21:0282(36)NG - NTEU, Chapter 207 and FDIC, Washington, DC -- 1986 FLRAdec NG



[ v21 p282 ]
21:0282(36)NG
The decision of the Authority follows:


 21 FLRA No. 36
 
 NATIONAL TREASURY EMPLOYEES 
 UNION, CHAPTER 207
 Union
 
 and
 
 FEDERAL DEPOSIT INSURANCE 
 CORPORATION, WASHINGTON, D.C.
 Agency
 
                                            Case No. 0-NG-446
                                                   14 FLRA 598
 
                            DECISION ON REMAND
 
                         I.  Statement of the Case
 
    By its Order of April 26, 1985, the United States Court of Appeals
 for the District of Columbia Circuit granted the Authority's motion to
 remand the record in the instant case so that the Authority could
 consider the relevance, if any, of the Agency's August 20, 1984 issuance
 to the Authority's initial decision herein, National Treasury Employees
 Union, Chapter 207 and Federal Deposit Insurance Corporation,
 Washington, D.C., 14 FLRA 598 (1984) (Member Haughton dissenting).  The
 proposal remanded to the Authority was the following:
 
                           Union Proposal 5 /1/
 
                           Article 59 -- Salary
 
                                 Section 1
 
          The salary structure, that is the grades and steps of the
       schedule, being used by FDIC will be maintained.  Hereafter, all
       employees will have their current salaries adjusted for the
       cost-of-living/comparability factor.  The adjustment will be equal
       to the statistical adjustment recommended to the President by the
       Pay Advisory Council.  (After October 1980 the adjustment factor
       developed by the Council will be modified to account for the
       different comparability positions between FDIC and those employees
       under the General Schedule.  Beginning in January 1981 the parties
       will meet to seek agreement on the modification formula.) This
       adjustment will become effective the beginning of the first pay
       period following the announcement of it by the council or other
       appropriate sources.  It will be unaffected by Presidential or
       Congressional actions.
 
                                 Section 2
 
          NTEU agrees to establish with the EMPLOYER a productivity
       committee that will monitor the impact of the new salary
       adjustment system and seek reasonable ways to increase the
       productivity of the EMPLOYER, e.g., decrease employee turnover,
       remove work obstacles, improve upon available machinery and
       procedures, raise employee morale, etc.
 
    In its initial decision the Authority held that Union Proposal 5 was
 outside the duty to bargain under section 7117(a)(2) of the Federal
 Service Labor-Management Relations Statute (the Statute), as amended, 5
 U.S.C. Sections 7101-7135 (1982 and Supp. II (1984) /2/ and section
 2424.11(a) of the Authority's Rules and Regulations /3/ because it was
 barred from negotiation by an Agency resolution for which a compelling
 need exists.  Specifically, the Authority determined that Agency
 resolutions establishing a uniform salary structure for Agency employees
 were essential to the accomplishment of the mission or the execution of
 the functions of the Agency in a manner which is consistent with the
 requirements of an effective and efficient government.  /4/ The
 Authority found that the Agency's uniform salary system, whereby
 employees at the same grade and step receive the same salary was
 essential to achieving the Agency's objective of pay equity.  Further,
 the Authority determined that pay equity was a critical factor in
 maintaining employee morale and productivity, which in turn facilitated
 the effective and efficient operation of the Agency.  The Union's
 proposal, the Authority concluded, by providing a different salary
 system for unit employees in the Washington headquarters office, would
 frustrate the goal of pay equity and thus would disrupt the effective
 and efficient accomplishment of the mission of the Agency.  The Agency
 is comprised of employees in 14 regional offices across the country as
 well as bargaining unit and nonbargaining unit employees in the
 Washington headquarters.
 
