21:0282(36)NG - NTEU, Chapter 207 and FDIC, Washington, DC -- 1986 FLRAdec NG
[ v21 p282 ]
The decision of the Authority follows:
21 FLRA No. 36 NATIONAL TREASURY EMPLOYEES UNION, CHAPTER 207 Union and FEDERAL DEPOSIT INSURANCE CORPORATION, WASHINGTON, D.C. Agency Case No. 0-NG-446 14 FLRA 598 DECISION ON REMAND I. Statement of the Case By its Order of April 26, 1985, the United States Court of Appeals for the District of Columbia Circuit granted the Authority's motion to remand the record in the instant case so that the Authority could consider the relevance, if any, of the Agency's August 20, 1984 issuance to the Authority's initial decision herein, National Treasury Employees Union, Chapter 207 and Federal Deposit Insurance Corporation, Washington, D.C., 14 FLRA 598 (1984) (Member Haughton dissenting). The proposal remanded to the Authority was the following: Union Proposal 5 /1/ Article 59 -- Salary Section 1 The salary structure, that is the grades and steps of the schedule, being used by FDIC will be maintained. Hereafter, all employees will have their current salaries adjusted for the cost-of-living/comparability factor. The adjustment will be equal to the statistical adjustment recommended to the President by the Pay Advisory Council. (After October 1980 the adjustment factor developed by the Council will be modified to account for the different comparability positions between FDIC and those employees under the General Schedule. Beginning in January 1981 the parties will meet to seek agreement on the modification formula.) This adjustment will become effective the beginning of the first pay period following the announcement of it by the council or other appropriate sources. It will be unaffected by Presidential or Congressional actions. Section 2 NTEU agrees to establish with the EMPLOYER a productivity committee that will monitor the impact of the new salary adjustment system and seek reasonable ways to increase the productivity of the EMPLOYER, e.g., decrease employee turnover, remove work obstacles, improve upon available machinery and procedures, raise employee morale, etc. In its initial decision the Authority held that Union Proposal 5 was outside the duty to bargain under section 7117(a)(2) of the Federal Service Labor-Management Relations Statute (the Statute), as amended, 5 U.S.C. Sections 7101-7135 (1982 and Supp. II (1984) /2/ and section 2424.11(a) of the Authority's Rules and Regulations /3/ because it was barred from negotiation by an Agency resolution for which a compelling need exists. Specifically, the Authority determined that Agency resolutions establishing a uniform salary structure for Agency employees were essential to the accomplishment of the mission or the execution of the functions of the Agency in a manner which is consistent with the requirements of an effective and efficient government. /4/ The Authority found that the Agency's uniform salary system, whereby employees at the same grade and step receive the same salary was essential to achieving the Agency's objective of pay equity. Further, the Authority determined that pay equity was a critical factor in maintaining employee morale and productivity, which in turn facilitated the effective and efficient operation of the Agency. The Union's proposal, the Authority concluded, by providing a different salary system for unit employees in the Washington headquarters office, would frustrate the goal of pay equity and thus would disrupt the effective and efficient accomplishment of the mission of the Agency. The Agency is comprised of employees in 14 regional offices across the country as well as bargaining unit and nonbargaining unit employees in the Washington headquarters. The Union appealed the Authority's decision to the U.S. Court of Appeals for the District of Columbia Circuit, appeal docketed sub nom. National Treasury Employees Union v. Federal Labor Relations Authority, No. 84-1286 (D.C. Cir. July 6, 1984). Subsequent to the filing of the appeal, the Agency's Board of Directors, on August 20, 1984, adopted a resolution establishing a cost-of-living adjustment to the salaries of all Agency employees effective January 1, 1985. /5/ On the same date, the Agency notified employees of a reorganization of its regional offices and explained that the system of cost-of-living benefits established by the Board of Directors' resolution was designed, in part, to make it possible for employees moving to higher cost areas pursuant to the reorganization to suffer no financial loss when compared to Agency employees in lower cost areas. /6/ The Union then filed with the Court a Motion to Supplement the Record to include the Agency's August 20, 1984 Notice to All Employees, arguing that the Notice revealed that the Agency had abandoned a uniform salary scheme. The Authority also filed a motion with the Court requesting that the case be remanded to enable it to consider the relevance, if any, of the Agency's action to the Authority's earlier decision. By Order of April 26, 1985, the Court granted the Authority's motion and denied the Union's motion. The issue before the Authority on remand concerns the relevance of the Agency's August 20, 1984 resolution to the Authority's previous decision. After careful consideration of the record in the