21:0910(106)AR - HHS, HCFA, Region IV, Atlanta, Ga. and NTEU, Chapter 210 -- 1986 FLRAdec AR



[ v21 p910 ]
21:0910(106)AR
The decision of the Authority follows:


 21 FLRA No. 106
 
 DEPARTMENT OF HEALTH AND HUMAN 
 SERVICES, HEALTH CARE FINANCING
 ADMINISTRATION, REGION IV, 
 ATLANTA, GEORGIA
 Activity
 
 and
 
 NATIONAL TREASURY EMPLOYEES 
 UNION, CHAPTER 210
 Union
 
                                            Case No. 0-AR-803
 
                                 DECISION
 
                         I.  STATEMENT OF THE CASE
 
    This matter is before the Authority on exceptions to the addendum
 award of attorney fees by Arbitrator Ralph Roger Williams filed by the
 Activity under section 7122(a) of the Federal Service Labor-Management
 Relations Statute and part 2425 of the Authority's Rules and
 Regulations.
 
                  II.  BACKGROUND AND ARBITRATOR's AWARD
 
    In his initial award in this matter, the Arbitrator found that the
 Activity violated the parties' collective bargaining agreement by
 failing to temporarily promote the grievant for a period of
 approximately 11 months when he performed the duties of a higher-graded
 position.  The Arbitrator ordered that the grievant be promoted
 retroactively for the period with backpay.  The Arbitrator also retained
 jurisdiction of the matter for the purpose of determining whether an
 award of reasonable attorney fees was warranted.  The Union subsequently
 filed a request for such fees for the services of its staff attorney who
 represented the grievant in the case.
 
    In his addendum opinion and award the Arbitrator found:  (1) the
 grievant had incurred attorney fees;  (2) the grievant was the
 prevailing party;  (3) an award of attorney fees was warranted in the
 interest of justice since the weight of the evidence favored the Union,
 the Activity knew or ought reasonably to have known that it had the
 "weaker case" and that the grievant was in fact working at the higher
 level, and the Activity's action was without merit;  and, (4) the
 grievant was entitled to reasonable attorney fees at the market-value
 presentation of the case multiplied by the reasonable market-value
 hourly rate for the geographic area for any attorney with similar
 experience and expertise.  In calculating the fee due the grievant, the
 Arbitrator found that 22.2 hours claimed by the Union attorney were
 reasonable and proper under the circumstances and were appropriately
 itemized.  As to the amount of fees, the Arbitrator concluded that the
 market-value rate of $85.00 per hour was reasonable for the locality for
 an attorney with the training and experience of the Union staff
 attorney.  Accordingly, as his addendum award, the Arbitrator provided:
 
          The Grievant's request for attorney fees is allowed.  The
       amount of such fees in the total of $1,887.00 is hereby awarded
       the Grievant.
 
                           III.  FIRST EXCEPTION
 
                              A.  Contentions
 
    In its first exception, the Activity contends that the Arbitrator's
 award is contrary to 5 U.S.C. Section 5596, /1/ and to 5 U.S.C. Section
 7701(g), /2/ because the case did not involve a prohibited personnel
 practice or an agency personnel action.  In support of this contention,
 the Activity argues that under the statutory provisions relied upon,
 particularly 5 U.S.C. Section 7701(g)(1), attorney fees cannot be
 granted in matters which are not the result of an action or proceeding
 taken by an agency or the result of a prohibited personnel practice, and
 the matter involved in this case was the result of a grievance filed by
 the employee.
 
                        B.  Analysis and Conclusion
 
    The Authority finds that the Activity's assertion that attorney fees
 are only warranted in situations involving agency prohibited personnel
 practices or actions taken against employees is without merit.  It is
 well-established that an agency's violation of a collective bargaining
 agreement constitutes an unjustified or unwarranted personnel action for
 purposes of a retroactive temporary promotion and backpay under the Back
 Pay Act.  Veterans Administration Hospital and American Federation of
 Government Employees, Lodge 2201, 4 FLRA 419, 424 (1980).  It is also
 clear that attorney fees may be awarded by arbitrators in a variety of
 unjustified and unwarranted personnel actions, including, but not
 limited to, actions subject to negotiated grievance procedures and that
 the broad category of personnel actions covered by the Back Pay Act
 includes the omission or failure to take an action or confer a benefit.
 Naval Air Development Center, Department of the Navy and American
 Federation of Government Employees, Local 1928, AFL-CIO, 21 FLRA No. 25,
 slip op. at 4.  Thus, the Authority concludes that the Activity has
 failed to establish that the award is contrary to law as alleged in this
 exception.
 
                           IV.  SECOND EXCEPTION
 
                              A.  Contentions
 
    In its second exception, the Activity alleges that the Arbitrator's
 award is contrary to law because it is not in the interest of justice as
 required by 5 U.S.C. Section 7701(g)(1).  In support of this exception,
 the Activity argues that it had substantial reason to believe it would
 prevail on the merits when it did not temporarily promote the grievant.
 
