NLRB Cases Archive 1960 - 1995, LABOR-RELATIONS 1993-94 CCH-NLRB ¶15,520, CENTRAL SECURITY SERVICES, INC. and JOHN E. BRADY., (Sep. 30, 1994), National Labor Relations Board, (Sep 30, 1994)

CENTRAL SECURITY SERVICES, INC. and JOHN E. BRADY.

315 NLRB No. 34.Case No. 20-CA-22502. September 30, 1994 George Christensen, Administrative Law Judge..

Before Stephens, Devaney and Browning.

Jonathan J. Seagle, for General Counsel. Roger Jeanson (Berman, Berkley & Lasky), San Francisco, California, for Central Security.

Employers--Coverage Under NLRA--Control Over Bargaining Terms.--The NLRB asserted jurisdiction over an employer engaged in providing contractual security services to an agency of the federal government because the employer retained sufficient control over its own labor relations so as to engage in meaningful collective bargaining. The employer solicited, screened and interviewed job applicants, had supervisors present at facilities where its employees were stationed, was responsible for maintaining quality control over its employees and was largely free to set the wages and benefits of its employees. Section 2(2).

Back reference: ¶1620.301.

Interference--Fact Finding--Work Rules.--On the facts, an employer’s work rule, which prohibited statements made by employees with knowledge that the statements were false, was not unlawful interference because such statements did not constitute protected employee activity. Section 8(a)(1).

Interference--Work Rules--Prohibiting Union Literature.--An employer’s work rule that prohibited the carrying or reading of any literature while on duty constituted unlawful interference. The rule was overbroad in that it reasonably could be understood to mean that employees were prohibited from reading or carrying union literature from the time they came on duty, including meal time or breaks. Section 8(a)(1).

Back reference: ¶3830.49.

From Text of Board’s Decision

The Board has considered the decision and the record in light of the exceptions and brief and has decided to affirm the judge’s rulings, findings, [1] and conclusions as modified and to adopt the recommended Order as modified. [2]

We are adopting in large part the decision of the administrative law judge. Several modifications are noted in footnote 1, supra, however, and we set forth at greater length in section II below our reasons for not adopting all of his recommendations with respect to certain of the Respondent’s rules of conduct alleged as violations of Section 8(a)(1) of the Act. For the reasons stated in section I below, we agree that we have jurisdiction over the Respondent. In so doing, we reject the Respondent’s contention that the control exercised by the United States Marshals Service (USMS) over the Respondent’s labor relations and the working conditions of the Respondent’s court security officers (CSOs) is so pervasive that meaningful collective bargaining with a labor organization representing the CSOs would not be practical and that therefore the Board’s assertion of jurisdiction is improper under the test of Res-Care, Inc., 280 NLRB 670 (1986).

I. JURISDICTIONAL ISSUE

A. Pertinent Factual Findings

The Respondent is in the business of providing security services. In this case, pursuant to a contract with the USMS, an agency of the Federal Government, the Respondent provided security services at Federal courthouses within the jurisdiction of the United States Court of Appeals for the Ninth Circuit. The contract between the USMS and the Respondent stated that the USMS had responsibility for Federal court security and needed skilled security officers to provide a “daily deterrent and reactionary force” against unauthorized activities directed toward court personnel and property. The USMS contracted with the Respondent to provide “except as otherwise specified ... all necessary manpower, supervision, transportation, and clothing to perform court security services for each USMS District covered by this award.”

The contract, which began in 1988, was for 1 year and granted the USMS an option to renew annually for a total duration of no more than 5 years. [3] The contract required the Respondent to provide not only CSOs but also an onsite supervisor at each facility. Additionally, the Respondent was required to have a contract manager available at all times for such purposes as redirecting CSOs in their duties, removing CSOs from their posts, and receiving and executing directions from the USMS. The CSOs were assigned to fixed posts and roving patrols within court buildings. As provided by the contract, CSOs received special, limited deputation through the USMS empowering them to enforce Federal law on Federal property in performance of contract duties during normal duty hours.

