27:0919(102)CA NTEU VS TREASURY -- 1987 FLRAdec CA


[ v27 p919 ]
27:0919(102)CA
The decision of the Authority follows:


27 FLRA NO. 102

 U.S. DEPARTMENT OF THE TREASURY

              Respondent

          and

NATIONAL TREASURY EMPLOYEES
UNION

              Charging Party

Case Nos. 3-CA-60291
          3-CA-60325

DECISION AND ORDER

I. Statement of the Case This unfair labor practice case is before the Authority on exceptions to the attached Administrative Law Judge's (Judge's) Decision filed by the General Counsel and the National Treasury Employees union (the Union), and on cross-exceptions filed by the Department of the Treasury (the Respondent or Treasury). The Respondent also filed an opposition to the General Counsel's and the Union's exceptions. The consolidated complaint alleges that the Respondent violated section 7116(a)(1) and (5) of the Federal Service Labor - Management Relations Statute (the Statute) by interfering with the collective bargaining relationship between the Union and two Treasury bureaus, the Internal Revenue Service (IRS) and the U.S. Customs Service (Customs), when it issued a directive on August 27, 1985, requiring all Treasury bureaus to eliminate hand delivery of employee salary checks by January 13, 1986. For the reasons stated below, we find that Treasury violated section 7116(a)(1) and (5) as alleged.

II. Facts

The Union is the exclusive representative of a majority of employees in separate collective bargaining units of IRS and Customs employees and has national consultation rights with Treasury under section 7113 of the Statute.

A. Internal Revenue Service

On April 8, 1985, IRS notified the Union of its intention to stop an existing practice of hand delivering paychecks, savings bonds, leave and earnings statements, and W-2 forms to employees at their worksites. The existing practice gave employees the option of having paychecks, savings bonds, leave and earnings statements, and W-2 forms delivered at their worksites by designated agents or having paychecks mailed to their home addresses or electronically deposited in a bank by electronic fund transfer. On April 12, the parties met and agreed to postpone negotiations until IRS had developed and provided the Union with an implementation plan. On June 18, 1985, before IRS provided the Union with a plan and before any negotiations, Treasury notified the Union of its intention to discontinue the "designated agent" method of paycheck delivery. Treasury provided the Union with the opportunity to comment on a draft directive that offered two alternative methods of payroll distribution: (1) direct electronic deposit to a financial institution or (2) mail delivery to a designated address.

By letter dated June 27, 1985, the IRS provided the Union with its implementation plan that set forth IRS' proposed change in paycheck delivery procedures. Under this plan, designated agents would no longer receive paychecks, savings bonds, earnings statements, and W-2 forms for distribution to employees. The first phase of the plan was to be implemented in January 1986. The Union and IRS met in July and the Union indicated that the parties could set up a bargaining schedule after IRS had decided on a formal implementation schedule.

On August 27, 1985, Treasury issued Directive 35-03.F, entitled, "Distribution of Paychecks and U.S. Savings Bonds." This directive was similar in all pertinent respects to Treasury's draft directive given to the Union on June 18 and set January 13, 1986 as the effective date for the provisions of the directive to be implemented. By letter dated September 26, 1985, the Union submitted proposals to IRS concerning Treasury's proposed change in paycheck distribution.

On November 4, 1986, the Union was advised by telephone that IRS was going to notify its employees on November 12 that they had to make an election between home delivery and direct deposit of paychecks. Also, IRS informed the Union that it was precluded from negotiating on the Union's proposals because the proposals were inconsistent with Treasury's directive and that IRS had no choice but to implement the  change. On November 8, 1985, IRS issued Manual Supplement 029-68 concerning direct mail of "payroll products," and on November 12 issued a notice of the change to employees.

On December 20, 1985, the United States Court of Appeals for the Ninth Circuit issued its decision in Federal Employees Metal Trades Council v. FLRA, 778 F.2d 1429 (9th Cir. 1985) (FEMTC). In FEMTC, the court reversed and remanded the Authority's determinations in Federal Employees Metal Trades Council, AFL - CIO and Department of the Navy, Mare Island Naval Shipyard, Vallejo, California, 16 FLRA 619 (1984) and American Federation of Government Employees, Local 1533 and Department of Navy, Navy Commissary Store Region, Oakland, and Navy Commissary Store, Alameda, California, 16 FLRA 623 (1984). In those cases, the Authority had found that proposals concerning paycheck distribution were outside the duty to bargain because they concerned the methods and means of performing the agency's work under section 7106(b)(1) of the Statute. On or about January 7, 1986, the Union asked if IRS, based on the Ninth circuit case, was prepared to stop the implementation of the new paycheck distribution system. IRS replied that it would still implement the new system.

