[ v27 p132 ]
27:0132(25)NG
The decision of the Authority follows:
27 FLRA No. 25
NATIONAL TREASURY EMPLOYEES UNION
Union
and
INTERNAL REVENUE SERVICE
Agency
Case No. 0-NG-524
(14 FLRA No. 77)
DECISION AND ORDER ON REMAND
I. Statement of the Case
This case is before the Authority pursuant to a remand from the
United States Court of Appeals for the District of Columbia Circuit.
The question involved is whether a proposal which seeks to establish the
rate of incentive pay to be awarded bargaining unit employees is
rendered nonnegotiable by sections 7103(a)(14)(C) and 7106(a)(1) of the
Federal Service Labor-Management Relations Statute (the Statute).
II. Background
In a previous decision in this case, National Treasury Employees
Union and Internal Revenue Service, 14 FLRA 463 (1984), the Authority
found the following proposal, which sought to establish the rate of
incentive pay for bargaining unit employees, to be nonnegotiable because
it interfered with management's rights to assign work and direct
employees:
Proposal 5
Incentive money is paid at the rate $.09 per one-tenth of an
efficiency 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 (function and program) task then the
$.09 will be increased by $.02 for each grade above the minimum
grade assigned the F/P task.
The Union sought review of the Authority's decision with respect to
this proposal.
On review, the D.C. Circuit rejected the Authority's reasoning that
the management right to assign work to employees includes the right to
reward superior performance of the work which has been assigned.
National Treasury Employees Union v. FLRA, 793 F.2d 371 (D.C. Cir.
1986). The court held that "the level of incentive pay awarded for the
performance of agency work, even work that has been 'assigned' or
'directed,' (did) not come within the nonbargainable management rights
to assign work and direct employees." NTEU v. FLRA, 793 F.2d at 375.
The court therefore vacated the Authority's decision and remanded the
case so that the Authority could pass on the other arguments raised by
the Agency but not addressed by the Authority in its decision. The
Agency's other arguments were that the proposal was nonnegotiable
because it: (1) concerned a pay matter which is not a condition of
employment under section 7103(a)(14)(C) of the Statute; and (2)
interfered with management's right to determine its budget under section
7106(a)(1) of the Statute.
On remand, the Authority granted the Agency's request to file a
supplemental memorandum. In granting the request, the Authority limited
the Agency's arguments to the issues before it on remand. Both parties
filed supplemental briefs, and the Union filed a response to the
Agency's supplemental brief. Further, the Authority granted the request
of the Office of Personnel Management (OPM) to file an amicus curiae
brief in this case.
III. Procedural Issues
The Union claims that the Agency's supplemental brief contains new
arguments, evidence, and reasons for nonnegotiability not previously
asserted, and therefore requests the Authority to "strike" the Agency's
submission.
We find that, except for the arguments concerning methods and means
under section 7106(b)(1) of the Statute, the Agency's supplemental brief
addressed the issues set forth in the Authority's letter granting the
Agency's request to file a supplemental brief. We therefore deny the
Union's request to strike the Agency's arguments relating to sections
7103(a)(14)(C) and 7106(a)(1) of the Statute. We grant the Union's
request to strike matters relating to section 7106(b)(1) of the Statute,
since the Agency did not raise this section as a bar to negotiation of
the proposal in its initial position before the Authority.
IV. Positions of the Parties
The Agency and OPM contend that Proposal 5 concerns matters relating
to pay which are specifically provided for by federal statute -- that
is, subpart D of 5 U.S.C. Sections 5101 et seq. -- and since the matter
is covered by statute, it is expressly excluded from the definition of
"conditions of employment" under section 7103(a)(14)(C) of the Statute
and therefore outside the duty to bargain. Both claim that the proposal
is an attempt by the Union to negotiate a pay or money-related fringe
benefit system since under the proposal employees would receive a fixed
amount of money per unit of work performed above a set efficiency point,
adjusted for overtime and grade level. According to the Agency and OPM,
it is this entitlement which makes the incentive money provided by this
proposal a method of compensation for specific work done as
distinguished from an award selectively given in appreciation of
extraordinary service.