The contract incorporated CSOs’ wage rates, including annual increases, that the Respondent had submitted in the wage compensation plan required as part of its contract proposal. The Respondent was prohibited from paying lower wages unless it obtained USMS approval for reductions in its compensation plan. The Respondent was free to pay wages greater than the rates specified in the plan. The Respondent, however, would not be reimbursed by the USMS for amounts over the contract rates without prior approval of the USMS. Nicholas Laporte, the Respondent’s vice president for administration, testified that the Respondent could increase the CSOs’ hourly wages above the rate the Respondent was reimbursed by the USMS, “but we don’t as a rule do that” because “we couldn’t afford it.”

As the contract was subject to the Service Contract Act of 1965, [4] the wage rates could not be below the prevailing area wage determined by the Secretary of Labor. The contract provided, in a section concerning multiyear and option contracts, that “[t]he minimum prevailing wage determination, including fringe benefits ... current at the beginning of each renewal period, shall apply to any renewal of this contract.” If the prevailing wage increased to a level above that set in the contract, the Respondent would be required to pay no less than the prevailing wage and would be reimbursed at the prevailing wage rate by the USMS.

The wage determination also mandated certain minimum fringe benefit levels for health and welfare, vacations, and number of holidays. However, the Respondent had discretion to pay its CSOs a specified hourly amount in lieu of health and welfare coverage. Additionally, the Respondent was not prohibited from exceeding the minimum benefit levels or from providing additional types of benefits. According to Laporte, the Respondent provided its CSOs 3 days of bereavement leave, which the wage determination did not require. [5]

When the Respondent began work under its contract with the USMS, it hired the CSOs who had been employed by the prior contractor. In filling job openings that subsequently occurred, the Respondent advertised the jobs, gathered applications, interviewed applicants, and had them complete application forms provided by the USMS. To be hired, applicants had to meet training, experience, and medical requirements set by the USMS. The Respondent decided which applicants’ forms to submit to the USMS for background investigation. The contract provided that a CSO could not begin work prior to passing the USMS’s preliminary background investigation. After a further investigation, the USMS, if not satisfied, could require the CSO’s removal from duty.

On the job, CSOs received work assignments and directions from lead CSOs employed by the Respondent. As provided by the contract, USMS personnel did not usually issue directions to a CSO except in an emergency. Rather, USMS officials communicated their wishes to the Respondent’s contract manager or a lead CSO. According to Lead CSO James Perkins, the Respondent’s lead CSOs decided which CSO to assign to each post and transferred CSOs from one location to another without seeking approval of USMS personnel. The CSOs’ paychecks were issued by the Respondent.

The USMS, however, was involved with the Respondent’s operations under the contract in a number of respects. Pursuant to the contract, the USMS determined the location and number of CSO posts, the duties to be performed at each post, the hours of coverage and workshifts, and the length of CSOs’ breaks and lunch periods. The USMS also required that CSOs sign in when reporting for duty and sign out at the end of the work day and determined when overtime would be worked. The contract also set forth a dress code for CSOs.

Additionally, the contract contained a “Removal from duty/replacement of CSOs” clause providing that the USMS could require the contractor to remove from the worksite any employee disqualified for suitability or security reasons or found to be unfit for the performance of security duties. The clause specified 11 types of misconduct or delinquency that could result in a determination of unfitness, such as neglect of duty, disorderly conduct, theft, and misuse of weapons.

The contract also contained a “Standards of Conduct” clause providing that the contractor was responsible for “maintaining satisfactory standards of employee competency, conduct, appearance, and integrity” and for taking such disciplinary action as necessary. The clause further provided that the USMS code of conduct would “provide the Contractor guidance in developing a standard for employees under this contract” and the the USMS could require the contractor to remove any CSO from CSO duties for disregard of the code of conduct. The USMS code of conduct was set forth in an attachment to the contract. Additionally, a contract clause concerning the contract manager included a requirement that the contract manager enforce CSOs’ adherence to the “Standards of Conduct” clause.

Laporte testified that the Respondent had terminated CSOs at the “implied or express direction” of the USMS and that the Respondent had no private contracts in northern California during 1988 through 1989 (the period during which the events at issue in this case occurred), although it did have a private contract in that area in 1991. Deputy United States Marshal Donald Davey, who was the USMS’s district court security coordinator in San Francisco, testified that on two or three occasions the USMS had directed the Respondent to “let one of the CSOs go.”