    The Union appealed the Authority's decision to the U.S. Court of
 Appeals for the District of Columbia Circuit, appeal docketed sub nom.
 National Treasury Employees Union v. Federal Labor Relations Authority,
 No. 84-1286 (D.C. Cir. July 6, 1984).  Subsequent to the filing of the
 appeal, the Agency's Board of Directors, on August 20, 1984, adopted a
 resolution establishing a cost-of-living adjustment to the salaries of
 all Agency employees effective January 1, 1985.  /5/ On the same date,
 the Agency notified employees of a reorganization of its regional
 offices and explained that the system of cost-of-living benefits
 established by the Board of Directors' resolution was designed, in part,
 to make it possible for employees moving to higher cost areas pursuant
 to the reorganization to suffer no financial loss when compared to
 Agency employees in lower cost areas.  /6/ The Union then filed with the
 Court a Motion to Supplement the Record to include the Agency's August
 20, 1984 Notice to All Employees, arguing that the Notice revealed that
 the Agency had abandoned a uniform salary scheme.  The Authority also
 filed a motion with the Court requesting that the case be remanded to
 enable it to consider the relevance, if any, of the Agency's action to
 the Authority's earlier decision.  By Order of April 26, 1985, the Court
 granted the Authority's motion and denied the Union's motion.  The issue
 before the Authority on remand concerns the relevance of the Agency's
 August 20, 1984 resolution to the Authority's previous decision.  After
 careful consideration of the record in the case, including the parties'
 submissions pursuant to the Authority's Notice of Reopened Proceedings,
 the Authority makes the following determinations.
 
                       II.  Positions of the Parties
 
    On remand, the Union contends that the Agency's August 20, 1984
 resolution undermines the Authority's earlier determination that a
 compelling need exists for Agency resolutions prescribing a uniform
 salary structure based upon an employee's grade and step.  The Agency
 contends that its August 20, 1984 resolution establishes a benefit for
 employees wholly apart from and unrelated to its salary schedule and,
 thus, the Aguust 20, 1984 resolution does not fall within the scope of
 the Authority's decision as to the essentiality of the Agency's salary
 schedule.  In the alternative, the Agency argues that even if the
 Agency's August 20, 1984 resolution is found to pertain to employee
 salaries, that determination does not require the reversal of the
 Authority's decision.  The Agency concludes that, for the same reasons
 as are set forth in the Authority's original decision, a compelling need
 exists for the cost-of-living adjustments established in the Agency's
 August 20, 1984 resolution.  The Agency also contends that the proposal
 directly interferes with its right to determine its budget under section
 7106(a)(1) of the Statute.
 
                              III.  Analysis
 
                 A.  Relationship of Resolution to Salary
 
    As to the Agency's first contention, that its cost-of-living
 adjustments constitute separate and unrelated employee benefits, the
 Authority finds, in agreement with the Union, /7/ that the subject
 matter of the Agency's August 20, 1984 resolution directly relates to
 the issues pertaining to the Agency's salary structure resolved by the
 Authority in its initial decision.  The resolution provides for "a full
 cost-of-living adjustment to the salaries of all . . . employees."
 (Emphasis added.) /8/ Moreover, the record indicates that a major reason
 for adopting a system of cost-of-living adjustments is to make the
 salaries of Agency employees more competitive with salaries for
 comparable jobs in higher cost areas.  /9/ The Agency argues that
 because the cost-of-living adjustment is based upon job location rather
 than position classification it is a "relocation differential" and as
 such is an employee benefit.  However, rather than substantiating its
 claim, the Agency's argument only emphasizes the similarity to other
 forms of wage differentials, like an environmental differential or
 hazardous duty pay.  Furthermore, the Agency acknowledges that its
 cost-of-living adjustment constitutes taxable income to the employee,
 again implicitly underscoring the distinction between the cost-of-living
 adjustment involved herein and typical non-taxable employee benefits,
 like life and health insurance.  /10/ In short, the cost-of-living
 adjustment established by the Agency is an increment to employee salary.
  It is necessary, therefore, to consider the effect of its establishment
 upon the Authority's prior decision.
 
                            B.  Compelling Need
 
    The Union contends that the Agency can no longer claim, and the
 Authority could not now find, that the uniform salary system established
 by Board of Director resolutions is essential to the accomplishment of
 the Agency's mission or the execution of its functions in a manner
 consistent with the requirements of an effective and efficient
 government.  With the adoption of the August 20, 1984 resolution, the
 Agency no longer has a uniform salary system.  In particular, the Union
 argues that since, under the Agency's cost-of-living adjustment,
 employees at the same grade and step will not receive the same salary,
 the Agency cannot claim, nor can the Authority find, that the August 20,
 1984 resolution is essential to the achievement of pay equity and the
 preservation of employee morale.  The Union concludes that there is no
 compelling need for the Agency's resolution so as to bar negotiation on
 the Union's proposal.  The Agency cannot show that the disparate rates
 of pay established thereby are any more "essential" than the difference
 in rates of pay for unit employees which would result from the Union's
 proposal.
 
