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52 FLRA No. 13

FEDERAL LABOR RELATIONS AUTHORITY

WASHINGTON, D.C.

_____

U.S. DEPARTMENT OF DEFENSE

DEFENSE LOGISTICS AGENCY

DEFENSE DISTRIBUTION REGION WEST

DEFENSE DISTRIBUTION DEPOT RED RIVER

TEXARKANA, TEXAS

(Agency)

and

NATIONAL ASSOCIATION OF GOVERNMENT EMPLOYEES

LOCAL R14-52

(Union)

0-AR-2691

_____

DECISION

September 6, 1996

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Before the Authority: Phyllis N. Segal, Chair; Tony Armendariz and Donald S. Wasserman, Members.

I. Statement of the Case

This matter is before the Authority on an exception to an award of Arbitrator Don J. Harr filed by the Agency under section 7122(a) of the Federal Service Labor-Management Relations Statute (the Statute) and part 2425 of the Authority's Regulations. The Union filed an opposition to the Agency's exception.

The Arbitrator determined that the Agency did not administer its performance awards program as required by the parties' memorandum of understanding (MOU) and Agency regulations. He ordered the Agency to administer the program as required by the MOU and regulations and to grant performance awards to all employees at a specified level of performance who had not received performance awards.

We conclude that the Agency has failed to establish that the Arbitrator's decision and order is deficient. Accordingly, we deny the Agency's exception.

II. Background and Arbitrator's Award

Under the Agency's performance appraisal system, employees receive numerical ratings up to and including 5.0. For the performance appraisal period ending in March 1993, the Agency granted performance awards of 3% of salary to all employees rated 5.0. The Agency also granted performance awards of 3% of salary to three employees rated 4.8 because they were the highest-rated employees in their division. Other employees rated 4.8 were not granted performance awards. The Union claimed that the Agency had failed to administer the performance award program on a fair and equitable basis as required by the parties' MOU on performance awards and that the Agency's actions were inconsistent with Agency performance appraisal system regulations.

The Arbitrator ruled that the Agency had not administered the performance award program as required by the MOU and Agency regulations. The Arbitrator found that approving cash awards to some employees rated 4.8 while denying awards to other employees rated 4.8 was inequitable, arbitrary and capricious. Accordingly, the Arbitrator ordered the Agency to grant all employees who were rated 4.8 and did not receive a performance award an award of 3% of salary and to administer the performance awards program as required by the MOU and Agency regulations.⁽¹⁾

III. Exception

A. Agency's Contentions

The Agency contends that the Arbitrator's order is contrary to management's right to determine its budget under section 7106(a)(1) of the Statute. The Agency argues that the Arbitrator's order does not satisfy either part of the budget test set forth in American Federation of Government Employees, AFL-CIO and Air Force Logistics Command, Wright-Patterson Air Force Base, Ohio, 2 FLRA 604 (1980), enforced as to other matters, 659 F.2d 1140 (D.C. Cir. 1981), cert. denied, 455 U.S. 945 (1982) (Wright-Patterson).

The Agency argues that the Arbitrator's order is deficient under the first part of the budget test because the order prescribes the amount to be budgeted for performance awards in the future. The Agency claims that the Arbitrator's decision requires it to budget at least 3% of the salaries of employees rated exceptional for future performance awards.

The Agency also argues that the Arbitrator's order is deficient under the second part of the budget test because the order requires a significant and unavoidable budget increase without any compensating benefits. The Agency maintains that the order would require a funding increase of almost $50,000, which it claims is significant because it constitutes about a 25% increase from the $186,433 budgeted for performance awards for Defense Distribution Depot Red River. The Agency also maintains that the increase is unavoidable because supervisors may not consider matters such as performance awards in rating employees. Finally, the Agency claims that the order does not provide for any compensating benefits that would offset the budget increase.

B. Union's Opposition

The Union contends that the Arbitrator's order is not contrary to management's right to determine its budget because the order merely enforces the Agency's obligations under the parties' MOU. The Union maintains that the Agency's reliance on Wright-Patterson is misplaced because that case did not concern arbitral remedies. Nevertheless, the Union asserts that the Arbitrator's order is not deficient under either part of the budget test. As to the first part of the test, the Union asserts that the Arbitrator's remedy does not directly prescribe any amounts for the Agency's budget. As to the second part of the test, the Union contends that the Agency fails to provide evidence to support its claim that no compensating benefits would accrue to the Government as a result of the performance awards ordered by the Arbitrator.

