[ v14 p463 ]
14:0463(77)NG
The decision of the Authority follows:
14 FLRA No. 77
NATIONAL TREASURY EMPLOYEES
UNION
Union
and
INTERNAL REVENUE SERVICE
Agency
Case No. O-NG-524
DECISION AND ORDER ON NEGOTIABILITY ISSUES
The petition for review in this case comes before the Authority
pursuant to section 7106(a)(2)(E) of the Federal Service
Labor-Management Relations Statute (the Statute) and raises issues
concerning the negotiability of seven Union proposals relating to
various aspects of the Agency's Incentive Pay System. /1/ In deciding
that some of those proposals or portions thereof are within the duty to
bargain, the Authority makes no judgment as to their merits.
Union Proposal 1
The production level at which the employer will begin awarding
incentive pay will be computed as follows:
a. NTEU and IRS will mutually agree on the standards by F/P,
or
b. Standards will be set no higher than were achieved by the
average person in the Philadelphia Service Center during FY 80
with reasonable adjustments for job format changes. The "Average
Person" is computed by measuring production by F/P and dividing
that by total staff hours for FY 80. Any conversion between
measurement systems, e.g., documents to strokes, will be based on
just cause as demonstrated by management. Management will make
all relevant and necessary data available to NTEU before NTEU
needs to make a decision on any standards. If management uses
5(b) above to set a standard and the union disagrees with any
standard by filing a grievance, no test will be implemented until
the grievance and arbitration is resolved absent waiver of this by
the union.
Union Proposal 2
Once standards are set for the participating F/P tasks no
revised standards will be imposed during the test except by mutual
agreement.
Question Before the Authority
The question presented is whether, as alleged by the Agency, Union
Proposals 1 and 2 are inconsistent with management's rights to direct
employees in the agency and to assign work under, respectively, section
7106(a)(2)(A) and (B) of the Statute.
Opinion
Conclusion and Order: The Union's proposals are inconsistent with
management's rights to direct employees and assign work. Accordingly,
pursuant to section 2424.10 of the Authority's Rules and Regulations, IT
IS ORDERED that the Union's petition for review as to Union Proposals 1
and 2 be, and it hereby is, dismissed.
Reasons: The Agency instituted an Incentive Pay System for data
transcribers at its Philadelphia Service Center in order to create a
more efficient workforce through increased productivity. /2/ Under the
program, the production rate of data entry operators is measured by the
number of keys an employee pushes per hour on a data keyboard. /3/
Incentive pay in addition to an employee's basic salary is awarded
biweekly to employees whose performance exceeds certain quantitative and
qualitative requirements. /4/
It is well settled that, in order to achieve the levels of
productivity and quality needed to accomplish an agency's mission and
functions, management, pursuant to its rights to assign work and direct
employees, determines what work will be done, by whom, when, and what
standards of quality and quantity are expected. /5/ Union Proposals 1
and 2 would require negotiation of the performance standards to be used
for determining which employees will receive incentive pay and any
changes to such standards. The Union's principal contention, that under
Bureau of the Public Debt management only has the right to establish
performance standards for job retention, /6/ cannot be sustained. The
Authority has also held that management's rights to assign work and
direct employees extend to establishing job requirements, e.g.,
performance standards, for various levels of achievement, which
management will use to encourage and reward successful performance. /7/
Thus, an integral aspect of management's exercise of these rights is to
prescribe the performance standards which an employee must attain in
order to be eligible for a reward, such as incentive pay, for superior
performance. /8/ Since Union Proposals 1 and 2 would require bargaining
over such standards, they directly interfere with those rights. /9/
Therefore, they are outside the duty to bargain. /10/
Union Proposal 3
Any and every data entry program/function task will be included
in the test and be eligible for reward absent mutual agreement
(between the) parties or just cause shown by management. If a
task is not included in the test, management will inform the
employee of such at the time he/she is assigned to the task.
Everyone will be given a list (of) the F/P Codes included in the
test.
Question Before the Authority
The question is whether Union Proposal 3 is inconsistent with
management's rights to direct employees and assign work under section
7106(a)(2)(A) and (B) of the Statute, as alleged by the Agency.
Opinion
Conclusion and Order: The first sentence of Union Proposal 3 is
inconsistent with management's rights to direct employees and assign
work. However, the last two sentences of the proposal constitute
negotiable procedures which management will follow in the exercise of
those rights. Accordingly, pursuant to section 2424.10 of the
Authority's Rules and Regulations, IT IS ORDERED that the petition for
review as to the first sentence of the proposal be, and it hereby is,
dismissed. IT IS FURTHER ORDERED that the Agency shall upon request (or
as otherwise agreed to by the parties) bargain on the last two sentences
of the proposal.
