Fayette Electrical Cooperative

National Labor Relations Board - Board Decisions

Sep 30, 1992

308 N.L.R.B. 1071 (N.L.R.B. 1992)

1071
308 NLRB No. 156
FAYETTE ELECTRICAL COOPERATIVE
1 NLRB v. Natural Gas Utility District of Hawkins County, 402
U.S. 600 (1971). The Employer, in its brief on review, states that
it is not contending that it is created directly by the State, the ‘‘first
prong’’ of the Hawkins test.
2 The Regional Director erred in finding that the directors are
elected by ‘‘the other members of their respective cooperatives.’’
Fayette Electrical Cooperative, Inc. and Inter-
national Brotherhood of Electrical Workers,
AFL–CIO, Local 2079, Petitioner. Case 16–RC–
9405
September 30, 1992
DECISION ON REVIEW AND ORDER
BY CHAIRMAN STEPHENS AND MEMBERS
DEVANEY AND OVIATT
On August 7, 1991, the Board granted the Employ-
er’s request for review of the Regional Director’s De-
cision and Direction of Election as it raised substantial
issues warranting review.
Based on a careful review of the record, the Board
concludes that the Regional Director erred in finding
that the Employer is engaged in commerce within the
meaning of the Act and in finding that it would effec-
tuate the purposes of the Act for the Board to assert
jurisdiction.
The Regional Director found that the Employer was
not a ‘‘political subdivision’’ exempt from jurisdiction
under Section 2(2) of the Act. The Employer argues on
review that it is a political subdivision because it is ad-
ministered by persons who are directly accountable to
the general electorate.1 Alternatively, the Employer ar-
gues that the petition should be dismissed because the
Employer lacks sufficient authority over employees’
wages, benefits, and other terms and conditions of em-
ployment to engage in meaningful and effective collec-
tive bargaining.
The Employer is a nonprofit electrical generating
and transmission cooperative incorporated in the State
of Texas in accordance with the Texas Electric Coop-
erative Act, Tex. Rev. Civ. Stat. Ann. art. 1528b,
which provides for incorporation of nonprofit coopera-
tives to furnish electricity to members in rural areas.
Each year the Employer generates revenue in excess of
$250,000 from its activities and is exempt from state
sales tax and Federal excise and income taxes. The
Employer has the power of eminent domain over pri-
vate property, but not over property of the State of
Texas or its political subdivisions. The statute provides
that any three or more qualified persons may act as
incorporators.
The Employer is the only entity providing electrical
power in the eight rural counties which it serves. Per-
sons desiring electrical service may apply for member-
ship in the cooperative. There are no persons in the ge-
ographic area served who are not members of the Em-
ployer. The statute mandates that only those persons
receiving electrical service from a cooperative may be
members of that cooperative. There were 9153 mem-
bers at the time of the hearing.
The state statute requires that nonprofit electrical co-
operatives, such as the Employer, have articles of in-
corporation providing for at least three directors to be
elected at annual meetings of members. The Employ-
er’s territory is divided into seven districts. The Em-
ployer is governed by a board of directors comprised
of one director from each of the seven districts. The
directors must reside in the district they represent and
must have been a resident for at least 1 year. The
members of the board of directors receive $50 per
diem for their services. Public officials who are paid
a salary for their position may not serve on the board
of directors. In accord with the bylaws, the directors
serve staggered terms of 3 years.
Each year an election is held for these directors’ po-
sitions whose incumbents’ terms are expiring that year.
The persons residing in the affected district meet in a
district meeting to select a nominee from that district
for the open position. At the annual meeting, in which
all persons who are members of the Employer may
participate, the nominees are presented. Additional
nominations may be made at that time by a member
of the respective district. The entire membership
present at the meeting then votes on the nominees.2
Each person has one vote, and proxies are not allowed
by the Employer’s bylaws, although they would be
permissible under the statute.
The statute provides for the calling of special meet-
ings by a petition signed by 10 percent of the member-
ship, and the bylaws specify a procedure for removal
of board members by a vote of the membership. There
is testimony that the membership of another electrical
cooperative in the State removed its entire board of di-
rectors although the membership of the Employer has
never done so.
The Employer is also accountable to its members
through a complaint procedure set up and administered
by the Texas Public Utility Commission (PUC), a state
agency which can impose civil and criminal sanctions
on the Employer.
