StarTran, Inc.

Plain-English summary

StarTran was a nonprofit corporation that provided bus transportation services for Austin, Texas, under an agreement with the public transit authority Capital Metro. OSHA cited StarTran for failing to provide injury and illness records to an authorized government representative. StarTran stipulated to the cited conduct but argued that it was a political subdivision of Texas and therefore outside the OSH Act's coverage. The Commission held that StarTran bore the burden of proving the exemption and had not shown sufficient public control because it independently managed employment, discipline, collective bargaining, and day-to-day safety enforcement. It affirmed the record-production violation and assessed the stipulated $500 penalty.

Decision snapshot

• Cited standard(s): 29 C.F.R. § 1904.40
• Outcome: The Commission affirmed the other-than-serious violation and assessed $500.
• Key point: An entity claiming the political-subdivision exemption bears the burden of proof, and public funding or appointment ties do not alone establish public control over employment operations.

Full text (OSHRC public release)

Startran, Inc., Docket No. 02-1140

DECISION

SECRETARY OF LABOR,

Complainant,

v.

STARTRAN, INC.,

Respondent,

OSHRC Docket No. 02-1140

AMALGAMATED TRANSIT UNION,
LOCAL 1091,

Authorized Employee Representative.

APPEARANCES:

Howard M. Radzely, Solicitor; M. Woodward, Associate Solicitor; Alexander Fernández,
Deputy Associate Solicitor; Daniel J. Mick, Counsel for Regional Trial Litigation; Mark
J. Lerner, Attorney; U.S. Department of Labor, Washington, DC

For the Complainant

John J. Franco Jr., Esq.; Jeffrey C. Londa, Esq.; Ogletree, Deakins, Nash, Smoak &
Stewart, P.C., San Antonio, TX

For the Respondent

Dr. William J. Kweder, Union Secretary; Joneth Wyatt, President; Amalgamated Transit
Union, Local 1091, Austin, TX

For Authorized Employee Representative

DECISION

Before: RAILTON, Chairman; ROGERS and THOMPSON, Commissioners.

BY RAILTON, Chairman:

Before the Commission is a decision by Administrative Law Judge Benjamin
Loye that upheld a violation of 29 C.F.R. § 1904.40 by concluding that StarTran, Inc.
(“StarTran”) is an employer, as defined in 29 U.S.C. § 652(5) of the Occupational Safety
and Health Act of 1970, 29 U.S.C. 29 U.S.C. § 651 et seq. (“OSH Act”), and not a
political subdivision of the State of Texas exempt from coverage under 29 C.F.R. §
1975.5(b). Former Commissioner James Stephens, acting under section 12(j) of the OSH
Act, 29 U.S.C. § 661(j), granted StarTran’s petition for review.

For the reasons that follow in this and Commissioner Rogers’s concurring opinion, we affirm the judge’s
decision.

Background

StarTran, a Texas non-profit corporation that provides bus transportation services
for the City of Austin, was created by authorization of Capital Metropolitan
Transportation Authority (“Capital Metro”), a governmental transit entity established
under Texas law that operates under the provisions of the Texas Transportation Code.
Capital Metro created StarTran to harmonize federal law requiring Capital Metro to
continue collective bargaining, see Fed. Transit Act, 49 U.S.C. § 5300 et seq. , with Texas
law that prohibits governmental entities from entering collective bargaining agreements,
see Tex. Code Ann. § 617.003 (Vernon 2004). Capital Metro, which has provided public
transportation services in the Austin area since 1985, contracts out transportation services
to various management companies, including StarTran.

On May 9, 2002, the Occupational Safety and Health Administration (“OSHA”)
inspected StarTran’s Austin worksite. As a result of that inspection, OSHA issued
StarTran a citation alleging a violation of 29 C.F.R. § 1904.40 for its failure to provide
records to an authorized government representative. Before the judge, StarTran
stipulated to the facts alleged in the citation, arguing only that it is a political subdivision
of the State of Texas exempt from the OSH Act under 29 C.F.R. § 1975.5(b).

StarTran
agreed that, if it is not exempt, the citation should be affirmed. The issue before the
Commission is whether StarTran is a political subdivision entitled to be exempt from
coverage under 29 C.F.R. § 1975.5(b).

Discussion

The threshold matter in this case is whether StarTran bears the burden of proving
it falls under the political subdivision exception to the definition of employer under the
OSH Act. StarTran argues on review that the Secretary bore the burden of proving that
OSHA had jurisdiction over StarTran. The Secretary contends, however, that whether an
entity is an employer under the OSH Act is not a question of jurisdiction, but of
coverage, and therefore StarTran bore the burden of proof. I agree with the Secretary
that whether StarTran is an employer within the meaning of the OSH Act is an issue of
coverage, not jurisdiction. See Arbaugh v. Y&H Corp. , 126 S. Ct. 1235, 1244 (2006)
(definitional issues are issues of coverage, not jurisdiction; Title VII employee-numerosity requirement is issue of coverage, not jurisdiction). Consequently, the burden
of proof rests with StarTran to show that it falls within the exception to the definition of
employer under the OSH Act. See NLRB v. Kentucky River Cmty. Care, Inc. , 532 U.S.
706 (2001) (burden of proving applicability of exemption falls on party claiming
exemption). In assessing StarTran’s showing, the Commission takes the evidence
StarTran introduced at face value and will look only at the testimony given and within
the four corners of the documents introduced.   See C.J. Hughes Constr. Inc. , 17 BNA
OSHC 1753, 1756, 1996 CCH OSHD ¶ 31,129, p. 43,476 (No. 93-3177, 1996) (party
seeking “the benefit of an exception to a legal requirement has the burden of proof to
show that it qualifies for the exception.”).