In their view, therefore, the proposal would effectively create a
supplemental pay system in which employees' salary levels set forth in 5
U.S.C. Section 5332 would be adjusted and supplemented based on
attainment of numerical performance levels. The Agency and OPM contend
that this is contrary to Chapter 53 of title 5 of the United States Code
which prescribes pay rates and the means by which those rates may be
adjusted.
The Agency additionally argues that, by permitting the Union to
negotiate specific amounts for awards, the proposal would interfere with
its discretion under Chapter 45 of title 5 of the United States Code to
adjust, implement, or eliminate the incentive pay awards program.
Finally, the Agency and OPM contend that the proposal is
nonnegotiable because it infringes on management's right under section
7106(a)(1) to determine its budget. They concede that the proposal does
not by its express terms prescribe the particular program or amounts to
be included in the Agency's budget as a line item, but contend that it
would result in a substantial and unavoidable increase in the
expenditure of Agency funds which would not be offset by compensating
benefits.
The Union asserts that although the proposal concerns money, it is
not pay as that term is used in the federal sector. It contends that
the proposal has no relation to the pay schedules set forth in 5 U.S.C.
Sections 5331 et seq. and 5 C.F.R. Sections 531 et seq. Rather, the
Union contends that the proposal concerns money distributed through the
provisions of 5 U.S.C. Sections 4501 et seq. and 5 C.F.R. Sections 451
et seq., which are discretionary with the Agency, and therefore not
excluded from the definition of condition of employment by section
7103(a)(14)(C) of the Statute. The Union contends that its proposal
does not prescribe a particular program or a particular amount of funds
to be included in the Agency's budget. The Union also contends that the
Agency has not made a substantial demonstration of a significant and
unavoidable increase in costs which would not be offset by compensating
benefits. Therefore, the Union concludes, the proposal is not
inconsistent with the Agency's right to determine its budget.
V. Analysis and Conclusion
We adopt the court's holding, as stated in Section II, that a
proposal such as the disputed proposal determining the level of
incentive pay awarded for the performance of Agency work does not
constitute an exercise of management's rights to direct employees and
assign work under section 7106(a)(2)(A) and (B) of the Statute.
Pursuant to the court's direction, we turn our attention to whether
Proposal 5 is rendered nonnegotiable by sections 7103(a)(14)(C) and
7106(a)(1) of the Statute. The issues presented here are limited solely
to the rate of incentive award money to be paid to employees and do not
in our view concern management's rights under section 7106 of the
Statute to set levels of performance for employees to receive a
particular rating.
A. Whether the Proposal Concerns a Matter which is
Specifically Provided for by Federal Statute so as not
to be a Condition of Employment within the Meaning of
Section 7103(a)(14)(C) of the Statute
In our view the rate at which incentive award money is payable to
employees under the Agency's productivity plan concerns those employees'
conditions of employment within the meaning of section 7103(a)(14). The
issue on remand, however, is whether the proposal concerns a condition
of employment which is specifically provided for by federal statute so
as to be excluded from the scope of the duty to bargain under section
7103(a)(14)(C) of the Statute. We find that Proposal 5 is not a
condition of employment which is specifically provided for by federal
statute so as to be excluded from the duty to bargain under section
7103(a)(14)(C) of the Statute.
