27:0132(25)NG - NTEU and IRS -- 1987 FLRAdec NG



[ v27 p132 ]
27:0132(25)NG
The decision of the Authority follows:


 27 FLRA No. 25
 
 NATIONAL TREASURY EMPLOYEES UNION
 Union
 
 and
 
 INTERNAL REVENUE SERVICE
 Agency
 
                                            Case No. 0-NG-524
                                            (14 FLRA No. 77)
 
                       DECISION AND ORDER ON REMAND
 
    I.  Statement of the Case
 
    This case is before the Authority pursuant to a remand from the
 United States Court of Appeals for the District of Columbia Circuit.
 The question involved is whether a proposal which seeks to establish the
 rate of incentive pay to be awarded bargaining unit employees is
 rendered nonnegotiable by sections 7103(a)(14)(C) and 7106(a)(1) of the
 Federal Service Labor-Management Relations Statute (the Statute).
 
    II.  Background
 
    In a previous decision in this case, National Treasury Employees
 Union and Internal Revenue Service, 14 FLRA 463 (1984), the Authority
 found the following proposal, which sought to establish the rate of
 incentive pay for bargaining unit employees, to be nonnegotiable because
 it interfered with management's rights to assign work and direct
 employees:
 
                                Proposal 5
 
          Incentive money is paid at the rate $.09 per one-tenth of an
       efficiency point over 100 percent.  For example, performance at
       125% efficiency equals $22.50 in incentive pay.  The money will be
       distributed on a pay period basis with the regular salary check.
       If the employee works overtime he/she will be paid $.04 more per
       one-tenth of a point otherwise payable.  If employees of more than
       one grade work the same F/P (function and program) task then the
       $.09 will be increased by $.02 for each grade above the minimum
       grade assigned the F/P task.
 
    The Union sought review of the Authority's decision with respect to
 this proposal.
 
    On review, the D.C. Circuit rejected the Authority's reasoning that
 the management right to assign work to employees includes the right to
 reward superior performance of the work which has been assigned.
 National Treasury Employees Union v. FLRA, 793 F.2d 371 (D.C. Cir.
 1986).  The court held that "the level of incentive pay awarded for the
 performance of agency work, even work that has been 'assigned' or
 'directed,' (did) not come within the nonbargainable management rights
 to assign work and direct employees." NTEU v. FLRA, 793 F.2d at 375.
 The court therefore vacated the Authority's decision and remanded the
 case so that the Authority could pass on the other arguments raised by
 the Agency but not addressed by the Authority in its decision.  The
 Agency's other arguments were that the proposal was nonnegotiable
 because it:  (1) concerned a pay matter which is not a condition of
 employment under section 7103(a)(14)(C) of the Statute;  and (2)
 interfered with management's right to determine its budget under section
 7106(a)(1) of the Statute.
 
    On remand, the Authority granted the Agency's request to file a
 supplemental memorandum.  In granting the request, the Authority limited
 the Agency's arguments to the issues before it on remand.  Both parties
 filed supplemental briefs, and the Union filed a response to the
 Agency's supplemental brief.  Further, the Authority granted the request
 of the Office of Personnel Management (OPM) to file an amicus curiae
 brief in this case.
 
    III.  Procedural Issues
 
    The Union claims that the Agency's supplemental brief contains new
 arguments, evidence, and reasons for nonnegotiability not previously
 asserted, and therefore requests the Authority to "strike" the Agency's
 submission.
 
    We find that, except for the arguments concerning methods and means
 under section 7106(b)(1) of the Statute, the Agency's supplemental brief
 addressed the issues set forth in the Authority's letter granting the
 Agency's request to file a supplemental brief.  We therefore deny the
 Union's request to strike the Agency's arguments relating to sections
 7103(a)(14)(C) and 7106(a)(1) of the Statute.  We grant the Union's
 request to strike matters relating to section 7106(b)(1) of the Statute,
 since the Agency did not raise this section as a bar to negotiation of
 the proposal in its initial position before the Authority.
 