Definition of Employer

Section 3(5) of the OSH Act, 29 U.S.C. § 652(5), exempts “any State or political
subdivision of a State” from the definition of the term “employer” and therefore from the
coverage of the Act. The Secretary promulgated a series of regulations under this
provision setting forth a two-part test for determining whether an entity is a state or
political subdivision. Under this test, any entity that is (1) “created directly by the State .
. .” or (2) “administered by individuals who are controlled by public officials and
responsible to such officials or to the general public” will be deemed to be an exempt
state or political subdivision under section 652(5) of the OSH Act. See 29 C.F.R.
§ 1975.5(b). This test is identical to the formula the National Labor Relations Board
(“NLRB”) has long used to determine whether an entity is a political subdivision exempt
from the Board’s jurisdiction under 29 U.S.C. § 152(2) of the National Labor Relations
Act, 29 U.S.C. § 151 et seq. (“NLRA”).

Because StarTran was not created by the State of Texas, it is undisputed that the
first part of the political subdivision test does not apply here. Thus, the question before
us is whether StarTran has established that it is “administered by individuals who are
controlled by public officials.” As the judge noted, the regulation contains a non-exhaustive list of factors to be considered in determining whether an entity is exempt
under this test. See 29 C.F.R. § 1975.5(c). The regulations prescribe that the weight of
any factor, and whether a single factor or multiple factors will be decisive, must be
decided based on the merits of each case. See 29 C.F.R. § 1975.5(d). In the present
matter, I find 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.

See Brock v. Chicago
Zoological Soc’y , 820 F.2d 909, 913 (7th Cir. 1987) (considering three factors to be
“decisive”: “the [entity’s] corporate structure, its resulting independence from direct
[governmental] control over operations and maintenance, and the indisputably private
nature of its employment relationships.”).

Although the facts here present a close case, I conclude that StarTran failed to
carry its burden of proving it is exempt from coverage under the OSH Act.

Public Control

First, 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.” See Chicago
Zoological Soc’y , 820 F.2d at 913 (“Exempting an entity that does not treat its employees
as public employees would obstruct the [OSH] Act’s basic purpose without advancing
the interests served by the exemption.”). It is undisputed that StarTran’s board is not
directly responsible to the general electorate. Although all five of StarTran’s board
members are appointed by the chief executive officer of Capital Metro, an entity the
majority of whose board is directly responsible to the general electorate, the evidence
fails to support StarTran’s claim that the individuals administering the company were
controlled by Capital Metro. On the contrary, I agree with the judge that StarTran was
controlled by its own board, as well as by the terms of StarTran’s collective bargaining
agreement with Amalgamated Transit Union Local 1091 (“the union”). See Tricil Res.,
Inc. v. Brock , 842 F.2d 141, 143-44 (6th Cir. 1988); Chicago Zoological Soc’y , 820 F.2d
at 912 (both finding employer was non-exempt independent entity where, inter alia ,
employer controlled and established terms and conditions of employment for its
employees).

Of particular significance here is StarTran and Capital Metro’s “Agreement for
the Provision of Employee Services” (hereinafter “Employee-support Agreement”), the
document that created StarTran as an independent entity. The Employee-support
Agreement states that the services provided by Capital Metro are to be ministerial only,
and StarTran is to “retain absolute and real day-to-day control over all matters relating to
the terms and conditions of employment.” See Employee-support Agreement at ST.08.
Under both this agreement and StarTran’s collective bargaining agreement with the
union, StarTran has the authority to hire, fire, promote, supervise, and direct employees
and to handle discipline and grievance procedures.

Indeed, the testimony of William Kweder, a StarTran bus driver, confirms that it
is StarTran alone that supervises, pays, and disciplines its employees. StarTran’s
manager of labor and human relations also testified that day-to-day administration of the
collective bargaining agreement is handled solely by StarTran. Further, Mr. Kweder
testified that he would raise day-to-day job-related concerns only with his StarTran
supervisor, and could think of no situation in which he would contact Capital Metro
regarding day-to-day work concerns.

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.” See Chicago
Zoological Soc’y , 820 F.2d at 912 (analyzing, inter alia , entity’s corporate structure in
denying exemption). Indeed, in NLRB cases involving the political subdivision
exemption under the NLRA, 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); Jefferson County Cmty. Ctr. for Devtl. Disabilities, Inc. v. NLRB , 732 F.2d 122,
125-26 (10th Cir. 1984) (no exemption where by-laws indicate majority of board is
neither appointed by nor subject to removal by public officials). StarTran’s failure to
provide any such evidence here further weakens its claims of control by Capital Metro.