                        B.  Analysis and Conclusion
 
    In Naval Air Development Center, the Authority summarized the
 requirements for an award of reasonable attorney fees under 5 U.S.C.
 Section 5596 and 5 U.S.C. Section 7701(g)(1).  In order for an award of
 attorney fees to be authorized, the award of fees must be in conjunction
 with an award of backpay to the grievant on correction of the
 unwarranted or unjustified personnel action;  must be reasonable and
 related to the personnel action;  and must be in accordance with
 standards established under section 7701(g).  Section 7701(g)(1), which
 applies to all cases except those of discrimination, requires that the
 fees must have been reasonable and have been incurred by the employee;
 the employee must have been the prevailing party in the proceeding;  and
 the payment of the fees by the agency must be warranted in the interest
 of justice.  Finally, there must be a "fully articulated, reasoned
 decision" setting forth the specific findings supporting the
 determination on each pertinent statutory requirement, including the
 basis upon which the reasonableness of the amount of fees was
 determined.  In this case, it is clear that the Arbitrator established
 in a fully articulated and reasoned decision that the Union is entitled
 to an award of attorney fees.  Thus, the award is in conjunction with an
 award of backpay to the grievant on correction of the unwarranted
 personnel action, the failure to temporarily promote the grievant.
 There is no dispute that fees were incurred on behalf of the employee
 and that the grievant is the prevailing party.  With regard to the
 "interest of justice" standard, the Arbitrator effectively found, based
 upon consideration and discussion of the various facts and circumstances
 involved, that the Activity knew or should have known that it would not
 prevail on the merits.  The Authority therefore concludes that the
 Arbitrator's determination that the payment of attorney fees was
 warranted in the interest of justice is fully consistent with applicable
 legal requirements and that the Activity's exception provides no basis
 for finding the award deficient.
 
                            V.  THIRD EXCEPTION
 
                              A.  Contentions
 
    As its third exception, the Activity contends the Arbitrator's award
 is not in accordance with the governing standards established under 5
 U.S.C. Section 7701(g) for determining the reasonableness of an award of
 attorney fees.  In support of this contention, the Activity argues that
 the Union should not receive fees calculated at the prevailing market
 rate but should recover only the salary of the Union attorney plus
 overhead costs.
 
    The Union in its opposition maintains that it is entitled to an award
 of attorney fees calculated at the prevailing market rate since the fees
 recovered in this case are set aside for a Legal Services Program (LSP)
 used solely to litigate the rights of Federal employees before
 administrative and judicial tribunals.  The Union argues that the LSP
 fund qualifies for treatment as a public interest organization or legal
 services firm and therefore it should be compensated under the
 market-rate formula.
 
                       B.  Analysis and Conclusions
 
    In determining what constitutes reasonable attorney fees, courts have
 applied a variety of methods and analyses.  An example of a method
 acceptable to administrative adjudicatory agencies and most courts is
 the "lodestar" method, in which the attorney's customary hourly billing
 rate is multiplied by the number of hours reasonably devoted to the case
 with appropriate adjustments for any special factors.  Naval Air
 Development Center, slip op. at 9.  This is the method ordinarily
 applied by the MSPB in determining reasonable attorney fees under 5
 U.S.C. Section 7701(g)(1) when the attorney involved is in private
 practice, for example, Kling v. Department of Justice, 2 MSPB 620,
 624-28 (1980), and applied by the Authority in reviewing an arbitrator's
 award of fees to an attorney in private practice.  Naval Air Development
 Center, slip op. at 12.
 
    Where, however, the attorney is an employee of a union, a different
 method must be applied in computing reasonable fees under 5 U.S.C.
 Section 5596 and 5 U.S.C. Section 7701(g)(1).  Where such fees are to be
 paid to a union, the fees are computed based on actual costs rather than
 on the prevailing market rate for the legal services rendered.  Further,
 a special fund created by a union into which all fees awarded to
 union-employed attorneys would be paid and expended solely for legal
 work does not entitle the union to market-rate fees for the services of
 its staff.  Id. at 10;  National Treasury Employees Union v. Department
 of the Treasury, 656 F.2d 848 (D.C. Cir. 1981);  Goodrich v. Department
 of the Navy, 733 F.2d 1578 (Fed. Cir. 1984), cert. denied 105 S. Ct. 958
 (1985);  Wells v. Schweiker, 12 MSPB 329 (1982).
 
    With regard to the computation of actual costs, there are three
 elements to be considered:  the compensation paid to the attorney
 employee for the time expended on the case;  out-of-pocket expenses
 related to the case;  and overhead costs.  Additionally, as to overhead
 costs, in the absence of evidence that an allowance of 100 percent of
 the attorney's compensation for overhead is substantially excessive or
 insufficient, such an overhead allowance may normally be included as an
 element of actual costs.  Powell v. Department of the Treasury, 8 MSPB
 21 (1981).
 
