19:0052(7)CA - Navy, Washington, DC and Navy, Naval Supply Center, Oakland, CA and AFGE Local 1533 -- 1985 FLRAdec CA



[ v19 p52 ]
19:0052(7)CA
The decision of the Authority follows:


 19 FLRA No. 7
 
 DEPARTMENT OF THE NAVY
 WASHINGTON, D.C.
 
 and
 
 DEPARTMENT OF THE NAVY
 U.S. NAVAL SUPPLY CENTER
 OAKLAND, CALIFORNIA
 Respondents
 
 and
 
 AMERICAN FEDERATION OF GOVERNMENT
 EMPLOYEES, LOCAL 1533, AFL-CIO
 Charging Party
 
                                            Case No. 9-CA-30108
 
                            DECISION AND ORDER
 
    The Administrative Law Judge issued the attached Decision in the
 above-entitled proceeding, finding that Respondent Department of the
 Navy had not engaged in the unfair labor practices alleged in the
 complaint and recommending dismissal of the complaint as to that
 Respondent.  The Judge further found that the U.S. Naval Supply Center
 (NSC) had engaged in the unfair labor practices alleged in the complaint
 and recommended that it be ordered to cease and desist therefrom and
 take certain affirmative action.  Thereafter, Respondent NSC filed
 exceptions to the Judge's Decision, and the General Counsel filed
 cross-exceptions and a motion to strike Respondent NSC's exceptions.
 /1/ Respondent NSC filed a response to the motion to strike its
 exceptions.
 
    Pursuant to section 2423.29 of the Authority's Rules and Regulations
 and section 7118 of the Federal Service Labor-Management Relations
 Statute (the Statute), the Authority has reviewed the rulings of the
 Judge made at the hearing and finds that no prejudicial error was
 committed.  The rulings are hereby affirmed.  Upon consideration of the
 Judge's Decision and the entire record, the Authority hereby adopts the
 Judge's findings, conclusions and recommendations only to the extent
 consistent herewith.
 
    Contrary to the Judge, the Authority finds that Respondent NSC did
 not violate section 7116(a)(1) and (5) of the Statute when it failed and
 refused to bargain with the American Federation of Government Employees,
 Local 1533, AFL-CIO, the exclusive representative of a unit of employees
 at the NSC, concerning a proposed change in the method of paycheck and
 savings bond distribution.  Thus, subsequent to the issuance of the
 Judge's Decision in this case, the Authority issued its decision in
 Federal Employees Metal Trades Council, AFL-CIO and Department of the
 Navy, Mare Island Naval Shipyard, Vallejo, California, 16 FLRA No. 88
 (1984), petition for review filed, No. 85-7039 (9th Cir. Jan. 22, 1985),
 wherein it found that the process which an agency adopts to fulfill its
 payroll obligation so as to ensure the continued, uninterrupted
 operation of the agency constitutes a support operation without which
 the agency's mission could not be accomplished.  Thus, the Authority
 found that mission-related matters which fall within the meaning of
 "performing work" under section 7106(b)(1) include support functions
 which are integrally related to the agency's mission.  In Federal
 Employees Metal Trades Council, the Authority found a proposal
 pertaining to the method of paycheck distribution to concern the methods
 and means of performing work, i.e., the agency's payroll function,
 within the meaning of section 7106(b)(1) of the Statute /2/ and thus
 negotiable only at the election of the agency.  /3/ Thus, in the
 circumstances of this case, the Authority finds that Respondent NSC's
 refusal to bargain concerning a change in the method of paycheck
 delivery did not constitute a violation of section 7116(a)(1) and (5) of
 the Statute.  Similarly, the Authority finds that there is no Agency
 obligation to bargain over its decision to change the method of
 distributing savings bonds.  In this regard, the Authority finds that
 inasmuch as an agency's distribution of savings bonds is a part of the
 method by which the agency fulfills its payroll obligation, as would be
 other things such as paycheck distribution, accounting for leave,
 overtime, compensatory time and tax deductions, it too concerns the
 methods and means of performing work within the meaning of section
 7106(b)(1) of the Statute and is negotiable only at the election of the
 Agency.  See Federal Employees Metal Trades Council, AFL-CIO, supra.
 Therefore, the Authority finds that Respondent NSC's refusal to bargain
 concerning a change in the method of distributing savings bonds did not
 constitute a violation of section 7116(a)(1) and (5) of the Statute.
 
    In addition, the Authority adopts the Judge's conclusion that the
 complaint must be dismissed as to Respondent Department of the Navy
 because the Authority has determined that the decision to change the
 method of paycheck delivery does not give rise to a duty to bargain over
 the substance of such change, and therefore the Department of the Navy
 did not prevent Respondent NSC from fulfilling any statutory bargaining
 obligation with respect thereto.  Therefore, the complaint shall be
 dismissed in its entirety.
 
                                   ORDER
 
    IT IS ORDERED that the complaint in Case No. 9-CA-30108 be, and it
 hereby is, dismissed.  
 
 Issued, Washington, D.C. July 11, 1985
 
                                       Henry B. Frazier III, Acting
                                       Chairman
                                       William J. McGinnis, Jr., Member
                                       FEDERAL LABOR RELATIONS AUTHORITY
                                       Case No. 9-CA-30108
 
 
 
 
 
 
 
 
 -------------------- ALJ$ DECISION FOLLOWS --------------------
 
    Mr. W. Don Wilson and
    Mr. Wayne J. Peterson
       For the Respondents
 
    Josanna Berkow, Esq.
       For the General Counsel
 
    Mr. Peter Lower
       For the Charging Party
 
    Before ELI NASH, JR.
       Administrative Law Judge
 
                                 DECISION
 
                           Statement of the Case
 
    Pursuant to a Complaint and Notice of Hearing issued on March 21,
 1983 by the Acting Regional Director for the Federal Labor Relations
 Authority, San Francisco, California Region, a hearing was held before
 the undersigned on April 18, 1983 at San Francisco, California.
 