Safety & Health Responsibilities

Second, I find the fact that StarTran was responsible on a day-to-day basis for the
safety and health of its employees to be of considerable significance, as ensuring
occupational safety and health is the very purpose of the OSH Act under which this case
arises. See Tricil Resources, Inc. , 842 F.2d 141; Brock v. Chicago Zoological Soc’y , 820
F.2d at 913 (both finding persuasive fact that entity claiming political subdivision status
was solely responsible for safety of its employees). Capital Metro’s safety manager
developed the safety program used by both Capital Metro and StarTran, but the record
shows that StarTran was chiefly responsible for enforcing its program. While the
original agreement states that Capital Metro is to provide safety and other training,
“Amendment One” expressly turns these duties over to StarTran. See Employee-support
Agreement at ST.03-04, 07. StarTran’s collective bargaining agreement contained an
article relating to safety, which provided generally that StarTran would provide
employees with protective gear and could require employees to attend safety meetings.
Id. at ST.089. Mr. Kweder testified that under the collective bargaining agreement only
StarTran could discipline him, and Capital Metro’s safety manager confirmed that he was
not at all involved in discipline. Mr. Kweder also testified that he would raise job-related
safety or health concerns with his StarTran supervisor. Under these circumstances, I am
simply not persuaded by StarTran’s claims that its safety program was controlled by
Capital Metro.

Treatment Under Other Federal and State Law

The third significant factor in my determination that StarTran has failed to
establish it is an independent entity centers upon how StarTran is regarded under State
and Federal laws. See 29 C.F.R. § 1975.5(c). StarTran seeks to be considered an
independent entity under Texas law. In fact, it is undisputed that Capital Metro created
StarTran to harmonize federal law requiring Capital Metro to continue collective
bargaining, see Fed. Transit Act, 49 U.S.C. § 5300 et seq. , with Texas law that prohibits
governmental entities from entering collective bargaining agreements, see Tex. Code
Ann. § 617.003 (Vernon 2004). The Employee-support Agreement states in its
introduction that “to ensure compliance with state and federal law, it is necessary for
Capital Metro to obtain certain services from an independent entity [StarTran] which can
recognize the collective bargaining rights of those persons who provide Mass Transit
Services for Capital Metro.” See Employee-support Agreement at ST.05. Although no
official determination has been made on the issue, StarTran states that it would be subject
to the NLRA, which guarantees the right of private-sector employees to bargain
collectively.

In essence, StarTran is asking the Commission to ignore the private status it
claims with respect to the State of Texas and the NLRA and instead find for purposes of
the OSH Act alone that it is a political subdivision exempt from coverage. There is
simply no basis for such a claim. In fact, I find this claim to be especially brazen in light
of the undisputed evidence that StarTran was specifically created and endowed with
indicia of independence to be viewed by the State of Texas as a non-political subdivision.
Also, as noted above, the Commission’s test for determining political subdivision status
is identical to the test used by the NLRB to determine whether an entity is a political
subdivision exempt from the NLRA. See 29 U.S.C. § 152(2). Yet, StarTran
paradoxically asks the Commission to apply an identical test, but reach the opposite
result. StarTran is simply not free to shed its private cloak and don the mantle of a
political subdivision whenever convenience dictates.

Order

For the reasons above, with which Commissioner Rogers joins in her concurring
opinion, the Commission affirms the judge’s finding that StarTran failed to comply with
29 C.F.R. § 1904.40, and assesses a penalty of $500.

SO ORDERED.

/s/______

W. Scott Railton

Chairman

Dated: September 27, 2006

ROGERS, Commissioner, dissenting in part and concurring in part:

I must respectfully disagree with the view of my colleagues that this case is
properly before the Commission. I do so based on my reading of the applicable Fifth
Circuit case law.

This case was directed for review one day after the final order date, due to a
clerical error in listing that date in a document circulated to the Commission. I agree
with my colleagues that under Commission precedent and the precedent of most Circuits,
the Commission could grant relief under Rule 60(a) of the Federal Rules of Civil
Procedure. See Voegele Co., Inc. , 7 BNA OSHC 1713, 1714 n.2 (No. 76-2199, 1979)
(correcting clerical error that led to direction for review being issued 31 days after
docketing of judge’s decision), aff’d , 625 F.2d 1075 (3 rd Cir. 1980).

However, Fifth Circuit precedent, Brennan v. OSHRC (“ Otinger ”), 502 F.2d 30
(5 th Cir. 1974), provides that once the 30 day review period has expired, there is “no
provision for further Commission consideration of the merits of the controversy.” Id. at

32. While in that case the Court rejected the use of Rule 60(b) to reinstate a case, the
    rationale of the Court’s decision would apply equally to the use of Rule 60(a). See
    Macktal v. Chao , 286 F.3 rd 822, 826 (5 th Cir. 2002) (“once the thirty-day review period
    had expired and the order had become final, no further consideration by the Commission
    was allowed,” citing to Otinger ).

