My new post is up on the Reason Foundation web site. (Earlier, I had posted there on the Supreme Court’s antitrust decision in FTC v. Phoebe Putney.) Here’s the beginning:
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 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.)
The rest of the post goes on to discuss the ADA, RLUIPA, and the state-action doctrine. My conclusion:
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.
UPDATE: Corrected a misstatement of labor law, thanks to commenter JFT.