On January 13, 1986, IRS implemented the change in paycheck distribution for all its employees consistent with Treasury's directive and the IRS Manual Supplement. By letter dated February 28, 1986, IRS declared the Union's bargaining proposals of September 26 to be nonnegotiable. 1

B. U.S. Customs Service

By letter dated June 13, 1985, Treasury provided Customs with a copy of the same draft directive it subsequently provided the Union on June 18 concerning the distribution of paychecks. Customs was requested to submit comments to Treasury by June 27. In late June or early July, the Union discussed the Treasury draft with Customs. The Union indicated that it wanted to retain the current system allowing hand delivery of paychecks, or as an alternative, allowing employees the option of receiving paychecks through the mail at the worksite. Customs replied that it had no authority to adopt either of the union's suggestions. 

On October 7, 1985, customs notified the Union by letter that distribution of paychecks and savings bonds through designated agents would be eliminated on January 13, 1986. The Union made no specific request to bargain nor did it submit any proposals in response to Customs' October 7 notice.

On January 13, 1986, Customs implemented the change in paycheck distribution to employees consistent with Treasury's directive.

III. Administrative Law Judge's Decision

The Judge found that Treasury's alleged interference with the Union's bargaining relationships with IRS and Customs did not violate section 7116(a)(1) and (5) of the Statute. He found that under Authority caselaw at the time of his decision, the change in the manner of paycheck distribution to employees involved the methods and means by which an agency performs work under section 7106(b)(1) of the Statute and was bargainable only at the election of the agency. Although the Judge noted that the Authority's decisions had been reversed by the Court of Appeals for the Ninth Circuit in its decision in FEMTC, he stated that he was bound by the decisions of the Authority as to the negotiability of delivering paychecks until the Authority revised its position on the matter.

The Judge stated that if the matter had been substantively negotiable, he would have found that the issuance of the Treasury directive interfered with the bargaining relationships between the Union and IRS and Customs. He found that the Treasury directive of August 27, 1985 mandated that hand delivery of paychecks would cease on January 13, 1986, and that only the options set out in the directive would be acceptable. The Judge also found that IRS and Customs had no discretion to deviate from its specific requirements. The Judge also stated that he would have found that Treasury did not meet its burden of establishing a compelling need for its directive, and he would have recommended that Treasury be required to order IRS and Customs to restore the status quo ante.

IV. Positions of the Parties

A. The Exceptions to the Judge's Decision

The Union notes that on February 2, 1987, the Authority issued its Decision and Order on Remand in Federal Employees Metal Trades Council, AFL - CIO and Department of the Navy, Mare Island Naval Shipyard, Vallejo, California and American Federation of Government Employees, Local 1533 and Department of the Navy, Navy Commissary Store Region, Oakland, and Navy Commissary Store, Alameda, California, 25 FLRA No. 31 (1987) (Mare Island Naval Shipyard) reversing the Authority's previous decisions in those cases and concluding that proposals with paycheck delivery are within the duty to bargain. Therefore, the Union contends that the Respondent's directive preventing IRS and Customs from bargaining with the Union over the substance of paycheck distribution interfered with the Union's bargaining relationships. Thus, the Union takes the position that the Judge's Decision should be modified to the extent that it is inconsistent with the Authority's current position. It also requests that we order a status quo ante remedy.

The General Counsel contends that because the Authority currently finds that the manner of paycheck delivery is substantively negotiable, the Authority must reverse the Judge and find that the Respondent interfered with the bargaining relationship between the Union and IRS and Customs when it precluded negotiations over the substance of the change in paycheck distribution. The General Counsel also takes the position that a status quo ante remedy should be ordered.

B. Respondent's Opposition and Cross-exceptions

Treasury argues that the issuance of the directive did not violate the Statute. It notes that the Authority's reversal in caselaw changes the obligation of IRS and Customs to negotiate with the Union. It maintains, however, that the issuance of the directive did not violate the Statute because the directive was consistent with Authority precedent at the time of its issuance. Finally, Treasury argues that if the Authority finds a violation, the special circumstances of this case dictate against the imposition of a status quo ante remedy.