    IV.  Positions of the Parties
 
    The Agency and OPM contend that Proposal 5 concerns matters relating
 to pay which are specifically provided for by federal statute -- that
 is, subpart D of 5 U.S.C. Sections 5101 et seq. -- and since the matter
 is covered by statute, it is expressly excluded from the definition of
 "conditions of employment" under section 7103(a)(14)(C) of the Statute
 and therefore outside the duty to bargain.  Both claim that the proposal
 is an attempt by the Union to negotiate a pay or money-related fringe
 benefit system since under the proposal employees would receive a fixed
 amount of money per unit of work performed above a set efficiency point,
 adjusted for overtime and grade level.  According to the Agency and OPM,
 it is this entitlement which makes the incentive money provided by this
 proposal a method of compensation for specific work done as
 distinguished from an award selectively given in appreciation of
 extraordinary service.
 
    In their view, therefore, the proposal would effectively create a
 supplemental pay system in which employees' salary levels set forth in 5
 U.S.C. Section 5332 would be adjusted and supplemented based on
 attainment of numerical performance levels.  The Agency and OPM contend
 that this is contrary to Chapter 53 of title 5 of the United States Code
 which prescribes pay rates and the means by which those rates may be
 adjusted.
 
    The Agency additionally argues that, by permitting the Union to
 negotiate specific amounts for awards, the proposal would interfere with
 its discretion under Chapter 45 of title 5 of the United States Code to
 adjust, implement, or eliminate the incentive pay awards program.
 
    Finally, the Agency and OPM contend that the proposal is
 nonnegotiable because it infringes on management's right under section
 7106(a)(1) to determine its budget.  They concede that the proposal does
 not by its express terms prescribe the particular program or amounts to
 be included in the Agency's budget as a line item, but contend that it
 would result in a substantial and unavoidable increase in the
 expenditure of Agency funds which would not be offset by compensating
 benefits.
 
    The Union asserts that although the proposal concerns money, it is
 not pay as that term is used in the federal sector.  It contends that
 the proposal has no relation to the pay schedules set forth in 5 U.S.C.
 Sections 5331 et seq. and 5 C.F.R. Sections 531 et seq.  Rather, the
 Union contends that the proposal concerns money distributed through the
 provisions of 5 U.S.C. Sections 4501 et seq. and 5 C.F.R. Sections 451
 et seq., which are discretionary with the Agency, and therefore not
 excluded from the definition of condition of employment by section
 7103(a)(14)(C) of the Statute.  The Union contends that its proposal
 does not prescribe a particular program or a particular amount of funds
 to be included in the Agency's budget.  The Union also contends that the
 Agency has not made a substantial demonstration of a significant and
 unavoidable increase in costs which would not be offset by compensating
 benefits.  Therefore, the Union concludes, the proposal is not
 inconsistent with the Agency's right to determine its budget.
 
    V.  Analysis and Conclusion
 
    We adopt the court's holding, as stated in Section II, that a
 proposal such as the disputed proposal determining the level of
 incentive pay awarded for the performance of Agency work does not
 constitute an exercise of management's rights to direct employees and
 assign work under section 7106(a)(2)(A) and (B) of the Statute.
 Pursuant to the court's direction, we turn our attention to whether
 Proposal 5 is rendered nonnegotiable by sections 7103(a)(14)(C) and
 7106(a)(1) of the Statute.  The issues presented here are limited solely
 to the rate of incentive award money to be paid to employees and do not
 in our view concern management's rights under section 7106 of the
 Statute to set levels of performance for employees to receive a
 particular rating.
 
            A.  Whether the Proposal Concerns a Matter which is
 
                Specifically Provided for by Federal Statute so as not
 
                to be a Condition of Employment within the Meaning of
 
                Section 7103(a)(14)(C) of the Statute
 
    In our view the rate at which incentive award money is payable to
 employees under the Agency's productivity plan concerns those employees'
 conditions of employment within the meaning of section 7103(a)(14).  The
 issue on remand, however, is whether the proposal concerns a condition
 of employment which is specifically provided for by federal statute so
 as to be excluded from the scope of the duty to bargain under section
 7103(a)(14)(C) of the Statute.  We find that Proposal 5 is not a
 condition of employment which is specifically provided for by federal
 statute so as to be excluded from the duty to bargain under section
 7103(a)(14)(C) of the Statute.
 