    This proceeding arose under the Federal Service Labor-Management
 Relations Statute (herein called the Statute).  It is based on a charge
 filed on December 29, 1982 and amended on March 14, 1983 by the American
 Federation of Government Employees, Local 1533, AFL-CIO (herein called
 the Union) against the Department of the Navy, Washington, D.C. (herein
 called Respondent Navy) and the Department of the Navy, U.S. Naval
 Supply Center, Oakland, California (hereinafter called Respondent NSC).
 
    The Complaint alleges that since on or about September 8, 1982,
 Respondent NSC in accordance with policies promulgated by Respondent
 Navy has failed and refused to bargain with the Union concerning the
 substance of a proposed change in paycheck and savings bond
 distribution.
 
    Respondents Answer denied the Commission of any unfair labor
 practices.
 
    All parties were represented at the hearing and each was afforded
 full opportunity to be heard, to adduce evidence, and examine as well as
 cross-examine witnesses.  Thereafter briefs were filed with the
 undersigned.  /4/
 
    Upon the entire record herein, from my observation of the witnesses
 and their demeanor, and from all of the testimony and evidence adduced
 at the hearing, /5/ I make the following findings and conclusions.
 
                             Findings of Fact
 
    The material facts, as provided by stipulation, are as follows:
 
    The Union at all times material herein, has been a labor organization
 within the meaning of section 7103(a)(4) of the Statute.
 
    At all times material herein, Respondent Navy has been, and is, an
 agency within the meaning of section 7103(a)(3) of the Statute.
 
    At all times material herein, Respondent NSC, an activity of the
 Department of the Navy, has been, and is, an agency within the meaning
 of section 7103(a)(3) of the Statute.
 
    The Union at all times material herein, has been certified as the
 exclusive representative of an appropriate unit of employees of Naval
 Supply Center, Oakland, California.
 
    Prior to January 14, 1983 all employees in the unit described above
 had the option of receiving their paychecks and savings bonds at their
 work location or at a nonwork address.  This option had been available
 to civilian employees at the Naval Supply Center, Oakland, California
 for at least 30 years.
 
    Beginning on December 11, 1982 through January 21, 1983 Respondent
 NSC, through its publication Party Line, announced to all its employees
 that effective on the January 14, 1983 payday, paychecks for employees
 hired on or after October 1, 1982 would be mailed to a nonwork address.
 
    On or about January 14, 1983, Respondent NSC unilaterally implemented
 new pay distribution procedures for employees in the unit whereby all
 employees hired on or after October 1, 1982 were required to have their
 paychecks and savings bonds either directly deposited in a financial
 institution or delivered to a nonwork address.
 
    The new prohibition against worksite paycheck and savings bond
 delivery was applied to 115 temporary bargaining unit employees who were
 terminated for 1 day and rehired by Respondent NSC on October 1, 1982.
 Prior to the date of their rehire, these employees had enjoyed the
 option of worksite pay delivery.
 
    On or about December 7, 1981, Labor Relations Specialist Wayne
 Peterson wrote to Union Business Agent Peter Lowe, enclosing a copy of
 SECNAV Instruction 7200.17 which set forth policies for military and
 civilian pay services and stated that Respondent NSC intended to
 discontinue delivery of paychecks and savings bonds at employees' work
 locations as soon as possible and that employees would be given the
 option of having their pay and savings bonds directly deposited into
 bank accounts or mailed to a nonwork address.
 
    On or about December 14, 1981, Business Agent Lowe responded to
 Peterson's letter requesting negotiations during a scheduled meeting of
 December 17, 1981, on SECNAV Instruction 7200.17.
 
    About December 17, 1981 and again on January 6, 1982, representatives
 of Respondent NSC and the Union met for collective bargaining on the
 proposed change in the pay policies set forth in Peterson's letter of
 December 7, 1981.  No agreement was reached and Respondent NSC
 implemented the changes in pay procedures on February 1, 1982 for
 employees hired on or after that date.
 
    Subsequently, on February 10, 1982, the Union filed an unfair labor
 practice charge (Case No. 9-CA-20154) alleging that NSC's refusal to
 bargain on the changes in pay policies violated section 7116(a)(1), (5)
 and (8) of the Statute.  On May 20, 1982, the Acting Regional Director
 for Federal Labor Relations Authority, Region IX, approved a bilateral
 settlement agreement between Respondent NSC and the Union which
 contained the following language:
 
          WE WILL NOT implement any changes regarding pay procedures,
       savings bonds, and leave and earnings statements for employees
       represented by the American Federation of Government Employees,
       Local 1533, AFL-CIO (AFGE) until we complete our bargaining
       obligations with AFGE Local 1533.
 
          Employees who have requested that their paychecks, savings
       bonds, and/or leave and earnings statements be sent to a nonwork
       address will be given the opportunity to request that these items
       be sent to their work address.
 
    Subsequently, on or about May 5, 1982, the Union submitted a
 bargaining proposal to Respondent NSC giving employees the option of
 participating in the direct deposit mail system or having their
 paychecks, leave and earnings statements and savings bonds hand
 delivered at their worksite.
 