    In its initial decision the Authority held that a compelling need
 existed for uniformity in the Agency's pay-setting system, compensating
 employees on the basis of the same salary rate for positions at the same
 grade and step.  The Authority stated as follows (at 611-12 of the
 decision)"
 
          The Agency has demonstrated that the need for uniformity in its
       pay system is an integral aspect of the Agency's stated objective
       of pay equity.  The Agency's need for uniformity is thus not one
       of mere administrative convenience, as our colleague suggests in
       dissent.  In this regard, the Agency has shown that in the pay
       setting area, under the circumstances presented, lack of
       uniformity would result in pay inequity which in turn would result
       in disruption inimical to the accomplishment of the Agency's
       mission and execution of its functions in a manner consistent with
       an effective and efficient government.  Thus, in the circumstances
       in this case, we are persuaded that there is an overriding need
       for a uniform pay setting system throughout the Agency in order to
       operate effectively and efficiently to accomplish its mission.
       (Footnotes omitted and emphasis added.)
 
    In reaching its finding of compelling need the Authority addressed
 both uniformity as to amount, i.e., that employees at the same grade and
 step receive the same salary, and uniformity of pay-setting method,
 i.e., that all employees would be paid on the basis of the same system
 of computing salary rates.  The Authority did not distinguish between
 these two different aspects of uniformity because, under the facts
 presented at that time, the method of computing employee salaries
 resulted in uniform salary rates.  However, as the Union argues, the
 Agency's pay-setting system as modified in the August 20, 1984
 resolution no longer provides uniform salary rates for employees at the
 same grade and step.  Thus, the issue now before the Authority is
 whether the Agency has shown that it nevertheless has preserved in its
 pay-setting system a uniformity of method which is essential to the
 accomplishment of its mission.  /11/
 
    While the August 20, 1984 resolution modifies the Agency's salary
 structure by adding a cost-of-living adjustment, the system of
 determining employee salaries remains uniform.  The same method or
 formula for computing relative cost-of-living in areas where Agency
 offices are located is applied to all employees of the Agency.  /12/ As
 the Agency notes, the cost-of-living adjustment modification of its
 salary structure enhances its ability to maintain pay equity among its
 employees by eliminating regional cost differentials and thereby
 equalizing employee "buying power." /13/ In so doing, the Agency
 increases the efficiency and effectiveness of its accomplishment of its
 mission by facilitating the movement of employees within its regional
 offices and by making its salaries more competitive with other employers
 in higher cost areas.  /14/ The Union's proposal, on the other hand,
 would establish a method of computing the cost-of-living adjustment for
 unit employees in the Washington headquarters office which is different
 from that established for non-unit employees in the headquarters and 14
 other regional locations by the Agency's August 20, 1984 resolution,
 /15/ namely, it would adopt the recommendations of the President's Pay
 Council.  /16/ Such different treatment of those employees who happen to
 be in the unit nullifies the Agency's objective of equalizing employee
 "buying power" throughout the Agency and, consequently, undermines the
 incentives for employees to move.  The only way by which the Agency can
 insure its ability to accomplish its objective of equitable treatment of
 its employees is to maintain a uniform pay-setting system.  The
 Authority disagrees with the Union's argument that the Agency has not
 shown that the pay-setting system set forth in the August 20, 1984
 resolution is the only way to achieve those objectives.  /17/ Any
 pay-setting system which involves different methods of calculating the
 salaries of similar groups of employees, as would be the case if the
 Union's proposal were ultimately to be adopted, could produce inherently
 inequitable results by treating similarly situated groups of employees
 differently.
 
              C.  Management's Right to Determine Its Budget
 
    The Agency also argued in this case that Union Proposal 5 is outside
 the duty to bargain under the Statute because it directly interferes
 with management's right to determine its budget under section
 7106(a)(1).  /18/ However, the Agency has not demonstrated that
 implementation of the Union's proposal would directly interfere with
 management's right to determine its budget under the test set forth in
 American Federation of Government Employees, AFL-CIO and Air Force
 Logistics Command, Wright-Patterson Air Force Base, Ohio, 2 FLRA 604
 (1980), enforced as to other matters sub nom. Department of Defense v.
 Federal Labor Relations Authority, 659 F.2d 1140 (D.C. Cir. 1981), cert.
 denied sub nom. AFGE v. FLRA, 455 U.S. 995 (1982).  It is clear from the
 record in this case that Union Proposal 5 does not prescribe a
 particular program or operation which must be included in the Agency's
 budget.  Rather, it concerns an already existing item, employee
 salaries.  Moreover, the proposal does not prescribe the amount to be
 allocated to that item.  It simply establishes a formula for adjusting
 employee salaries.  There is no showing that the proposal directly
 interferes with the Agency's right to determine its budget.  Further,
 the Agency has not demonstrated that implementation of the Union's
 proposal would result in a significant and unavoidable increase in
 costs.  The Agency has presented no evidence as to the cost impact of
 the Union's proposal compared with the costs of the system, including
 the regional differential, adopted by the Agency.  It has not been shown
 that the alleged increase in costs is not outweighed by compensating
 benefits.  Union Proposal 5 does not directly interfere with
 management's right to determine its budget under section 7106(a)(1) of
 the Statute.
 
