were private but whether they were political subdivisions.

The claim does have a core of truth. The NLRB ruling does recognize what was true from the start: charter schools, at least in Illinois, are privately organized and privately managed, which puts them into a different labor-management regime than traditional public schools. But the usage of “public” and “private” is ambiguous. Are charter schools really private? Other factors cut toward the public side: they do agree to do tasks for the state (as do public employees), they get the lion’s share of their funding from the state, they’re “subject to extensive compliance and reporting requirements, including the submission of a proposed budget and various financial reports,” and they can get their charter revoked for various misdeeds; their “teachers must be certified under the Illinois School Code and participate in the same assessments required of public school teachers, and they participate in the Chicago Public Schools pension fund.”

This is typical of the potential of privatization, which on the one hand puts management (and sometimes physical assets) in private hands (whether for-profit or non-profit), but on the other hand can impose any number of public-law requirements by statute or by contract, either just to overcome political opposition or to address real accountability concerns. These requirements can include a mandate that a charter school take all comers, or that a contractor hold public hearings or obey requirements similar to the Administrative Procedure Act or the Freedom of Information Act. In this case, the Illinois legislature may have tried to make charter schools politically more attractive by subjecting them to the same labor-management regime as public schools; this strategy turned out to be unsuccessful because states can’t tell the NLRB the limits of its own jurisdiction, but in general the idea of giving conscious thought to the regime governing contractors, and making them “public” in some ways while keeping them “private” in others, may well be sound.

Thus, thinking about the NLRB ruling shows that “public vs. private” is a shorthand for a number of different attributes; privatization might mean a change in some, like the power to hire and fire, or the right to sell the building, but might leave other attributes unchanged.

* * *

The fuzziness of the term “private” also emerges from comparing the constitutional treatment of schools with that of prisons. Students in public schools, and inmates in public prisons, have a range of constitutional rights, though less than the typical free adult—First Amendment rights to free speech and freedom of religion, Fifth Amendment rights to due process, Equal Protection rights against unjustified discrimination, Eighth Amendment rights against cruel and unusual punishment (for prisons, not for schools), and the like. What if schools or prisons are privatized? Constitutional protections are only good against “state actors,” so asking whether students in private schools or inmates in private prisons have constitutional rights is equivalent to asking whether private schools’ and prisons’ treatment of students and inmates is state action.

It turns out that the answers for schools and prisons are quite different. Private prisons always remain state actors with respect to their inmates, since they fulfill the traditionally exclusive public function of incarceration. (But they’re not state actors with respect to their own employees.) But private schools that contract with the state are not state actors—even if they get almost all their funding from the state. (Education, it’s been held, is not a traditionally exclusive public function, since public education is a comparative newcomer to the scene.) So privatization really can mean a retreat from constitutional accountability in the case of schooling, but not in the case of incarcerating inmates. Private prisons are “private” enough to be subject to the NLRB but public enough to be subject to constitutional protections; it just goes to show that, in the hazy middle world of contracting out, the mere words “public” and “private” can mean less than they seem.

Other recent cases outside the labor-management context teach similar lessons. In March 2012, a federal district court in California ruled in the case of jail inmate Shawna Wilkins-Jones, who had sued Prison Health Services (now called Corizon), the for-profit health provider at the California jail where she was being housed, for violations of the Americans with Disabilities Act (ADA). And in December 2012, a federal district court in Arizona ruled in the case of prison inmate Anthony Rodrigues, who had likewise sued private prison firm MTC on the same grounds. The section of the ADA at issue, Title II, prohibits “public entit[ies]” from discriminating against people with disabilities or excluding them from their services. The question, then, was whether PHS/Corizon or MTC are public entities. The statute defines “public entity” to include state and local governments, as well as their departments, agencies, special purpose districts, “or other instrumentalit[ies].” The Wilkins-Jones and Rodrigues district courts, both within the Ninth Circuit, had no circuit precedent to rely on, but they fell back on appellate cases from other circuits, holding that instrumentalities had to be either part of the government or created by it. Since PHS/Corizon and MTC are just private corporations contracting with state governments, they’re not instrumentalities under this definition—and therefore not subject to Title II of the ADA. (The Wilkins-Jones court did note, though, that Wilkins-Jones could still sue the county directly for any of the contractors’ ADA violations, so privatization didn’t reduce the total extent of ADA liability.)

But while Title II of the ADA may not apply against private prisons, the opposite is true of the Religious Land Use and Institutionalized Persons Act (RLUIPA), which protects inmates’ religious rights (among other things). In February 2012, a federal district court in Montana ruled in the case of Knows His Gun v. Montana. Native American inmate John Knows His Gun had sued CCA, the private prison firm running the Montana prison where he was incarcerated, charging that CCA had imposed a substantial burden on his ability to participate in sweat lodge ceremonies at the prison. RLUIPA limits the ability of any “government” to impose substantial burdens on inmates’ religious exercise in “a program or activity that receives Federal financial assistance.” Here, RLUIPA defines “government” broadly to include any state actor, so CCA qualified as “government” for purposes of the statute. As for “program or activity,” the term was defined to include “all the operations of” a list of entities, including state government agencies; and the whole private prison could be construed as an “operation” of the Montana Department of Corrections. Thus, private prison inmates have the same statutory religious freedom rights as their public counterparts, even if not the same statutory disability accommodation rights.

* * *

If this is confusing, that was the goal. Contracting with a private corporation to deliver an activity may alter the labor-management relations regime and the ADA regime but not the RLUIPA regime. The constitutional state-action regime may be unchanged with respect to the population served, but may be radically different with respect to hiring and firing decisions. What other regimes are altered may also depend on what conditions the contractor committed to fulfill in its contract. How, then, do we define “public” vs. “private,” “government” vs. “private sector,” “instrumentality of government” vs. “mere contractor”, “state actor” vs. “private actor”? We don’t. Each of these terms is a shorthand designating a broad set of attributes, and contracting out is all about exploring the limits of these concepts. For any given statute or constitutional provision, different rules might be appropriate in different contexts. Choosing to contract with private corporations may change the ownership of assets, but other legal regimes may or may not change, and overall accountability might either increase or decrease. From the perspective of the institutional designer, better just to ask how institutions—whether schools, prisons, or anything else—should be run, and choose the set of governance regimes appropriate to the goal.

Alexander "Sasha" Volokh is an associate professor of law at Emory Law School.


Alexander Volokh is Associate Professor of Law


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