    Sometime around June 11, 1982, Respondent NSC submitted a
 counterproposal to the Union under which current employees would have 6
 months to elect either to enroll in the direct deposit program or have
 their paychecks mailed to a nonwork address and new employees would be
 given 3 months from their date of entry to choose one of the same
 options.  The Union resubmitted its May 5, 1982 proposal on or about
 July 8, 1982.
 
    Around July 22, 1982, Respondent NSC wrote and acknowledged receipt
 of the Union's July 8, 1982 proposal and stated it would soon submit its
 counterproposal.
 
    On August 19, 1982, Respondent NSC advised the Union that, in
 accordance with Navy's pay policies as promulgated, it intended to
 implement a policy whereby all employees hired on or about October 1,
 1982 would be required to receive their paychecks and savings bonds at a
 nonwork address.  Respondent NSC further advised the Union that it would
 bargain only on the impact and implementation and not the substance of
 the new policy.
 
    By letter dated September 8, 1982, the Union requested negotiations
 on the substance of the change in paychecks and savings bonds
 distribution described and submitted its counterproposal, under which
 new employees would not have to accept direct deposit as a condition of
 employment, but would have the same options as current employees.
 
    On September 16, 1982, Respondent NSC refused to negotiate with the
 Union concerning the substance of its proposal to change paychecks and
 savings bonds distribution on the grounds that said change constituted
 "technology, methods, and means of performing work" under Section
 7106(b)(1) of the Statute and because such negotiations were barred by
 an agency-wide regulation for which Respondent NSC asserted that a
 compelling need exists under Section 7116(a)(3) of the Statute.
 
    In correspondence dated September 30, 1982 the Union reiterated its
 prior requests to negotiate on the proposed paychecks/savings bonds
 distribution policy for new employees.  Respondent NSC again refused to
 negotiate on the substance of said policy by letter dated October 8,
 1982.
 
                                  Issues
 
    Whether Respondents' Motion to Sever Charges Against Respondent Navy
 should be denied.
 
    Whether Respondents' decision to eliminate delivery of paychecks and
 savings bonds to bargaining unit employees at their worksite is fully
 negotiable condition of employment.
 
    Whether Respondents' decision to eliminate delivery of paychecks and
 savings bonds to bargaining unit employees at their worksite was a
 change in existing conditions of employment which gave rise to an
 obligation to negotiate on the substance of such change.
 
    If so, whether Respondent NSC's refusal to bargain was justified by
 the fact that the new pay distribution policy was implemented pursuant
 to agency-wide instructions.
 
    If not, whether Respondent Navy violated 5 U.S.C. 7116(a)(1) and (5)
 by its interference with Respondent NSC's obligation to negotiate with
 the Union on the new pay distribution policy.
 
    If not, whether, Respondent NSC violated 5 U.S.C. 7116(a)(1) and (5)
 by its refusal to negotiate on the substance of the new pay distribution
 policy.
 
                                Discussion
 
    A. Responsibility of Respondents
 
    The Complaint alleges that Respondent Navy and Respondent NSC
 violated section 7116(a)(1) and (5) of the Statute by unilaterally
 instituting changes in existing working conditions without bargaining
 about the substance of the change.  General Counsel asserts that
 Respondent Navy violated the statute by interfering with and preventing
 Respondent NSC from fulfilling its statutory bargaining obligation with
 regards to its decision to eliminate hand delivery of payroll checks and
 savings bonds to new employees at their worksite.  Being contingent on
 Respondent NSC's actions, the violation, in the matter thus occurred on
 January 14, 1983 at which time NSC implemented the new pay policy
 without providing the local Union an opportunity to bargain.  Even
 assuming that Respondent NSC is not liable for Respondent Navy's refusal
 to bargain about the decision to change the pay policy, the General
 Counsel maintains that Respondent NSC is nonetheless liable for its
 refusal to bargain about the substance of the change.
 
    Respondent Navy raises arguments which it asserted before the
 undersigned in a matter involving substantially the same issues.  That
 decision Department of the Navy, Washington, D.C. and Department of the
 Navy, Naval Underwater Support Systems, Case Nos. 1-CA-30010 and
 1-CA-30011 (OALJ-83-138 (1983)).  Respondents in both cases raise
 several basic points regarding the responsibility of the Department of
 the Navy.  In this matter Respondents argue first that SECNAV
 Instruction 7200.17 was a valid exercise of the Navy's regulatory
 authority to govern its agency.  Second, that the instruction does not
 require any activity to violate the provisions of any collective
 bargaining agreement with provisions at odds with the terms of the
 instructions.  Third, the instruction itself does not foreclose or
 supersede any bargaining obligations whatsoever at the level of
 recognition at any naval activity.  Fourth, that section 5.b.(5) of the
 instruction did not alter or change any established pay practice, since
 no employee hired prior to October 1, 1982 had that practice altered or
 stopped.  Fifth, that the instruction serves as a valid bar to
 negotiations at any activity unless and until the Authority determines
 pursuant to section 7117 of the Statute that no compelling need exists.
 Respondent also suggests that such language indicates that each activity
 retains the discretion necessary to fulfill its collective bargaining
 obligations.  Consequently, it is argued that the Navy should not be
 liable for the activity's breach of this obligation.  Finally,
 Respondent Navy urges that it published and distributed notification of
 the proposed changes far in advance of the implementation date to the
 activities.  With respect to the pre-hire employee's provision, the Navy
 gave the activities 1 year lead time to make the change.  In situations
 where possible past practices or contrary provisions of a collective
 bargaining agreement might be involved, the Navy allegedly gave
 activities a lead time of 4 years.  Even within this framework, the time
 limits provided the activities seemingly were flexible.
 
