Startran, Inc. v. Occupational Safety And Health Review Commission

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 11, 2008
No. 06-61032 Charles R. Fulbruge III
Clerk
STARTRAN, INC.
Petitioner
v.
OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION;
ELAINE CHAO, SECRETARY, DEPARTMENT OF LABOR
Respondents
Petition for Review of an Order of the
Occupational Safety and Health Review Commission
(02-1140)
Before GARWOOD, GARZA, and BENAVIDES, Circuit Judges.
PER CURIAM:*
Petitioner StarTran, Inc. (StarTran) appeals the decision of the
Occupational Safety and Health Review Commission (the Commission) holding
that it does not qualify for the political subdivision exemption from the
Occupational Safety and Health Act (the OSH Act), 29 U.S.C. § 652(5) and, as
a result, must comply with a citation and penalty issued against it. Section
652(5) provides that “[t]he term ‘employer’ . . . does not include . . . any . . .
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
No. 06-61032
political subdivision of a State,” but the OSH Act does not define “political
subdivision.” For the reasons stated below, we affirm in part and in part remand
to the Commission for reconsideration in light of this opinion.
FACTS AND PROCEEDINGS BELOW
Capital Metropolitan Transit Authority (Capital Metro) is a regional area
public transit authority in Austin, Texas. It was established about 1985 under
Texas law (then Tex. Rev. Civ. Stats art. 1118x), operates under Chapter 451 of
the Texas Transportation Code and is a political subdivision of State of Texas.
See Tex. Transportation Code § 451.052(a)(1). In December 1991 Capital Metro
created StarTran, a Texas nonprofit corporation incorporated under the Texas
Non-Profit Corporation Act (Art. 1396-1.01-11.01, Tex. Rev. Civ. Stats.), in order
to provide transportation services in Austin while complying with both the
Federal Transportation Act and Texas law. The Federal Transportation Act
conditions federal funding for transit authorities like Capital Metro on the
continuation of existing collective bargaining with employees, while Texas law
prohibits public employees from engaging in collective bargaining. See 49 U.S.C.
§ 5333(b); Tex. Gov’t Code Ann. § 617.002 (Vernon 2004).1
1
49 U.S.C. § 5333(b) provides:
“(b) Employee protective arrangements.–(1) As a condition of
financial assistance under sections 5307-5312, 5316, 5318, 5323(a)(1), 5323(b),
5323(d), 5328, 5337, and 5338(b) of this title, the interests of employees affected
by the assistance shall be protected under arrangements the Secretary of Labor
concludes are fair and equitable. The agreement granting the assistance under
sections 5307-5312, 5316, 5318, 5323(a)(1), 5323(b), 5323(d), 5328, 5337, and
5338(b) shall specify the arrangements.
(2) Arrangements under this subsection shall include provisions that
may be necessary for –
(A) the preservation of rights, privileges, and benefits
(including continuation of pension rights and benefits) under
existing collective bargaining agreements or otherwise;
(B) the continuation of collective bargaining rights;
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No. 06-61032
StarTran has characteristics of both a public and a private entity. A few
weeks after it was created by Capital Metro, StarTran and Capital Metro, in
December 1991, entered into a written “Agreement for Provision of Employee
Support Services” in which Capital Metro designated and appointed StarTran
as its “agent to provide Employee Support Services.” The agreement has been
amended twice, in 1993 and again in 1997. StarTran’s duties under the
(C) the protection of individual employees against a
worsening of their positions related to employment;
(D) assurances of employment to employees of acquired
public transportation systems;
(E) assurances of priority of reemployment of employees
whose employment is ended or who are laid off; and
(F) paid training or retraining programs.”
Texas Government Code § 617.002 provides:
Ҥ 617.002. Collective Bargaining by Public Employees Prohibited
(a) An official of the state or of a political subdivision of the state may not
enter into a collective bargaining contract with a labor organization regarding
wages, hours, or conditions of employment of public employees.
(b) A contract entered into in violation of Subsection (a) is void.
(c) an official of the state or of a political subdivision of the state may not
recognize a labor organization as the bargaining agent for a group of public
employees.”
Shortly after StarTran’s formation, it contracted with Capital Metro to provide
employee services to Capital Metro, services which the record indicates were previously
provided to Capital Metro by a different private employee service company (which also served
businesses other than Capital Metro) whose employees were unionized and subject to a
collective bargaining agreement.
We note that 29 C.F.R. § 215.3(a)(2) provides in part:
“In instances where states or political subdivisions are subject to legal
restrictions on bargaining with employee organizations, the Department of
Labor will utilize special procedures to satisfy the Federal statute in a manner
which does not contravene state or local law.”
3
No. 06-61032
agreement include employing workers for the area mass transit system and
negotiating collective bargaining agreements with the employees’ union.
StarTran has the exclusive right to enter collective bargaining agreements, but
the agreements must be approved by the Capital Metro board. Capital Metro
has approved every bargaining agreement that StarTran has presented to it.
The Agreement for the Provision of Employee Support Services, states that
StarTran will “retain absolute and real day-to-day control over all matters
relating to the terms and conditions of employment, supervision and control of
its employees.” Thus, StarTran has authority to hire, fire, promote, and
discipline its employees.
Capital Metro developed StarTran’s safety program, but StarTran takes
a great deal of responsibility in enforcing it. The 1993 amendment to the
Agreement reflects that StarTran is responsible for the “safety and other
training and claims related services” for its employees. The 1997 amendment
added, among other things, language stating that:
“. . . Capital metro shall have no right to supervise or control the
duties and activities of StarTran so as to cause a violation of the
provisions of Chapter 617 of the Texas Government Code or 49
U.S.C. Section 5333. It is the intent of the parties that, for purposes
of Collective Bargaining, StarTran is an independent corporate
entity which shall in no way be deemed to be an affiliate, partner,
subsidiary, joint venturer, or otherwise under the control of Capital
Metro.”