                              IV.  Conclusion
 
    The Authority finds that the Agency's August 20, 1984 resolution,
 modifying the Agency's pay-setting system by providing for regional
 cost-of-living adjustments, maintains a uniform formula for calculating
 the salary of employees of the Agency.  Such action is essential to the
 accomplishment of the Agency's mission and execution of its functions in
 a manner consistent with an effective and efficient government.  The
 Authority finds that Union Proposal 5 conflicts with an Agency
 resolution for which a compelling need exists.  The Authority reaffirms
 its decision that the proposal is outside the duty to bargain under
 section 7117(a)(2) of the Statute and section 2424.11(a) of the
 Authority's Rules and Regulations.
 
    Issued, Washington, D.C., April 14, 1986.
                                       /s/ Jerry L. Calhoun, Chairman
                                       /s/ Henry B. Frazier III, Member
                                       FEDERAL LABOR RELATIONS AUTHORITY
 
 
                                 FOOTNOTES
 
    (1) The proposal will be referred to herein by the number given to it
 in the Authority's initial decision.
 
    (2) Section 7117(a)(2) provides as follows:
 
          Section 7117.  Duty to bargain in good faith;  compelling need;
        duty to consult
 
                       .   .   .   .   .   .   .
 
 
          (a)(2) The duty to bargain in good faith shall, to the extent
       not inconsistent with Federal law or any Government-wide rule or
       regulation, extend to matters which are the subject of any agency
       rule or regulation referred to in paragraph (3) of this subsection
       only if the Authority has determined under subsection (b) of this
       section that no compelling need (as determined under regulations
       prescribed by the Authority) exists for the rule or regulation.
 
    (3) Section 2424.11(a) of the Authority's Rules and Regulations
 provides as follows:
 
          Section 2424.11 Illustrative criteria.
 
          A compelling need exists for an agency rule or regulation
       concerning any condition of employment when the agency
       demonstrates that the rule or regulation meets one or more of the
       following illustrative criteria:
 
          (a) The rule or regulation is essential, as distinguished from
       helpful or desirable, to the accomplishment of the mission or the
       execution of functions of the agency or primary national
       subdivision in a manner which is consistent with the requirements
       of an effective and efficient government.
 
    (4) The parties stipulated that the Agency is a Government
 corporation and is not subject to the pay and allowance provisions of
 Chapter 51 of title 5 of the United States Code, see 5 U.S.C. Section
 5102, 5 CFR 511.201;  the compensation paid to its employees is not
 limited by the restrictions applicable to the "General Schedule";  and
 the Agency's Board of Direcotrs, in its discretion, regularly has
 adopted resolutions pursuant to which the Agency pays its general graded
 and wage graded employees at the same rates of pay as are paid to
 Federal employees who are subject to Chapter 51 of title 5 of the U.S.
 Code.  There is no dispute in this case as to whether the Agency's
 salary resolutions constitute agency rules or regulations which could
 bar negotiation of conflicting proposals if supported by a compelling
 need.  National Treasury Employees Union, Chapter 207 and Federal
 Deposit Insurance Corporation, Washington, D.C., 14 FLRA 598, 610
 (1984).  See also Agency Statement of Position on Remand at 5;  Union
 Statement of Position on Remand at 2.
 
    (5) The resolution of the Board of Directors of the Federal Deposit
 Insurance Corporation, August 20, 1984, (Attachment C to Agency's
 Statement of Position on Remand), provided, in relevant part, as
 follows:
 
          BE IT FURTHER RESOLVED, that the Board of Directors hereby
       approves, and authorizes appropriate officers of the Corporation
       to take such actions as are necessary to implement, the following
       changes in employee benefits:
 
          1.  the establishment of a full cost-of-living adjustment to
       the salaries of all Corporation employees except members of the
       Board of Directors, to become effective on January 1, 1985, as
       proposed at Tab D of the attached document entitled "Regional
       Restructuring and Other Proposals" and as amended by the attached
       document entitled "Salary Differential Locations," with
       adjustments for Budget Year 1986 and ensuing years to be
       determined in accordance with an index to be developed annually at
       the direction of the Division of Accounting and Corporate Services
       and reported to the Board of Directors(.)
 