V. Analysis and Conclusion

At the time Treasury issued its directive and at the time the Judge issued his Decision, our caselaw provided that bargaining on the method of paycheck delivery was negotiable only at the election of management because it concerned the methods and means of performing the agency's work under section 7106(b)(1) of the Statute. However, we decide an unfair labor practice complaint based on the state of the law at the time the case is before us. See Department of the Navy, Mare Island Naval Shipyard, Vallejo, California, 26 FLRA No. 57 (1987); Director of Administration, Headquarters, U.S. Air Force, 17 FLRA 372 (1985). Therefore, whether Treasury's  alleged interference with the bargaining relationship between the Union and IRS and Customs was an unfair labor practice must be determined under current caselaw.

Current caselaw is set forth in our Decision and Order on Remand in Mare Island Naval Shipyard, 25 FLRA No. 31 (1987). 2 In that decision, we reviewed the Authority's previous decision that proposals concerning the method of paycheck distribution concern the methods and means of performing work under section 7106(b)(1) of the Statute. We concluded that paycheck delivery does not involve the methods and means of performing work within the meaning of section 7106(b)(1) of the Statute. We also concluded that (1) the proposals related to matters affecting working conditions of bargaining unit employees; (2) the agency failed to demonstrate a compelling need for its regulation to bar negotiations on the proposals; (3) the proposals did not interfere with the agency's right to determine its budget or organization; and (4) the proposals were not directly or integrally related to the assignment of work or to determinations as to the personnel by which the agency's operations were to be conducted. We therefore concluded that the proposals were within the duty to bargain.

We find, consistent with our Decision and Order on Remand in Mare Island Naval Shipyard, that Treasury's conduct violated section 7116(a)(1) and (5) of the Statute. Treasury's directive precluded IRS and Customs from bargaining as to the substantive matters encompassed in the directive. We also find, for the reasons stated in that decision, and in agreement with the Judge in this case, that the Respondent's contention before the Judge that there was a compelling need for its directive cannot be sustained. As noted above, however, the Respondent's issuance of its directive was consistent with Authority caselaw at the time.

In these circumstances, we conclude that the purposes and policies of the Statute will best be effectuated by a remedial order which requires Treasury (1) to direct IRS and Customs to make available to unit employees the options for delivery of paychecks and other payroll products that existed prior to the issuance and implementation of Treasury's directive; (2) to cease and desist from enforcing its directive in a manner which prevents IRS and the Union and Customs and the Union from bargaining concerning the options for delivery of paychecks and other payroll products; and (3) to post a notice to that effect.

ORDER

The Department of the Treasury shall:

1. Cease and desist from:

(a) Enforcing the provisions of Treasury Directive 35-03.F entitled "Distribution of Paychecks and U.S. Savings Bonds," issued on August 27, 1985 and effective on January 13, 1986, in a manner which prevents the Internal Revenue Service and the National Treasury Employees Union and the U.S. Customs Service and the National Treasury Employees Union from bargaining concerning the options for delivery of paychecks and other payroll products.

(b) In any like or related manner interfering with, restraining or coercing its employees in the exercise of their rights assured by the Federal Service Labor - Management Relations Statute.

2. Take the following affirmative action:

(a) Direct the Internal Revenue Service and the U.S. Customs Service to make available to unit employees the options for delivery of paychecks and other payroll products that existed prior to the issuance and implementation of Treasury Directive 35-03.F.

(b) Post at its Office of the Secretary, Department of the Treasury, Washington, D.C. facility and at all facilities of the Internal Revenue Service and U.S. Customs Service where bargaining unit employees are located, copies of the attached Notice on forms to be furnished by the Federal Labor Relations Authority. Upon receipt of such forms, they shall be signed by the Assistant Secretary of Management, Department of the Treasury, Washington, D.C., and they shall be posted for 60 consecutive days thereafter in conspicuous places, including all bulletin boards and other places where notices to employees in the Office of the Secretary, Department of the Treasury, Washington, D.C., and Internal Revenue Service and U.S. Customs Service are customarily posted. Reasonable steps shall be taken to ensure that notices are not altered, defaced or covered by any other material.

(c) Pursuant to section 2423.30 of the Federal Labor Relations Authority's Rules and Regulations, notify the Regional Director, Region III, in writing, within 30 days from the date of this Order, what steps have been taken to comply with this Order.

Issued, Washington, D.C., June 29, 1987.