B. Discussion

As established in National Transportation Service, [1978-79 CCH NLRB ¶15,554] 240 NLRB 565 (1979), the Board will assert jurisdiction over an employer providing services to a governmental entity that is itself exempt from the Board’s jurisdiction unless the employer lacks sufficient control over the employment conditions of its employees to enable it to bargain with a labor organization as their representative. In Res-Care, Inc., above, the Board reaffirmed and clarified the National Transportation test. The Board stated that it would “examine closely not only the control over essential terms and conditions of employment retained by the employer, but also the scope and degree of control exercised by the exempt entity over the employer’s labor relations.” 280 NLRB at 672. The Board noted a core group of basic bargaining subjects and stated that “if an employer retains control over decisions affecting those subjects, meaningful bargaining is possible.” Id. at 674.

Finding that the exempt governmental entity retained control over the primary elements of wages and benefits as well as other aspects of the employer’s personnel policies, the Board in Res-Care declined to assert jurisdiction. [6] In a companion case, Long Stretch Youth Home, [1986-87 CCH NLRB ¶18,733] 280 NLRB 678 (1986), the Board distinguished Res-Care and asserted jurisdiction based on that employer’s retention of sufficient control over the essential terms and conditions of employment. [7]

Subsequently, in Community Transit Services, [1988-89 CCH NLRB ¶15,116] 290 NLRB 1167 (1988), the Board clarified that Res-Care did not “stand for the proposition that the employer must retain control over each of the economic aspects of its labor relations if meaningful bargaining is to be possible.” Id. at 1170 fn. 5. The Board indicated in Community Transit, however, that control over solely noneconomic terms would not be sufficient.

It is well established that “[a]n employer seeking to avoid the Board’s exercise of jurisdiction carries the burden of showing that is is not free to set the wages, fringe benefits, and other terms and conditions of employment for its employees.” R. W. Harmon & Sons, Inc., [1989-90 CCH NLRB ¶15,949] 297 NLRB 562, 563 (1990), citing Firefighters, [1988-89 CCH NLRB ¶15,465] 292 NLRB 1025, 1026 (1989). We find that the Respondent has failed to satisfy this burden.

We find that the Respondent is largely free to set the wages and benefits of its CSOs. In formulating its contract proposal, the Respondent chose the wage rates that were incorporated in the contract. Once adopted, these wage rates became a minimum but did not prohibit the Respondent from compensating its CSOs at higher rates. That the Respondent “as a rule” did not increase wage rates above the reimbursement rate provided in its contract with the USMS does not establish that the Respondent was prohibited from doing so but only that it preferred not to do so. Thus, unlike in Res-Care, no maximum limits were imposed on wages the Respondent could pay. [8] Similarly, the Respondent’s contract required a certain minimum level of benefits, but the Respondent was not prohibited from exceeding that level. Even with regard to the mandated health and welfare benefits, the Respondent had the option of providing either the benefits themselves or a cash equivalent.

Additionally, the Respondent’s contract with the USMS was subject to the Service Contract Act of 1965. In several prior cases, the Board has found that the Service Contract Act does not bar meaningful bargaining but, rather, accommodates it. As the Board explained in Dynaelectron Corp., [1986-87 CCH NLRB ¶18,952] 286 NLRB 302 (1987), the Service Contract Act provides for substitution of collectively bargained wages and benefits for the prevailing compensation rates set forth in wage determinations. See Koba Associates, [1987-88 CCH NLRB ¶19,536] 289 NLRB 390, 393 (1988); Old Dominion Security, [1987-88 CCH NLRB [19,464] 289 NLRB 81 (1988); see also FKW, Inc., [1992-93 CCH NLRB ¶17,461] 308 NLRB 598 (1992). Thus, “if during the term of the contract, the [Respondent] were to enter into a collective bargaining agreement ... the collectively bargained rates would become the new wage determination at the next renewal period.” Koba Associates, supra at 394 (fn. omitted). As noted above, the Respondent’s contract with the USMS provided for annual renewal periods, with the wage determination current at the beginning of each period to apply to the renewal.