IV. Analysis and Conclusions

In this case, the Arbitrator ordered only a make-whole remedy. That order, which redresses the Agency's failure to grant performance awards on a fair and equitable basis during the appraisal period ending March 1993, requires the Agency to grant a specified performance award for that appraisal period. It does not direct future performance awards to any particular category of employees or in any particular amount. Therefore, in contending that the Arbitrator's order is deficient because it will have an effect on its future budgeting decisions, the Agency misconstrues that order.

In light of our interpretation of the Arbitrator's order, we find it unnecessary to decide whether, as the Agency asserts, we are required to apply the budget test set forth in Wright-Patterson to this case. As we discuss below, it is clear that the application of that test would not render the Arbitrator's order deficient.

However, we take this opportunity to note several points regarding the application of the Authority's budget test to a case such as this. First, although the Authority in the past has applied that test in resolving whether an arbitration award conflicted with management's right, the Authority has never found a monetary arbitration remedy to conflict with management's right to determine its budget under section 7106(a)(1) of the Statute. E.g., U.S. Department of the Air Force, Ogden Air Logistics Center, Hill Air Force Base, Utah and American Federation of Government Employees, Local 1592, 46 FLRA 1297 (1993) (Ogden Air Logistics Center). Second, as the Union points out, the test was developed as a means of resolving whether a union's bargaining proposal is inconsistent with management's right to determine its budget under section 7106(a)(1) and, therefore, outside the duty to bargain. The resolution of agency allegations that a matter proposed for negotiation is not negotiable is quite different from determining whether an arbitration award enforcing a negotiated contractual provision is deficient under section 7122(a) of the Statute. See Department of the Treasury, U.S. Customs Service and National Treasury Employees Union, 37 FLRA 309, 315-16 (1990). Finally, arbitrators are accorded significant latitude in the fashioning of remedies and every financial remedy will, of necessity, have some budget consequences.

In sum, application of the Wright-Patterson budget test in resolving exceptions to an arbitration award raises significant doctrinal and policy questions. These questions have not been addressed in the briefs filed by the parties in this case. In view of this fact, and because, as discussed below, the disposition of this case would be the same in any event, we will await a future case where the issue is fully litigated before resolving whether the budget test applies to the review of an arbitrator's order.

Even assuming that the Wright-Patterson budget test provides the analytical framework for resolving the Agency's exception, the Agency fails to establish that the award is deficient. First, in view of our finding that the Arbitrator's order does not prescribe future performance award budgets, we conclude that the Agency has failed to establish that the Arbitrator's order conflicts with management's right to determine its budget under the first part of the budget test. See, e.g., Ogden Air Logistics Center, 46 FLRA at 1302 (arbitrator's order granting a performance award as a remedy for an improper performance appraisal did not conflict with management's right to determine its budget because it did not prescribe a program, operation, or dollar amount that the agency was required to include in its budget).

The Agency also does not establish that the Arbitrator's order conflicts with management's right under the second part of the budget test. The Agency has failed to provide the information that is necessary to make a meaningful comparison with the Agency's budget. According to the Agency, the appropriate comparison is between the amount ordered paid by the Arbitrator and the performance award budget of Defense Distribution Depot Red River. However, prior decisions of the Authority have never used such a narrow and restrictive budget amount in assessing significance as that proposed by the Agency in its exception. The Agency has supplied no other budget information that would allow us to determine whether the Arbitrator's remedy requires a significant increase in the Agency's budgetary costs. Therefore, the Agency provides no basis for finding the Arbitrator's order deficient.

Accordingly, we deny the Agency's exception.⁽²⁾

V. Decision

The Agency exception is denied.

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FOOTNOTES:
(If blank, the decision does not have footnotes.)
 

1. There were no employees rated 4.9.

2. In U.S. Department of the Army, Headquarters, U.S. Army Aviation Center, Fort Rucker, Alabama and Wiregrass Metal Trades Council, 52 FLRA No. 9 (1996), the agency contended, and the Authority found, that an arbitrator's order that the agency grant the grievant a performance award was contrary to 5 C.F.R. § 430.504(d). In this case, the Agency has not contended that the Arbitrator's order is contrary to section 430.504(d). Consequently, we do not address the matter.

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