The Employer is subject to regulation from both the
PUC and the Rural Electrification Administration
(REA), a division of the United States Department of
Agriculture. The PUC has granted the Employer a cer-
tificate of convenience and necessity. The procedure
for obtaining such a certificate includes publishing a
notice of intent in the Texas Register and provides for
a public hearing. In addition, in order to change its
rates, the Employer must obtain approval from the
PUC.
The Employer is closely regulated by the REA. The
REA imposes certain requirements on the Employer’s
1072 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
3 Chairman Stephens, who dissented in Woodbury, joins in the
Board’s conclusion on the basis of this distinction.
4 Because we find that the Employer is exempt from the Board’s
jurisdiction as a political subdivision, we find it unnecessary to con-
sider the Employer’s alternate position that its lack of control over
determination of terms and conditions of employment precludes the
possibility of meaningful and effective bargaining.
accounting and management practices. The REA pro-
vides loans to the Employer as operating capital. The
REA requires that the Employer provide detailed fi-
nancial information, including employee salary, wage,
and benefit information. If the various budget items are
not in accord with the standards for a cooperative, the
REA representative makes ‘‘suggestions’’ which can
be enforced through the REA’s power to withhold loan
funds or even to relieve the cooperative manager of his
duties. The REA must also approve the Employer’s
wholesale power contracts and construction contracts.
The PUC has similar oversight powers and demands
similar information. The record states that if the PUC
finds the budget items are ‘‘out of line,’’ penalties, in-
cluding personal penalties, can be assessed.
Financial records which are filed with either the
REA or the PUC are available to the general public.
Meetings of the Employer’s board of directors are
open to the public, with the exception of certain ‘‘pay-
roll matters.’’
We agree with the Employer that its board of direc-
tors is responsible to the general electorate and, thus,
it is a ‘‘political subdivision’’ within the meaning of
the Act and is exempt from the Board’s jurisdiction.
In NLRB v. Natural Gas Utility District of Hawkins
County, 402 U.S. 600 (1971), the Supreme Court held
that for an entity to be exempt from the Board’s juris-
diction as a political subdivision, it must have been ei-
ther directly created by the Federal, state, or local gov-
ernment or be administered by individuals who are re-
sponsible to public officials or the general electorate.
The evidence indicates that the membership in the Fay-
etteville Electrical Cooperative is coextensive with
residency in the geographical area served. There are no
persons residing in the geographical territory served by
the Employer who are not members of the Employer.
The Board, in both Woodbury County Community
Action Agency, 299 NLRB 554 (1990), and Economic
Security Corp., 299 NLRB 562 (1990), found the non-
profit entities involved there to be exempt political
subdivisions because a majority of the membership of
the respective boards of directors were responsible to
the general electorate. In each case, one-third of the
board was comprised of elected public officials, and
one-third were representatives of the poor, chosen at a
secret-ballot election. Thus, two-thirds of the directors
were found to be individuals responsible by law to
public officials or the general electorate. Accordingly,
because all directors of the Fayette Electrical Coopera-
tive, Inc. are elected, according to democratic proce-
dures, by the persons residing in the geographic area
served by the Employer, they, like the representatives
of the poor in Woodbury, supra, and Economic Secu-
rity, supra, must be considered to be responsible to the
general electorate.
The case at hand presents an even stronger argument
for exemption from Board jurisdiction than Woodbury
and Economic Security because the directors of the
Fayette Electrical Cooperative, Inc. are elected not by
a subgroup of the general electorate in the geographi-
cal area served, or by a defined insular class of voters,
but by the entire electorate.3 Furthermore, unlike the
statute and bylaws governing the nonprofit entities in
Woodbury and Economic Security, the state legislation
and corporation bylaws applicable to the Employer
allow for the removal of any or all directors, during
their term of office, by the membership.
We find Natchez Trace Electric Power Assn., 193
NLRB 1098 (1971), enfd. 476 F.2d 1042 (5th Cir.
1973), cited by the Regional Director, to be distin-
guishable. Unlike Natchez Trace, the Employer’s
membership is coextensive with the general electorate
and directors may be removed by the
membership/general electorate during their term of
office. Furthermore, the Employer is exempt from state
sales tax and Federal excise and income taxes. In addi-
tion, Fayette Electric Cooperative, Inc. was required to
obtain a certificate of convenience and necessity from
the PUC, and the certificate was issued only after pub-
lic notice and hearing. The REA and PUC both closely
regulate the Employer in such matters as rate increases
and budget items. Most of the financial records and
meetings of the Employer are open to the public. Thus,
in addition to the fact its directors are responsible to
the general electorate, the Employer possesses other
characteristics required for exemption from the Board’s
jurisdiction under Section 2(2) of the Act.4 Accord-
ingly, the petition is dismissed.