Reasons: The first sentence of the proposal either would have the
effect of requiring the Agency to bargain over which job elements will
be eligible for incentive pay or of subjecting the Agency's decision as
to that matter to arbitral review. As discussed in connection with
Union Proposals 1 and 2, supra, management's rights to assign work and
direct employees extend to establishing job requirements, for various
levels of achievement, which management will use to encourage and reward
successful performance. By offering incentives to employees with
respect to certain, but not all, elements of their jobs, the Agency sets
priorities for the accomplishment of its work. Thus, the identification
of job elements for which incentives will be paid is an exercise of
management's rights to direct employees and assign work and may not be
negotiated /11/ or subjected to arbitral review. American Federation of
Government Employees, AFL-CIO, Local 1968 and Department of
Transportation, Saint Lawrence Seaway Development Corporation, Massena,
New York, 5 FLRA 70, 77-82 (1981), affirmed sub nom. American Federation
of Government Employees, AFL-CIO, Local 1968 v. Federal Labor Relations
Authority, 691 F.2d 565 (D.C. Cir. 1982), cert. denied, 103 S.Ct. 2085
(1983). The Union relies on the Authority's decision in American
Federation of Government Employees, AFL-CIO, Local 32 and Office of
Personnel Management, Washington, D.C., 3 FLRA 784 (1981) (Union
Proposal 5) which held negotiable a proposal to establish a "fair and
equitable" standard for certain arbitrations. That decision is
distinguishable. In that case, the proposed standard at issue was
limited to grievances and arbitration concerning the application to an
employee of the critical elements and performance standards established
by management. The "just cause" standard proposed herein, however,
would apply to management's identification of job elements for incentive
pay, rather than to application of that determination to an employee.
Thus, the sole effect of the standard proposed here would be to permit
arbitral review of the Agency's exercise of management rights. For that
reason, the Authority's decision in Saint Lawrence Seaway is controlling
and the Union's argument to the contrary cannot be sustained.
The Union explicitly requested the Authority to consider the last two
sentences of Union Proposal 3 separately from the first sentence. These
sentences are notice requirements that: (1) when a job task is not one
for which incentive pay may be awarded, management so inform an employee
upon assignment of such work; and (2) bargaining unit employees be
given a list of all job elements for which incentive pay may be awarded.
Such informational notices do not directly interfere with management's
rights to direct employees or assign work. /12/ Consequently, the last
two sentences of Union Proposal 3 constitute negotiable procedures under
section 7106(b)(2) relating to management's setting of requirements for
incentive pay purposes and are within the duty to bargain.
Union Proposal 4
Once IRS has assigned employees to the positions (Title,
Series, Grade) that will work the F/P tasks in the test, it will
permit employees to divide up the tasks among themselves or IRS
will be responsible for distributing the assigned tasks so that
each participating employee is given, to the maximum extent
feasible, a fair and equitable chance to earn incentive pay.
Management will avoid assigning an employee to a lower producing
F/P continuously. If this is violated, the harmed employee will
receive retroactive incentive pay at a reasonably projected rate.
Question Before the Authority
The question presented is whether, as alleged by the Agency, Union
Proposal 4 is inconsistent with management's right to assign work under
section 7106(a)(2)(B) of the Statute.
Opinion
Conclusion and Order: Union Proposal 4 is not inconsistent with
section 7106(a)(2)(B) of the Statute. Accordingly, pursuant to section
2424.10 of the Authority's Rules and Regulations, IT IS ORDERED that the
Agency shall upon request (or as otherwise agreed to by the parties)
bargain thereon.
Reasons: The first two sentences of Union Proposal 4 provide that
once management has assigned employees to the positions to which work
subject to the Incentive Pay System is assigned, specific job tasks
will, to the maximum extent feasible, be distributed so that each
employee will have a fair and equitable opportunity to earn incentive
pay. Although under the proposal the Agency could permit employees to
divide job tasks among themselves, it clearly reserves to Agency
management the ultimate right to make assignments of job tasks within
the Incentive Pay System. See American Federation of Government
Employees, AFL-CIO and Air Force Logistics Command, Wright-Patterson Air
Force Base, Ohio, 2 FLRA 604, 610-14 (1980) (Union Proposal III),
enforced sub nom. Department of Defense v. Federal Labor Relations
Authority, 659 F.2d 1140 (D.C. Cir. 1981), cert. denied sub nom. AFGE v.
