DC Circuit Overturns NLRB’s Assertion of Jurisdiction over Airline Contractor

By Michele Haydel Gehrke

In an important decision for the airline industry and its contractors, the United States Court of Appeals for the DC Circuit in ABM Onsite Services – West, Inc. v. NLRB overturned a decision by the National Labor Relations Board (NLRB) asserting jurisdiction over an airline contractor in a representation dispute involving baggage handlers at the Portland airport. The Court specifically held that by adopting the National Mediation Board’s “whittl[ed] down version of its “control test,” the NLRB acted arbitrarily and capriciously when asserting jurisdiction over an entity that is a contractor for airlines (which historically have been subject to the RLA, not the NLRA). As a result, the Court remanded the case to the NLRB to either offer a reasoned explanation for departing from the traditional six-factor jurisdictional test, or refer the matter to the NMB to explain why it changed its jurisdictional analysis so the NLRB could determine whether it (the NLRB) agreed with the NMB’s modified approach. 

The case initially arose when the International Association of Machinists and Aerospace Workers (IAM) sought to organize a group of ABM Onsite Services – West, Inc. (ABM) employees. A consortium of airlines at the Portland airport hired ABM to handle baggage at the airport. In response to the IAM’s petition to represent the baggage handlers, ABM objected to the NLRB’s jurisdiction and argued it is subject to the Railway Labor Act (RLA), not the National Labor Relations Act (NLRA), since ABM is controlled by airlines. The Regional Director of the NLRB rejected this argument, which was affirmed by the NLRB, and ordered an election. The IAM won the election, which required ABM to bargain with the union. ABM refused to bargain, to challenge the jurisdictional decision, and the IAM filed an unfair labor practice charge. The NLRB granted summary judgment against ABM and this appeal followed. 

When determining whether a given company is “controlled by” an airline, the NMB considers:(1) the extent of the airline’s control over the manner in which the contractor conducts its business, (2) the airline’s access to the contractor’s operations and records, (3) the airline’s role in the contractor’s personnel decisions, (4) the degree of supervision by the airline over the contractor’s employees, (5) whether the contractor’s employees are held out to the public as the airline’s employees, and (6) the extent of the airline’s control over employee training. Air Serv Corp., 33 NMB 272, 285 (2006). The NLRB adopted this test as its own when deciding cases before it. 

However, since 2013, without overruling its traditional test or prior precedent, the NMB has required airlines to exercise a “substantial ‘degree of control over the firing[] and discipline of a company’s employees’ before it would find that company subject to the RLA.” Following the NMB’s lead, the NLRB adopted this heightened test when finding that the airlines did not exercise sufficient control over ABM. 

The DC Circuit explained that the NLRB’s decision was arbitrary and capricious because once the NLRB “adopted and applied the NMB’s traditional test, it bound itself to continue doing so; any deviation would require a reasoned explanation.” When asserting jurisdiction over ABM, the NLRB relied exclusively on the NMB’s more stringent control test without explaining its departure from the standards the NLRB has previously adopted. Overturning the NLRB’s order, the Court held “when the Board fails to explain – or even acknowledge – its deviation from established precedent, ‘its decision will be vacated as arbitrary and capricious.’” 

This case is important for airlines and airline contractors because by requiring the NLRB to continue to follow its precedent or justify its departure from the traditional application of the jurisdictional test, the NLRB may be more likely to find RLA jurisdiction applies -- particularly given the shifting composition of the NLRB in today’s political landscape. The unique protections of RLA jurisdiction -- chief among them system-wide bargaining units and procedural obstacles to work stoppages-- are important for airline contractors to provide greater stability in labor relations in the airline industry.