Jerry L. Calhoun Henry B. Frazier III, Member Jean McKee, Member

FEDERAL LABOR RELATIONS AUTHORITY

                   NOTICE TO ALL EMPLOYEES
       ORDERED BY THE FEDERAL LABOR RELATIONS AUTHORITY
              AND TO EFFECTUATE THE POLICIES OF
    THE FEDERAL SERVICE LABOR-MANAGEMENT RELATIONS STATUTE
             WE HEREBY NOTIFY OUR EMPLOYEES THAT:

WE WILL NOT enforce the provisions of Treasury Directive 35-03.F in a manner which prevents the Internal Revenue Service and the National Treasury Employees Union and the U.S. Customs Service and the National Treasury Employees union from bargaining concerning the options for delivery of paychecks and other payroll products.

WE WILL NOT in any like or related manner interfere with, restrain, or coerce our employees in the exercise of rights assured them by the Federal Service Labor - Management Relations Statute.

WE WILL direct the Internal Revenue Service and the U.S. Customs Service to make available to unit employees the options for delivery of paychecks and other payroll products that existed prior to the issuance and implementation of Treasury Directive 35-03.F, entitled "Distribution of Paychecks and U.S. Savings Bonds," issued on August 27, 1985 and effective on January 13, 1986.

                           __________________________________
                                        (Agency)

Dated:________________ By: __________________________________
                                       (Signature)

This Notice must remain posted for 60 consecutive days from the date of posting, and must not be altered, defaced, or covered by any other material.

If employees have any questions concerning this Notice or compliance with its provisions, they may communicate directly with the Regional Director, Region III, Federal Labor Relations Authority, whose address is: 1111 18th Street, N.W., 7th Floor, (P.O. Box 33758), Washington, D.C. 20033-0758, and whose telephone number is: (202) 653-8500. 

 
 
U.S. DEPARTMENT OF THE
TREASURY

              Respondent
    and

NATIONAL TREASURY EMPLOYEES
UNION

              Charging Party

    Case Nos. 3-CA-60291
              3-CA-60325

Serena D. Moe, Esq.
         For the Respondent

Dennis Schneider, Esq.
         For the Charging Party

Philip Boyer, Esq.
         For the General Counsel

Before: SALVATORE J. ARRIGO
         Administrative Law Judge

DECISION

Statement of the Case

This matter arose under the Federal Service Labor - Management Relations Statute, Chapter 71 of Title 5 of the U.S. Code, 5 U.S.C. 7101, et seq.

Upon unfair labor practice charges having been filed by the captioned Charging Party (herein referred to as the Union or NTEU) against the U.S. Department of the Treasury (herein sometimes referred to as Treasury or Respondent), the General Counsel of the Federal Labor Relations Authority, by the Regional Director for Region III, issued a consolidated Complaint and Notice of Hearing alleging Respondent interfered with the collective bargaining  relationship between NTEU and two bureaus of Respondent, i.e. the Internal Revenue Service (herein IRS) and the U.S. Customs Service (herein Customs), by issuing a directive requiring all bureaus of Respondent, including IRS and Customs, to eliminate hand delivery of employee salary checks by January 13, 1986.

A hearing on the Complaint was conducted in Washington, D.C. at which all parties were represented by Counsel and afforded full opportunity to adduce evidence, call, examine and cross-examine witnesses and argue orally. Briefs were filed by all parties and have been carefully considered.

Upon the entire record in this matter, my observation of the witnesses and their demeanor and from my evaluation of the evidence, I make the following:

Findings of Fact

At all times material herein NTEU has been the exclusive collective bargaining representative of a majority of employees in separate collective bargaining units of IRS and Customs employees. At all times material herein NTEU also had national consultation rights with the Department of the Treasury within the meaning of section 7113 of the Statute.

Internal Revenue Service

On April 8, 1985 IRS notified NTEU by letter that it intended to eliminate an existing practice of hand delivering paychecks, savings bonds, leave and earnings statements and W-2 forms to employees at their worksites. Apparently at the time employees had the option of having paychecks delivered at their worksites by designated agents or having paychecks mailed to their home addresses or electronically deposited in a bank by electronic fund transfer (EFT). A document which appears to be an intra-management communication entitled "Administrative Activities Study" accompanied the notice and gave a description of the change as follows:

"Paychecks, savings bonds, earning statements and Forms W-2 should no longer be hand-delivered. Paychecks may be direct-deposited or mailed to an address of the employee's choice. Savings bonds, leave and earnings statements and Forms W-2 should be mailed. Office mailing would be discouraged. 