    Based on those reasons, Respondent Navy, consistent with its argument
 in the Newport case, supra, concluded that it cannot be held responsible
 for the activity's failure to bargain with the local Union.
 
    It is a well-settled principle that "the acts and conduct of higher
 level agency management may constitute an unfair labor practice when
 such conduct prevents agency management at the level of exclusive
 recognition from fulfilling its bargaining obligation under the
 Statute." Department of Defense Schools, 11 FLRA 597 (1983).  In a case
 where an agency directs an activity to carry out a change in conditions
 of employment without bargaining with the union and the activity has "no
 choice but to follow the dictates" of the agency, the Authority has held
 the agency exclusively liable for the violation.  Department of the
 Interior, Water and Power Resources Services, Grand Coulee Project,
 Grand Coulee Washington and Office of the Secretary Department of the
 Interior, Washington, D.C., 9 FLRA 385 (1982).  The Authority reached a
 similar conclusion where a Regional Director issued a memorandum to
 Bureau Chiefs and District Managers directing them to implement
 immediately a policy which altered an established condition of
 employment.  There the District Manager was not found responsible for
 the unilateral change as such action "merely complied with a direction
 from agency management at a higher level;" the action was found to be
 simply ministerial.  Social Security Administration and Department of
 Health, Education and Welfare, Region VI, Social Security
 Administration, Galveston, Texas, 10 FLRA 33 (1982).  But, in a case
 where an agency simply advised an activity that a contract proposal
 submitted by the Union was nonnegotiable, the activity, not the agency
 was held responsible for a violation of section 7116(a)(1) and (5) of
 the Statute.  Kansas Army National Guard and National Guard Bureau, 10
 FLRA 303 (1982).  Where a particular subject matter is nonnegotiable
 because, for example, it falls within management's rights under section
 7106, bargaining over the implementation and impact of the changes is
 required.  Social Security Administration, 8 FLRA 517 (1982), seeks to
 resolve the question of whether the blame for the refusal to bargain
 should fall on the agency or on the activity based on the Grand Coulee
 case, supra.
 
    On the whole, Respondents contend that blame should rest on the
 shoulders of the activity officials, if anywhere, because there was an
 option to bargain under the terms of the SECNAV 7200.17 Instruction.
 General Counsel, on the other hand, contends that the Respondent Navy is
 responsible since it interfered with its activities bargaining
 obligations and that Respondent NSC is liable for refusing to bargain
 about the substance change in this new policy.
 
    The Respondent Navy's argues with respect to section 4.b.(2) and
 5.b.(5) state that changes in the method of payment should be made
 "where feasible and to the maximum extent possible within current labor
 agreement and resource constraints." The Navy points out that this
 discretionary language applying only to changes in the pay distribution
 program for current employees.  That section contains, no language
 mandating changes in the pay distribution procedures for employees hired
 on or after October 1, 1982.  Section 5.b.(5) states that all Navy
 activities have the responsibility for:
 
          Supporting the establishment of civilian pay distribution by
       PDQ/Direct Deposit or mail upon entry of all civilian employees
       hired by any (Department of Navy) activity on or after 1 October
       1982.
 
 The Complaint alleges that Respondent Navy violated the Statute by
 refusing to bargain in good faith concerning the paycheck distribution
 changes involving employees hired on or after October 1st-- in other
 words, new employees.  The General Counsel maintains that Respondent NSC
 "had no choice but to ministerially implement the provisions of the
 (SECNAV Instructions)" with respect to new employees.  I do not agree.
 Section 5.b.(5) relating to new employees does not direct activities to
 evade any bargaining obligation by establishing October 1, 1982 as the
 cut off date on PDQ for new employees.  It does, however, make
 activities responsible for "supporting" that date as the optimum date.
 Thus, it is found that the language of the SECNAV Instruction, without
 more does not establish that Respondent Navy interfered with or
 prevented Respondent NSC from fulfilling its bargaining obligation.
 
    Respondent Navy's position that the activities had discretion to
 bargain by pointing to the fact that it gave the activities sufficient
 time to bargain about the proposed changes and that the issuance of the
 instruction did not foreclose bargaining at the level of recognition is,
 therefore accepted.  This factor distinguishes the instant matter from
 Social Security Administration, Galveston, Texas, 10 FLRA 33 (1982),
 where the Regional Commissioner directed the District and Branch
 Managers to make certain changes only 12 days in advance of the changes
 sought, thereby preventing them from bargaining with the local unions.
 
    Nothing in the instant record demonstrates that the Navy did anything
 more than issue the new regulations.  If, Defense Logistics Agency,
 infra, is followed that action alone does not constitute interference
 nor does it, based on the wording of the instruction, preclude
 activities from bargaining with local unions even for new employees.
 For this reason, it is found and concluded that Respondent Navy did not
 interfere with Respondent NSC's bargaining obligation, in violation of
 the Statute.  Accordingly, and consistent with the findings in the
 Newport case, supra, it is found and concluded that the Complaint
 against Respondent Navy should be dismissed.  /6/
 
    B.  Compelling Need
 
    At the hearing and in its brief, Respondent argues that compelling
 need determinations should be made only under negotiability provisions
 of section 7116(b) of the Statute.  These provisions, Respondent
 maintains prohibit a labor union from raising the issues under unfair
 labor practice procedures and likewise prevents an Administrative Law
 Judge from making such determinations with the General Counsel present.
 