Apart from its collective bargaining agreement with the union
representing its employees, StarTran does not serve or contract with any entity
other than Capital Metro, and Capital Metro serves as its sole source of
financing. Capital Metro pays the salaries of StarTran’s board and processes the
StarTran paychecks of StarTran employees. The buses and vans operated by
StarTran employees are owned by Capital Metro, which fixes their routes and
schedules. Bus fares paid are collected by StarTran employees but are all fixed
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No. 06-61032
by and turned over daily to Capital Metro. Capital Metro also provides
StarTran, among other things, with all its funding and office supplies, and the
two entities share office space in the same building. StarTran’s only asset is its
employees. StarTran employees do not receive the same benefits as public
employees like the Capital Metro employees.
StarTran has been informally treated as a private entity, not a political
subdivision, under the National Labor Relations Act (the NLRA), and StarTran
has never challenged or questioned that treatment. The NLRA governs the right
of private employees to bargain collectively. See 29 U.S.C. § 151. Like the OSH
Act, the NLRA covers “employers,” but provides that “the term ‘employer’ shall
not include . . . any State or political subdivision thereof . . .” 29 U.S.C. § 152(2).
Also like the OSH Act, the NLRA contains no definition of “political subdivision.”
In NLRB v. Natural Gas Util. Dist. of Hawkins County, Tenn., 91 S.Ct. 1746(1971), the Supreme Court reversed the NLRB’s determination that the Hawkins
County, Tennessee, utility District, was not exempt under section 152(2) as a
political subdivision of Tennessee. The Court noted that the question was one
of federal law, id. at 1748-49, and assumed, without deciding, the correctness
of the test generally applied by the NLRB in deciding that question, namely
whether such entities are ones “‘either (1) created directly by the state, so as to
constitute departments or administrative arms of the government, or (2)
administered by individuals who are responsible to public officials or to the
general electorate.” Id. at 1749. The Court held that as a matter of law the
district met the second prong of the NLRB’s test since it was administered by
individuals who were responsible to public officials.2 See also Brock v. Chi.
2
However, the Court focused primarily on the facts that the district had broad
governmental powers, such as “the power of eminent domain . . . even against other
governmental entities,” it was declared by the state statute under which it was created to be
“a ‘municipality’ or public corporation,” its “records were ‘public records’”, the governing body
had “the power to subpoena witnesses and administer oaths in investigating” its affairs, and
5
No. 06-61032
Zoological Soc’y (“Chicago Zoo”), 820 F.2d 909, 910 (7th Cir. 1987) (indicating
that the test for determining whether an entity is a political subdivision under
the OSH Act is “identical to the formula the National Labor Relations Board has
long used to determine whether an entity is a political subdivision exempt from
the Board’s jurisdiction under [the NLRA]”). Although StarTran has never
disputed NLRA coverage, there has been no formal determination by the
National Labor Relations Board (the NLRB) as to whether StarTran qualifies as
a political subdivision for NLRA purposes.
Finally, the StarTran board is appointed and removable by the Capital
Metro CEO. Five of the seven Capital Metro board members are elected officials,
while two are hired by the board. The Capital Metro board members select and
may remove the CEO of Capital Metro. StarTran’s bylaws provide that people
who hold certain specified executive positions at StarTran will be on the board
of directors of that entity. The CEO of Capital Metro appoints the five members
of the StarTran board by controlling who holds these specified executive
positions. All members of the board of directors of StarTran are at-will
employees of StarTran. They report to the CEO of Capital Metro, who can shift
them to different positions at StarTran where they will no longer be on the
StarTran board. Thus, the CEO of Capital Metro, who is subject to the control
of elected officials, has the power to appoint and remove StarTran board
members.
On May 9, 2002, OSHA representatives conducted an inspection of
StarTran at StarTran’s facility in Austin, Texas. After the inspection, OSHA
requested copies of injury and illness data from StarTran pursuant to 29 C.F.R.
§ 1904.40, and issued StarTran a Citation and Notification of Penalty on July 1,
the members of its governing body were “subject to removal under Tennessee’s General Ouster
Law, which provides procedures for removing public officials from office for misfeasance or
nonfeasance.” See id. at 1750-51. Nothing of the kind is the case with respect to StarTran or
its board of directors.
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No. 06-61032
2002. On July 9, 2002, StarTran indicated that it would not provide these
documents to OSHA because it did not consider itself to be covered by the OSH
Act. It argued that it does not qualify as an “employer” as that term is defined
in the OSH Act because it is exempt from that definition as a “political
subdivision” of Texas. 29 U.S.C. § 652(5).
The Secretary of Labor (the Secretary) filed a complaint against StarTran
on October 8, 2002, to which StarTran responded on October 29, 2002 with a
Motion to Dismiss. OSHA cited StarTran for a violation of 29 C.F.R. § 1904.40based on StarTran’s failure to provide the requested records within four business
hours, and proposed a penalty of $500. StarTran contested this citation, but the
administrative law judge (ALJ), affirmed the citation and penalty on December
11, 2002. He found that the OSH Act governs StarTran because StarTran is not
a political subdivision of the State of Texas and is an employer under section
652(5). StarTran then sought interlocutory review of the ALJ’s order, which the
Commission denied on January 22, 2003. The ALJ conducted an evidentiary
hearing in Austin on April 24, 2003 regarding the case. The ALJ then entered
an undated Decision and Order holding that StarTran was subject to the OSH
Act, and the jurisdiction of OSHA. The Commission upheld the ALJ ruling in
a two-to-one decision issued September 27, 2006. StarTran timely filed a
Petition for Review in this court.