    Among the reasons for limiting fees for salaried union attorneys
 under those statutory provisions to recovery of actual costs is, as the
 MSPB held in Wells v. Schweiker, 12 MSPB at 333:
 
          (T)o award more . . . than that which is available under the
       cost-plus method would be inconsistent with the language and
       purpose of 5 U.S.C. Section 5596(b)(1)(A) (ii), the fees provision
       of the Back Pay Act.  An attorney fee award ordered under that
       provision may not exceed the cost reasonably incurred by or on
       behalf of the employee for legal representation.  Cf. 5 U.S.C.
       Section 7701(g).  This is consistent with the general purpose of
       the Back Pay Act to "make whole" employees who had suffered a loss
       in salary and benefits as the result of an improper personnel
       action.  Senate Report No. 1062, 89th Cong., 2nd Sess. (1966) 1-2.
        Nothing in the Civil Service Reform Act indicates that Congress,
       in amending section 5596, intended to deviate from this basic
       principle.  Thus, section 5596 clearly limits the recovery of
       costs for legal expenses incurred by or on behalf of employees to
       the expense they suffered as a result of the action.  It is not
       intended to provide a union with a windfall profit for the
       performance of services which it was created to provide and by
       their dues its members support.
 
    In this case, it is undisputed that the attorney who represented the
 grievant is an employee of the Union.  Consequently, reasonable attorney
 fees under 5 U.S.C. Section 5596 and 5 U.S.C. Section 7701(g)(1) for his
 services can only be awarded on a cost-plus basis.  Therefore, to the
 extent that the Arbitrator awarded attorney fees on other than a
 cost-plus basis, the award is deficient and must be modified.
 
                               VI.  DECISION
 
    Accordingly, for the above reasons, the Arbitrator's award is
 modified to provide as follows:
 
          Reasonable attorney fees are hereby awarded to reimburse the
       Union for its actual costs in representing the Grievant in this
       matter, including the 22.2 hours the Union attorney devoted to the
       case, in accordance with the applicable cost-plus formula.
 
    Issued, Washington, D.C., May 22, 1986.
 
          /s/Jerry L. Calhoun, Chairman
                                       /s/Henry B. Frazier III, Member
                                       FEDERAL LABOR RELATIONS AUTHORITY
 
 
                ---------------  FOOTNOTES$ ---------------
 
 
 
    (1) 5 U.S.C. Section 5596, the Back Pay Act, provides in part:
 
           Section 5596.  Back pay due to unjustified personnel
 
                action.
 
    . . . . . . .
 
 
    (b)(1) An employee of an agency who, on the basis of a timely appeal
 or an administrative determination (including a decision relating to an
 unfair labor practice or a grievance) is found by appropriate authority
 under applicable law, rule, regulation, or collective bargaining
 agreement, to have been affective by an unjustified or unwarranted
 personnel action which has resulted in the withdrawal or reduction of
 all or part of the pay, allowances, or differentials of the employee --
 
    (A) is entitled, on correction of the personnel action, to receive
 for the period for which the personnel action was in effect --
 
            . ..
 
 
          (ii) reasonable attorney fees related to the personnel action
       which, with respect to any decision relating to an unfair labor
       practice or a grievance processed under a procedure negotiated in
       accordance with chapter 71 of this title . . . shall be awarded in
       accordance with standards established under section 7701(g) of
       this title(.)
 
    (2) 5 U.S.C. Section 7701(g)(1) (1982) provides:
 
    Except as provided in paragraph (2) of this subsection, the Board . .
 . may require payment by the agency involved of reasonable attorney fees
 incurred by an employee . . . if the employee . . . is the prevailing
 party and the Board . . . determines that payment by the agency is
 warranted in the interest of justice, including any case in which a
 prohibited personnel practice was engaged in by the agency or any case
 in which the agency's action was clearly without merit.
     ORDER DISMISSING REQUEST FOR RECONSIDERATION AND RELATED
 REQUESTS
 
    This matter is before the Authority on a request for reconsideration
 filed by the Agency on April 14, 1986, seeking reconsideration of the
 above-entitled Authority's Decision and Order of March 25, 1986.  Filed
 with its request for reconsideration, the Agency submitted requests for
 stay, oral argument, and consolidation with Case No. 0-AR-583 (21 FLRA
 No. 27 issued March 27, 1986), On April 28, 1986, the Union filed an
 opposition to the Agency's request for reconsideration and related
 requests.  For the reason set forth below, the Agency's requests must be
 dismissed.
 
    Section 2429.17 of the Authority's Rules and Regulations, provides in
 pertinent part:
 
                          2429.17 Reconsideration
 
          After a final decision or order of the Authority has been
       issued, a party to the proceeding before the Authority who can
       establish in its moving papers extraordinary circumstances for so
       doing, may move for reconsideration of such final decision or
       order.  The motion shall be filed within ten (10) days after
       service