    Respondent apparently assumes that the existence of a regulation such
 as the SECNAV Instruction automatically creates a bar to negotiations on
 counter-proposals until the Authority determines that a compelling need
 does not exist for the regulation.  Respondent further points out that a
 "no compelling need" determination issued by the Authority would not
 retroactively render a refusal to bargain improper, but prospectively
 the regulation could no longer serve as a bar to negotiation.  The
 result as Respondent envisions is, that even if the Authority were to
 rule that there was no compelling need to alter the pay distribution
 procedures, it could not be found liable for committing an unfair labor
 practice.
 
    The General Counsel characterizes Respondent's reliance on section
 7117 of the Statute as an effort to evade its responsibility to bargain
 with the Union.  The General Counsel urges that section 7117 was
 designed to facilitate and not to frustrate the collective bargaining
 process.  Accordingly, he would distinguish this case from section
 7117(b)(1) proceedings because there is no collective bargaining
 agreement at issue.  Rather, he perceives the matter only as an
 unilateral change in conditions of employment to which "compelling need"
 is asserted as an unfair labor practice defense.  Further, the General
 Counsel maintains that there is nothing to preclude the Authority from
 making a compelling need determination within the context of an unfair
 labor practice proceeding.  State of Nevada National Guard, 7 FLRA 245
 (1981).  For these reasons, the General Counsel urges that the
 Authority, with an Administrative Law Judge delegated to conduct unfair
 labor practice proceedings on its behalf, has jurisdiction to evaluate a
 respondents' compelling need defense.  Contra U.S. Air Force
 (Washington, D.C.) and U.S. Air Force, Electronic Systems Division,
 Hanscom Air Force Base (Bedford, MA), Case No. 1-CA-853, OALJ-83-20
 (1982).  Based on this interpretation of precedent and the facts of the
 case, the General Counsel urges that Respondents' compelling need
 defense should be rejected.
 
    Since Respondent did not produce any evidentiary support for its
 compelling need assertions the General Counsel emphasized that no
 compelling need in fact exists and Respondent NSC was not relieved of
 its bargaining obligations under the Statute by virtue of the fact that
 the new pay policy was implemented pursuant to instructions issued by
 the Respondent Navy.  Defense Logistics Agency, et al., 12 FLRA 424
 (1983) decided after the hearing in the matter, plainly states that the
 determination of whether or not a compelling need exists can
 theoretically take place either in an unfair labor practice or in a
 negotiability proceeding.  However, when an exclusive representative has
 selected the unfair labor practice forum and agency management raises as
 an affirmative defense that it refused to bargain because there was a
 compelling need for the regulation, the compelling need issue must
 necessarily be decided in the unfair labor practice proceeding.  Under
 these circumstances, a respondent is required to come forward with
 affirmative support for its assertion, in an unfair labor practice
 proceeding, just as it would in a negotiability proceeding.
 Furthermore, the decision suggests that a respondent should raise the
 compelling need issue in its answer to the complaint, rather than in its
 post-hearing brief.  However, the Authority considered, in that case,
 whether the record provided sufficient proof for the existence of a
 compelling need.
 
    Section 2424.11 of the Authority's Rules and Regulations (5 CFR
 2424.11 (1981)) provides the criteria for determining the compelling
 need for agency rules and regulations under the negotiability procedures
 established in section 7117(a)(2).  These criteria also apply to
 compelling need determinations made in the context of unfair labor
 practice proceedings.  See State of Nevada National Guard, supra, and
 are as follows:
 
    A rule or regulation demonstrates the existence of a compelling need
 if one of the following criteria is met:
 
          (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.
 
          (b) The rule or regulation is necessary to insure the
       maintenance of basic merit principles.
 
          (c) The rule or regulation implements a mandate to the agency
       or primary national subdivision under law or other outside
       authority, which implementation is essentially nondiscretionary in
       nature.
 
 5 CFR 2424.11 (1981).  Under the criterion (a), an agency must
 demonstrate that its regulation is essential, as distinct from being
 merely helpful or desirable, by showing that the objective sought in the
 regulation could not have been achieved by any other means.  American
 Federation of Government Employees, AFL-CIO, Local 3804, 7 FLRA 217
 (1981).  Similarly, under criterion (b), an agency must demonstrate that
 its regulation is necessary as the only means of attaining that
 objective.  If a respondent does not prove that it had a compelling need
 for refusing to bargain about changes made as a result of an agency-wide
 rule or regulation and there is no merit to any of its other defenses,
 the respondent is vulnerable to unfair labor practice violations under
 the Statute.  Defense Logistics Agency, supra.
 
    In light of the Defense Logistics Agency decision, the General
 Counsel, in my opinion, successfully refuted Respondent's argument that
 a compelling need determination can only be made under the negotiability
 provisions of section 7117 of the Statute.  Clearly such determinations
 now can be made within the context of an unfair labor practice
 proceeding and the unfair labor practice forum is the proper tribunal
 for agency management to raise as an affirmative defense that it refused
 to bargain on the basis that there is a compelling need for the
 regulation in question.  Defense Logistics Agency, supra.
 