"Employees should have options about paycheck delivery -- direct deposit, and home mail or office mail direct from the disbursement centers. But in-office hand-delivery and the associated control procedures for paychecks and savings bonds should be eliminated, eliminating the need for the network of designated Agents and subagents.

"The primary savings impact will be that the numerous employees who now devote one to eight hours each pay period handling the distribution of paychecks, savings bonds and earnings statements would be able to spend that time on other work instead of designated agent duties. A contact person in each office would still be needed to respond to payroll problems, but many of these problems (lost or late paychecks) would be eliminated where direct deposit was used.

"A recent Federal Labor Relations Board ruling confirms management's right to determine how pay is delivered. However, delivery of other items like savings bonds, earnings statements and Forms W-2 are not specifically addressed, and this would seem to be a subject appropriate for discussion with the employee union. if this recommendation is approved, discussions with the union should be begun as soon as possible."

The parties met on April 12, 1985 and agreed to postpone negotiations until IRS had developed and provided the Union with an implementation plan. However, on June 18, 1985 before IRS provided the Union with an implementation plan or any negotiations between IRS and the Union commenced, Treasury sent a letter notifying the Union of its intention to discontinue the designated agent method of paycheck delivery. The Union was provided with a draft directive on the subject and given 10 days to provide comments. The draft directive applied to Respondent and all of its bureaus and stated under the captioned "Background":

"a. The current practice of using designated agents to deliver paychecks and U.S. savings bonds to employees at their offices or duty stations is inefficient and costly and is being discontinued. Instead, paychecks will be deposited directly to an employee's bank account, or paychecks and U.S. savings bonds will be mailed directly to an address designated in writing by the employee. 

"b. The Department of the Treasury records reflect that more payroll checks are lost when they are delivered to employees at their offices than with any other delivery method. Eliminating the distribution of payroll checks and U.S. savings bonds through designated agents will (1) increase the efficiency of the payroll distribution process; (2) reduce distribution costs; (3) greatly reduce instances of lost checks and bonds; and (4) give employees the use of their pay much sooner."

The draft directive provided the following "Explanation of New Procedures":

"a. Employees may elect to receive their net pay in the form of:

(1) a check or electronic fund transfer payment drawn in favor of a bank, savings and loan association, or a Federal- or state-chartered credit union, for credit to their account; or

(2) a check drawn in the employee's name and mailed to a home, post office box, or other address. The address identified for the receipt of payroll checks must be the address used for mailing all other payroll and personnel documents and notices; e.g., IRS Form W-2, "Wage and Tax Statement."

"b. Failure to elect one of the options will result in checks and savings bonds being mailed to the current address in the employee's personnel file. Of the two options available, the electronic fund transfer (EFT) is the most reliable method.

"c. Exceptions to this policy will only be granted due to severe hardship or other mitigating circumstances for current employees. No exceptions will be granted for new employees. In exceptional cases, employees will be authorized to collect their paychecks and savings bonds at one site and at times designated by bureau management for this purpose. Such requests must be approved at the Assistant Commissioner or comparable level. Authorization of exceptions may not be delegated below the Assistant Commissioner level. All requests for exceptions must be in writing, and copies of exceptions granted must be forwarded to the Office of Personnel . . . ."

The draft directive made the Director, Office of Personnel responsible to "(s)eek cooperative efforts with appropriate labor organizations and assist the bureaus with respect to their labor organizations on the implementation of the policy change." Heads of bureaus were also given specific responsibilities regarding the program including "(s)atisfy(ing) obligations with all appropriate labor organizations on the implementation of (the) directive."

By letter dated June 27, 1985, IRS provided the Union with the implementation plan for is proposed change in paycheck delivery procedures. Under the IRS "Direct Mail Project" designated agents would no longer receive salary checks, Savings Bonds, earnings statements and W-2 forms for distribution to employees. 3 The plan provided, inter alia:

"l. Employees may elect to receive their pay in the form of:

"(a) a check or electronic fund transfer payment drawn in favor of a bank, savings and loan association, or a Federal or State-chartered Credit Union, for credit to their account; or

"(b) a check drawn in the employee's name and mailed to a home, post office box, or other address.

(1) The employee has the option of designating either his/her residence address or an optional mailing address. (In addition to salary checks, this option will also be available for mailing of Leave and Earnings Statements and Form W-2.