DISCUSSION
We limit our discussion to the issues argued on appeal: whether the
Commission erred in holding that StarTran should bear the burden of proving
its status as a political subdivision under the OSH Act, and whether the
Commission erred in holding that StarTran does not qualify as a political
subdivision. For the reasons stated below, we affirm the Commission’s decision
in part on the burden of proof issue, and remand the case to the Commission for
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No. 06-61032
reconsideration in light of this opinion on the issue of whether StarTran is a
political subdivision of Texas for OSH Act purposes.
A. The Political Subdivision Exemption to the OSH Act
The OSH Act is a federal statute created to assure safe working conditions
for employees in the United States. 29 U.S.C. § 651(b). It imposes various
duties on employers to ensure that they provide a safe work place. 29 U.S.C. §
654(a). An “employer” under the OSH Act is defined as “a person engaged in a
business affecting commerce who has employees, but does not include the United
States or any State or political subdivision of a State.” 29 U.S.C. § 652(5). Thus,
a “political subdivision” of a state is not covered by the OSH Act. This exemption
constitutes “an accommodation between the [OSH] Act’s general purpose of
ensuring a safe workplace and the states’ interest in preserving autonomy in
their role as employers.” Chicago Zoo, 820 F.2d at 913.
The term “political subdivision” is not defined in the OSH Act. However,
29 C.F.R. § 1975.5(b), a regulation promulgated by the Secretary of Labor,
provides two “[t]ests” for determining whether an entity qualifies as a political
subdivision. Under the tests, an entity is a “State or political subdivision
thereof” if it “has been (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 controlled by public officials and responsible to such officials
or to the general electorate.” The regulation goes on to provide “Factors for
meeting the tests,” stating:
“Various factors will be taken into consideration in determining
whether an entity meets the test discussed above. Some examples
of these factors are: Are the individuals who administer the entity
appointed by a public official or elected by the general electorate?
What are the terms and conditions of the appointment? Who may
dismiss such individuals and under what procedures? What is the
financial source of the salary of these individuals? Does the entity
earn a profit? Are such profits treated as revenue? How are the
entity’s functions financed? What are the powers of the entity and
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No. 06-61032
are they usually characteristic of a government rather than a
private instrumentality like the power of eminent domain? How is
the entity regarded under State and local law as well as under other
Federal laws? Is the entity exempted from State and local tax laws?
Are the entity’s bonds, if any, tax-exempt? As to the entity’s
employees, are they regarded like employees of other State and
political subdivisions? What is the financial source of the
employee-payroll? How do employee fringe benefits, rights,
obligations, and restrictions of the entity’s employees compare to
those of the employees of other State and local departments and
agencies?” 29 C.F.R. § 1975.5(c).
The regulation further provides:
“Weight of the factors. The above list of factors is not exhaustive
and no factor, isolated from the particular facts of a case, is assigned
any particular weight for the purpose of a determination by the
Secretary of Labor as to whether a given entity is a “State or
political subdivision of a State” and, as such, not subject to the Act
as an “employer.” Each case must be viewed on its merits; and
whether a single factor will be decisive, or whether the factors must
be viewed in their relationship to each other as part of a sum total,
also depends on the merits of each case.” 29 C.F.R. § 1975.5(d).
B. Burden of Proof
The Commission held that StarTran bore the burden of proving that it
falls under the political subdivision exception to the OSH Act’s definition of
“employer.” StarTran contends that in proceedings before the ALJ, the parties
litigated the issue of whether StarTran was subject to OSHA’s authority under
the assumption that it was a jurisdictional issue on which the Secretary bore the
burden of proof. Thus, it argues that the Commission should not have addressed
this issue because the Secretary did not question the assignment of the burden
of in front of the ALJ. StarTran also argues that the Commission erred in
concluding that the Secretary did not bear the burden of proof. This court will
review the Commission’s legal conclusions regarding the burden of proof to
determine if they are “arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law.” 5 U.S.C. § 706(2)(A); See also Trinity Marine
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No. 06-61032
Nashville, Inc. v. Occupational Safety and Health Review Comm’n, 275 F.3d 423,
427 (5th Cir. 2001).
StarTran first argues that the Commission should not have addressed the
Secretary’s argument that StarTran bore the burden of proof because the
Secretary first raised this argument in her Responsive Brief to the Commission,
and did not raise it before the ALJ. It contends that because the Secretary
indicated that the case involved a jurisdictional issue, she stipulated that she
bore the burden of proof because the party asserting subject matter jurisdiction
has the burden of proving that it exists. See Peoples Nat’l Bank v. Office of
Comptroller of Currency of the United States, 362 F.3d 333, 336 (5th Cir. 2004).
StarTran also notes that the Secretary never challenged StarTran’s assertion
during the hearing in front of the ALJ that the Secretary bore the burden of
proof. Because a litigant should not be able to raise new issues on appeal,
StarTran suggests that the Secretary waived her argument that StarTran bears
the burden of proof. See 29 C.F.R. § 2200.92(c) (“The Commission will ordinarily
not review issues that the [ALJ] did not have the opportunity to pass upon.”).
The Secretary argues that the Commission had discretion to address this issue
even if neither party raised it in front of the ALJ. She also suggests that the
failure to raise this issue did not harm StarTran’s ability to develop its case.