The incentive award money which is the subject of the Union's
proposal is not paid to employees pursuant to 5 U.S.C. Sections 5301 et
seq. It is not wages or salary authorized by these provisions, in
particular 5 U.S.C. Section 5332. Rather, as indicated by the record
and as found by the court, the incentive award money payable to
employees here is authorized pursuant to 5 U.S.C. Section 4503. /1/ OPM
itself has acknowledged that money paid to employees pursuant to that
provision is not properly considered pay within the meaning of Chapter
53. In revising its regulations governing the Performance Management
System, OPM moved the provisions concerning incentive awards from 5
C.F.R. Chapter 531, pertaining to pay systems, to 5 C.F.R. Chapter 430,
pertaining to performance appraisals. /2/ OPM explained its action by
distinguishing incentive awards from pay, stating particularly: /3/
Two agencies believe that the performance awards provisions
should be moved from Part 531 to another part (of) Title 5,
(C.F.R.) because awards are not additions to basic pay. These
agencies think that Part 531 should only include pay-setting
regulations.
. . . . . . .
OPM concurs that performance awards provisions are
inappropriately placed in Part 531 because these awards are not
increases to basic pay.
. . . . . . .
(P)art 531, Subpart F has been moved to Part 430, Subpart E . .
.
Because incentive award money is not paid to employees pursuant to 5
U.S.C. Sections 5301 et seq., the Agency's and OPM's contention that
incentive rates are specifically provided for by these statutory
provisions, particularly 5 U.S.C. Section 5332, is without merit.
Moreover, the rates at which incentive award money is to be paid to
employees under the incentive system established by the Agency are not
matters specifically provided for under 5 U.S.C. Section 4503 so as to
be excluded from conditions of employment concerning which the Agency
has an obligation to bargain. Section 4503 provides the Agency with
authority to award employee performance, but it does not specify the
amount to be paid as an award. /4/ It is clear from the legislative
history of section 7103(a)(14) of the Statute that only those matters
specifically provided for by other federal statutes are excepted from
the obligation to negotiate under that provision. /5/ As the Agency
acknowledges, the amount to be awarded as incentive money is left to the
Agency's discretion pursuant to 5 U.S.C. Section 4503. See the Agency's
Statement of Position in Response to the Union's Petition for Review at
12 and 13. Thus, the rate at which incentive award money will be paid
to employees under the Agency's incentive program is not specifically
provided for by statute and is within the duty to bargain. See also
National Treasury Employees Union, Chapter 6 and Internal Revenue
Service, New Orleans District, 3 FLRA 748 (1980); March Air Force Base,
Riverside, California, 13 FLRA 255 (1983); compare American Federation
of Government Employees v. FLRA, 653 F.2d 669 (D.C. Cir. 1981) (where
the court affirmed the Authority's decision that the agency in that case
had no duty to bargain over a union proposal concerning overtime rate of
compensation because the matter was specifically provided for by federal
statute, 5 U.S.C. Section 5542(a), so as to be excluded from the
definition of conditions of employment under section 7103(a)(14)(C) of
the Statute).
Further, Proposal 5 would not prevent the Agency from eliminating the
program. The proposal only addresses the rate of incentive pay. As
explained by the Union, the proposal is only intended "to address the
rate of incentive pay once the (A)gency determines that it will have an
incentive pay program. Nothing in this proposal requires perpetuating
the program forever." Union's Response to Agency's Supplemental Brief at
4-5. In the absence of any indication to the contrary, we accept the
Union's explanation of the proposal's meaning.
Finally, the Agency contends that certain portions of the legislative
history of the Statute support its position that Congress did not intend
to include the subject of pay or money-related fringe benefits in the
scope of conditions of employment. However, as we have shown, the
proposal does not concern wages or salaries. Further, the Agency has
not shown nor do we find that incentive awards are the kinds of matters
which are referred to in statements relied on by the Agency, for
example, wages and salaries, retirement, life and health insurance, and
leave. /6/ These matters are all statutory entitlements of federal
employees. There is no such entitlement to an incentive award. Rather,
the Agency has discretion under 5 U.S.C. Sections 4502 and 4503 to
decide the conditions under which it will award that money to employees.
The terms under which incentive award money is given to employees in
this case have been prescribed by the Agency itself in its incentive
program.