(2) The residence address should be the address of record in the employee's personnel file. The optional mailing address can be any valid address, to include the employee's office address. However, if the office address is selected, the employee should be cautioned that the salary check will take the same route as normal office mail - no special handling provisions will be made for delivery of salary checks. Employees who elect delivery to the office address should be cautioned further that the Department of Treasury records reflect that more payroll checks are lost when they are delivered to employees at their offices than with any other delivery method . . .

"(c) Failure to elect one of the options for the mailing of salary checks will result in checks being mailed to the current address in the employee's personnel file . . .

"(e) Of the two options available to employees (electronic fund transfer and home mail), the electronic funds transfer (EFT) is the most reliable . . ."

The employee would have similar options for receiving leave and earnings statements and W-2 forms. Savings Bonds would be delivered only to the address shown on the face of the bond.

With regard to "exceptions," the new plan provided:

"1. Exceptions to the policy established by "Direct Mail" will only be granted due to severe hardship or other mitigating circumstances for current employees. No exceptions will be granted for new employees.

"2. In exceptional cases, employees will be authorized to collect their pay checks, savings bonds, Leave and Earnings Statements, and W-2's at one site and at times designated by management for this purpose. Such requests must be approved at the following levels of authority: 

(a) National Office - appropriate Assistant commissioner

(b) Regional Office - appropriate Assistant Regional Commissioner

(c) District Office - District Director

Authorization of exceptions may not be delegated below the levels indicated above.

"3. All requests for exceptions must be in writing, and copies filed in the appropriate Personnel Office."

The program was to commence with the mailing of W-2 forms in January 1986 and dates for further implementation of the plan were to be provided thereafter in the following sequence: salary checks, Savings Bonds and leave and earnings statements.

The Union and IRS met on July 18, 1985 to discuss the "Direct Mail Project." Joseph Kaplan, then NTEU Assistant Director of Negotiations for IRS, represented the Union and IRS was represented by Richard Cooper, Labor Relations Specialist and management spokesperson, and three other management representatives. Kaplan wished to maintain the status quo regarding paycheck receipt by employees and objected to management discontinuing hand delivery of checks. In response to his questions, management affirmed that under the proposed plan employees would be able to receive pay checks at their office location, albeit through regular mail service. Aware of the existence of Treasury's June 18, 1985 notification to the union that it intended to require all subordinate bureau's to discontinue pay check distribution by designated agents, supra, Kaplan inquired as to IRS'S authority in the matter and was told that IRS had authority over the implementation of the change at issues until such time as Treasury finalized its program. Kaplan inquired as to the dates IRS expected to implement their plan and was informed that January 1986 was a target date for elimination of hand delivery of leave and earnings statements and March 1986 the target date for eliminating hand delivery of paychecks. Management indicated they would have a firm implementation schedule by October 1985 and the meeting concluded with Kaplan indicating that after IRS had decided on a formal implementation schedule the parties could set up a bargaining schedule. 

On August 27, 1985 Respondent issued Treasury Directive 35-03.F entitled Distribution of Paychecks and U.S. Savings Bonds which was, in essence, virtually identical to the Treasury draft directive provided to the Union on June 18, 1985, supra. However, directive 35-03.F was different from the draft in that the directive specifically stated that the employee's mailing address for the receipt of paychecks could not be the employee's work address and set January 13, 1986 as the effective date for the provisions of the Directive. Thus, with regard to the delivery of paychecks, the directive stated that it was the policy of the U.S. Treasury that: 4

"a. Each employee shall elect to receive his/her net pay in the form of:

"(1) A check or electronic fund transfer payment drawn in favor of a bank, savings and loan association, or credit union, for credit to the employee's account; or

"(2) A check drawn in the employee's name and mailed to a home, post office box, or other address. The address identified for the receipt of paychecks must be the address used for mailing all other payroll and personnel documents and notices, e.g., IRS Form W-2, "Wage and Tax Statement." Such address may not be the employee's work address . . . ."

In early September 1985 NTEU representative Kaplan received a telephone call from IRS representative Cooper. Kaplan was informed that since the Treasury directive set January 13, 1986 as the date by which the new paycheck distribution plan was to be implemented, IRS and the Union had to expedite their bargaining schedule on the matter and NTEU had better submit its proposals promptly. Accordingly, by letter to IRS dated September 26, 1985 the Union submitted various proposals regarding paycheck distribution including a proposal that IRS ". . . maintain the current practice of hand-delivering employees' paychecks, earning statements, etc." NTEU also proposed, inter alia, that in the event IRS should declare the above proposal nonnegotiable, pending "negotiability litigation" employees be permitted to designate any address, including the employees' post-of-duty, for mail distribution of paychecks, etc. The Union proposed procedures for the distribution of paychecks received by mail to employees' duty stations and also proposed that employees receive administrative leave for time spent visiting banks to fill out forms necessary to effectuate direct deposit check transfers.