Two Circuits have chosen not to follow the analysis in Otinger . See J. I. Hass
Co., Inc. v. OSHRC , 648 F.2d 190 (3 rd Cir. 1981); Marshall v. Monroe & Sons, Inc. , 615
F.2d 1156, 1159 n.1 (6 th Cir. 1980) (suggesting that Otinger did not appropriately account
for the provision of the Occupational Safety and Health Act which specifically applies
the Federal Rules of Civil Procedure to Commission proceedings). Otinger is also
broader in its scope than Chao v. Russell P. LeFrois Builder, Inc. , 291 F.3d 219 (2 nd Cir.
2002), which only proscribes the use of Rule 60(b) by the Commission to reinstate a case
in the narrower context of a late-filed notice of contest. Nevertheless, Otinger is the law
of the Circuit.

However, the majority has decided that the case is properly before us. “Although
I disagree, I will accept the decision of the majority as dictating the law of this case.
Having so accepted the law of the case,” I now join the Chairman in the issuance of the
order to affirm the judge. See Massachusetts v. EPA , 415 F.3d 50, 61 (D.C. Cir. 2005)
(Sentelle, J., dissenting in part and concurring in the judgment), cert. granted , 126 S.Ct.
2960 (2006). With that explanation, I join in the Chairman’s analysis on the merits of
this case and agree that StarTran failed to carry its burden of proving it is exempt from
coverage under the OSH Act.

/s/_______

Thomasina V. Rogers

Commissioner

Dated: September 27, 2006

THOMPSON, Commissioner, dissenting in part and concurring in part:

While I concur with Chairman Railton in concluding that this case is properly
before the Commission, I must respectfully dissent from my colleagues’ decision on the
merits. Although I agree that the burden rests with StarTran to prove it is a political
subdivision exempt from coverage under the OSH Act, 29 U.S.C. § 652(5) [“§ 2(5)”], I
would find, in contrast to my colleagues, that StarTran met its burden on the record
before us. See NLRB v. Kentucky River Cmty. Care, Inc. , 532 U.S. 706 (2001) (burden of
proving applicability of exemption falls on party claiming exemption); C.J. Hughes
Constr. Inc. , 17 BNA OSHC 1753, 1756, 1996 CCH OSHD ¶ 31,129, p. 43,476 (No. 93-3177, 1996) (party seeking “the benefit of an exception to a legal requirement has the
burden of proof to show that it qualifies for the exception.”). In my view, the evidence
clearly establishes that StarTran is “administered by individuals who are controlled by
public officials and responsible to such officials or to the general public[.]” See 29
C.F.R. § 1975.5(b). Accordingly, I would reverse the judge and find that StarTran is
exempt from coverage under the Act.

Public Control

Of decisive significance in my mind for the purposes of determining StarTran’s
status as a political subdivision is the record evidence clearly establishing that the chain
of command of both controlling entity Capital Metro and operating entity StarTran
begins with the electorate.

Five of the seven members of the Capital Metro Board of
Directors are publicly elected. The Board of Directors hires the Chief Executive Officer
(CEO) of Capital Metro, who is a public official by virtue of his role in presiding over a
governmental agency. Capital Metro’s CEO in turn appoints each member of StarTran’s
five-member Board of Directors. StarTran’s Board of Directors is controlled by and
responsible to Capital Metro’s current CEO, Fred Gilliam, who has the power to appoint
and terminate StarTran’s board members. Indeed, StarTran’s board members consider
Mr. Gilliam to be their boss. Moreover, Capital Metro pays the salaries of the entire
StarTran Board of Directors.

While I agree with my colleagues that StarTran’s corporate structure is an
important consideration here, I do not feel it necessary to look beyond the record to find
that StarTran established Capital Metro’s plenary authority to control the company and
that this authority could not be altered by StarTran. See NLRB v. Princeton Mem’l Hosp. ,
939 F.2d 174, 175 (4th Cir. 1991) (hospital exempt where Board of Directors’ members
were subject to ratification and removal by municipal entity). Clearly, StarTran could
not elect to exist independently of Capital Metro. Capital Metro is, in fact, StarTran’s
sole transportation contract, as well as StarTran’s sole source of funding. See § 1975.5(c)
(relevant factors for determining public control include how the entity’s functions are
financed and what is the financial source of the employee-payroll). Capital Metro
provides StarTran with the following: all office, storage, and bus maintenance facilities;
office furniture, equipment, and materials; all fiscal, purchasing, and personnel services;
and, financial support sufficient to cover StarTran’s costs in meeting its obligations under
the employee-support agreement, including providing all the wages and benefits of
StarTran employees. Capital Metro even collects StarTran’s fares at the end of each day.
Capital Metro could also audit StarTran and in fact has done so.