FLRA, 455 U.S. 945 (1982) (proposal containing alternatives, one of
which preserved management's right to assign employees, held
negotiable). Moreover, it is the Union's stated intent that the choice
as to who makes assignments under the proposal is itself reserved to
management. Cf. International Organization of Masters, Mates and Pilots
and Panama Canal Commission, 11 FLRA No. 19 (1982) (proposal which would
have permitted only bargaining unit employees to make work assignments
held inconsistent with section 7106(a)(2)(B)). Thus, based upon this
interpretation of the proposal and contrary to the Agency's contention,
the first two sentences of the proposal are not inconsistent with
section 7106(a)(2)(B) of the Statute. /13/ With respect to the last
sentence of the proposal, the Union interprets it consistent with its
language as, in effect, merely incorporating the requirements and
remedies of the Back Pay Act, 5 U.S.C. 5596. /14/ That is, in an
arbitration proceeding based on an alleged violation of such contract
language, an arbitrator could award an appropriate remedy under 5 U.S.C.
5596. Such remedy would comprise only that which the arbitrator
determined an employee would have earned or received during the period
if the contractual violation had not occurred. /15/ Thus, the last
sentence of Union Proposal 4 is also within the duty to bargain.
Union Proposal 5
Incentive money is paid at the rate $.09 per one-tenth of an
efficient point over 100 percent. For example, performance at
125% efficiency equals $22.50 in incentive pay. The money will be
distributed on a pay period basis with the regular salary check.
If the employee works overtime he/she will be paid $.04 more per
one-tenth of a point otherwise payable. If employees of more than
one grade work the same F/P task then the $.09 will be increased
by $.02 for each grade above the minimum grade assigned the F/P
task.
Union Proposal 6
If an employee earns incentive pay for three consecutive pay
periods, he/she will receive incentive pay for any period during
which he/she takes paid leave at a rate equal to his/her average
incentive rate for the last pay period.
Union Proposal 7
Either party can halt this test at any time.
Question Before the Authority
The question presented is whether Union Proposals 5, 6, and 7 are
inconsistent with management's rights to direct employees and assign
work under section 7106(a)(2)(A) and (B) of the Statute.
Opinion
Conclusion and Order: The Union's proposals are inconsistent with
management's rights to direct employees and assign work. Accordingly,
pursuant to section 2424.10 of the Authority's Rules and Regulations, IT
IS ORDERED that the Union's petition for review as to Union Proposals 5,
6, and 7 be, and it hereby is, dismissed.
Reasons: Union Proposal 5 would set the rate of incentive pay for
bargaining unit employees and Union Proposal 6 would permit bargaining
unit employees to receive incentive pay for periods of time during which
they perform no work because they are on leave. As discussed in
connection with Union Proposals 1 and 2, supra, an integral aspect of
management's exercise of its rights to assign work and direct employees
is to establish a system of rewards and sanctions for employee
performance, including the provision of incentives to encourage and
reward superior performance. The nature of the incentive (e.g.,
monetary or nonmonetary), the amount of a monetary incentive, and the
circumstances under which an incentive may be awarded are essential
components of management's judgment. That is, they directly relate to
the potential success of the incentive in motivating the performance of
particular job tasks and, hence, to some extent determine the priorities
for accomplishing the agency's work.
In American Federation of State, County and Municipal Workers,
AFL-CIO, Council 26 and U.S. Department of Justice, 13 FLRA No. 96
(1984), the Authority stated, with respect to a proposal concerning the
number of rating levels for appraisal of an employee's performance:
The determination of the number of performance levels directly
affects the degree of precision with which management can
establish and communicate job requirements (performance
standards), the range of judgments which management can make
regarding performance in the context of performance appraisals,
and the range of rewards and sanctions which management can apply
to such performance. In short, the number of such levels is
integrally related to the effectiveness of an agency's using
performance standards to accomplish the work of the agency in a
manner consistent with the exigencies of effective government.
(Footnote omitted.)
Thus, on that bases, the Authority held the proposal to be
inconsistent with management's statutory rights to direct employees and
assign work.
