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International House v. National Labor Relations Board

decided: April 9, 1982.


Petition for review of an order of the National Labor Relations Board finding petitioner in violation of sections 8(a) (1), (3) and (5) of the National Labor Relations Act, 29 U.S.C. § 158(a) (1), (3), (5) (1976), and cross-petition for enforcement. Review granted, order set aside and enforcement denied.

Before Waterman, Van Graafeiland and Meskill, Circuit Judges.

Author: Meskill

This appeal involves an order of the National Labor Relations Board finding International House ("IH") in violation of sections 8(a)(1), (3), and (5) of the National Labor Relations Act ("NLRA"), 29 U.S.C. § 158(a)(1), (3), (5) (1976). IH petitions to have the order set aside, and the Board cross-petitions for enforcement. The Board's order was premised upon a finding that IH was a joint employer of cafeteria workers represented by District 1199, National Union of Hospital and Health Care Employees, a/w Retail, Wholesale and Department Store Union, AFL-CIO ("Union"). Because this finding is not supported by substantial evidence, we grant IH's petition to review, set aside the Board's order and deny enforcement.


IH is a non-profit residence for students from around the world who attend graduate schools in New York City. Each of its 500 residents has a single room and access to a variety of other facilities including music practice rooms, a game room, laundry facilities, a pub, and a cafeteria. In addition, IH sponsors a "work-aid" program which enables residents to offset room and board costs by performing work within the building. IH allows its residents to earn credit only up to the total value of room and board. Thus, resident workers are never paid in cash.*fn1

In December 1974, IH retained Dining and Kitchen Administration, Inc. ("Daka") to manage and to operate the cafeteria. Daka, a Massachusetts corporation, provided similar food services at approximately 160 other locations. The contract provided that Daka would operate "as an independent contractor on its own credit." IH's principal responsibilities under the contract were to furnish "completely equipped" facilities, utilities, and maintenance. The contract also authorized IH to set standards of "quality, cleanliness, safety, and health," and provided that IH and Daka would mutually determine "menus, prices, hours, service, and schedules of food service." The contract left Daka with all other principal duties, including day-to-day management and "hiring and supervision of all employees in the food service department." The agreement provided for automatic renewal each year and was terminable upon thirty days notice by either party.

The contract originally provided for compensation on a "cost-plus basis":

DAKA will charge 3% of total operating revenue for general and administrative expense. DAKA will retain the first 3% profit defined as total operating revenue less food, labor, controlled and fixed expenses. Profit in excess of 3% will be divided on an equal basis between DAKA and (IH) on an annual basis at the end of each DAKA fiscal year. DAKA will have the sole responsibility for financial loss from the food service operation.

This compensation formula was revised for the 1978-79 year. The changes did not alter the cost-plus arrangement, but did, inter alia, call upon Daka to submit an annual fixed budget covering estimated operating costs for the entire fiscal year. Only actual food costs were to be excluded from the budget. IH paid Daka monthly for the agreed upon operating costs, including Daka's management fee, and for actual substantiated food expenses.

In addition to its regular staff of approximately ten, Daka employed a number of IH residents. These residents were not carried on Daka's payroll and did not receive the fringe benefits of regular staff workers. Instead, Daka merely recorded the number of hours worked by residents each week so IH could give appropriate credit against room and board. IH then deducted the value of the residents' labor from Daka's monthly compensation. The resident workers, however, were under the direct supervision of Daka personnel.

During all times relevant to this case, the cafeteria was open only to IH residents and their guests, and was located on IH's third floor. There were no outward indications that Daka operated the cafeteria-the workers' uniforms had no insignias, and no identifying signs were posted. As one Daka employee stated:

If you walked in there for the first time in your life you would probably not know that it was operated by DAKA because there was nothing to indicate. If you didn't know what our uniform color was or what our standards were and how we dressed the counters and so forth, you would not know.

J. App. Exh. Vol. at 278x.

On September 6, 1978, the Union filed a certification petition with the Board's regional office, requesting an election among the "service and maintenance employees" employed by Daka at the IH cafeteria. There was never any indication during the representation proceedings that IH was considered a joint employer of the cafeteria workers. The petition named Daka as the sole employer at the representation hearings. An IH attorney attended the first day of hearings as an observer, and entered a formal appearance for IH on the second day of hearings. However, IH did not otherwise participate in the proceedings.*fn2 In fact, the Hearing Officer at one point specifically asked Daka's attorney, John Coyne:

There is, as I understand, a relationship between (IH) and (Daka) for these kitchen employees. Does the Employer intend to raise at all an issue of joint employers?

J. App. Exh. Vol. at 95x. Mr. Coyne responded negatively.

Daka contended at the hearings that the cafeteria's resident workers should be included within the bargaining unit. Initially, the Union sought to exclude residents from the unit on the ground that they lacked a sufficient community of interests with full-time Daka employees, particularly with respect to fringe benefits and payroll matters. Eventually, the Union ...

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