Conversely, StarTran has little control over the integral parts of its own
operations. StarTran is required to work with Capital Metro to develop proposed budgets
corresponding to Capital Metro’s fiscal year and these budgets are subject to Capital
Metro’s approval. Indeed, StarTran lacks its own accounting department. StarTran is
required to notify Capital Metro about the departure of key personnel. Although Capital
Metro is not involved in StarTran’s actual collective bargaining process, any agreement
that StarTran reaches is subject to approval by Capital Metro and StarTran personnel
often discuss collective bargaining issues with Capital Metro’s CEO and Board of
Directors. Furthermore, on those occasions when StarTran employees raised day-to-day
concerns with StarTran supervisors who were unable to address those concerns, the
matter would be sent up the well-established chain of command to Capital Metro and
then to the public. Under these circumstances, I have little doubt that StarTran is
“administered by individuals who are controlled by public officials and responsible to
such officials or to the general public.”

Safety & Health Responsibilities

In contrast to my colleagues, I would find that the evidence regarding Capital
Metro and StarTran’s safety and health responsibilities weighs in favor of finding
StarTran to be an exempt political entity. See 29 C.F.R. § 1975.5(c) (“In evaluating these
factors, due regard will be given to whether any occupational safety and health program
exists to protect the entity’s employees.”). In previous cases denying the exemption at
issue here, courts have found persuasive the fact that the entity claiming political
subdivision status was solely responsible for the safety of its employees. See Tricil Res.,
Inc. v. Brock , 842 F.2d 141 (6th Cir. 1988); Brock v. Chicago Zoological Soc’y , 820 F.2d
909, 913 (7th Cir. 1987). That is not the case here. The evidence clearly shows that
Capital Metro bears chief responsibility for safety and health matters at StarTran. Capital
Metro is the entity that developed the safety program used by StarTran. Capital Metro is
also responsible for enforcing the safety program through training new StarTran
employees, holding monthly safety training classes, and requiring all StarTran operators
and drivers to attend safety training classes on a quarterly basis. Indeed, StarTran’s
president testified that, despite any agreements to the contrary, Capital Metro was
responsible for safety. My colleagues attach great significance to the fact that StarTran
could discipline employees for safety violations, subject by the nature of their
relationship to potential override or reversal by Capital Metro, but this fact alone cannot
overcome the overwhelming evidence of Capital Metro’s involvement in, and control of,
StarTran’s safety program.

Treatment under Other Federal and State Laws

Finally, my colleagues make much of the fact that StarTran characterizes itself as
an independent entity subject to the National Labor Relations Act [“NLRA”] as a
consequence of its statement in its Employee-support Agreement that it is “an
independent entity which can recognize the collective bargaining rights of those persons
who provide Mass Transit Services for Capital Metro.” Employee Support Agreement at
ST.05. In my view, in determining whether the objective facts prove that StarTran is a
political subdivision exempt from coverage under the OSH Act, 29 U.S.C. § 652(5), little
weight should be given to such a characterization plainly intended to avoid undermining
the agency’s eligibility for federal subsidy. My colleagues acknowledge that StarTran’s
characterization in its Employee-support Agreement of its status as an independent
employer is designed to harmonize federal mass transit subsidy authority requiring
Capital Metro to engage in collective bargaining , see Fed. Transit Act, 49 U.S.C. § 5300
et seq. , with Texas law that prohibits governmental entities from entering collective
bargaining agreements, see Tex. Code Ann. § 617.003 (Vernon 2004). Whatever weight
is given in application of § 2(5) to StarTran’s characterization of its status under the
NLRA, the greater weight should be given to the overwhelming body of objective
evidence showing that StarTran serves merely as a puppet of Capital Metro, the Austin
municipal transit authority.

Moreover, as my colleagues note, the National Labor Relations Board [“NLRB “]
has made no determination that StarTran is an independent private entity subject to the
NLRA. However, even if a determination had been made by the NLRB finding StarTran
subject to the NLRA, I would not find that to be dispositive for the purposes of applying
§ 2(5) of the OSH Act. The OSH Act, not the NLRA, is concerned with regulating the
safety and health conditions of private employers and, as discussed above, it is clear on
this record that a public entity, Capital Metro, was primarily responsible for the safety
and health conditions of StarTran’s employees. In my view, the Commission should
therefore apply its own test, which is clearly set out under § 1975.5(b) and (c), to
determine whether StarTran qualifies as a political subdivision under the OSH Act.
Applying this test, I would find that the record overwhelmingly establishes that StarTran
is a political subdivision.

For all of these reasons, I respectfully dissent in part from my colleagues’
decision.

/s/________

Horace A. Thompson, III

Commissioner

Dated: September 27, 2006

SECRETARY OF LABOR,

Complainant,

v.

OSHRC DOCKET NO. 02-1140

STARTRAN, INC., and its successors,

Respondent.

Dr. William J. Kweder, Union Secretary,

AMALGAMATED TRANSIT UNION

LOCAL 1091,

Authorized Employee Representative.

APPEARANCES:

For the Complainant:

Madeleine T. Le, Esq., C. Elizabeth Fahy, Esq., U.S. Department of Labor, Office of the Solicitor, Dallas,
Texas.