    "Tab D" referenced above is set forth in an Appendix to the decision
 herein.
 
    (6) The Agency's Notice to All Employees, August 20, 1984, entitled
 "Restructuring of Regional Operations" (Attachment A to Agency's
 Statement of Position on Remand at 5-6) states, in relevant part, as
 follows:
 
          What about the Changes in the Compensation and Benefit Packages
       We've Been Hearing About?
 
                       .  .  .  .  .  .  .
 
 
          Cost-of-Living Salary Adjustments (COLA) -- A comprehensive
       analysis has been made of variations in the costs of housing,
       taxation, transportation, goods and services and other pertinent
       expenses in 135 field locations representing DBS field offices and
       major Liquidation sites across the country.  The analysis was
       based on a family of four with a $35,000 income level, ownership
       of the home and two automobiles, etc.  From that information, an
       index of cost-of-living adjustments was prepared which will allow
       us to more nearly match the salaries of personnel working in
       high-cost locations with those working in standard-cost areas.
       For example, individuals assigned to New York City would have
       their salaries adjusted upward 12.6% while persons working in
       Syracuse, New York would receive a 1.6% adjustment.  If you work
       in a standard cost area, there would be no COLA adjustment to your
       salary.  This is a significant and long-studied step by the
       Corporation and will markedly improve the equity of our salary
       structure and enable us to attract more people to the urban areas
       where our attention is increasingly being focused.  Implementation
       is set for January 1, 1985.
 
                       .  .  .  .  .  .  .
 
 
          The structural changes we are implementing are extensive and
       may involve relocation and new responsibilities for some of you.
       While change can be disruptive, consolidation of the Regional
       Offices will also bring about many new opportunities.  The Board
       believes these steps are necessary to enable the Corporation to
       properly meet its future responsibilities and has attempted to
       compensate for their adverse impact through a number of very
       positive steps affecting compensation and benefits.  I have every
       confidence that the skill, dedication and professionalism which
       have consistently been the hallmark of Corporation employees will
       again be demonstrated as we put this plan into effect.
 
    See also Agency Statement of Position on Remand at 9.
 
    (7) Union Supplemental Statement of Position on Remand at 1-3.
 
    (8) See note 5, supra.
 
    (9) See Appendix ("Tab D") at 1.
 
    (10) Agency Statement of Position on Remand at 7-10.
 
    (11) The Authority notes that employees' basic salary is still
 determined by grade and step.  Pursuant to the August 20, 1984
 resolution, employees' total salary is determined by a combination of
 that method with the method used to determine the applicable
 cost-of-living adjustment.
 
    (12) The Agency refers to the formula set forth in the August 20,
 1984 resolution as a "standard cost area index." See Agency Statement of
 Position on Remand at 8.  See also Attachment B to the Agency's
 Statement of Position on Remand and "Tab D" set forth in the Appendix
 hereto;  Agency Supplemental Statement of Position on Remand at 5-6.
 
    (13) Agency Statement of Position on Remand at 10-12.  Agency
 Supplemental Statement of Position on Remand at 4-5.  See note 6, supra.
  See also "Tab D" set forth in the Appendix hereto.
 
    (14) Agency Statement of Position on Remand at 10-12.  See also "Tab
 D" set forth in the Appendix hereto.
 
    (15) Union Statement of Position on Remand at 5.  Agency Supplemental
 Statement of Position on Remand at 6.  It is not disputed on remand
 herein that Union Proposal 5 conflicts with the Agency's August 20, 1984
 resolution.
 
    (16) See 5 U.S.C. Section 5305(b).
 
    (17) Union Statement of Position on Remand at 11.
 
    (18) Section 7106(a)(1) of the Statute provides, in relevant part, as
 follows:
 
          Section 7106.  Management rights
 
          (a) Subject to subsection (b) of this section, nothing in this
       chapter shall affect the authority of any management official of
       any agency --
 
          (1) to determine the . . . budget . . . of the agency . . . (.)
 
 
                                 APPENDIX
 
                               I.  PROPOSAL
 
    A combination of factors is likely to result in a significant number
 of Corporation employees moving over time from generall