Thus, the proposal in this respect is like Proposals 2 and 3 in
American Federation of Government Employees, AFL-CIO, Local 3477 and
Community Futures Trading Commission, 21 FLRA No. 18 (1986), remanded as
to other matters, No. 86-1286 (D.C. Cir. July 3, 1986), which concerned
the amount of money to be awarded to employees for suggestions. The
Authority found that those proposals were not inconsistent with 5 U.S.C.
Sections 4502 and 4503 and were within the duty to bargain. The money
to be awarded under the Agency's incentive awards program in this case
is authorized under the same provisions as in that case. In our view
the money awarded under this program is unlike the money-related fringe
benefits mentioned above but rather is similar to money awarded to
employees for suggestions under an agency's suggestion program.
B. Whether the Proposal Interferes with Management's Right
to Determine its Budget under Section 7106(a)(1) of the
Statute
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. FLRA, 659 F.2d 1140 (D.C. Cir. 1981),
cert. denied sub nom., AFGE v. FLRA, 455 U.S. 945 (1982). In that case,
the Authority stated generally that it would find a proposal
inconsistent with an agency's right to determine its budget if the
proposal by its terms prescribed a particular program or an amount of
funds to be included in the agency's budget or if the agency made a
substantial demonstration that the proposal would result in a
significant and unavoidable increase in costs which would not be offset
by compensating benefits. It is clear from the record in this case, as
recognized by the Agency and OPM, that Proposal 5 does not prescribe
either a particular program or operation or an amount of funds to be
included in the Agency's budget.
The Agency projected the cost of hiring a certain number of persons
as data entry operators and argued that the Union's proposal would
infringe on its right to determine a certain percentage of its budget
related to data operators at the Philadelphia Service Center. The
figures provided by the Agency are speculative at best, because it is
impossible to determine at this point the number of employees the Agency
will actually hire or how many employees will participate in the
incentive awards program, and if so at what level. Moreover, Proposal 5
does not specify a dollar amount to be budgeted for the program but
simply addresses the rate at which incentive award money will be paid to
employees who qualify for an award under the program.
Further, the Agency has not demonstrated that implementation of
Proposal 5 would result in a significant and unavoidable increase in
costs which would not be offset by compensating benefits. In fact, the
proposal specifically links the amount of incentive money to be awarded
to increases in an employee's productivity, which would directly benefit
the Agency's "objective of greater efficiency in Government." /7/ We
therefore find that Proposal 5 does not directly interfere with
management's right to determine its budget under section 7106(a)(1) of
the Statute. See, for example, Commodity Futures Trading Commission, 21
FLRA No. 18 (1986) (Proposals 2 and 3) (proposals prescribing the
amounts to be paid for suggestion awards did not directly interfere with
management's right to determine its budget); United States Department
of the Treasury, Internal Revenue Service and United States Department
of the Treasury, Internal Revenue Service, Houston District, 25 FLRA No.
70 (1987), petition for review filed sub nom. National Treasury
Employees Union v. FLRA, No. 87-1165 (D.C. Cir. April 15, 1987)
(proposal providing for free or low cost parking for unit employees did
not interfere with the agency's right to determine its budget).
VI. Conclusion
Based on the above, we find that Proposal 5 is not a condition of
employment which is specifically provided for by federal statute so as
to be excluded from the duty to bargain under section 7103(a)(14)(C) of
the Statute. Moreover, the proposal does not interfere with
management's right to determine its budget under section 7106(a)(1) of
the Statute. It therefore is within the Agency's duty to bargain.
VII. Order
The Agency must upon request, or as otherwise agreed to by the
parties, bargain concerning Proposal 5. /8/
Issued, Washington, D.C., May 29, 1987.