case, including the parties' submissions pursuant to the Authority's Notice of Reopened Proceedings, the Authority makes the following determinations. II. Positions of the Parties On remand, the Union contends that the Agency's August 20, 1984 resolution undermines the Authority's earlier determination that a compelling need exists for Agency resolutions prescribing a uniform salary structure based upon an employee's grade and step. The Agency contends that its August 20, 1984 resolution establishes a benefit for employees wholly apart from and unrelated to its salary schedule and, thus, the Aguust 20, 1984 resolution does not fall within the scope of the Authority's decision as to the essentiality of the Agency's salary schedule. In the alternative, the Agency argues that even if the Agency's August 20, 1984 resolution is found to pertain to employee salaries, that determination does not require the reversal of the Authority's decision. The Agency concludes that, for the same reasons as are set forth in the Authority's original decision, a compelling need exists for the cost-of-living adjustments established in the Agency's August 20, 1984 resolution. The Agency also contends that the proposal directly interferes with its right to determine its budget under section 7106(a)(1) of the Statute. III. Analysis A. Relationship of Resolution to Salary As to the Agency's first contention, that its cost-of-living adjustments constitute separate and unrelated employee benefits, the Authority finds, in agreement with the Union, /7/ that the subject matter of the Agency's August 20, 1984 resolution directly relates to the issues pertaining to the Agency's salary structure resolved by the Authority in its initial decision. The resolution provides for "a full cost-of-living adjustment to the salaries of all . . . employees." (Emphasis added.) /8/ Moreover, the record indicates that a major reason for adopting a system of cost-of-living adjustments is to make the salaries of Agency employees more competitive with salaries for comparable jobs in higher cost areas. /9/ The Agency argues that because the cost-of-living adjustment is based upon job location rather than position classification it is a "relocation differential" and as such is an employee benefit. However, rather than substantiating its claim, the Agency's argument only emphasizes the similarity to other forms of wage differentials, like an environmental differential or hazardous duty pay. Furthermore, the Agency acknowledges that its cost-of-living adjustment constitutes taxable income to the employee, again implicitly underscoring the distinction between the cost-of-living adjustment involved herein and typical non-taxable employee benefits, like life and health insurance. /10/ In short, the cost-of-living adjustment established by the Agency is an increment to employee salary. It is necessary, therefore, to consider the effect of its establishment upon the Authority's prior decision. B. Compelling Need The Union contends that the Agency can no longer claim, and the Authority could not now find, that the uniform salary system established by Board of Director resolutions is essential to the accomplishment of the Agency's mission or the execution of its functions in a manner consistent with the requirements of an effective and efficient government. With the adoption of the August 20, 1984 resolution, the Agency no longer has a uniform salary system. In particular, the Union argues that since, under the Agency's cost-of-living adjustment, employees at the same grade and step will not receive the same salary, the Agency cannot claim, nor can the Authority find, that the August 20, 1984 resolution is essential to the achievement of pay equity and the preservation of employee morale. The Union concludes that there is no compelling need for the Agency's resolution so as to bar negotiation on the Union's proposal. The Agency cannot show that the disparate rates of pay established thereby are any more "essential" than the difference in rates of pay for unit employees which would result from the Union's proposal. In its initial decision the Authority held that a compelling need existed for uniformity in the Agency's pay-setting system, compensating employees on the basis of the same salary rate for positions at the same grade and step. The Authority stated as follows (at 611-12 of the decision)" The Agency has demonstrated that the need for uniformity in its pay system is an integral aspect of the Agency's stated objective of pay equity. The Agency's need for uniformity is thus not one of mere administrative convenience, as our colleague suggests in dissent. In this regard, the Agency has shown that in the pay setting area, under the circumstances presented, lack of uniformity would result in pay inequity which in turn would result in disruption inimical to the accomplishment of the Agency's mission and execution of its functions in a manner consistent with an effective and efficient government. Thus, in the circumstances in this case, we are persuaded that there is an overriding need for a uniform pay setting system throughout the Agency in order to operate effectively and efficiently to accomplish its mission. (Footnotes omitted and emphasis added.) In reaching its finding of compelling