The Illinois Appellate Court for the Fourth District recently found that a school district did not engage in any unfair labor practices when it subcontracted student transportation services to a third-party vendor and discharged its in-house bus drivers and bus monitors. The Court’s decision makes clear that subcontracting is an important economic weapon for employers and that, at least in some cases, it will not be an unfair labor practice to do it.

In Community Unit School District No. 5 v. Illinois Educational Labor Relations Boardthe District had been experiencing ongoing and significant operational problems in its transportation department, including difficulty hiring drivers to cover all of its routes, rampant absenteeism, and short staffing leading to frequent late buses and drop-off violations. By 2011, these problems were amplified, and the District had fielded numerous complaints from parents and the public regarding its transportation services. At the same time, in 2011 the transportation department employees unionized and a union (AFSCME) was certified as their exclusive bargaining representative. After receiving an initial demand to bargain from AFSCME, the District notified AFSCME that it was considering subcontracting its transportation services because of operational issues.

The District continued to bargain with AFSCME over an initial collective bargaining agreement while simultaneously soliciting and evaluating bids from third-party vendors to provide transportation services. Throughout this process, the District complied with its obligations under Section 10-22.34c of the Illinois School Code, which governs outsourcing of non-instructional services currently performed by school district employees. To that end, the District prepared cost comparisons and conducted a public hearing to review the matter, ultimately finding that it could achieve approximately $1.5 million in cost savings by subcontracting when compared to AFSCME’s economic proposal. The District then decided to approve a contract with a third-party vendor, and the following month terminated all of its transportation department employees.

AFSCME responded by filing an unfair labor practice charge against the District. Ultimately, the Illinois Educational Labor Relations Board (IELRB) found that the terminations constituted retaliation for the transportation department employees’ union activity and that the District failed to bargain in good faith regarding its subcontracting decision.

On appeal, the court reversed the IELRB’s decision in its entirety. With respect to the retaliation claim, the court found no evidence that the transportation department employees’ union activity was a substantial or motivating factor in their terminations. The court held that the IELRB improperly relied on the close proximity in time between AFSCME’s certification and the terminations, which standing alone is insufficient to establish unlawful union animus. The court further held that the overwhelming record evidence of significant operational issues within the transportation department, when coupled with the opportunity to achieve a significant cost savings by subcontracting, was sufficient to establish the District’s legitimate and bona fide business rationale for the terminations.

Significantly, the court rejected the IELRB’s reliance on the “inherently destructive” standard to analyze this retaliation claim. The court specifically held that, if this standard applied in this case, every decision by an employer to subcontract could be labeled “inherently destructive,” given that subcontracting decisions deprive work to entire groups of employees. Instead, the court pointedly held that subcontracting of bargaining unit work is both an inherent managerial right and an important economic weapon of self-help.

With respect to the refusal to bargain claim, the court agreed that the District’s decision to subcontract was a mandatory subject of bargaining, but reversed the IELRB’s determination that the District failed to bargain in good faith about this matter. The court found that the District provided ample notice to AFSCME in advance of its decision to subcontract, met with AFSCME to explain its decision, responded to AFSCME’s information requests, and considered AFSCME’s counterproposals.

This decision is a strong recognition of a public school district employer’s inherent managerial right to subcontract non-instructional services. It also serves as a timely reminder that Illinois courts will closely review the decisions of the IELRB on appeal, and will not hesitate to reverse the decisions of the IELRB—an agency that frequently is not a favorable venue for educational employers.

Susan Esquivel