Finally, she contends that she had a good reason for failing to raise the issue
earlier—she was not aware that it was disputed until she read StarTran’s
opening brief for the proceedings in front of the Commission.
Although the Commission generally does not review issues that the ALJ
did not address, it has discretion to do so. 29 C.F.R. § 2200.92(c). In
determining whether to address an issue not raised before the ALJ, the
Commission may consider factors such as whether there was good cause for
failing to raise the issue earlier, the degree to which the proceedings will be
disrupted by raising the issue, whether addressing the issue will injure the
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No. 06-61032
adverse party’s ability to raise a claim or defense, and whether considering the
new issue would avoid injustice. Id.In light of 29 C.F.R. § 2200.92(c), the Commission did not abuse its
discretion or act arbitrarily or capriciously by addressing the burden of proof
issue. 5 U.S.C. § 706(2)(A). Although the Commission would not normally
address such an issue, it had discretion to do so. The Commission did not
explain why it chose to address the burden of proof issue, but it could have found
that doing so was proper for multiple reasons. First, the Secretary explained
that she did not raise the argument earlier because she did not know that the
issue was disputed until she read StarTran’s opening brief for the proceedings
in front of the Commission. Furthermore, StarTran does not demonstrate that
it was injured or prejudiced by being required to address the issue in its briefs
before the Commission. Finally, StarTran does not argue that it would have
presented additional evidence had it known that it bore the burden of proof.3
Thus, addressing the issue did not harm StarTran’s ability to develop its case.
Therefore, the Commission did not err in addressing the burden of proof issue
raised by the Secretary.
Next, StarTran argues that the district court erroneously concluded that
StarTran bore the burden of proving its status as a political subdivision.
StarTran contends that whether it is an employer under the OSH Act is a
jurisdictional issue, so the Secretary should have had the burden of proof. See
Peoples Nat’l Bank, 362 F.3d at 336 (“The party claiming federal subject matter
jurisdiction has the burden of proving it exists.”). The Secretary argues that this
3
When questioned at oral argument, StarTran indicated that if had it known that it
bore the burden of proof, it would have submitted its bylaws as evidence and had the Capital
Metro CEO testify regarding who controls StarTran’s safety program. However, StarTran did
not assert these arguments in either of its briefs. Moreover, the Capital Metro CEO did give
some testimony reflecting Capital Metro’s relation to the safety program and the bylaws were
mentioned several times in the testimony.
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No. 06-61032
is not a jurisdictional issue, but an issue of exemption from coverage, so
StarTran properly bore the burden of proof. The Commission agreed with the
Secretary, and held that whether StarTran is an employer under the OSH Act
is an issue of coverage, not of jurisdiction. Thus, it concluded that the burden
of proof rests with StarTran to show that it falls within the political subdivision
exception to the definition of employer under the OSH Act.
In Arbaugh v. Y&H Corp., 126 S. Ct. 1235, 1238 (2006), the Supreme
Court addressed whether the requirement that an “employer” under Title VII
have at least fifteen employees is a jurisdictional issue or a delineation of a
substantive element of a Title VII claim for relief. The numerical requirement
for employees is included in the definition of “employer” under Title VII at 42
U.S.C. § 2000e(b), which states that “[t]he term ‘employer’ means a person
engaged in an industry affecting commerce who has fifteen or more employees.”
The Arbaugh Court indicated that “when Congress does not rank a statutory
limitation on coverage as jurisdictional, courts should treat the restriction as
non-jurisdictional in character.” 126 S. Ct. at 1245. As Title VII does not
explicitly rank the numerical limitation in the definition of employer as a
jurisdictional issue, the Court concluded that it was an element of the plaintiff’s
claim for relief. Id.Like the Title VII definition of employer, the OSH Act’s definition of
employer does not rank the political subdivision limitation as jurisdictional.
Thus, the Commission properly concluded that whether StarTran is a political
subdivision is not a jurisdictional issue. See id. However, the Arbaugh court
indicated that the numerical limitation was an element of the plaintiff’s claim
for relief. Id. This implies that the Secretary must prove, as an element of her
claim in this case, that StarTran is not a political subdivision. Id. However, the
Supreme Court suggested that this is not the case in NLRB v. Kentucky River
Cmty. Care, Inc., 121 S. Ct. 1861, 1866 (2001).
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No. 06-61032
In Kentucky River, the Supreme Court approved the NLRB’s rule that the
party asserting the “supervisory exception” to the NLRA has the burden of
proving that it applies. Id. at 1866. The definition of “employee” in the NLRA
provides that “[t]he term ‘employee’ . . . shall not include . . . any individual
employed as a supervisor.” 29 U.S.C. § 152(3). The Court noted that supervisors
were “expressly excepted” from the definition of employee. Kentucky River, 121
S. Ct. at 1866. It indicated that as a rule of statutory construction, “the burden
of proving justification or exemption under a special exception to the prohibitions
of a statute generally rests on one who claims its benefits.” Id. (quoting FTC v.
Morton Salt Co., 68 S. Ct. 822, 827 (1948)). Thus, the Court deferred to the
NLRB’s rule for allocating the burden of proof because it was reasonable and
consistent with the NLRA. Id.Morever, this court has held that the party asserting the private
membership club exemption under the Title VII definition of “employer,” 42
U.S.C. 2000e(b)(2), has the burden of proving that it does not qualify as an
employer. Quijano v. Univ. Fed. Credit Union, 617 F.2d 129, 132 (5th Cir. 1980).
