[ v21 p282 ]
21:0282(36)NG
The decision of the Authority follows:
21 FLRA No. 36
NATIONAL TREASURY EMPLOYEES
UNION, CHAPTER 207
Union
and
FEDERAL DEPOSIT INSURANCE
CORPORATION, WASHINGTON, D.C.
Agency
Case No. 0-NG-446
14 FLRA 598
DECISION ON REMAND
I. Statement of the Case
By its Order of April 26, 1985, the United States Court of Appeals
for the District of Columbia Circuit granted the Authority's motion to
remand the record in the instant case so that the Authority could
consider the relevance, if any, of the Agency's August 20, 1984 issuance
to the Authority's initial decision herein, National Treasury Employees
Union, Chapter 207 and Federal Deposit Insurance Corporation,
Washington, D.C., 14 FLRA 598 (1984) (Member Haughton dissenting). The
proposal remanded to the Authority was the following:
Union Proposal 5 /1/
Article 59 -- Salary
Section 1
The salary structure, that is the grades and steps of the
schedule, being used by FDIC will be maintained. Hereafter, all
employees will have their current salaries adjusted for the
cost-of-living/comparability factor. The adjustment will be equal
to the statistical adjustment recommended to the President by the
Pay Advisory Council. (After October 1980 the adjustment factor
developed by the Council will be modified to account for the
different comparability positions between FDIC and those employees
under the General Schedule. Beginning in January 1981 the parties
will meet to seek agreement on the modification formula.) This
adjustment will become effective the beginning of the first pay
period following the announcement of it by the council or other
appropriate sources. It will be unaffected by Presidential or
Congressional actions.
Section 2
NTEU agrees to establish with the EMPLOYER a productivity
committee that will monitor the impact of the new salary
adjustment system and seek reasonable ways to increase the
productivity of the EMPLOYER, e.g., decrease employee turnover,
remove work obstacles, improve upon available machinery and
procedures, raise employee morale, etc.
In its initial decision the Authority held that Union Proposal 5 was
outside the duty to bargain under section 7117(a)(2) of the Federal
Service Labor-Management Relations Statute (the Statute), as amended, 5
U.S.C. Sections 7101-7135 (1982 and Supp. II (1984) /2/ and section
2424.11(a) of the Authority's Rules and Regulations /3/ because it was
barred from negotiation by an Agency resolution for which a compelling
need exists. Specifically, the Authority determined that Agency
resolutions establishing a uniform salary structure for Agency employees
were essential to the accomplishment of the mission or the execution of
the functions of the Agency in a manner which is consistent with the
requirements of an effective and efficient government. /4/ The
Authority found that the Agency's uniform salary system, whereby
employees at the same grade and step receive the same salary was
essential to achieving the Agency's objective of pay equity. Further,
the Authority determined that pay equity was a critical factor in
maintaining employee morale and productivity, which in turn facilitated
the effective and efficient operation of the Agency. The Union's
proposal, the Authority concluded, by providing a different salary
system for unit employees in the Washington headquarters office, would
frustrate the goal of pay equity and thus would disrupt the effective
and efficient accomplishment of the mission of the Agency. The Agency
is comprised of employees in 14 regional offices across the country as
well as bargaining unit and nonbargaining unit employees in the
Washington headquarters.
The Union appealed the Authority's decision to the U.S. Court of
Appeals for the District of Columbia Circuit, appeal docketed sub nom.
National Treasury Employees Union v. Federal Labor Relations Authority,
No. 84-1286 (D.C. Cir. July 6, 1984). Subsequent to the filing of the
appeal, the Agency's Board of Directors, on August 20, 1984, adopted a
resolution establishing a cost-of-living adjustment to the salaries of
all Agency employees effective January 1, 1985. /5/ On the same date,
the Agency notified employees of a reorganization of its regional
offices and explained that the system of cost-of-living benefits
established by the Board of Directors' resolution was designed, in part,
to make it possible for employees moving to higher cost areas pursuant
to the reorganization to suffer no financial loss when compared to
Agency employees in lower cost areas. /6/ The Union then filed with the
Court a Motion to Supplement the Record to include the Agency's August
20, 1984 Notice to All Employees, arguing that the Notice revealed that
the Agency had abandoned a uniform salary scheme. The Authority also
filed a motion with the Court requesting that the case be remanded to
enable it to consider the relevance, if any, of the Agency's action to
the Authority's earlier decision. By Order of April 26, 1985, the Court
granted the Authority's motion and denied the Union's motion. The issue
before the Authority on remand concerns the relevance of the Agency's
August 20, 1984 resolution to the Authority's previous decision. After
careful consideration of the record in the case, including the parties'
submissions pursuant to the Authority's Notice of Reopened Proceedings,
the Authority makes the following determinations.
