14:0463(77)NG - NTEU and IRS -- 1984 FLRAdec NG



[ 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) p