need the Authority addressed both uniformity as to amount, i.e., that employees at the same grade and step receive the same salary, and uniformity of pay-setting method, i.e., that all employees would be paid on the basis of the same system of computing salary rates. The Authority did not distinguish between these two different aspects of uniformity because, under the facts presented at that time, the method of computing employee salaries resulted in uniform salary rates. However, as the Union argues, the Agency's pay-setting system as modified in the August 20, 1984 resolution no longer provides uniform salary rates for employees at the same grade and step. Thus, the issue now before the Authority is whether the Agency has shown that it nevertheless has preserved in its pay-setting system a uniformity of method which is essential to the accomplishment of its mission. /11/ While the August 20, 1984 resolution modifies the Agency's salary structure by adding a cost-of-living adjustment, the system of determining employee salaries remains uniform. The same method or formula for computing relative cost-of-living in areas where Agency offices are located is applied to all employees of the Agency. /12/ As the Agency notes, the cost-of-living adjustment modification of its salary structure enhances its ability to maintain pay equity among its employees by eliminating regional cost differentials and thereby equalizing employee "buying power." /13/ In so doing, the Agency increases the efficiency and effectiveness of its accomplishment of its mission by facilitating the movement of employees within its regional offices and by making its salaries more competitive with other employers in higher cost areas. /14/ The Union's proposal, on the other hand, would establish a method of computing the cost-of-living adjustment for unit employees in the Washington headquarters office which is different from that established for non-unit employees in the headquarters and 14 other regional locations by the Agency's August 20, 1984 resolution, /15/ namely, it would adopt the recommendations of the President's Pay Council. /16/ Such different treatment of those employees who happen to be in the unit nullifies the Agency's objective of equalizing employee "buying power" throughout the Agency and, consequently, undermines the incentives for employees to move. The only way by which the Agency can insure its ability to accomplish its objective of equitable treatment of its employees is to maintain a uniform pay-setting system. The Authority disagrees with the Union's argument that the Agency has not shown that the pay-setting system set forth in the August 20, 1984 resolution is the only way to achieve those objectives. /17/ Any pay-setting system which involves different methods of calculating the salaries of similar groups of employees, as would be the case if the Union's proposal were ultimately to be adopted, could produce inherently inequitable results by treating similarly situated groups of employees differently. C. Management's Right to Determine Its Budget The Agency also argued in this case that Union Proposal 5 is outside the duty to bargain under the Statute because it directly interferes with management's right to determine its budget under section 7106(a)(1). /18/ However, the Agency has not demonstrated that implementation of the Union's proposal would directly interfere with management's right to determine its budget under the test set forth in American Federation of Government Employees, AFL-CIO and Air Force Logistics Command, Wright-Patterson Air Force Base, Ohio, 2 FLRA 604 (1980), enforced as to other matters sub nom. Department of Defense v. Federal Labor Relations Authority, 659 F.2d 1140 (D.C. Cir. 1981), cert. denied sub nom. AFGE v. FLRA, 455 U.S. 995 (1982). It is clear from the record in this case that Union Proposal 5 does not prescribe a particular program or operation which must be included in the Agency's budget. Rather, it concerns an already existing item, employee salaries. Moreover, the proposal does not prescribe the amount to be allocated to that item. It simply establishes a formula for adjusting employee salaries. There is no showing that the proposal directly interferes with the Agency's right to determine its budget. Further, the Agency has not demonstrated that implementation of the Union's proposal would result in a significant and unavoidable increase in costs. The Agency has presented no evidence as to the cost impact of the Union's proposal compared with the costs of the system, including the regional differential, adopted by the Agency. It has not been shown that the alleged increase in costs is not outweighed by compensating benefits. Union Proposal 5 does not directly interfere with management's right to determine its budget under section 7106(a)(1) of the Statute. IV. Conclusion The Authority finds that the Agency's August 20, 1984 resolution, modifying the Agency's pay-setting system by providing for regional cost-of-living adjustments, maintains a uniform formula for calculating the salary of employees of the Agency. Such action is essential to the accomplishment of the Agency's mission and execution of its functions in a manner consistent with an effective and efficient government. The