The definition of “employer” under Title VII states that “[t]he term ‘employer’ .
. . does not include . . . a bona fide private membership club.” 42 U.S.C. §
2000e(b).
Kentucky River and Quijano support the Commission’s holding that
StarTran should bear the burden of proving that it qualifies for the political
subdivision exception. The definitions at issue in Kentucky River, Quijano, and
this case all contain language limiting a general definition of an otherwise
covered employer or employee (the term “employee” under the NLRA “shall not
include” supervisors, the term “employer” under Title VII “does not include”
private clubs, the term “employer” under the OSH Act “does not include” political
subdivisions). 29 U.S.C. § 152(3); 42 U.S.C. § 2000e(b); 29 U.S.C. § 652(5).
Under Kentucky River and Quijano, this limiting language creates an
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“exemption under a special exception to the prohibitions of a statute,” which
indicates that the party asserting the exemption has the burden of proving it
applies. Kentucky River, 121 S. Ct. at 1866; Quijano, 617 F.2d at 132. On the
other hand, Arbaugh suggests that when a limitation is contained in the initial
general statement of the affirmative statutory definition (“[E]mployer means a
person . . . who has fifteen or more employees”), rather than as a subsequently
stated exception to it, it should be treated as an element of the plaintiff’s claim
and the plaintiff should bear the burden of proving it. 42 U.S.C. § 2000e(b);
Arbaugh, 126 S. Ct. at 1245. Because the definition of employer in the OSH Act
contains limiting language comparable to that in the definitions of employee and
employer at issue in Kentucky River and Quijano, it should be treated as an
exemption for which StarTran bears the burden of proof instead of as an element
of the Secretary’s claim. Thus, the Commission properly concluded that
StarTran should bear the burden of proving that it is exempt from the OSH Act
as a political subdivision.
C. Whether StarTran is a Political Subdivision of Texas
StarTran argues that the Commission erred in concluding that StarTran
does not qualify as a political subdivision of Texas. The Secretary agrees with
the Commission’s holding, but interprets 29 C.F.R. § 1975.5 in what appears to
be a slightly different manner than the Commission. This court reviews the
Commission’s factual findings to determine whether they are supported by
substantial evidence in the record taken as a whole. 29 U.S.C. § 660(a). It
reviews the Commission’s legal conclusions to determine if they are “arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with law.” 5
U.S.C. §706(2)(A); Trinity Marine Nashville, 275 F.3d at 427.
In a two-to-one decision, the Commission held that StarTran does not
qualify as a political subdivision under the OSH Act and, therefore, is subject to
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OSHA’s jurisdiction.4 In its decision, the Commission indicated that whether
StarTran is a political subdivision depends on whether it can satisfy the second
test set forth in 29 C.F.R. 1975.5(b) by showing that it is “administered by
individuals who are controlled by public officials and responsible to such officials
or to the general electorate.” It found “three factors to be particularly
significant: the lack of public control over StarTran; StarTran’s responsibilities
for safety and health; and the fact that StarTran seeks to be viewed as an
independent entity in other contexts.”5 It did not address the other factors listed
in 29 C.F.R. § 1975.5(c).6 The Commission concluded that although it is a “close
4
The decision was written by Chairman Railman, with Commissioners Rogers and
Thompson concurring in part and dissenting in part. Commissioner Rogers dissented in part
from the Chairman’s decision on the grounds that the case was not properly before the
Commission. An ALJ’s decision becomes a final order within thirty days unless a Commission
member directs it for review within that period. 29 C.F.R. §661(j). Documents circulated to
Commission members indicated that the ALJ’s decision in this case was docketed on July 30,
2003 and would become final on August 29, 2003, when in reality, the decision was docketed
one day earlier, and should have become final on August 28, 2003. Thus, a Commissioner
directed the case for review on August 29, 2003, thirty-one days after the ALJ’s decision was
docketed. Commissioner Rogers dissented on the basis that the ALJ’s decision was final on
August 28, 2003, and the case was not properly brought before the Commission. However, he
agreed with the Chairman’s conclusion regarding StarTran’s status as an employer under the
OSH Act. Commissioner Thompson concurred with Chairman Railman’s conclusion that the
case was properly before the Commission, but dissented on the grounds that he would hold
that StarTran qualifies as a political subdivision under the OSH Act. As the issue of whether
this case was properly before the Commission was not raised by either party, we need not
address it at this time.
5
In setting forth its “public control” factor, the Commission cites Chicago Zoo, 820 F.2d
at 913, for the proposition that “the record lacks sufficient evidence to show that StarTran met
the political subdivision exemption because it was ‘administered by individuals who are
controlled by public officials and responsible to such officials or to the general public.’” This
“factor” is actually the test for determining whether StarTran is a political subdivision. It is
not one of the factors listed in 29 C.F.R. § 1975.5(c) for determining whether an entity satisfies
the political subdivision test. However, § 1975(d) indicates that the § 1975.5(c) list of factors
is not exhaustive.
6
The Commission was not necessarily required to look to other factors as the regulation
states that “[e]ach case must be viewed on its merits; and whether a single factor will be
decisive, or whether the factors must be viewed in their relationship to each other as part of
a sum total, also depends on the merits of each case.” Id. at § 1975.5(d).
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No. 06-61032
case,” StarTran did not carry its burden of proving that it is exempt from
coverage under the OSH Act.
The Commission determined that StarTran is not subject to public control
because it is not responsible to the general electorate, and evidence does not
indicate that the individuals who administer the entity are controlled by Capital
Metro.7 It concluded that StarTran is controlled by its own board and the terms
of its collective bargaining agreement with the union. In reaching this
conclusion it emphasized that StarTran has “day-to-day control over all matters
relating to the terms and conditions of employment.”