On November 4, 1986, NTEU representative Kaplan received a telephone call from IRS representative Cooper and was told that commencing November 12 employees would be notified that they had to make an election between home delivery and direct deposit of paychecks and the procedures to be followed. Kaplan objected reminding Cooper that bargaining proposals had been submitted by the Union and the parties had not yet negotiated on them. Cooper responded that IRS was precluded from negotiating on the Union's proposals since the proposals were inconsistent with the Treasury directive and that IRS had no choice but to proceed and implement the change. However, Cooper indicated that IRS would bargain with the Union on the issue of granting employees a reasonable amount of time to visit banks to effectuate direct deposit check transfer. Kaplan repeated his objection and, in any event, a bargain session was scheduled for November 18. 5

By letter dated November 7, 1985 IRS forwarded to NTEU a copy of an IRS "Information Notice" dealing with "Mandatory Direct Mail of Payroll Products (salary checks, Forms W-2, U.S. Savings Bonds, and Leave and Earnings Statements). The "Notice" began with the following "background" notation:

"As a result of the Direct mail study of 1983 and related recommendations of the Administrative Activities Study Group of 1985, a program to eliminate the delivery of payroll products by designated agents in IRS offices has been initiated. The program will generate cost savings and make available valuable human resources that are needed in more productive activities.

"Although unrelated, but for similar reasons, the Department of the Treasury issued Directive 35-03.F, Distribution of Paychecks and U.S. Savings Bonds, dated August 27, 1985, which requires that all bureaus eliminate hand delivery of salary checks by January 13, 1985."

The substance of the Notice essentially tracked that contained in the IRS implementation plan provided to the Union on June 27, 1985, supra. However, with regard to the optional mailing address which an employee might use for paycheck delivery, the Notice provided that ". . . in accordance with the aforementioned Treasury Directive, the optional mailing address may not be the employee's work address." The Notice, inter alia, also set out January 13, 1986 as the pay date for discontinuance of use of designated agents and also set forth various procedural matters including implementation dates for sign-up for Direct Deposit (November 30), verification of employee addresses (November 9) and mandatory mailing of Savings Bonds (March 15, 1986).

On November 8, 1985 IRS issued manual supplement 029-68 which was essentially a verbatim duplication of the IRS "Information Notice," above.

In late November 1985 NTEU President Robert M. Tobias, and Frank Ferris, NTEU Director of Negotiations met with John F.W. Rogers, Assistant Secretary of the Treasury (Management) and a member of his staff and requested that Rogers withdraw his "order" to Treasury bureaus ending job site delivery of paychecks. 6 During the meeting the Union representatives presented various reasons why NTEU considered it necessary that employees be permitted to receive paychecks at the workplace. Assistant Secretary Rogers countered with his reasons why he implemented the directive and declined to withdraw it. The Union then asked that Rogers make the order discretionary at bureau level but Rogers refused indicating that the matter had been previously discretionary with the bureaus but virtually none of the bureaus adopted the procedure. The Union then suggested that Treasury broaden the availability of using hardship in permitting managers to exempt employees for application of the directive. Rogers replied that he would inform the bureaus that he wanted the hardship clause generally exercised during the first six months under the new system and the meeting ended.

On December 20, 1985 the United States Court of Appeals for the Ninth Circuit issued its decision in Federal Employees Metal Trades Council, AFL - CIO, v. Federal Labor Relations Authority, 778 F. 2d 1429, which concerned Authority decisions in 16 FLRA 619 (1984) and 16 FLRA 623 (1984). In those cases, involving facilities of the Department of the Navy (Mare Island Naval Shipyard and Navy Commissary Stores in California respectively), the Authority essentially held that the manner of distributing pay checks to employees concerns the methods or means by which an agency performed work under section 7106(b)(1) of the Statute and was therefore outside the agency's duty to bargain with the unions involved. 7 The Court of Appeals for the Ninth Circuit reversed the Authority in these cases finding the union proposals dealing with direct deposit of paychecks to be a bargainable condition of employment under the Statute and the court remanded the matter to the Authority. Accordingly, on or about January 7, 1986 NTEU representative Kaplan telephoned IRS representative Cooper alerting him of the Ninth Circuit case and inquired whether IRS was prepared to halt implementation of the new paycheck distribution system. Cooper informed Kaplan that the change would be effective on January 13 and elimination of hand delivery would occur on that date. 