II. Positions of the Parties
On remand, the Union contends that the Agency's August 20, 1984
resolution undermines the Authority's earlier determination that a
compelling need exists for Agency resolutions prescribing a uniform
salary structure based upon an employee's grade and step. The Agency
contends that its August 20, 1984 resolution establishes a benefit for
employees wholly apart from and unrelated to its salary schedule and,
thus, the Aguust 20, 1984 resolution does not fall within the scope of
the Authority's decision as to the essentiality of the Agency's salary
schedule. In the alternative, the Agency argues that even if the
Agency's August 20, 1984 resolution is found to pertain to employee
salaries, that determination does not require the reversal of the
Authority's decision. The Agency concludes that, for the same reasons
as are set forth in the Authority's original decision, a compelling need
exists for the cost-of-living adjustments established in the Agency's
August 20, 1984 resolution. The Agency also contends that the proposal
directly interferes with its right to determine its budget under section
7106(a)(1) of the Statute.
III. Analysis
A. Relationship of Resolution to Salary
As to the Agency's first contention, that its cost-of-living
adjustments constitute separate and unrelated employee benefits, the
Authority finds, in agreement with the Union, /7/ that the subject
matter of the Agency's August 20, 1984 resolution directly relates to
the issues pertaining to the Agency's salary structure resolved by the
Authority in its initial decision. The resolution provides for "a full
cost-of-living adjustment to the salaries of all . . . employees."
(Emphasis added.) /8/ Moreover, the record indicates that a major reason
for adopting a system of cost-of-living adjustments is to make the
salaries of Agency employees more competitive with salaries for
comparable jobs in higher cost areas. /9/ The Agency argues that
because the cost-of-living adjustment is based upon job location rather
than position classification it is a "relocation differential" and as
such is an employee benefit. However, rather than substantiating its
claim, the Agency's argument only emphasizes the similarity to other
forms of wage differentials, like an environmental differential or
hazardous duty pay. Furthermore, the Agency acknowledges that its
cost-of-living adjustment constitutes taxable income to the employee,
again implicitly underscoring the distinction between the cost-of-living
adjustment involved herein and typical non-taxable employee benefits,
like life and health insurance. /10/ In short, the cost-of-living
adjustment established by the Agency is an increment to employee salary.
It is necessary, therefore, to consider the effect of its establishment
upon the Authority's prior decision.
B. Compelling Need
The Union contends that the Agency can no longer claim, and the
Authority could not now find, that the uniform salary system established
by Board of Director resolutions is essential to the accomplishment of
the Agency's mission or the execution of its functions in a manner
consistent with the requirements of an effective and efficient
government. With the adoption of the August 20, 1984 resolution, the
Agency no longer has a uniform salary system. In particular, the Union
argues that since, under the Agency's cost-of-living adjustment,
employees at the same grade and step will not receive the same salary,
the Agency cannot claim, nor can the Authority find, that the August 20,
1984 resolution is essential to the achievement of pay equity and the
preservation of employee morale. The Union concludes that there is no
compelling need for the Agency's resolution so as to bar negotiation on
the Union's proposal. The Agency cannot show that the disparate rates
of pay established thereby are any more "essential" than the difference
in rates of pay for unit employees which would result from the Union's
proposal.
In its initial decision the Authority held that a compelling need
existed for uniformity in the Agency's pay-setting system, compensating
employees on the basis of the same salary rate for positions at the same
grade and step. The Authority stated as follows (at 611-12 of the
decision)"
The Agency has demonstrated that the need for uniformity in its
pay system is an integral aspect of the Agency's stated objective
of pay equity. The Agency's need for uniformity is thus not one
of mere administrative convenience, as our colleague suggests in
dissent. In this regard, the Agency has shown that in the pay
setting area, under the circumstances presented, lack of
uniformity would result in pay inequity which in turn would result
in disruption inimical to the accomplishment of the Agency's
mission and execution of its functions in a manner consistent with
an effective and efficient government. Thus, in the circumstances
in this case, we are persuaded that there is an overriding need
for a uniform pay setting system throughout the Agency in order to
operate effectively and efficiently to accomplish its mission.
(Footnotes omitted and emphasis added.)