With respect to Union Proposals 5 and 6 herein, as noted above, an
award of incentive pay is directly linked to job performance. The rate
of the incentive and the circumstances under which it will be provided
has direct bearing on the successful use of performance-based incentives
by management in order to accomplish the work of the Agency in a manner
consistent with the exigencies of effective government. Thus, in a
manner substantially similar to the proposal held nonnegotiable in
Department of Justice, these matters are an essential aspect of the job
requirements which operate to encourage and reward successful
performance, within the meaning of the management rights to direct
employees and assign work. Consequently, these proposals are outside
the duty to bargain. /16/
Union Proposal 7 would permit the Union to terminate at any time the
Incentive Pay System. As previously determined herein with respect to
Union Proposals 1 and 2, management has the statutory right to establish
such a system. It is clear that the termination of the system by the
Union would directly interfere with that prerogative. For that reason,
Union Proposal 7 is not within the duty to bargain. See Association of
Civilian Technicians, Delaware Chapter and National Guard Bureau,
Delaware National Guard, 3 FLRA 57 (1980). Issued, Washington, D.C.,
May 9, 1984
Barbara J. Mahone, Chairman
Henry B. Frazier III, Member
FEDERAL LABOR RELATIONS AUTHORITY
Member Haughton concurring in part, dissenting in part:
In this case the Authority has the opportunity to consider whether
proposals on various aspects of an incentive pay system are within the
statutory duty to bargain or, conversely, whether the proposals infringe
on management's right to direct employees and assign work. The
Authority here decides that a Federal agency may unilaterally establish
an incentive pay system, set the standards to be used in determining
which employees will be eligible to receive incentive pay and identify
the job elements for which incentives will be paid. With these
conclusions, I agree as coming under management's rights to assign work
and to direct employees in performing such work. I therefore agree with
the decision of the majority as to Proposals 1 through 4 and Proposal 7.
My colleagues further decide, with respect to Union Proposals 5 and
6, that management may unilaterally establish the amount of incentive
pay for particular production and the periods for which it would be
paid. As to this part of the decision, I respectfully dissent. It is a
strained interpretation to include the setting of incentive rates under
the rubric of management's rights to assign work and direct employees.
It must be recognized that the incentive rate payable is a condition
of employment as the term is defined in the Statute /17/ and that the
duty to bargain under the Statute extends to conditions of employment.
/18/ Although matters "specifically provided for by Federal statute" are
expressly excluded from the definition of "conditions of employment" in
section 7103(a)(14)(C) (and, thus, are not within the scope of the duty
to bargain), incentive pay is not "specifically provided."
Incentive pay is not mentioned in the Chapter which establishes the
basic rates of pay for Federal employees. See 5 U.S.C. 5301 et seq.
Neither has it been shown that incentive pay is mentioned in any other
statute covering wages or fringe benefits. While the Agency has cited
statutory provisions authorizing certain specific kinds of awards
systems, these provisions are silent with respect to incentive rates.
(See, for example, 5 U.S.C. 5401 et seq. and 5 U.S.C. 4503.)
The fact is, no Federal statute governs the area of incentive pay
systems so as to exclude such matters from the definition of conditions
of employment under section 7103(a)(14)(C). Furthermore, with respect
to the Agency's argument that the establishment of an incentive pay
system is within its discretion, the Authority has held that to the
extent an agency has discretion with respect to a matter affecting the
working condition of its employees, that matter is within the duty to
bargain. National Treasury Employees Union, Chapter 6 and Internal
Revenue Service, New Orleans District, 3 FLRA 737 (1980); American
Federation of State, County and Municipal Employees, AFL-CIO Local 2477
and Library of Congress, Washington, D.C. (and the case consolidated
therewith), 7 FLRA 578 (1982), enforced sub nom. Library of Congress v.
Federal Labor Relations Authority, 699 F.2d 1280 (D.C. Cir. 1983).
The question still remains as to whether the rights reserved to
management by section 7106(a) of the Statute restrict the parties'
ability to negotiate the amount of incentive pay.
My colleagues find that Union Proposals 5 and 6 involve reserved
management rights on the theory that "the nature of the incentive (e.g.,
monetary or nonmonetary), the amount of a monetary incentive, and the
circumstances under which an incentive may be awarded are essential
components of management's judgment." In another part of the opinion,
the majority finds that because "the rate of the incentive and the
circumstances under which it will be provided has a direct bearing on
the successful use of performance-based incentives . . . these matters
are an essential aspect of the job requirements which operate to
encourage and reward successful performance, within the meaning of the
management rights to direct employees and assign work."
It seems from the foregoing that the majority opinion might suggest
that implementation of an incentive pay system designed to motivate
employees to greater performance must be regarded as an integral part of
management's right to direct employees and assign work. The effect an
incentive rate might have on motivation should not be the basis on which
the Authority decides whether a proposal is within the duty to bargain.