For the Respondent:  

John J. Franco, Jr., Esq., Ogletree, Deakins, Nash, Smoak & Stewart., P.C., San Antonio, Texas

For the Authorized Employee Representative:

Dr. William J. Kweder, Joneth Wyatt, Amalgamated Transit Union, Local 1091, Austin, Texas

Before:             Administrative Law Judge: Benjamin R. Loye

DECISION AND ORDER

This proceeding arises under the Occupational Safety and Health Act of 1970 (29 U.S.C.
Section 651-678; hereafter called the “Act”).

Respondent, StarTran, Inc., and its successors ( StarTran), at all times relevant to this action
maintained a place of business at 2910 East 5 th Street, Austin, Texas, where it was engaged in
providing public transportation for the Austin area. On May 9, 2002 the Occupational Safety and
Health Administration (OSHA) conducted an inspection of StarTran’s Austin work site. As a result of
that inspection, on July 1, 2002 StarTran was issued an “other than serious” citation alleging violation
of §1904.40 of the Act together with a proposed penalty. By filing a timely notice of contest, StarTran

brought this proceeding before the Occupational Safety and Health Review Commission
(Commission).

StarTran maintains that it is an exempt employer under 29 C.F.R. 1975.5 of the Act, and so is
not subject to OSHA regulations. On October 29, 2003 StarTran moved for summary judgment
dismissing the July 1, 2002 citation. On December 11, 2002 this judge ruled that StarTran was not an
exempt entity pursuant to §1975.5. StarTran filed a petition for interlocutory review on December 20,
2002. That petition was denied without prejudice on January 22, 2003. On April 24, 2003 a hearing
was held in Austin, Texas. The parties have submitted briefs on the issues and this matter is ready for
disposition.

Alleged Violations

Other than Serious citation 1, item 1 alleges:

29 CFR 1904.40: Copies of records kept under Part 1904 were not provided upon request to an
authorized government representative within four (4) business hours:

a)On or about 05-19-02 the employer did not provide a copies (sic) of injury and
illness data for this establishment to the OSHA Compliance Safety and Health Officer,
pursuant to the investigation of a complaint. On or about 05-23-02 the employer wrote
a letter stating these records would not be produced.

StarTran stipulates to the facts alleged in the citation, and agrees that the proposed penalty of
$500.00 is appropriate should this judge find that the Act is applicable to its place of employment (Tr.
9; Exh. J-1). StarTran, however, continues to maintain that it is exempt from the operation of the Act
pursuant to 29 C.F.R. §1975.5. The only issue for this judge’s consideration, therefore, is the
applicability of §1975.5.

29 C.F.R. § 1975.5 provides that an "employer" subject to the Act "means a person engaged in a
business affecting commerce who has employees, but does not include the United States (not including

the United States Postal Service) or any State or political subdivision of a State." Under subparagraph
(b) of that section, an entity may be declared exempt from the Act under this provision if it is either:

(1) created directly by the State, so as to constitute a department or administrative arm
of the government, or (2) is administered by individuals who are controlled by public
officials and responsible to such officials or to the general electorate.

29 C.F.R. § 1975.5(c) sets forth factors to be considered in determining whether an entity
meets the test set forth in subparagraph (b).

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 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?

In evaluating these factors, due regard will be given to whether any occupational safety and
health program exists to protect the entity's employees.

Facts

StarTran is a Texas non-profit corporation organized pursuant to the Texas Non-Profit
Corporation Act, Article 1396–1.01, et seq., Texas Revised Civil Statutes Annotated (Exh. J-1, ¶ 8).
StarTran was created by the Capital Metropolitan Transportation Authority (Capital Metro), a
governmental entity established under the laws of the State of Texas (Exh. J-1, ¶ 8). StarTran was
created to comply with the requirements of the Federal Transportation Act [49 U.S.C. §533(3)], which
conditions the receipt of federal funds by a transit authority on the continuation of existing collective
bargaining rights of employees, inter alia (Tr. 158-165, Exh. C-1, R-1). Texas law prohibits collective
bargaining by public employees (Tr. 158-165).

Capital Metro’s board of directors consists of five publicly elected officials and two private
individuals who are hired by the board. One of the two non-elected members is Chief Executive
Officer (CEO) Fred Gilliam (Tr. 161, 174). According to the agreement under which StarTran
provides “employee support services” to Capital Metro, 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 (Exh. C-1, R-1). Under the agreement, Capital Metro retains its
governmental functions, including the right and obligation to determine routes, service and fares for
the mass transit system (Exh. C-1, R-1). Capital Metro provides 100 percent of StarTran’s financial
support, and retains control over its budget, fiscal affairs and property (Tr. 168-69; Exh. C-1, R-1).

StarTran’s rights and duties under the agreement are to provide “those services related to and
required by employment of the drivers, mechanics, and such other personnel as are necessary to
support Capital Metro in the manner mutually agreed by the parties in the provision of Mass Transit
service” (Exh. C-1, R-1). Article II amending the agreement states that StarTran additionally agrees to
provide safety and other training; Article III states that though Capital Metro provides fiscal,
purchasing and personnel services to support StarTran’s operations, “such services shall be ministerial
only, and that StarTran shall 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” (Exh. C-1, R-1).