Under this section of its opinion, the Commission also indicated that had
StarTran included its bylaws, it may have been able to establish that it qualifies
as a political subdivision because it is controlled by public officials.8 The
7
StarTran does not argue that it is simply the alter-ego of Capital Metro, or that its
separate corporate existence should be disregarded under Texas law, so that both entities
should be treated as political subdivisions. Although such an argument might have force under
Texas law, if successful, it might render StarTran a public entity for all purposes under Texas
law, which would prevent StarTran from bargaining collectively with its employees, which
would prevent Capital Metro from receiving federal funding. Furthermore, the fact that
Capital Metro has been involved with the creation and operation of StarTran does not
necessarily mean that the two entities should be treated as one. See United States v. Bestfoods,
118 S. Ct. 1876, 1884 (1998) (stating, in a case involving a wholly owned subsidiary, that “[i]t
is a general principle of corporate law deeply ‘ingrained in our economic and legal systems’ that
a parent corporation (so-called because of control through ownership of another corporation’s
stock) is not liable for the acts of its subsidiaries.”). Capital Metro’s close involvement with
StarTran does not necessarily render StarTran a political subdivision like Capital Metro
because a subsidiary is not necessarily treated the same as its parent.
8
The Commission opinion states: “Perhaps, had StarTran introduced its by-laws or
other evidence regarding its corporate structure that could indicate it was subject to external
control, StarTran may have been able to establish that it was ‘administered by individuals who
are controlled by public officials and responsible to such officials or to the general public.’ . . .
Indeed, in NLRB cases involving the political subdivision exemption under the NLRB, courts
in determining the exemption have found decisive the fact that an entity’s by-laws subject it
to outside control. See NLRB v. Princeton Mem’l Hosp., 939 F.2d 174, 175 (4th Cir. 1991)
(hospital exempt where bylaws of hospital provided that the affairs of the corporation were
managed by its Board of Directors, whose members were subject to ratification and removal
by the Princeton Municipal Council). . . . StarTran’s failure to provide any such evidence here
further weakens its claims of control by Capital Metro.”
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No. 06-61032
Commission noted that in cases involving the political subdivision exception to
the NLRA, courts have found important the fact that an entity’s bylaws subject
its board of directors to “outside control.” In support of this proposition, it cited
NLRB v. Princeton Mem’l Hosp., 939 F.2d 174, 175 (4th Cir. 1991), a case in
which the Fourth Circuit held that the Princeton Health Care Center was
exempt from NLRA coverage as a political subdivision in part because it was
operated by the Princeton Memorial Hospital, whose board members were
subject to ratification and removal by a public entity.9 It also cited Jefferson
County Cmty. Ctr. for Developmental Disabilities, Inc. v. NLRB, 732 F.2d 122,
125-26 (10th Cir. 1984), overruled on other grounds by Aramark Corp. v. NLRB,
179 F.3d 872, 882 (10th Cir. 1999), a case in which the Tenth Circuit found that
an entity was not a political subdivision in part because a majority of its board
was not appointed or removable by public officials or the electorate. The
Commission concluded that “StarTran’s failure to provide any such evidence
here further weakens its claims of control by Capital Metro.”
The Commission also found that it was “of considerable significance” that
StarTran was responsible for the daily maintenance of the safety and health of
its employees because ensuring safety and health of employees is the purpose of
the OSH Act. Finally, the Commission discussed StarTran’s treatment under
federal and state laws. It noted that StarTran seeks to be an independent entity
under Texas law, but does not dispute that it is subject to the NLRA, and does
not assert the political subdivision exception to that act. Upon review of these
9
The Princeton Memorial Hospital court described the relationship between the Center
and other governmental bodies as follows: “the Center was established and operated under the
authority of Princeton Memorial Hospital, whose five board members are selected from,
approved by, and subject to removal by the board of Princeton Community Hospital, whose
directors in turn are subject to ratification and removal by the Princeton Municipal Council
and whose membership must include the Mayor of the City of Princeton.” 939 F.2d at 178 n.5.
17
No. 06-61032
three factors, the Commission concluded that StarTran does not qualify for the
political subdivision exception to the OSH Act.
Only five cases, including two cases from federal courts of appeals, have
cited 29 C.F.R. § 1975.5. See, e.g., Tricil Res., Inc. v. Brock, 842 F.2d 141, 142-43
(6th Cir. 1988); Chicago Zoo, 820 F.2d at 910. In Chicago Zoo, the Seventh
Circuit reversed the Commission’s holding that the Chicago Zoological Society
(the Zoo Society) was a political subdivision of the state. 820 F.2d at 910. The
court found that the Zoo Society clearly failed the first branch of the test set
forth in 29 C.F.R. § 1975.5(b), and addressed whether it was administered by
people who are controlled by public officials. Id. at 910-11. Despite the Zoo
Society’s financial dependence on a governmental body, the court held that the
Zoo Society was not a political subdivision because the government did not
directly control the zoo operations and management, the corporate structure of
the Zoo Society did not include public officials, and the nature of the employment
relationships was “indisputably private.” Id. at 912. It emphasized that when
the Commission determined that the Zoo Society was a political subdivision, it
erred by giving too little weight to the Zoo Society’s structure and the non-public
nature of the zoo employee’s jobs. Id. at 913. It stated that “[a]bsent direct
evidence of control” it would not infer that because the Zoo Society relied on
public funding, it was not a private entity. Id.In Tricil, the Sixth Circuit upheld the decision of the Commission that
Tricil Resources, Inc. (Tricil) was not a political subdivision. 842 F.2d at 141.