Management has the statutory right to establish the performance
standards which an employee must attain in order to receive incentive
pay and the job elements which are subject to such incentive pay (see
the discussion as to Proposals 1 and 2). However, negotiation over the
implementation of an incentive pay system after management has exercised
its rights does not interfere with management's judgment. In this case,
Union Proposals 5 and 6 would not limit management's authority to
determine what work shall be done, how or by which employee it shall be
done, or the quality, quantity or timeliness of work required of an
employee. See National Treasury Employees Union and Department of the
Treasury, Bureau of the Public Debt, 3 FLRA 769, 776-78 (1980), affirmed
sub nom. National Treasury Employees Union v. Federal Labor Relations
Authority, 691 F.2d 553, 556-57, 564 (D.C. Cir. 1982). As I have noted
above, it requires a strained interpretation of the phrases "direct
employees" and "assign work" to find that Proposals 5 and 6 are not
negotiable.
The majority is concerned about motivation. Not to permit joint
negotiations to the maximum extent permitted by law could, particularly
in incentive system cases, be counterproductive to motivating employees
to greater efficiency and productivity. This is a goal expressly
recognized in section 7101(a)(2) of the Statute, where Congress found
that " . . . the public interest demands the highest standards of
employee performance and the continued development and implementation of
modern and progressive work practices to facilitate and improve employee
performance and the efficient accomplishment of the operations of the
Government." Issued, Washington, D.C., May 9, 1984
Ronald W. Haughton, Member
--------------- FOOTNOTES$ ---------------
/1/ The Union in its response to the Agency's statement of position
withdrew its petition for review as to three other proposals.
Therefore, these proposals will not be considered further herein.
/2/ Agency Statement of Position at 2.
/3/ Philadelphia Service Center Incentive Pay System Guide (IPS
Guide) at 3 (set forth as Attachment 1 to the Union's Reply Brief). See
also Union Reply Brief at 1.
/4/ IPS Guide at 4-6.
/5/ National Treasury Employees Union and Department of the Treasury,
Bureau of the Public Debt, 3 FLRA 769, 776-78 (1980), affirmed sub nom.
National Treasury Employees Union v. Federal Labor Relations Authority,
691 F.2d 553, 556-57, 564 (D.C. Cir. 1982).
/6/ Union Reply Brief at 6-7.
/7/ National Treasury Employees Union and U.S. Nuclear Regulatory
Commission, 13 FLRA No. 49 (1983) (Union Proposal 2).
/8/ Cf. National Federation of Federal Employees, Local 541 and
Veterans Administration Hospital, Long Beach, California, 12 FLRA No. 62
(1983) (proposal to design, develop and administer an incentive awards
program which did not present the issue of management's right to
establish performance-based incentives was held negotiable).
/9/ In support of its position, the Union cites Internal Revenue
Service, Buffalo District and National Treasury Employees Union, Chapter
58, 2 FLRA 105 (1979), a decision on exceptions to an arbitration award
arising under Executive Order 11491, as amended. Such reliance is
misplaced. Simply stated, that case did not involve questions
concerning negotiability under the Statute.
/10/ The Union's further contention, that the Agency "raised no
objections" to the last three sentences of Union Proposal 1 and,
therefore, these sentences should be considered to be negotiable, is
without merit. The Agency alleged that the entire proposal is
nonnegotiable. Petition for Review, Attachment 1.
/11/ Nuclear Regulatory Commission, 13 FLRA No. 49 at 3-4.
/12/ American Federation of Government Employees, AFL-CIO, Local 3804
and Federal Deposit Insurance Corporation, Chicago Region, Illinois, 7
FLRA 217 (1981) (Union Proposal 1).
/13/ Association of Civilian Technicians and State of Georgia
National Guard, 2 FLRA 581 (1980).
/14/ Union Reply Brief at 9.
/15/ See Bureau of Alcohol, Tobacco and Firearms and National
Treasury Employees Union, 12 FLRA No. 13 (1983).
/16/ In view of this decision, it is unnecessary to address the
Agency's remaining contentions as to the nonnegotiability of these
proposals.
/17/ Section 7103(a)(14) provides, in pertinent part:
conditions of employment means personnel policies, practices,
and matters, whether established by rule, regulation, or
otherwise, affecting working conditions(.)
/18/ Section 7103(a)(12) provides:
collective bargaining means the performance of the mutual
obligation of the representative of an agency and the exclusive
representative of employees in an appropriate unit in the agency
to meet at reasonable times and to consult and bargain in a good
faith effort to reach agreement with respect to the conditions of
employment affecting such employees and to execute, if requested
by either party, a written document incorporating any collective
bargaining agreement reached, but the obligation referred to in
this paragraph does not compel either party to agree to a proposal
or to make a concession(.)