There is an exception to the Service Contract Act’s requirement that collectively bargained wage rates and benefits be incorporated in the wage determination. The DOL will not adopt such rates if they are not the result of arm’s-length negotiations or if the Secretary of Labor finds, after a hearing, that the wages and benefits clearly are “substantially at variance” with those prevailing in the area. See Dynaelectron Corp., supra at 304. The Board has found that Congress considered such circumstances to be unusual. It has noted, however, that even if a government contractor were forced to absorb collectively bargained wage increaqses, this situation would be no different from that facing any private company working on a fixed-price contract at the time a new collective-bargaining agreement is negotiated and that, in any event, the contractor could bargain for language in the collective-bargaining agreement protecting it if the rates were not incorporated in a revised wage determination. [9] Id. at 305. Moreover, in the present case, there is no evidence that collectively bargained wage and benefit increases would not have been incorporated in the wage determinations here. See Old Dominion Security, supra at 82. [10]

The Respondent also has failed to show that it did not retain control over many of its CSOs’ non-economic terms and conditions of employment. Thus, the Respondent solicited, screened, and interviewed job applicants and decided which applications to forward to the USMS for security checks. The Respondent had supervisors present at facilities where its CSOs were stationed, and the Respondent’s supervisors, rather than USMS personnel, normally directed and supervised CSO activities. Under the contract, the Respondent was responsible for maintaining standards of employee competency, conduct, appearance, and integrity and taking disciplinary action to enforce these standards. While the USMS could disapprove the hiring of an applicant as a CSO and could order the Respondent to remove a CSO, this did not preclude the Respondent’s retaining that individual in another capacity, such as to perform guard service for another client. Moreover, the Board has found a governmental entity’s possession of authority to request a contractor to dismiss an employee did not preclude the Board’s assertion of jurisdiction over the contractor. See FKW, Inc., 308 NLRB 598 (1992); Old Dominion Security, 289 NLRB at 83; Dynaelectron Corp., 286 NLRB at 305. The Respondent’s argument that the USMS’s control over matters such as employment qualifications, dress codes, security clearances, work shifts, and CSOs’ duties precludes the Respondent from engaging in meaningful collective bargaining is unpersuasive. In Old Dominion Security, the Board found similar restrictions to be operational controls necessary to “ensure contract compliance and maintenance of security measures at a secure facility,” 289 NLRB at 83, and not to negate the employer’s ability to engage in meaningful collective bargaining. [11]

We also find without merit the Respondent’s arguments that the Board should not assert jurisdiction over the Respondent because the USMS and the Respondent are joint employers and because of the essential Federal role performed by the CSOs. As the Respondent acknowledges, it is well established that, in determining whether to refrain from asserting jurisdiction over a government contractor, the Board does not look to whether there is a joint employer relationship betweem the employer and the governmental entity. Res-Care, 280 NLRB at 673 fns. 12 & 14. Similarly, the Board long ago rejected the approach of refraining from asserting jurisdiction based on whether the employer’s operations were intimately related to a governmental function. See National Transportation Service, 240 NLRB 565 (1979). Indeed, from the perspective of whether a governmental function is being performed, the role performed by the Respondent’s CSOs is indistinguishable from the security services the employer performed for the U.S. Navy in Old Dominion Security, above, a case in which the Board asserted jurisdiction over the employer. And, more generally, the Board has repeatedly asserted jurisdiction over employers providing security services for the Federal Government. See Champlain Security Services, [1979-80 CCH NLRB ¶16,085] 243 NLRB 755 (1979); Atlas Guard Service, [1978-79 CCH NLRB ¶15,008] 237 NLRB 1067 (1978); Federal Services, 115 NLRB 1729 (1956); see also U.S. Corrections Corp., [1991-92 CCH NLRB ¶16,902] 304 NLRB 934, 937 at fn. 32 and accompanying text (1991).

Based on the foregoing, we find that the Respondent has failed to prove that it did not retain sufficient control over its CSO’s wages, benefits, and other terms and conditions of employment to engage in meaningful collective bargaining. Accordingly, we will assert jurisdiction over the Respondent. [12]

II. LAWFULNESS OF PARTICULAR RULES IN THE RESPONDENT’S CODE OF CONDUCT

In his decision, the judge found, inter alia, that rules 8, 23, and 29 of the Respondent’s code of conduct violated Section 8(a)(1) of the Act. We agree that rules 8 and 29 are violative, but we reverse as to rule 23. [13] Rule 23 required the Respondent’s CSOs to:

Not make statement(s) about fellow employees or officials with knowledge of the falseness of the statement or with ruthless disregard of the truth which would be a defamatory falsehood made with malice.