Joneth Wyatt, president of Amalgamated Transit Union (ATU) Local 1091, testified that
StarTran employees are not public employees. They do not receive the same benefits as state
employees, do not have the same paid holidays, contribute to a different 401(k) plan, and have no civil
service job protection (Tr. 23-25, 31; see also , testimony of Kent McCulloch, Tr. 209).

The
employment conditions of the members of ATU Local 1091 are governed by the collective bargaining
agreement submitted as Complainant’s Exhibit C-2. The agreement covers the employees’ wages,
benefits, and disciplinary and grievance procedures (Tr. 197; Exh. C-2). The agreement was
negotiated by Mr. Wyatt and StarTran’s board of directors, which at the time included: StarTran’s
president, Gerald Reaubichaux, Reaubichaux’s secretary, StarTran’s director of transportation, its
manager of special transit, its labor relations coordinator, and its manager of maintenance (Tr. 27-28,
53). No one from Capital Metro was involved in negotiation of the collective bargaining agreement,
though the agreement had to be approved by Capital Metro (Tr. 28).

Wyatt testified that Capital Metro controls the purse strings for StarTran, and that StarTran,
therefore, generally follows recommendations made by Fred Gilliam, Capitol Metro’s CEO (Tr. 56).
Wyatt testified that he met with Gilliam and Capitol Metro’s board of directors several times over the
last three years to discuss personnel and collective bargaining issues (Tr. 57). According to Wyatt,
when the union cannot reach an agreement with StarTran during negotiations, it will bring the issue to
Gilliam and the Capitol Metro board before going public with the issue (Tr. 68-69, 71; see also,
testimony of Kent McCulloch, Tr. 191). Wyatt maintained that ATU did not, however, negotiate with
Capital Metro (Tr. 73).           William Kweder, a fixed route bus operator, testified that he receives his
paycheck from StarTran and is supervised by a StarTran employee (Tr. 77, 79). Kweder testified that
he can only be disciplined by his employer, StarTran (Tr. 78).

Mark Ostertag, Capital Metro’s safety manager, testified that he develops and administers both
Capital Metro and StarTran’s safety program (Tr. 126, 149). Either Ostertag or a safety specialist with
his department conducts new employee orientation for StarTran employees (Tr. 132). According to
Ostertag, the orientation includes a ‘safety component’ (Tr. 132). Training addressing defensive
driving skills and safe driving is conducted by the training department, as are quarterly 1 ½ hour safety
training courses (Tr. 132). Capital Metro and StarTran’s safety program covers hazardous materials,
lockout/tagout of electrical equipment, entry into confined spaces and hazards associated with blood-borne pathogens (Tr. 134-35). Ostertag does not participate in the enforcement of the safety program,
however (Tr. 146). StarTran is solely responsible for disciplining employees who violate safety rules
(Tr. 146).

Kent McCulloch, StarTran’s president and manager of labor relations, testified that he was
originally hired by StarTran’s president, Gerald Reaubichaux, but that his current boss is Fred Gilliam,
CEO of Capital Metro (Tr. 156-57). McCulloch stated that he is an at-will employee, whose continued
employment and pay depend on evaluations made by Gilliam (Tr. 157). McCulloch testified that all
the members of StarTran’s board of directors are appointed by Gilliam, based on their job titles, and
may be removed at the will of Capital Metro’s CEO (Tr. 174, 181-82). McCulloch stated that
StarTran’s administrative and managerial personnel are, in essence, employees of Capital Metro,
although their paychecks are paid out of StarTran’s budget (Tr. 182-83). McCulloch further testified
that the services provided by Capital Metro are not merely ministerial, as specified in its written
agreement with StarTran (Tr. 167-68, 213). In addition to safety training, Capital Metro provides
accounting, purchasing, and personnel services for StarTran. According to McCulloch, the provision
of these services requires the exercise of judgment and discretion. Capital Metro formulates policy in
these areas; those policies are reviewed and approved by Capital Metro management (Tr. 166-67, 210-11).

In the area of labor relations, however, McCulloch deals with the day-to-day administration of
the labor contract (Tr. 191). McCulloch has the authority to dispose of employee questions or
complaints; Capital Metro would not be involved in the regular conduct of business (Tr. 192-93).
Grievances and the arbitration of same are handled by representatives of StarTran (Tr. 197, 208; Exh.
C-2).