In reaching its finding of compelling need the Authority addressed
both uniformity as to amount, i.e., that employees at the same grade and
step receive the same salary, and uniformity of pay-setting method,
i.e., that all employees would be paid on the basis of the same system
of computing salary rates. The Authority did not distinguish between
these two different aspects of uniformity because, under the facts
presented at that time, the method of computing employee salaries
resulted in uniform salary rates. However, as the Union argues, the
Agency's pay-setting system as modified in the August 20, 1984
resolution no longer provides uniform salary rates for employees at the
same grade and step. Thus, the issue now before the Authority is
whether the Agency has shown that it nevertheless has preserved in its
pay-setting system a uniformity of method which is essential to the
accomplishment of its mission. /11/
While the August 20, 1984 resolution modifies the Agency's salary
structure by adding a cost-of-living adjustment, the system of
determining employee salaries remains uniform. The same method or
formula for computing relative cost-of-living in areas where Agency
offices are located is applied to all employees of the Agency. /12/ As
the Agency notes, the cost-of-living adjustment modification of its
salary structure enhances its ability to maintain pay equity among its
employees by eliminating regional cost differentials and thereby
equalizing employee "buying power." /13/ In so doing, the Agency
increases the efficiency and effectiveness of its accomplishment of its
mission by facilitating the movement of employees within its regional
offices and by making its salaries more competitive with other employers
in higher cost areas. /14/ The Union's proposal, on the other hand,
would establish a method of computing the cost-of-living adjustment for
unit employees in the Washington headquarters office which is different
from that established for non-unit employees in the headquarters and 14
other regional locations by the Agency's August 20, 1984 resolution,
/15/ namely, it would adopt the recommendations of the President's Pay
Council. /16/ Such different treatment of those employees who happen to
be in the unit nullifies the Agency's objective of equalizing employee
"buying power" throughout the Agency and, consequently, undermines the
incentives for employees to move. The only way by which the Agency can
insure its ability to accomplish its objective of equitable treatment of
its employees is to maintain a uniform pay-setting system. The
Authority disagrees with the Union's argument that the Agency has not
shown that the pay-setting system set forth in the August 20, 1984
resolution is the only way to achieve those objectives. /17/ Any
pay-setting system which involves different methods of calculating the
salaries of similar groups of employees, as would be the case if the
Union's proposal were ultimately to be adopted, could produce inherently
inequitable results by treating similarly situated groups of employees
differently.
C. Management's Right to Determine Its Budget
The Agency also argued in this case that Union Proposal 5 is outside
the duty to bargain under the Statute because it directly interferes
with management's right to determine its budget under section
7106(a)(1). /18/ However, the Agency has not demonstrated that
implementation of the Union's proposal would directly interfere with
management's right to determine its budget under the 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 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. 995 (1982). It is clear from the
record in this case that Union Proposal 5 does not prescribe a
particular program or operation which must be included in the Agency's
budget. Rather, it concerns an already existing item, employee
salaries. Moreover, the proposal does not prescribe the amount to be
allocated to that item. It simply establishes a formula for adjusting
employee salaries. There is no showing that the proposal directly
interferes with the Agency's right to determine its budget. Further,
the Agency has not demonstrated that implementation of the Union's
proposal would result in a significant and unavoidable increase in
costs. The Agency has presented no evidence as to the cost impact of
the Union's proposal compared with the costs of the system, including
the regional differential, adopted by the Agency. It has not been shown
that the alleged increase in costs is not outweighed by compensating
benefits. Union Proposal 5 does not directly interfere with
management's right to determine its budget under section 7106(a)(1) of
the Statute.
IV. Conclusion
The Authority finds that the Agency's August 20, 1984 resolution,
modifying the Agency's pay-setting system by providing for regional
cost-of-living adjustments, maintains a uniform formula for calculating
the salary of employees of the Agency. Such action is essential to the
accomplishment of the Agency's mission and execution of its functions in
a manner consistent with an effective and efficient government. The
Authority finds that Union Proposal 5 conflicts with an Agency
resolution for which a compelling need exists. The Authority reaffirms
its decision that the proposal is outside the duty to bargain under
section 7117(a)(2) of the Statute and section 2424.11(a) of the
Authority's Rules and Regulations.
Issued, Washington, D.C., April 14, 1986.
/s/ Jerry L. Calhoun, Chairman
/s/ Henry B. Frazier III, Member
FEDERAL LABOR RELATIONS AUTHORITY
FOOTNOTES
(1) The proposal will be referred to herein by the number given to it
in the Authority's initial decision.
(2) Section 7117(a)(2) provides as follows:
Section 7117. Duty to bargain in good faith; compelling need;
duty to consult
. . . . . . .