ORDER
The petition is dismissed.
MEMBER OVIATT, dissenting.
I do not agree that the Employer is a ‘‘political sub-
division’’ within the meaning of Section 2(2) of the
Act. I also find that the Employer has not met its bur-
den of showing that it does not have the ultimate au-
thority to determine the primary terms and conditions
of employment, as required by Res-Care, Inc., 280
NLRB 670 (1986). Accordingly, like the Regional Di-
rector, I would process the petition.
As more fully discussed in my dissent in Economic
Security Corp., 299 NLRB 562 (1990), to be an ex-
empt political entity within the meaning of Section
2(2) of the Act, an Employer must demonstrate not
1073FAYETTE ELECTRICAL COOPERATIVE
1 Contrary to the majority’s contention, art. 12586 does not contain
any provision regarding the removal of directors.
only that its directors are chosen by the electorate but
also that its directors can be removed by the electorate.
Only in this way, in my view, can the Employer sat-
isfy the requirement in NLRB v. Natural Gas Utility
District of Hawkins County, 402 U.S. 600, 604–605
(1971), that it is administered by individuals who are
responsible to the general electorate.
This case is not materially different from Economic
Security. In Economic Security, supra, I noted that the
bylaws conferred on the directors alone the power to
amend the bylaws and thus to increase the directors’
term of office and to abolish any removal procedure.
Nothing in the organic statute or in the bylaws them-
selves precluded the directors from doing so, and the
electorate had no say in the matter. Id. at 567. I ob-
served that to the extent the bylaws conferred on the
directors some degree of responsibility to the elector-
ate, the directors were ‘‘so accountable by choice rath-
er than by law.’’ Id. (quoting from Jefferson County
Community Center v. NLRB, 732 F.2d 122, 125 fn. 3
(10th Cir.), cert. denied 469 U.S. 1086 (1984)). That
was not sufficient, in my view, to make them respon-
sible to the electorate within the meaning of Hawkins
County.
In Economic Security only a quorum of the board of
directors could remove a director. Here, under the by-
laws, the members themselves can remove a director,
but the term of a director’s office (now 3 years) and
the procedure for removing directors is set not by the
organic statute1 but by the bylaws. Significantly, these
bylaws can be amended only by a vote of two-thirds
of the board of directors—not by the members. (See
art. XIV of the bylaws.) Here, as in Economic Secu-
rity, the directors can, by amending the bylaws them-
selves, abolish or amend the removal procedures and
increase their term of office. There is nothing in the
organic statute or in the bylaws that gives the members
any power to prevent this from happening. The mem-
bers’ removal power in this case is thus transitory at
best.
In my view, the directors here do not have the type
of responsibility to the electorate that qualifies the Em-
ployer as a political subdivision under Section 2(2) of
the Act. See Skills Development Services v. Donovan,
728 F.2d 294, 300 (6th Cir. 1984); Powell v. Tucson
Air Museum Foundation of Pima, 771 F.2d 1309,
1311–1312 (9th Cir. 1985); Williams v. Eastside Men-
tal Health Center, 669 F.2d 671, 679 (11th Cir.), cert.
denied 459 U.S. 976 (1982); and St. Jude Industrial
Park Board v. NLRB, 760 F.2d 223, 225–226 (8th Cir.
1985).
The Employer also now contends, in the alternative,
that, pursuant to Res-Care, Inc., 280 NLRB 670
(1986), the Board should decline jurisdiction because
of the extent of control of the Employer’s operations
exercised by the Rural Electrification Administration
and the Texas Public Utility Commission. The Em-
ployer has not, however, met its burden of showing
that the control exercised by these agencies is so ex-
tensive as to preclude meaningful collective bargain-
ing. Thus, the Employer has not introduced evidence,
for example, on whether a collective-bargaining agree-
ment would require approval by these agencies or
whether these agencies would effectively control wage
rates. In my opinion, the Employer has not satisfied its
burden under Res-Care, supra.
In sum, I conclude, as did the Regional Director,
that the Employer is not an entity exempt from our ju-
risdiction. Accordingly, I would process the election
petition.