The judge did not find rule 23 to have played any part in the Respondent’s discipline of CSOs Brady and Clarke or its discharge of Brady, all of which the judge found unlawful. Rather, he found the Respondent’s maintenance of rule 23 to be unlawful per se. The cases on which the judge relied in finding the rule violative establish that “within the area of concerted activities, false and inaccurate employee statements are protected as long as they are not malicious,” Wabeek Country Club, [1991-92 CCH NLRB ¶16,489] 301 NLRB 694, 699 (1991), quoting American Cast Iron Pipe Co., [1978 CCH NLRB ¶19,092] 234 NLRB 1126, 1131 (1978), and that, therefore, work rules prohibiting merely false statements violate Section 8(a)(1). It is also well established, however, that “false statements that are knowingly false and therefore malicious are unprotected.” Radisson Muehlebach Hotel, [1984-85 CCH NLRB ¶17,072] 273 NLRB 1464 (1985).

The Respondent’s rule 23 did not prohibit statements that were merely false. Rather, the prohibition of that rule was much narrower. It prohibited only those statements made “with knowledge of the falseness of the statement or with ruthless disregard of the truth which would be a defamatory falsehood made with malice.” Because such statements are not protected, see Radisson Muehlebach Hotel, above, we dismiss the allegation that rule 23 violated Section 8(a)(1) of the Act. [14]

The judge found that the Respondent’s rule 29 violated Section 8(a)(1). Rule 29 provided that “[o]nce on duty, the carrying and reading of any type of literature is strictly forbidden.” We adopt the judge’s finding, but only on the basis that the rule was overbroad in that it reasonably could be understood to mean that CSOs were prohibited from carrying or reading literature concerning union or other protected concerted activity from the time that they came on duty or began their shift, including during breaks or meal periods. Cf. Norris/O’Bannon, [1992-93 CCH NLRB ¶17,362] 307 NLRB 1236, 1245 (1992) (ambiguity in work rule resolved against promulgator of rule); Southeastern Brush Co., [1992-93 CCH NLRB ¶17,184] 306 NLRB 884 fn. 1 (1992) (rule overbroad as “company time” could reasonably be construed as encompassing both working and nonworking time).

We find unpersuasive the Respondent’s contention that its rules cannot be found to violate the Act because the Respondent was required to adopt the USMS’s code of conduct, of which two of the rules at issue are a part. (The Respondent’s rule 29 is not contained in the USMS’s code of conduct.) The Respondent fails to cite any statute mandating that it adopt the USMS’s code of conduct. Rather, the Respondent’s asserted obligation to adopt the USMS’s code of conduct is based solely on its contract with the USMS into which the Respondent entered voluntarily.

As noted above, the Respondent’s contract with the USMS required the Respondent to maintain “standards of employee competency, conduct, appearance, and integrity” and stated that the USMS code of conduct, contained in an attachment to the contract, would “provide the Contractor guidance in developing a standard for employees.” (Emphasis added.) This provision did not require that the Respondent adopt the USMS’s code of conduct but only that the USMS code of conduct would give the Respondent “guidance” in developing employee standards. While the contract also reserved to the USMS the right to require the Respondent to remove any CSO for disregard of the code of conduct, this provision did not require the Respondent itself to adopt the USMS’s code of conduct.

Additionally, the Respondent notes that the USMS code of conduct contained the following introductory statement:

The integrity of the Marshals Service is dependent upon the conduct of its individual employees. A minimum Code of Conduct is set forth below to provide guidance in achieving a greater individual standard.

It is clear from its context and language that this statement was addressed to Marshals Service employees. Thus, its reference to a “minimum” code of conduct does not constitute a requirement that the Respondent adopt at a minimum the USMS’s code of conduct. Rather, it was an exhortation to Marshals Service employees to achieve even a “greater individual standard” than the “minimum” code of conduct set forth therein.

In sum, while the contract required the Respondent to maintain standards of employee conduct and required that the USMS code of conduct serve as guidance to the Respondent, it did not require the Respondent simply to adopt the USMS code of conduct, which is what the Respondent largely did. Indeed, there is no indication that the Respondent made any effort to tailor its code of conduct rules so as to take cognizance of its employees’ Section 7 rights. [15]