(a)(2) The duty to bargain in good faith shall, to the extent
not inconsistent with Federal law or any Government-wide rule or
regulation, extend to matters which are the subject of any agency
rule or regulation referred to in paragraph (3) of this subsection
only if the Authority has determined under subsection (b) of this
section that no compelling need (as determined under regulations
prescribed by the Authority) exists for the rule or regulation.
(3) Section 2424.11(a) of the Authority's Rules and Regulations
provides as follows:
Section 2424.11 Illustrative criteria.
A compelling need exists for an agency rule or regulation
concerning any condition of employment when the agency
demonstrates that the rule or regulation meets one or more of the
following illustrative criteria:
(a) The rule or regulation is essential, as distinguished from
helpful or desirable, to the accomplishment of the mission or the
execution of functions of the agency or primary national
subdivision in a manner which is consistent with the requirements
of an effective and efficient government.
(4) The parties stipulated that the Agency is a Government
corporation and is not subject to the pay and allowance provisions of
Chapter 51 of title 5 of the United States Code, see 5 U.S.C. Section
5102, 5 CFR 511.201; the compensation paid to its employees is not
limited by the restrictions applicable to the "General Schedule"; and
the Agency's Board of Direcotrs, in its discretion, regularly has
adopted resolutions pursuant to which the Agency pays its general graded
and wage graded employees at the same rates of pay as are paid to
Federal employees who are subject to Chapter 51 of title 5 of the U.S.
Code. There is no dispute in this case as to whether the Agency's
salary resolutions constitute agency rules or regulations which could
bar negotiation of conflicting proposals if supported by a compelling
need. National Treasury Employees Union, Chapter 207 and Federal
Deposit Insurance Corporation, Washington, D.C., 14 FLRA 598, 610
(1984). See also Agency Statement of Position on Remand at 5; Union
Statement of Position on Remand at 2.
(5) The resolution of the Board of Directors of the Federal Deposit
Insurance Corporation, August 20, 1984, (Attachment C to Agency's
Statement of Position on Remand), provided, in relevant part, as
follows:
BE IT FURTHER RESOLVED, that the Board of Directors hereby
approves, and authorizes appropriate officers of the Corporation
to take such actions as are necessary to implement, the following
changes in employee benefits:
1. the establishment of a full cost-of-living adjustment to
the salaries of all Corporation employees except members of the
Board of Directors, to become effective on January 1, 1985, as
proposed at Tab D of the attached document entitled "Regional
Restructuring and Other Proposals" and as amended by the attached
document entitled "Salary Differential Locations," with
adjustments for Budget Year 1986 and ensuing years to be
determined in accordance with an index to be developed annually at
the direction of the Division of Accounting and Corporate Services
and reported to the Board of Directors(.)
"Tab D" referenced above is set forth in an Appendix to the decision
herein.
(6) The Agency's Notice to All Employees, August 20, 1984, entitled
"Restructuring of Regional Operations" (Attachment A to Agency's
Statement of Position on Remand at 5-6) states, in relevant part, as
follows:
What about the Changes in the Compensation and Benefit Packages
We've Been Hearing About?
. . . . . . .
Cost-of-Living Salary Adjustments (COLA) -- A comprehensive
analysis has been made of variations in the costs of housing,
taxation, transportation, goods and services and other pertinent
expenses in 135 field locations representing DBS field offices and
major Liquidation sites across the country. The analysis was
based on a family of four with a $35,000 income level, ownership
of the home and two automobiles, etc. From that information, an
index of cost-of-living adjustments was prepared which will allow
us to more nearly match the salaries of personnel working in
high-cost locations with those working in standard-cost areas.
For example, individuals assigned to New York City would have
their salaries adjusted upward 12.6% while persons working in
Syracuse, New York would receive a 1.6% adjustment. If you work
in a standard cost area, there would be no COLA adjustment to your
salary. This is a significant and long-studied step by the
Corporation and will markedly improve the equity of our salary
structure and enable us to attract more people to the urban areas
where our attention is increasingly being focused. Implementation
is set for January 1, 1985.
. . . . . . .
The structural changes we are implementing are extensive and
may involve relocation and new responsibilities for some of you.
While change can be disruptive, consolidation of the Regional
Offices will also bring about many new opportunities. The Board
believes these steps are necessary to enable the Corporation to
properly meet its future responsibilities and has attempted to
compensate for their adverse impact through a number of very
positive steps affecting compensation and benefits. I have every
confidence that the skill, dedication and professionalism which
have consistently been the hallmark of Corporation employees will
again be demonstrated as we put this plan into effect.
