Public Entities Cannot Hide Behind a Private Entity to Escape PERB’s Jurisdiction
In a rare procedural posture, the Public Employment Relations Board (“PERB”), rather than an administrative law judge, issued a post-hearing decision in El Camino Healthcare District (Aug. 15, 2023) PERB Dec. No. 2868-M. WRR represented the charging party union in this case. The case involved the application of the single/joint employer test from County of Ventura (2018) PERB Dec. No. 2600-M.
In 2008, El Camino Hospital acquired six outpatient clinics from the Verity bankruptcy and created a private company called Silicon Valley Medical Development (“SVMD”) to own and operate these clinics. El Camino Hospital was the only owner and member of SVMD. While there is PERB precedent making clear that the El Camino Healthcare District and El Camino Hospital are public entities subject to PERB precedent, the Hospital and District took the position that SVMD is a private entity and therefore under the jurisdiction of the National Labor Relations Board, not PERB. However, PERB rejected this argument and held that a private corporation whose sole “parent” is a public entity is subject to PERB jurisdiction. The holding took into account that the private entity is subject to the control of a public entity (that is ultimately responsible to the public), uses public funds, and accomplishes a public purpose (the provision of healthcare to the public).
In applying County of Ventura for a single-employer relationship, PERB looks at (1) the functional integration of operations; (2) centralized control of labor relations; (3) common management; and (4) common ownership or common financial control. Since PERB found a single-employer relationship, it did not need to reach the question of a joint-employer relationship. When various facilities are part of an integrated healthcare network, (the LLC clinics were part of El Camino Health), PERB views such a network as functionally integrated operations. PERB also looked at the financial investment made by the Hospital in SVMD, as well as the fact that SVMD profits and losses ultimately belonged to the Hospital. PERB also noted that SVMD and the Hospital shared officials and upper management, including labor relations for a period of time, and that the Hospital had the authority to appoint and remove SVMD leadership.
PERB also analyzed the successorship doctrine in this case, or when one employer takes over for another, for example, after the sale of a business. In this case, SVMD was a “clear successor” meaning it had to bargain over terms and conditions. Since SVMD was in a single employer relationship with both the District and Hospital, all three entities had an obligation to bargain with the union.
If you believe a public employer is using a wholly-owned private company to avoid bargaining or other legal obligations, contact your union counsel.