Like the Chicago Zoo court, the Sixth Circuit analyzed whether Tricil satisfied
the second prong of the political subdivision test. Id. at 143. It held that,
although many factors supported the contention that Tricil should be exempt
from the OSH Act, including the fact that the city exercised “substantial fiscal
control” over its operations, Tricil did not qualify as a political subdivision. Id.
at 143. In support of its proposition, the Court noted that Tricil had independent
18
No. 06-61032
authority over its workers and the terms of their employment, that it dealt with
their labor unions, that its workers had different employee benefit plans than
the city workers, and “most significantly,” that Tricil was responsible for its
workers’ safety. Id. at 143-44.
The Commission’s reasoning resembles that outlined in the two cases from
our sister circuits discussing the political subdivision exemption from the OSH
Act. As was ultimately determined in Chicago Zoo and Tricil, in this case, the
Commission found that StarTran was not a political subdivision despite the fact
that it receives all its funding from Capital Metro. The Commission found other
factors that were discussed in those cases more important, such as the fact that
StarTran’s operations and management are not fully controlled by Capital
Metro. See Chicago Zoo, 820 F.2d at 912. Furthermore, Tricil supports the
Commission’s claim that StarTran’s responsibility for its workers’ safety and
health constitutes an important factor, as the Tricil court held that this factor
is especially significant because the OSH Act is primarily concerned with the
safety and health of workers. 842 F.2d at 144.
However, this case contains at least two important differences from
Chicago Zoo and Tricil. In Chicago Zoo, the governmental body that funded the
Zoo Society did not have the power to appoint and remove Zoo Society board
members or officials, while in this case, the Capital Metro CEO has the power
to appoint and remove individuals from the StarTran board. 820 F.2d at 912.
Furthermore, unlike StarTran, the Society was originally formed with the help
of state officials as a private nonprofit corporation, and only later did the Forest
Preserve of Cook County become involved in the Beckfield Zoo operations. Id.
at 910-11. Likewise, the Zoo Society’s functions were never limited to operating
the Beckfield Zoo. Similarly, Tricil was an existing private for-profit coproration
both before and after it contracted with the City of Akron to operate Akron’s
facility in question, and apparently thereafter continued to operate other
19
No. 06-61032
facilities for other clients. Tricil, 842 F.2d at 141. StarTran was created by
Capital Metro, a government entity, and has never either existed independently
of Capital Metro or served other clients.
The Commission’s opinion is problematic in that it does not acknowledge
the evidence that the StarTran board may be removed by the Capital Metro
CEO.10 The Commission asserted that StarTran did not produce its bylaws or
any other evidence regarding its corporate structure that could indicate that it
is subject to external control. See note 8 supra. This statement is incorrect
because the relevant corporate structure of StarTran was adequately
demonstrated in the testimony provided in the hearing before the ALJ on April
24, 2003. The undisputed and unobjected to evidence (including references to
the StarTran by-laws) presented at the hearing clearly demonstrated that
StarTran’s five person board is controlled by and responsible to Capital Metro’s
CEO, who has the power to appoint and remove all StarTran board members
(who are all at will employees, removable from their positions, as well as from
their status as employees, by the Capital Metro CEO) from their positions. The
ALJ in essence acknowledged this in his Decision and Order of July 23, 2003.
It is also clear that the Capital Metro CEO is subject to the control of public
officials as he is selected by the Capital Metro board, five out of seven of whom
are elected officials. The Secretary has never disputed any of this.11 Thus, the
10
However, the Commission does acknowledge that StarTran’s board members are
appointed by the Capital Metro CEO.
11
See, e.g., the “Secretary’s Responsive Brief” before the Commission:
“Organizational Structure of capital Metro and StarTran
Capital Metro’s board of directors consists of five publicly elected officials
and two private individuals hired by the board. The board employs Chief
Executive Officer (CEO) Fred Gilliam. (record citations).
StarTran’s board of directors is composed of five persons who are
members of the board by virtue of the fact that they occupy certain specified
positions at StarTran, including but not limited to, Ken McCulloch, the
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No. 06-61032
Commission’s factual finding that StarTran did not demonstrate that its board
of directors is subject to the external control of public officials is not supported
by substantial evidence in the record. See 29 U.S.C. § 660(a).
The fact that the Commission’s opinion cites Princeton Memorial Hospital
and Jefferson County suggests that it may have reached a different conclusion
had it properly analyzed the evidence regarding Capital Metro’s control of
StarTran’s board. These are two cases involving the political subdivision
exception to the NLRA in which our sister circuits discussed the importance of
whether the board of an entity is subject to removal by public officials. See
Princeton Mem’l Hosp., 939 F.2d at 178; Jefferson County, 732 F.2d at 125-26.
The cases suggest that if a public official (or leaders of a concededly public
entity) may remove members of the board of the entity in question, that entity
is more likely to qualify as a political subdivision. Id. By citing these opinions,
the Commission seems to have suggested that if it had acknowledged evidence
regarding control of StarTran’s board, it may have reached a different conclusion
about StarTran’s status as a political subdivision.
In light of the Commission’s factual error regarding Capital Metro’s
control of StarTran’s board, we must remand this case to the Commission for
president and labor relations manager, and Dan Peabody, the director of
transportation (record citations). Persons are appointed to these positions as
employees of StarTran and may be removed by the CEO of Capital Metro.”
Ibid.” (Id. at 4).
