By Nelson Cary and James Patrick
In Chicago Mathematics & Science Academy Charter School, Inc. (“CMSA”), the NLRB unanimously concluded that the CMSA was not a political subdivision exempt from the NLRB’s jurisdiction. In reaching this conclusion, the NLRB applied the two-part test established in NLRB v. Natural Gas Utility District of Hawkins County, 402 U.S. 600 (1971). Under this test, an entity is 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.”
With respect to the first part of the test, the NLRB concluded that CMSA was not created directly by the state, but instead was created by private individuals who incorporated a non-profit corporation pursuant to Illinois law. The NLRB emphasized that Illinois’ charter school laws merely provided the authorization or framework for creating charter schools as opposed to directly creating them. The NLRB also noted that receiving public funding or operating pursuant to a contract with a governmental entity does not, in and of itself, result in an entity being exempt as a political subdivision.
With respect to the second aspect of the test, the NLRB concluded that CMSA was not a political subdivision because it is not administered by individuals who are responsible to public officials or to the general electorate. The NLRB noted that CMSA’s board of directors was selected in accordance with its bylaws rather than pursuant to any law. Moreover, the bylaws provided that only sitting members may appoint and remove other CMSA board members, and not a government official. The NLRB also noted that CMSA hired its own employees and developed its own personnel handbook, which supported its decision that CMSA is not a political subdivision.
Despite concurring that CMSA was not a political subdivision and that there should not be a universal rule with respect to charter schools, Member Hayes (R) would have exercised discretion and declined jurisdiction. The NLRB has the discretion to decline jurisdiction over any type of employer whose labor disputes would not have a substantial effect on commerce. Relying on principles established in prior decisions, Member Hayes would have declined jurisdiction because CMSA, in providing services that are public and local in nature, is closely intertwined with and defined by the State of Illinois and the City of Chicago.
Labor professionals should note that the NLRB did not establish a bright-line rule that it has jurisdiction over charter schools. The NLRB’s jurisdiction is determined by looking at how charter schools are created, designed, regulated, and operated in the applicable state.