Dan Peabody, StarTran’s current director of transportation for fixed route services, testified
that Capital Metro’s CEO, Gilliam, is his boss (Tr. 230). In addition to his duties with StarTran,
Peabody supervises Capital Metro employees in the Purchased Transportation Division, including
employees of the Van Pool Division (Tr. 222). Peabody also oversees Capital Metro’s private
contracts with ATC Van Com and Greater Austin Transportation Company, which provide a shuttle
service and a fixed-route van service, respectively (Tr. 222). Peabody testified that Capital Metro’s
relationship with private, third parties who contract with them differs from Capital Metro’s
relationship with StarTran (Tr. 223). According to Peabody, he deals with Capital Metro’s CEO on a
daily basis in regard to the day-to-day operation of the fixed route services provided by StarTran (Tr.
225, 232-33), whereas Gilliam’s involvement with the private contractors is more limited (Tr. 226).
Third-party providers are required to meet performance standards, or to pay liquidated damages unlike
StarTran (Tr. 224).

Discussion

In order to determine whether StarTran is administered by individuals who are controlled by
and are responsible to public officials, this judge must consider the factors set forth under 29 C.F.R. §
1975.5(c), as set forth in subparagraph (b), which is cited in its entirety above.

It is undisputed that Capital Metro is a governmental entity, and that the majority of its board is
responsible to the general electorate. It is also undisputed that StarTran is a non-profit corporation
entirely funded by Capital Metro. The Secretary correctly points out that, because StarTran and its
employee unions participate in collective bargaining, StarTran’s employees are not treated like, or
regarded as employees of other State and/or political subdivisions. The only fact is dispute here is
whether t he individuals who actually administer StarTran are controlled by public officials.
Respondent maintains that StarTran’s operations are, in fact, administered by Capital Metro, which
controls StarTran’s purse strings, and therefore, ultimately, its operations. The Secretary argues that
StarTran independently exercises real day-to-day control over its employees, and over the terms and
conditions of their employment, through its administration of its collective bargaining agreement with
the unions to which its employees belong.

The only employee testifying, William Kweder, stated that he is supervised by StarTran
employees, is paid by StarTran, and can only be disciplined by StarTran. Kent McCulloch, StarTran’s
manager of labor relations, though believing that Capital Metro’s involvement in StarTran’s
accounting, purchasing, safety and human resources was more than ministerial, testified that the day-to-day administration of the labor agreement under which StarTran employees work remains within
StarTran, whose board is not directly responsible to the general electorate. The StarTran managerial
employees testifying, McCulloch, and Peabody, testified that they are at-will employees, appointed,
evaluated and retained at the discretion of Fred Gilliam, Capital Metro’s CEO. They reported to
Gilliam, and considered him their boss. There is no evidence in the record which suggests that Gilliam
had any authority to ask StarTran management to depart from the terms of the collective bargaining
agreement in matters concerning the terms and conditions of StarTran employees’ employment.
Although StarTran’s board may report to Capital Metro’s CEO, it does not follow that Capital Metro
administers Respondent StarTran’s operations. StarTran’s sole asset is its employees (Tr. 208); the
terms and conditions of its employees’ relationship with StarTran is governed by the collective
bargaining agreement negotiated between StarTran and the employee unions. This judge concludes,
therefore, that the individuals administering the entity in question, StarTran, are ultimately controlled
by the collective bargaining agreement, and not by the Capital Metro board.

Finally, in evaluating these factors, due regard must be given to the occupational safety and
health program in effect at StarTran to protect its employees. In Brock v. Chicago Zoological Soc.,
820 F.2d 909 (7 th Cir. 1987), the Seventh Circuit noted that the Act’s political subdivision exemption
represents an accommodation between the Act's general purpose of ensuring a safe workplace and the
states’ interest in preserving autonomy in their role as employers. The Court found that the Act’s
immediate concern was with the employment relationship, especially in matters involving the
employees’ safety and health. The Court held that the most important factors for consideration in
finding the exemption under the Act, therefore, were those dealing with the determination of the terms
and conditions of employment. Section 1927.5(c) itself requires that due regard be given to the
entity’s safety and health program when evaluating any and all of the other listed factors. The record
establishes that Capital Metro provided StarTran with its safety program, and also provided safety
training to StarTran employees. However, Capital Metro’s safety manager, however, did not actually
administer or enforce the safety program, as disciplining StarTran’s employees lay outside of his area
of authority. In this case, though Capital Metro provided StarTran’s safety program, that program was
administered by StarTran supervisory personnel. Capital Metro provided no oversight of StarTran’s
enforcement of the plan. It is clear that it was outside Capital Metro’s authority to interfere with
StarTran’s disciplinary procedures in any area, including the area of safety and health. Under Article
II of Amendment I to Capital Metro’s agreement with StarTran, StarTran is responsible for the safety
and health of its employees.

The record shows that the day-to-day working conditions of its employees, including the safety
and health program in place at the work site, is administered by StarTran’s board of directors.
StarTran’s board of directors is responsible for the negotiation and enforcement of the collective
bargaining agreement, and answers only indirectly to either public officials or to the general
electorate. I find that StarTran is not a governmental entity, and that its workplace is covered by the
strictures of the Act.

There being no other issue in this matter, the citation is affirmed.

ORDER

1. Citation 1, item 1, alleging violation of 29 C.F.R. §1904.40 is AFFIRMED, and a penalty of
   $500.00 is ASSESSED.

/s/

Benjamin R. Loye

Judge, OSHRC

Dated: July 23, 2003