    Consistent with its belief that the compelling need issue has no
 place in an unfair labor practice proceeding, Respondent did not raise
 the issue as an affirmative defense in response to the Complaint.  While
 Respondent raised compelling need to the Union as a bar to negotiations
 no request for a compelling need determination was even filed in this
 matter.  Although Respondent did not attempt, at the hearing, to offer
 evidence to support its compelling need defense, in its brief it
 attempted to demonstrate that it had important reasons to seek the
 changeover from worksite delivery of the paychecks to automatic deposit
 of employee checks and savings bonds.  According to Respondent's brief,
 dramatic savings ($4.5 million per year) is the cost of paying employees
 if 180,000 employees salaries were mailed directly to each financial
 institution (using master checks for each institution) would result.
 Further, the use of electronic funds transfer would provide for better
 cash management and serves as a savings in interest costs.  Although
 none of these savings is assured if the Navy mails the paychecks to the
 employees' homes, it demonstrates the potential for saving the
 government money if employees readily adopt the Direct Deposit Program.
 
    To determine whether or not these reasons constitute a compelling
 need to make changes in the regulation without bargaining with the
 exclusive representative, I turn to a consideration of the three
 illustrative criteria provided in section 2424.11 of the Authority's
 Rules and Regulations.  According to the first criterion, the regulation
 must be essential and not merely helpful or desirable.  Clearly, the
 practice of directly depositing employee salaries at the banks where
 employees have their accounts would save the Navy money in terms of
 printing checks and distributing them.  But it is questionable whether
 mailing checks to employees' homes, which remains one of the options
 under the SECNAV Instruction, really saves the Navy any money:  there
 are still costs associated with printing the checks, providing and
 stuffing the envelopes and mailing the checks to employees' homes.
 Leaving aside these points, serious doubts are raised when considering
 whether the program is essential to the Navy.  In short, although the
 program seems helpful, it has not been established that it is essential.
  Furthermore, in terms of the second criterion, there is no
 substantiation that the program is necessary for the Department of the
 Navy to insure the maintenance of basic merit principles.  There may
 well be alternative methods which would save the Department of the Navy
 money in disbursing employee salaries.  The last criterion, concerning
 implementation which is essentially nondiscretionary in nature, is in no
 manner supported by any evidence.  For the above reasons and in
 accordance with the previous findings in the Newport case, it is found
 and concluded that the changes announced in the SECNAV Instruction do
 not warrant a finding that a compelling need for the regulation existed.
 
    C. Section 7116(a)(1) and (5) Violation
 
    The Statute requires notice to exclusive bargaining representatives
 of proposed changes of conditions of employment and, upon request, good
 faith bargaining.  An agency or its activity is not free to unilaterally
 change conditions of employment either through a memoranda or a
 regulation, except as provided by section 7117 of the Statute.  Under
 section 7117, an agency is not required to bargain about a
 Government-wide rule or regulation;  nor is it required to bargain about
 an agency-wide rule or regulation for which a compelling need has
 already been found.  /7/ See National Treasury Employees Union, 9 FLRA
 983 (1982).  It is also well-established that conditions of employment
 include those established by contract, as well as those established
 through past practices, the result of tacit or informal agreement.
 Department of Defense, Department of the Navy, Polaris Missile Facility,
 Charleston, South Carolina, 6 FLRA 372 (1981), citing Department of the
 Navy, Naval Underwater Systems Center, Newport Naval Base, 3 FLRA 413
 (1980).  In this regard, "a practice will be considered to have ripened
 into a term or condition of employment if it has been consistently
 exercised for an extended period of time with the knowledge of
 respondent's supervisors." As a consequence, management is often
 required to negotiate about conditions of employment whose terms may not
 be expressly stated in the contract between the parties.
 
    The relevant facts disclose that the Union involved herein was
 notified about the proposed changes in the distribution of payroll
 checks and that it requested to bargain concerning the matter.
 Subsequently, Respondent met with representatives from the Union to
 discuss the SECNAV Instruction, but refused to bargain on the change in
 the pay procedures although it did exchange proposals regarding the
 impact and implementation of the change.
 
    As already noted, although the established practice of paying
 employees at their worksite was not a matter of contract, such fact does
 not release the activity from its obligation to bargain.  See Polaris
 Missile Facility Atlantic, supra.  Clearly NSC never considered
 negotiations with the Union about the substance of changing the practice
 of delivering the employees' paychecks.
 
    Although the Authority has not, to date, addressed the question as to
 the extent of an agency's bargaining obligations with regard to a
 decision to alter a practice of hand delivering payroll checks to
 bargaining unit employees at their worksites, Administrative Law Judge
 Devaney recently considered a similar issue in United States Department
 of Defense, Department of the Army, McAlester Army Ammunition Plant,
 Case No. 6-CA-1041, OALJ-82-77 (1982), exceptions filed (FLRA May 30,
 1982).  There, the Activity decided to eliminate the traditional
 practice of providing bargaining unit employees with the option of
 receiving hand delivery of their payroll checks at their worksites.
 While the activity, therein notified the exclusive representative of
 this change, it asserted that the decision was nonnegotiable in that it
 involved the exercise of reserved "management rights" under section 7106
 of the Statute and that its bargaining obligations were limited to the
 impact and implementation of the change.  Judge Devaney rejected the
 activity's assertions of nonnegotiability (i.e., that the decision to
 eliminate hand delivery involved the activity's right under section
 7106(a)(1) of the Statute to determine its budget;  OALJ-82-77 at 18-24;
  or internal security;  OALJ-82-77 at 24-27) and concluded that the
 activity had refused to bargain over the decision to change an
 established condition of employment in violation of section 7116(a)(1)
 and (5) of the Statute.  In reaching this conclusion, Judge Devaney
 stated:
 