Authority finds that Union Proposal 5 conflicts with an Agency resolution for which a compelling need exists. The Authority reaffirms its decision that the proposal is outside the duty to bargain under section 7117(a)(2) of the Statute and section 2424.11(a) of the Authority's Rules and Regulations. Issued, Washington, D.C., April 14, 1986. /s/ Jerry L. Calhoun, Chairman /s/ Henry B. Frazier III, Member FEDERAL LABOR RELATIONS AUTHORITY FOOTNOTES (1) The proposal will be referred to herein by the number given to it in the Authority's initial decision. (2) Section 7117(a)(2) provides as follows: Section 7117. Duty to bargain in good faith; compelling need; duty to consult . . . . . . . (a)(2) The duty to bargain in good faith shall, to the extent not inconsistent with Federal law or any Government-wide rule or regulation, extend to matters which are the subject of any agency rule or regulation referred to in paragraph (3) of this subsection only if the Authority has determined under subsection (b) of this section that no compelling need (as determined under regulations prescribed by the Authority) exists for the rule or regulation. (3) Section 2424.11(a) of the Authority's Rules and Regulations provides as follows: Section 2424.11 Illustrative criteria. A compelling need exists for an agency rule or regulation concerning any condition of employment when the agency demonstrates that the rule or regulation meets one or more of the following illustrative criteria: (a) The rule or regulation is essential, as distinguished from helpful or desirable, to the accomplishment of the mission or the execution of functions of the agency or primary national subdivision in a manner which is consistent with the requirements of an effective and efficient government. (4) The parties stipulated that the Agency is a Government corporation and is not subject to the pay and allowance provisions of Chapter 51 of title 5 of the United States Code, see 5 U.S.C. Section 5102, 5 CFR 511.201; the compensation paid to its employees is not limited by the restrictions applicable to the "General Schedule"; and the Agency's Board of Direcotrs, in its discretion, regularly has adopted resolutions pursuant to which the Agency pays its general graded and wage graded employees at the same rates of pay as are paid to Federal employees who are subject to Chapter 51 of title 5 of the U.S. Code. There is no dispute in this case as to whether the Agency's salary resolutions constitute agency rules or regulations which could bar negotiation of conflicting proposals if supported by a compelling need. National Treasury Employees Union, Chapter 207 and Federal Deposit Insurance Corporation, Washington, D.C., 14 FLRA 598, 610 (1984). See also Agency Statement of Position on Remand at 5; Union Statement of Position on Remand at 2. (5) The resolution of the Board of Directors of the Federal Deposit Insurance Corporation, August 20, 1984, (Attachment C to Agency's Statement of Position on Remand), provided, in relevant part, as follows: BE IT FURTHER RESOLVED, that the Board of Directors hereby approves, and authorizes appropriate officers of the Corporation to take such actions as are necessary to implement, the following changes in employee benefits: 1. the establishment of a full cost-of-living adjustment to the salaries of all Corporation employees except members of the Board of Directors, to become effective on January 1, 1985, as proposed at Tab D of the attached document entitled "Regional Restructuring and Other Proposals" and as amended by the attached document entitled "Salary Differential Locations," with adjustments for Budget Year 1986 and ensuing years to be determined in accordance with an index to be developed annually at the direction of the Division of Accounting and Corporate Services and reported to the Board of Directors(.) "Tab D" referenced above is set forth in an Appendix to the decision herein. (6) The Agency's Notice to All Employees, August 20, 1984, entitled "Restructuring of Regional Operations" (Attachment A to Agency's Statement of Position on Remand at 5-6) states, in relevant part, as follows: What about the Changes in the Compensation and Benefit Packages We've Been Hearing About? . . . . . . . Cost-of-Living Salary Adjustments (COLA) -- A comprehensive analysis has been made of variations in the costs of housing, taxation, transportation, goods and services and other pertinent expenses in 135 field locations representing DBS field offices and major Liquidation sites across the country. The analysis was based on a family of four with a $35,000 income level, ownership of the home and two automobiles, etc. From that information, an index of cost-of-living adjustments was prepared which will allow us to more nearly match the salaries of personnel working in high-cost locations with those working in standard-cost areas. For example, individuals assigned to New York City would have their salaries adjusted upward 12.6% while persons working in Syracuse, New York would receive a 1.6% adjustment. If you work in a standard cost area, there would be no COLA adjustment to your salary. This is a significant and long-studied step by the Corporation and will markedly improve the equity of our salary structure and enable us to attract more people