/s/ Jerry L. Calhoun, Chairman
/s/ Henry B. Frazier III, Member
/s/ Jean McKee, Member
FEDERAL LABOR RELATIONS AUTHORITY
--------------- FOOTNOTES$ ---------------
(1) 5 U.S.C. Section 4503 provides:
Section 4503. Agency awards
The head of an agency may pay a cash award to, and incur
necessary expense for the honorary recognition of, an employee who
--
(1) by his suggestion, invention, superior accomplishment, or
other personal effort contributes to the efficiency, economy, or
other improvement of Government operations or achieves a
significant reduction in paperwork; or
(2) performs a special act or service in the public interest in
connection with or related to his official employment.
(2) In NTEU v. FLRA, at n.2, the court noted that the regulations
issued to implement 5 U.S.C. Section 4503 divide awards into two
categories: "'Performance Awards,' 5 C.F.R. Part 531, Subpart F (based
on performance within the scope of job responsibilities) (which is
involved in this case) and 'Special Awards,' 5 C.F.R. Part 451, Subpart
B (based on employee suggestions, inventions and actions)." These
regulations were changed by OPM. See 51 Fed. Reg. 8396 (March 11,
1986). Title 5 C.F.R. Part 531, Subpart F was moved to 5 C.F.R. Part
430, Subpart E and 5 C.F.R. Part 451, Subpart B was revised and
redesignated as 5 C.F.R. Part 451, Subpart A. See 51 Fed. Reg. 8407,
8417 and 8418 (March 11, 1986).
(3) 51 Fed. Reg. 8409 (March 11, 1986).
(4) See also 5 U.S.C. Section 4502, which provides in pertinent part:
. . . . . . .
(d) A cash award to, and expense for the honorary recognition
of, an employee may be paid from the fund or appropriation
available to the activity primarily benefiting or the various
activities benefiting. The head of the agency concerned
determines the amount to be paid by each activity for an agency
award under section 4503 of this title.
(5) See statement of Congressman Clay concerning that portion of the
bill passed by the House (the "Udall substitute") which excluded matters
specifically provided for by other federal statutes from the obligation
to bargain, which portion was enacted as section 7103(a)(14)(C):
Mr. CLAY.
. . . . . . .
Section 7103(a)(14)(D), removing from subjects of bargaining those
matters specifically provided for by federal statute, was adopted by the
committee and retained in the Udall substitute with the clear
understanding that only matters "specifically" provided for by statute
would be excluded under this subsection. Thus, where a statute merely
vests authority over a particular subject with an agency official with
the official given discretion in exercising that authority, the
particular subject is not excluded by this subsection from the duty to
bargain over conditions of employment.
124 Cong. Rec. 29,187 (1978).
(6) See, for example, the Report accompanying the House Committee
bill (H.R. 11280) which states that "Federal pay will continue to be set
in accordance with the pay provisions of title 5, and fringe benefits,
including retirement, insurance, and leave, will continue to be set by
Congress" (emphasis added). H.R. Rep. No. 1403, 95th Cong., 2d Sess. 12
(1978), reprinted in Legislative History of the Federal Service
Labor-Management Relations Statute, Title VII of the Civil Service
Reform Act of 1978 at 682 (hereinafter referred to as "Legislative
History"). See also id. at 377, where Congressmen Clay and Ford, the
primary sponsors of the labor-management relations bill, stated in
Supplementary comments to the staff report accompanying their bill that
"Among the collective bargaining rights not included in this bill are:
. . . (2) (t)he right to bargain collectively over pay and money-related
fringe benefits such as retirement benefits and life and health
insurance" (emphasis added) (Legislative History at 721); and 124 Cong.
Rec. 29,182 (1978), where Congressman Udall, whose substituted version
of the Ford-Clay bill formed the basis for the legislation enacted by
Congress, stated: "All these major regulations about wages and hours
and retirement and benefits will continue to be established by law
through congressional action" (emphasis added) (Legislative History at
923).
(7) See Philadelphia Service Center Incentive Pay System Guide at 1
(set forth as Attachment 1 to the Union's Reply Brief).
(8) In finding this proposal to be within the duty to bargain, the
Authority makes no judgment as to its merits.