          Pay practices are "conditions of employment" within the meaning
       of the Statute.  Indeed, other than employment itself, no other
       matter is of more immediate, direct, or personal concern to each
       employee than pay practices.  Specifically, the hand delivery of
       paychecks on the premises on payday had been an established
       condition of employment since the inception of the Plant in 1941
       and had been continued without change from the date the Department
       of the Army assumed control on October 1, 1977.  In connection
       therewith, a bank provided facilities, on the premises, to cash
       paychecks on payday.  Of course, employees relied on receipt of
       their checks on payday and on the assurance that they could
       convert those checks to cash on payday.  Mailing of paychecks,
       whether to a home address or to a bank, altered the prior
       practice, frequently, as the record shows, to the considerable
       inconvenience and expense to employees.
 
 (Quotations in original;  underlining added) OALJ-82-77 at 22.
 Respondent's argument notwithstanding, Judge Devaney's conclusions, in
 my opinion, not only find support in a logical reading of the Statute,
 but in the substantial in the body of law developed in the private
 sector where the National Labor Relations Board has consistently held
 that unilateral changes in the time and manner of payment of employees'
 wages are violative of section 8(a)(1) and (5) of the National Labor
 Relations Act, as amended, 29 USC 158(a)(1) and (5).  See e.g. Superior
 Rambler, 150 NLRB 1264, 1268 (1965) (unilateral change in payday from
 Saturday to Friday);  American School Supply Co., 157 NLRB 473, 474
 (1966) (unilateral change in payday from every other Monday to every
 other Friday);  and Southern Florida Hotel and Motel Assn., 245 NLRB
 561, 569 (1970) (unilateral change in time and manner of paying tips
 from payment within 48 hours of a function to payment every other week).
 
    Therefore, agency management seemingly is obligated under the Statute
 to bargain with an exclusive representative of its employees concerning
 a decision to eliminate hand delivery of payroll checks and savings
 bonds to bargaining unit employees at their worksites and the impact and
 implementation of the decision because such decision involves a change
 in pay practices which are negotiable conditions of employment.
 
    As already noted, with the exception of the scope of the change
 (i.e., the new pay policy involved herein affected only new employees
 whereas the change in McAlester affected all employees) the instant case
 does not differ markedly from McAlester.  Thus, both cases involve the
 same basic change in conditions employment-- the elimination of hand
 delivery of payroll checks and savings bonds and the requirement that
 employees have their checks and savings bonds mailed directly to a
 non-work address or a financial institution.  Moreover, the impact of
 the new pay policy on affected employees at Respondent NSC is
 essentially the same as that which was found to be substantial in
 McAlester.  That is, the decision to eliminate hand delivery of payroll
 checks and savings bonds at the worksite operates to deprive affected
 employees of the assurance that they will receive their payroll checks
 and savings bonds on time and be able to convert those checks to cash
 that same day during their normal working hours.  In this regard, it is
 uncontroverted that Respondent NSC has seldom, if ever, failed to
 deliver payroll checks on the designated payday and that procedures were
 established whereby employees could readily "cash" their checks during
 their normal working hours on payday.  New employees, on the other hand,
 are required to assume the risk that their payroll checks may not arrive
 at their bank or nonwork address until after payday.  In such
 circumstances, it becomes clear that the new pay policy was neither
 insignificant nor trivial.
 
    Respondent mistakenly assumed that it had no obligation to bargain on
 the decision to effect the change in delivery of paychecks and savings
 bonds.  Such a mistake clearly prevented effective bargaining on the
 impact and implementation of the change in policy.  Moreover, since as
 Respondent argues, Respondent NSC retained discretion to negotiate on
 the new pay distribution policy under the SECNAV Instruction, it was
 required to bargain to the full extent of that discretion.  Department
 of the Navy, Long Beach Naval Shipyard, 7 FLRA 362 (1981);  National
 Treasury Employees Union and Internal Revenue Service, 6 FLRA 522
 (1981).  The obligation, in my view, included the obligation to bargain
 concerning the decision as it affected new employees.  Thus, while
 Respondent was willing to bargain on impact and implementation, it could
 not, if bargaining were commenced fulfill its Statutory obligation since
 its position precludes complete bargaining on the matter.  Accordingly,
 it is found and concluded that Respondent NSC was obligated to provide
 the Union with an opportunity to bargain concerning the substance of the
 new pay policy and its impact and implementation.  Failing to do so, in
 my view, constitutes a violation of section 7116(a)(1) and (5) of the
 Statute.
 
    Having found that Respondent Navy did not engage in any unfair labor
 practices in violation of section 7116(a)(1) and (5) of the Statute, it
 is recommended that the Complaint insofar as it alleges a violation by
 the Department of the Navy, be dismissed, in its entirety.  Having
 further found that Respondent NSC has engaged in, and is engaging in
 certain conduct in violation of section 7116(a)(1) and (5) of the
 Statute it is recommended that the Authority issue the following:
 
                                   ORDER
 
    Pursuant to Section 18 of the Statute, 5 U.S.C. 7118 and, section
 2423.29 of the Regulations, 5 C.F.R. 2423.29, the Authority hereby
 orders that Department of the Navy, U.S. Naval Supply Center, Oakland,
 California, shall:
 
    1.  Cease and desist from:
 
          (a) Instituting any change in the established policy and
       practice of the hand delivery of employee paychecks and savings
       bonds on the premises without first notifying the American
       Federation of Government Employees, Local 1533, AFL-CIO, the
       exclusive representatives of its employees, and affording such
       representative the opportunity to negotiate in good faith, to the
       extent consonant with law, regulations and the Statute, prior to
       any decision concerning such policy and practice.
 