    The incentive award money which is the subject of the Union's
 proposal is not paid to employees pursuant to 5 U.S.C. Sections 5301 et
 seq.  It is not wages or salary authorized by these provisions, in
 particular 5 U.S.C. Section 5332.  Rather, as indicated by the record
 and as found by the court, the incentive award money payable to
 employees here is authorized pursuant to 5 U.S.C. Section 4503.  /1/ OPM
 itself has acknowledged that money paid to employees pursuant to that
 provision is not properly considered pay within the meaning of Chapter
 53.  In revising its regulations governing the Performance Management
 System, OPM moved the provisions concerning incentive awards from 5
 C.F.R. Chapter 531, pertaining to pay systems, to 5 C.F.R. Chapter 430,
 pertaining to performance appraisals.  /2/ OPM explained its action by
 distinguishing incentive awards from pay, stating particularly:  /3/
 
          Two agencies believe that the performance awards provisions
       should be moved from Part 531 to another part (of) Title 5,
       (C.F.R.) because awards are not additions to basic pay.  These
       agencies think that Part 531 should only include pay-setting
       regulations.
 
                       . . . . . . .
 
 
          OPM concurs that performance awards provisions are
       inappropriately placed in Part 531 because these awards are not
       increases to basic pay.
 
                       . . . . . . .
 
 
          (P)art 531, Subpart F has been moved to Part 430, Subpart E . .
       .
 
    Because incentive award money is not paid to employees pursuant to 5
 U.S.C. Sections 5301 et seq., the Agency's and OPM's contention that
 incentive rates are specifically provided for by these statutory
 provisions, particularly 5 U.S.C. Section 5332, is without merit.
 
    Moreover, the rates at which incentive award money is to be paid to
 employees under the incentive system established by the Agency are not
 matters specifically provided for under 5 U.S.C. Section 4503 so as to
 be excluded from conditions of employment concerning which the Agency
 has an obligation to bargain.  Section 4503 provides the Agency with
 authority to award employee performance, but it does not specify the
 amount to be paid as an award.  /4/ It is clear from the legislative
 history of section 7103(a)(14) of the Statute that only those matters
 specifically provided for by other federal statutes are excepted from
 the obligation to negotiate under that provision.  /5/ As the Agency
 acknowledges, the amount to be awarded as incentive money is left to the
 Agency's discretion pursuant to 5 U.S.C. Section 4503.  See the Agency's
 Statement of Position in Response to the Union's Petition for Review at
 12 and 13.  Thus, the rate at which incentive award money will be paid
 to employees under the Agency's incentive program is not specifically
 provided for by statute and is within the duty to bargain.  See also
 National Treasury Employees Union, Chapter 6 and Internal Revenue
 Service, New Orleans District, 3 FLRA 748 (1980);  March Air Force Base,
 Riverside, California, 13 FLRA 255 (1983);  compare American Federation
 of Government Employees v. FLRA, 653 F.2d 669 (D.C. Cir. 1981) (where
 the court affirmed the Authority's decision that the agency in that case
 had no duty to bargain over a union proposal concerning overtime rate of
 compensation because the matter was specifically provided for by federal
 statute, 5 U.S.C. Section 5542(a), so as to be excluded from the
 definition of conditions of employment under section 7103(a)(14)(C) of
 the Statute).
 
    Further, Proposal 5 would not prevent the Agency from eliminating the
 program.  The proposal only addresses the rate of incentive pay.  As
 explained by the Union, the proposal is only intended "to address the
 rate of incentive pay once the (A)gency determines that it will have an
 incentive pay program.  Nothing in this proposal requires perpetuating
 the program forever." Union's Response to Agency's Supplemental Brief at
 4-5.  In the absence of any indication to the contrary, we accept the
 Union's explanation of the proposal's meaning.
 
