NLRB Asserts Jurisdiction Over Chicago Nonprofit Corporation That Operates Charter School

by Franczek Radelet P.C.

In a 3-1 decision in Chicago Mathematics & Science Academy Charter School, Inc. and Chicago Alliance of Charter Teachers & Staff, IFT, AFT, AFL-CIO, the National Labor Relations Board (NLRB) asserted jurisdiction over a private, nonprofit corporation that operates a public charter school in Chicago.

At issue was whether the Chicago Mathematics & Science Academy Charter School, Inc. (CMSA) was exempt from the NLRB’s jurisdiction because it is a political subdivision of the State of Illinois. Under the National Labor Relations Act (NLRA), an “employer” is defined to include any person acting as an agent of an employer, either directly or indirectly, but does not include “any State or political subdivision thereof.” The NLRB has limited this political subdivision exemption to entities that are 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.

The NLRB concluded that CMSA did not qualify as a political subdivision under either prong of this analysis. First, the NLRB determined that CMSA was created and incorporated by private individuals under the Illinois Not-for-Profit Corporation Act, and not created directly by any State of Illinois government entity, special statute, legislation or public official. The NLRB specifically found that no Illinois statute—including the Illinois Charter Schools Law—either mandates that charter schools be created or directly creates the schools themselves. Instead, by providing in the Illinois Charter Schools Law that Illinois school districts may contract with third parties to establish charter schools, the NLRB found that the State had demonstrated its intent to permit others, and not the State itself, to create and operate those schools.

Second, the NLRB held that none of CMSA’s governing board members are appointed by or subject to removal by any public official. Instead, the NLRB found that the selection of all of CMSA’s governing board members is dictated by its internal by-laws, and not by any State statute or governmental regulation. The NLRB further found that, under the by-laws, only sitting CMSA board members may appoint and remove other CMSA board members, and no person affiliated with any State or local government agency or official has any involvement in that selection or removal process. In the NLRB’s view, the fact that an entity’s governing board is subject solely to private appointment and removal is the single determinative factor, and where appointment and removal is controlled by private individuals, the entity—like CMSA—will not satisfy the second prong of this analysis.

Having found that CMSA was not exempt from its jurisdiction as a political subdivision, the NLRB next considered whether CMSA is itself an “employer” for purposes of the NLRA. Given that CMSA hires, fires, compensates, and provides benefits to its teachers, the NLRB found that CMSA was not much different from any other government contractor—over which the NLRB routinely asserts jurisdiction. Finally, the NLRB rejected the notion that it should decline to assert jurisdiction over CMSA, finding no policy reasons for doing so. Member Hayes dissented from this portion of the decision, holding that the NLRB should decline to assert jurisdiction over CMSA based on its official status as a public school, its highly regulated relationship with the State of Illinois and the Chicago public school system, and its fundamentally local nature. For example, the Chicago Public Schools provides approximately 80% of CMSA’s operating budget, CMSA is obligated to make pension contributions to the Chicago Teachers Pension Fund and the Illinois Charter Schools Law specifically requires charter schools to comply with the Illinois Educational Labor Relations Act, which was amended to provide that charter schools fall within the definition of a public “educational employer.”

While this case appears to reflect the NLRB’s recent trend to assert jurisdiction in the charter school context, see, e.g., Charter School Administration Services, Inc. and Michigan Education Association/NEA, 353 NLRB 394 (2008)(non-precedential decision from two-member NLRB panel finding private, for-profit corporation that managed and operated charter schools was not a political subdivision of the State of Michigan), and Civitas Schools, LLC, Case 13-RM-1764 (Regional Director’s Decision and Direction of Election, June 2, 2009)(finding that private educational management organization that managed charter school location was not a political subdivision of the State of Illinois), the NLRB was careful to limit the reach of its decision. It specifically held that it was not establishing a “bright-line rule” that it has jurisdiction over entities that operate charter schools. In what is perhaps an interesting twist, in this case the Union and amici (including the NEA and AFL-CIO) argued that the NLRB should not assert jurisdiction, while CMSA and the National Alliance for Public Charter Schools, as amicus, argued that the NLRB should assert jurisdiction.

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