          (b) In any like or related manner, interfering with,
       restraining, or coercing its employees in the rights assured by
       the Statute.
 
    2.  Take the following affirmative action in order to effectuate the
 purposes and policies of the Statute:
 
          (a) Rescind and withdraw the decision announced in the Party
       Line publications from December 11, 1982 through January 21, 1983
       and unlawfully implemented on January 14, 1983.
 
          (b) Forthwith reinstate the policy and practice of the hand
       delivery of paychecks and savings bonds on the premises as it
       existed prior to October 1, 1982.
 
          (c) Notify the American Federation of Government Employees,
       Local 1533, AFL-CIO any proposed change regarding the hand
       delivery of paychecks and savings bonds on the premises and, upon
       request, negotiate with such representative, to the extent
       consonant with law and regulations, on any such proposal.
 
          (d) Post at its facility at the Department of the Navy, U.S.
       Naval Supply Center, Oakland, California, copies of the attached
       notice marked "Appendix", on forms to be furnished by the Federal
       Labor Relations Authority.  Upon receipt of such forms, they shall
       be signed by the Commanding Officer and they shall be posted for
       60 consecutive days thereafter in conspicuous places, including
       all places where notice to employees are customarily posted.  The
       Commanding Officer shall take reasonable steps to insure that such
       notices are not altered, defaced, or covered by any other
       material.
 
          (e) Notify the Regional Director of the Federal Labor Relations
       Authority for Region IX, whose address is:  530 Bush Street, Room
       542, San Francisco, California 94108, in writing, within 30 days
       from the date of this Order, what steps have been taken to comply
       therewith.
 
    IT IS FURTHER ORDERED that the Complaint predicated upon a violation
 of the Statute by the Department of the Navy, be, and it hereby is
 dismissed.
 
                                       ELI NASH, JR.
                                       Administrative Law Judge
 
 Dated:  September 30, 1983
         Washington, D.C.
 
 
 
                                 APPENDIX
 
                          NOTICE TO ALL EMPLOYEES
 
  PURSUANT TO A DECISION AND ORDER OF THE FEDERAL LABOR
 RELATIONS
 AUTHORITY AND IN ORDER TO EFFECTUATE THE POLICIES OF CHAPTER 71
 OF TITLE
 5 OF THE UNITED STATES CODE FEDERAL SERVICE LABOR-MANAGEMENT
 RELATIONS
 STATUTE WE HEREBY NOTIFY OUR EMPLOYEES THAT:
 
 WE WILL NOT institute any change in the established policy and practice
 of the hand delivery of employee paychecks and savings bonds on the
 premises without first notifying the American Federation of Government
 Employees, Local 1533, the exclusive representative of our employees,
 and affording it the opportunity to negotiate in good faith, to the
 extent consonant with law and regulations, prior to any decision
 concerning such policy and practice.  WE WILL NOT in any like or related
 manner, interfere with, restrain or coerce our employees in the exercise
 of their rights assured by the Federal Service Labor-Management
 Relations Statute.  WE WILL rescind and withdraw the decision announced
 in the Party Line publications from December 11, 1982 through January
 21, 1983 and which we unlawfully implemented on January 14, 1983.  WE
 WILL forthwith reinstate the policy and practice of the hand delivery of
 payroll checks and savings bonds on the premises as it existed prior to
 October 1, 1982.
                                       . . . (Agency or Activity)
 
    Dated:  . . .  By:  . . . (Signature) This Notice must remain posted
 for sixty (60) consecutive days from the date of posting and must not be
 altered, defaced, or covered by any other material.  If employees have
 any questions concerning this Notice or compliance with any of its
 provisions, they may communicate directly with the Regional Director of
 the Federal Labor Relations Authority, Region IX, whose address is:  530
 Bush Street, Room 542, San Francisco, California 94108 and whose
 telephone number is (415) 556-8106.
 
 
 
 
 
 
 --------------- FOOTNOTES$ ---------------
 
 
    /1/ In view of the disposition herein, it is unnecessary to pass upon
 the General Counsel's motion to strike Respondent NSC's exceptions.
 
 
    /2/ Section 7106(b)(1) provides in pertinent part:
 
          Sec. 7106.  Management rights
 
                                .  .  .  .
 
          (b) Nothing in this section shall preclude any agency and any
       labor organization from negotiating--
 
          (1) at the election of the agency, . . . on the technology
       methods, and means of performing work(.)
 
 
    /3/ In view of the Authority's decision herein, it is unnecessary to
 address the Respondent's assertion that a compelling need exists under
 section 7117 of the Statute for the agency regulation involved herein.
 
 
    /4/ The General Counsel filed a Motion to Strike Respondent's Brief
 or alternatively to strike portions of the brief.  After careful review,
 it is concluded that the Motion should be, and it is, denied.  It is
 noted, and considered in the determination regarding this Motion that
 the General Counsel's brief, mailed on June 7, 1983, was also untimely
 received.
 
 
    /5/ The General Counsel's unopposed Motion to Correct Transcript is
 granted.
 
 
    /6/ In view of the above finding, it is unnecessary to address other
 arguments raised on its behalf by the Department of the Navy conc