    Finally, the Agency contends that certain portions of the legislative
 history of the Statute support its position that Congress did not intend
 to include the subject of pay or money-related fringe benefits in the
 scope of conditions of employment.  However, as we have shown, the
 proposal does not concern wages or salaries.  Further, the Agency has
 not shown nor do we find that incentive awards are the kinds of matters
 which are referred to in statements relied on by the Agency, for
 example, wages and salaries, retirement, life and health insurance, and
 leave.  /6/ These matters are all statutory entitlements of federal
 employees.  There is no such entitlement to an incentive award.  Rather,
 the Agency has discretion under 5 U.S.C. Sections 4502 and 4503 to
 decide the conditions under which it will award that money to employees.
  The terms under which incentive award money is given to employees in
 this case have been prescribed by the Agency itself in its incentive
 program.
 
    Thus, the proposal in this respect is like Proposals 2 and 3 in
 American Federation of Government Employees, AFL-CIO, Local 3477 and
 Community Futures Trading Commission, 21 FLRA No. 18 (1986), remanded as
 to other matters, No. 86-1286 (D.C. Cir. July 3, 1986), which concerned
 the amount of money to be awarded to employees for suggestions.  The
 Authority found that those proposals were not inconsistent with 5 U.S.C.
 Sections 4502 and 4503 and were within the duty to bargain.  The money
 to be awarded under the Agency's incentive awards program in this case
 is authorized under the same provisions as in that case.  In our view
 the money awarded under this program is unlike the money-related fringe
 benefits mentioned above but rather is similar to money awarded to
 employees for suggestions under an agency's suggestion program.
 
        B.  Whether the Proposal Interferes with Management's Right
 
                to Determine its Budget under Section 7106(a)(1) of the
 
                Statute
 
    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. FLRA, 659 F.2d 1140 (D.C. Cir. 1981),
 cert. denied sub nom., AFGE v. FLRA, 455 U.S. 945 (1982).  In that case,
 the Authority stated generally that it would find a proposal
 inconsistent with an agency's right to determine its budget if the
 proposal by its terms prescribed a particular program or an amount of
 funds to be included in the agency's budget or if the agency made a
 substantial demonstration that the proposal would result in a
 significant and unavoidable increase in costs which would not be offset
 by compensating benefits.  It is clear from the record in this case, as
 recognized by the Agency and OPM, that Proposal 5 does not prescribe
 either a particular program or operation or an amount of funds to be
 included in the Agency's budget.
 
    The Agency projected the cost of hiring a certain number of persons
 as data entry operators and argued that the Union's proposal would
 infringe on its right to determine a certain percentage of its budget
 related to data operators at the Philadelphia Service Center.  The
 figures provided by the Agency are speculative at best, because it is
 impossible to determine at this point the number of employees the Agency
 will actually hire or how many employees will participate in the
 incentive awards program, and if so at what level.  Moreover, Proposal 5
 does not specify a dollar amount to be budgeted for the program but
 simply addresses the rate at which incentive award money will be paid to
 employees who qualify for an award under the program.
 
    Further, the Agency has not demonstrated that implementation of
 Proposal 5 would result in a significant and unavoidable increase in
 costs which would not be offset by compensating benefits.  In fact, the
 proposal specifically links the amount of incentive money to be awarded
 to increases in an employee's productivity, which would directly benefit
 the Agency's "objective of greater efficiency in Government." /7/ We
 therefore find that Proposal 5 does not directly interfere with
 management's right to determine its budget under section 7106(a)(1) of
 the Statute.  See, for example, Commodity Futures Trading Commission, 21
 FLRA No. 18 (1986) (Proposals 2 and 3) (proposals prescribing the
 amounts to be paid for suggestion awards did not directly interfere with
 management's right to determine its budget);  United States Department
 of the Treasury, Internal Revenue Service and United States Department
 of the Treasury, Internal Revenue Service, Houston District, 25 FLRA No.
 70 (1987), petition for review filed sub nom. National Treasury
 Employees Union v. FLRA, No. 87-1165 (D.C. Cir. April 15, 1987)
 (proposal providing for free or low cost parking for unit employees did
 not interfere with the agency's right to determine its budget).
 
    VI.  Conclusion
 
    Based on the above, we find that Proposal 5 is not a condition of
 employment which is specifically provided for by federal statute so as
 to be excluded from the duty to bargain under section 7103(a)(14)(C) of
 the Statute.  Moreover, the proposal does not interfere with
 management's right to determine its budget under section 7106(a)(1) of
 the Statute.  It therefore is within the Agency's duty to bargain.
 