See also Agency Statement of Position on Remand at 9.
(7) Union Supplemental Statement of Position on Remand at 1-3.
(8) See note 5, supra.
(9) See Appendix ("Tab D") at 1.
(10) Agency Statement of Position on Remand at 7-10.
(11) The Authority notes that employees' basic salary is still
determined by grade and step. Pursuant to the August 20, 1984
resolution, employees' total salary is determined by a combination of
that method with the method used to determine the applicable
cost-of-living adjustment.
(12) The Agency refers to the formula set forth in the August 20,
1984 resolution as a "standard cost area index." See Agency Statement of
Position on Remand at 8. See also Attachment B to the Agency's
Statement of Position on Remand and "Tab D" set forth in the Appendix
hereto; Agency Supplemental Statement of Position on Remand at 5-6.
(13) Agency Statement of Position on Remand at 10-12. Agency
Supplemental Statement of Position on Remand at 4-5. See note 6, supra.
See also "Tab D" set forth in the Appendix hereto.
(14) Agency Statement of Position on Remand at 10-12. See also "Tab
D" set forth in the Appendix hereto.
(15) Union Statement of Position on Remand at 5. Agency Supplemental
Statement of Position on Remand at 6. It is not disputed on remand
herein that Union Proposal 5 conflicts with the Agency's August 20, 1984
resolution.
(16) See 5 U.S.C. Section 5305(b).
(17) Union Statement of Position on Remand at 11.
(18) Section 7106(a)(1) of the Statute provides, in relevant part, as
follows:
Section 7106. Management rights
(a) Subject to subsection (b) of this section, nothing in this
chapter shall affect the authority of any management official of
any agency --
(1) to determine the . . . budget . . . of the agency . . . (.)
APPENDIX
I. PROPOSAL
A combination of factors is likely to result in a significant number
of Corporation employees moving over time from generally lower-cost
areas to higher-cost urban centers. These factors are mainly the
regional realignment itself and our changing regulatory focus on large
and problem banks regardless of their charter source. To minimize the
financial hardships associated with relocating into higher-cost areas,
to mitigate employee concern with the phase-out of six Regional Offices,
and to make our salary structure more equitable for all personnel and
the Corporation more competitive with other employers in high cost
locations, we recommend adoption of a salary cost-of-living
differential.
A summary schedule is attached which presents an index of adjustments
that would be necessary to make more equitable the incomes of employees
in high-cost locations throughout the country and those who work in
standard or low-cost areas. Five alternatives are shown, ranging from
paying full COLA to maximum adjustments of 10%, 7.5%, 5% and 2.5% of
current salaries. Either the full living cost adjustment or the cap at
10% would go a long way toward alleviating the present inequities.
However, we favor the full COLA option and feel its higher cost will be
well justified.
III. JUSTIFICATION
As noted, we believe a mechanism is needed to adjust employee
salaries for the significant differences that exist in various locations
across the country in terms of housing, taxation, transportation, goods
and services and other expense elements. This will therefore be an
important benefit for the significant number of Corporation employees
now living in high cost areas, and will also be helpful as we implement
the regional restructuring plan and relocate significant numbers of
personnel.
We contracted with Runzheimer and Company, Inc., to undertake a
comprehensive analysis of living cost differences in 135 field
locations. These locations represent DBS field offices and major
Liquidation sites. Based on the firm's report, we believe we now have a
supportable index and comprehensive cost profiles for each of the
selected sites and therefore have a sound basis for instituting regional
pay differentials.
The adjustment percentages shown in the attached summary schedule
represent cost-of-living differences with "Standard City", an arithmetic
mean of living cost standards in 100 representative cities. These
percentages can be adjusted each year.
COST OF LIVING ADJUSTMENT
TABLE OMITTED
NOTE: Some of the above indexes are composites of several
communities within a metropolitan area (e.g., the index for Minneapolis,
Minnesota) and certain others represent selected communities within a
metropolitan area (e.g., the index for San Francisco, California).
III. IMPLEMENTATION
DACS has indicated the program can be implemented on January 1, 1985
and we recommend that be the initiation date. This will provide
sufficient time for needed administrative and payroll changes and will
also mean that the plan is operational when the first Regional Office
closing takes place (June 15, 1985).
IV. COST ANALYSIS
Estimated annual costs for the various percentage adjustment
scenarios, as developed by DACS, are shown below. It should be noted
this proposal results in no change to the salaries of most Corporation
employees who work in standard or low-cost areas.
Adjustment
TABLE OMITTED