to the urban areas where our attention is increasingly being focused. Implementation is set for January 1, 1985. . . . . . . . The structural changes we are implementing are extensive and may involve relocation and new responsibilities for some of you. While change can be disruptive, consolidation of the Regional Offices will also bring about many new opportunities. The Board believes these steps are necessary to enable the Corporation to properly meet its future responsibilities and has attempted to compensate for their adverse impact through a number of very positive steps affecting compensation and benefits. I have every confidence that the skill, dedication and professionalism which have consistently been the hallmark of Corporation employees will again be demonstrated as we put this plan into effect. See also Agency Statement of Position on Remand at 9. (7) Union Supplemental Statement of Position on Remand at 1-3. (8) See note 5, supra. (9) See Appendix ("Tab D") at 1. (10) Agency Statement of Position on Remand at 7-10. (11) The Authority notes that employees' basic salary is still determined by grade and step. Pursuant to the August 20, 1984 resolution, employees' total salary is determined by a combination of that method with the method used to determine the applicable cost-of-living adjustment. (12) The Agency refers to the formula set forth in the August 20, 1984 resolution as a "standard cost area index." See Agency Statement of Position on Remand at 8. See also Attachment B to the Agency's Statement of Position on Remand and "Tab D" set forth in the Appendix hereto; Agency Supplemental Statement of Position on Remand at 5-6. (13) Agency Statement of Position on Remand at 10-12. Agency Supplemental Statement of Position on Remand at 4-5. See note 6, supra. See also "Tab D" set forth in the Appendix hereto. (14) Agency Statement of Position on Remand at 10-12. See also "Tab D" set forth in the Appendix hereto. (15) Union Statement of Position on Remand at 5. Agency Supplemental Statement of Position on Remand at 6. It is not disputed on remand herein that Union Proposal 5 conflicts with the Agency's August 20, 1984 resolution. (16) See 5 U.S.C. Section 5305(b). (17) Union Statement of Position on Remand at 11. (18) Section 7106(a)(1) of the Statute provides, in relevant part, as follows: Section 7106. Management rights (a) Subject to subsection (b) of this section, nothing in this chapter shall affect the authority of any management official of any agency -- (1) to determine the . . . budget . . . of the agency . . . (.) APPENDIX I. PROPOSAL A combination of factors is likely to result in a significant number of Corporation employees moving over time from generally lower-cost areas to higher-cost urban centers. These factors are mainly the regional realignment itself and our changing regulatory focus on large and problem banks regardless of their charter source. To minimize the financial hardships associated with relocating into higher-cost areas, to mitigate employee concern with the phase-out of six Regional Offices, and to make our salary structure more equitable for all personnel and the Corporation more competitive with other employers in high cost locations, we recommend adoption of a salary cost-of-living differential. A summary schedule is attached which presents an index of adjustments that would be necessary to make more equitable the incomes of employees in high-cost locations throughout the country and those who work in standard or low-cost areas. Five alternatives are shown, ranging from paying full COLA to maximum adjustments of 10%, 7.5%, 5% and 2.5% of current salaries. Either the full living cost adjustment or the cap at 10% would go a long way toward alleviating the present inequities. However, we favor the full COLA option and feel its higher cost will be well justified. III. JUSTIFICATION As noted, we believe a mechanism is needed to adjust employee salaries for the significant differences that exist in various locations across the country in terms of housing, taxation, transportation, goods and services and other expense elements. This will therefore be an important benefit for the significant number of Corporation employees now living in high cost areas, and will also be helpful as we implement the regional restructuring plan and relocate significant numbers of personnel. We contracted with Runzheimer and Company, Inc., to undertake a comprehensive analysis of living cost differences in 135 field locations. These locations represent DBS field offices and major Liquidation sites. Based on the firm's report, we believe we now have a supportable index and comprehensive cost profiles for each of the selected sites and therefore have a sound basis for instituting regional pay differentials. The adjustment percentages shown in the attached summary schedule represent cost-of-living differences with "Standard City", an arithmetic mean of living cost standards in 100 representative cities. These percentages can be adjusted each year. COST OF LIVING ADJUSTMENT TABLE OMITTED NOTE: Some of the above indexes are composites of several communities within a metropolitan area (e.g., the index for Minneapolis, Minnesota) and certain others represent selected communities within a metropolitan area (e.g.