    VII.  Order
 
    The Agency must upon request, or as otherwise agreed to by the
 parties, bargain concerning Proposal 5.  /8/
 
    Issued, Washington, D.C., May 29, 1987.
                                       /s/ Jerry L. Calhoun, Chairman
                                       /s/ Henry B. Frazier III, Member
                                       /s/ Jean McKee, Member
                                       FEDERAL LABOR RELATIONS AUTHORITY
 
 
                ---------------  FOOTNOTES$ ---------------
 
 
 
    (1) 5 U.S.C. Section 4503 provides:
 
          Section 4503.  Agency awards
 
          The head of an agency may pay a cash award to, and incur
       necessary expense for the honorary recognition of, an employee who
       --
 
          (1) by his suggestion, invention, superior accomplishment, or
       other personal effort contributes to the efficiency, economy, or
       other improvement of Government operations or achieves a
       significant reduction in paperwork;  or
 
          (2) performs a special act or service in the public interest in
       connection with or related to his official employment.
 
    (2) In NTEU v. FLRA, at n.2, the court noted that the regulations
 issued to implement 5 U.S.C. Section 4503 divide awards into two
 categories:  "'Performance Awards,' 5 C.F.R. Part 531, Subpart F (based
 on performance within the scope of job responsibilities) (which is
 involved in this case) and 'Special Awards,' 5 C.F.R. Part 451, Subpart
 B (based on employee suggestions, inventions and actions)." These
 regulations were changed by OPM.  See 51 Fed. Reg. 8396 (March 11,
 1986).  Title 5 C.F.R. Part 531, Subpart F was moved to 5 C.F.R. Part
 430, Subpart E and 5 C.F.R. Part 451, Subpart B was revised and
 redesignated as 5 C.F.R. Part 451, Subpart A.  See 51 Fed. Reg. 8407,
 8417 and 8418 (March 11, 1986).
 
    (3) 51 Fed. Reg. 8409 (March 11, 1986).
 
    (4) See also 5 U.S.C. Section 4502, which provides in pertinent part:
 
                       . . . . . . .
 
 
          (d) A cash award to, and expense for the honorary recognition
       of, an employee may be paid from the fund or appropriation
       available to the activity primarily benefiting or the various
       activities benefiting.  The head of the agency concerned
       determines the amount to be paid by each activity for an agency
       award under section 4503 of this title.
 
    (5) See statement of Congressman Clay concerning that portion of the
 bill passed by the House (the "Udall substitute") which excluded matters
 specifically provided for by other federal statutes from the obligation
 to bargain, which portion was enacted as section 7103(a)(14)(C):
 
          Mr. CLAY.
 
                       . . . . . . .
 
 
    Section 7103(a)(14)(D), removing from subjects of bargaining those
 matters specifically provided for by federal statute, was adopted by the
 committee and retained in the Udall substitute with the clear
 understanding that only matters "specifically" provided for by statute
 would be excluded under this subsection.  Thus, where a statute merely
 vests authority over a particular subject with an agency official with
 the official given discretion in exercising that authority, the
 particular subject is not excluded by this subsection from the duty to
 bargain over conditions of employment.
 
    124 Cong. Rec. 29,187 (1978).
 
    (6) See, for example, the Report accompanying the House Committee
 bill (H.R. 11280) which states that "Federal pay will continue to be set
 in accordance with the pay provisions of title 5, and fringe benefits,
 including retirement, insurance, and leave, will continue to be set by
 Congress" (emphasis added).  H.R. Rep. No. 1403, 95th Cong., 2d Sess. 12
 (1978), reprinted in Legislative History of the Federal Service
 Labor-Management Relations Statute, Title VII of the Civil Service
 Reform Act of 1978 at 682 (hereinafter referred to as "Legislative
 History").  See also id. at 377, where Congressmen Clay and Ford, the
 primary sponsors of the labor-management relations bill, stated in
 Supplementary comments to the staff report accompanying their bill that
 "Among the collective bargaining rights not included in this bill are:
 . . . (2) (t)he right to bargain collectively over pay and money-related
 fringe benefits such as retir