The Secretary’s brief in this court likewise states: “StarTran’s board of directors is
composed of five members, all appointed and removable by the chief executive officer of Capital
Metro, five of whose seven board members are publicly elected” (Id. at 18).
The Secretary has never taken the position, either before the ALJ, before the
Commission or before this court, that the evidence of Capital Metro’s control over the StarTran
board and its members, both in their capacity as members of its board in their capacity as
StarTran executives, was in any way undermined or rendered incomplete, unpersuasive or
incompetent by the absence of a copy of the StarTran by-laws.
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No. 06-61032
reconsideration of whether StarTran should be treated as a political subdivision
of Texas under the OSH Act. As StarTran has characteristics of both a political
subdivision and a private entity, this issue presents a close call. The evidence
is simply not enough to establish conclusively that StarTran either is or is not
a political subdivision for OSH Act purposes. Even the evidence that the
StarTran board is removable by Capital Metro does not per se conclusively make
StarTran a political subdivision. See note 7, supra. Thus, a remand to the
Commission– rather than this court either affirming the Commission or
rendering judgment for StarTran – is appropriate to allow the Commission to
reevaluate the evidence and reach a conclusion not inconsistent with this
opinion. See S&H Riggers & Erectors, Inc. v. Occupational Safety and Health
Review Comm’n, 659 F.2d 1273, 1283 (5th Cir. 1981) (indicating that fact finding
is the role of the Commission and not the role of this court). On remand, the
Commission must reconsider all of the evidence, including StarTran’s corporate
structure as reflected by the undisputed and unchallenged evidence.
Furthermore, on remand, the Commission must defer to the Secretary’s
interpretation and application of 29 C.F.R. § 1975.5 to this case, to the extent
that such interpretation and application is reasonable. Martin v. Occupational
Safety and Health Review Comm’n, 111 S. Ct. 1171, 1176 (1991). The OSH Act
is unique in that it creates two administrative actors, the Secretary and the
Commission. Id. at 1174. The Secretary is responsible for setting and enforcing
health and safety standards in the workplace through the exercise of her rule
making power, while the Commission is responsible for the adjudicatory
functions under the OSH Act. Id. In OSH Act cases in which the Secretary and
the Commission have reasonable but conflicting interpretations of an ambiguous
regulation promulgated by the Secretary, this court should defer to the
Secretary’s interpretation. Id. at 1176; see also Chicago Zoo, 820 F.2d at 912(“[T]he Commission’s determination is owed no special deference; it is the
22
No. 06-61032
Secretary, not the Commission, who exercises policymaking and prosecutorial
authority under the [OSH] Act.”).12 The Court explained that “the power to
render authoritative interpretations of OSH Act regulations is a ‘necessary
adjunct’ of the Secretary’s powers to promulgate and to enforce national health
and safety standards.” Martin, 111 S. Ct. at 1176.
The Commission’s and the Secretary’s interpretations of 29 C.F.R. § 1975.5seem to differ in one important respect. In her brief, the Secretary emphasizes
similar factors as the Commission when interpreting 29 C.F.R. § 1975.5 and
applying it to this case, such as the fact that StarTran is responsible the safety
and health of its employees and the fact that StarTran seeks to be treated as an
independent entity under statutes other than the OSH Act. However, she does
not appear to find the Commission’s public-control factor significant or
determinative. She even mentions two times in her brief that StarTran board
members may be removed from their positions by the Capital Metro CEO, but
claims that this does not demonstrate that StarTran is a political subdivision.
She states that who selects StarTran’s board, whether they may be dismissed by
Capital Metro, and who pays their salaries, are not important “because the
Commission reasonably found that StarTran had contractual autonomy to
determine its employment conditions, the implementation of its collective
bargaining agreements, and the administration of its safety program.” She
concludes that “even though all of StarTran’s five board members are appointed
and removable by Capital Metro’s chief executive officer . . . StarTran is not
12
However, the Court noted that “agency ‘litigating positions’ are not entitled to
deference when they are merely appellate counsel’s ‘post hoc rationalizations’ for agency action,
advanced for the first time in the reviewing court” because such interpretations are furnished
after agency proceedings have terminated and do not constitute an exercise of the Secretary’s
lawmaking power. Id. at 1179 (citations omitted). As there is no evidence that the Secretary
changed her interpretation of 29 C.F.R. § 1975.5 from the time the OSHA representative
issued StarTran a fine to the time she began litigating the issue, her interpretation of the
regulation is not a “litigating position,” and deserves deference.
23
No. 06-61032
controlled by Capital Metro in these critical areas.” Thus, the Secretary
emphasizes StarTran’s day-to-day control of its employees instead of Capital
Metro’s control of StarTran’s board. She looks more to the factors set forth in
section 1975.5(c) than the actual test set forth in section 1975.5(b), whether
StarTran is “administered by individuals who are controlled by public officials
and responsible to such officials.” The Commission placed emphasis on the
actual test by stressing the importance of who actually controls StarTran’s
leaders.
Because the Commission and the Secretary appear to set forth somewhat
different interpretations of the regulation at issue, on remand, the Commission
should defer to the Secretary’s interpretation, to the extent that it is reasonable,
in making its decision regarding whether the evidence reflects that StarTran is
a political subdivision of Texas. See Martin, 111 S. Ct. at 1176. We accordingly
remand to the Commission for reconsideration, for the Commission to reassess
the evidence, recognizing the StarTran’s board is controlled by Capital Metro,
and render a new judgment not inconsistent with this opinion.
CONCLUSION
The judgment of the Commission is
AFFIRMED IN PART and REMANDED IN PART
FOR RECONSIDERATION.
24