On January 13, 1986 IRS implemented the change in paycheck distribution to all its employees consistent with the Treasury directive of August 27, 1985 and the November 8, 1985 IRS Manual Supplement, supra. 8

U.S. Customs Service

By letter dated June 13, 1985 Treasury provided Customs with a copy of the same draft Treasury directive concerning the distribution of paychecks mentioned above which was subsequently provided the Union by Treasury on June 18. The cover letter, sent to the Commissioner, requested that the draft be reviewed and comments submitted by June 27. Shortly thereafter the letter and the draft directive came to the attention of John McEleney, Assistant Director of Negotiations for NTEU and labor relations coordinator between Customs and NTEU in which capacity McEleney served as chief spokesperson for negotiations involving customs. McEleney's agency counterpart for labor relations discussions at Customs was Robert Lewis, National Labor Relations Program Officer. According to McEleney, whose testimony I credit, 9 in late June or early July he discussed the Treasury draft directive with Lewis. McEleney indicated the Union wished to retain the then current system which enabled employees to hand receive paychecks at their desks. Lewis replied that the directive did not give Customs that latitude. McEleney suggested that as an alternative the Union would be interested in allowing employees the option to receive paychecks through the mail at the worksite. Lewis replied that although the final document on the matter had not issued, it was his understanding that customs would have no latitude to adopt this procedure either. The conversation ended with the parties indicating they would talk further after the final document issued.

After McEleney saw what he identified as the final Treasury directive on the matter in the Union's office, 10 be raised the same concerns with Lewis as previously regarding the delivery of paychecks to employees at their worksites. Lewis again took the position that Customs would not be able to address those concerns since Treasury left Customs with no latitude on the matter.

On October 7, 1985 Customs sent McEleney the following letter:

"This is to notify you that distribution of paychecks and U.S. Savings bonds through designated agents will be eliminated effective January 13, 1986.

"Each employee shall elect to receive his or her net pay in the form of:

1) A check or electronic fund transfer payment in favor of a bank, savings and loan association, or credit union, for credit to the employee's account; or

2) A check drawn in the employee's name and mailed to a home, post office box, or other address. The address identified for the receipt of paychecks must be the address used for mailing all other payroll and personnel documents and notices, e.g. IRS Form W-2, Wage and Tax Statement." Such address may not be the employee's work address. 

"Should you have any proposals regarding impact and implementation of the above, please submit them to me in writing no later than October 21, 1985."

Shortly after receiving Custom's letter McEleney had another conversation with Lewis where again Lewis indicated Customs could not distribute paychecks as it had in the past nor could employees designate their work addresses for receipt of paychecks. Part of the discussion also concerned the Authority's prior determinations of nonnegotiability of bargaining proposals dealing with paycheck distribution, supra. While McEleney acknowledged he made no specific request to bargain nor did he submit any proposals in response to Customs October 7 letter, he testified that the Union's primary concern was to negotiate on the decision to change paycheck distribution procedures, not the impact and implementation of the change and based upon his prior conversations with Lewis, substantive proposal would have been futile.

In late December 1985 after the issuance of the Ninth Circuit's decision in Mare Island and Navy Commissary Stores on December 20, 1985, supra, McEleney spoke with Lewis and asked whether Customs would reconsider its position on the matter at issue in view of the court's decision. Lewis replied that Treasury was not budging or making any concessions in the matter.

Lewis met with McEleney during a National Labor Management Committee meeting held on January 6 and 7, 1986. The only discussion relative to paychecks during that meeting occurred when the Union asked and was informed by management how electronic transfer of funds would be provided for certain employees stationed in foreign countries and how Customs intended to deal with hardship cases.

On January 13, 1986 Customs implemented the change in paycheck distribution to employees consistent with the Treasury directive of August 27, 1985.

Supplemental Findings, Discussion and Conclusions

The General Counsel contends that by the issuance of Treasury Director 35-03.F on August 27, 1985 Respondent required its subordinate bureaus, IRS and Customs, to discontinue the hand delivery of salary checks and did thereby interfere with NTEU'S collective bargaining relationship with IRS and Customs in violation of section 7116(a)(1) and (5) of the Statute. 

Respondent contends: paycheck distribution is a matter which falls within the meaning of "performing work" under section 7116(b)(1) of the Statute and is negotiable only at the discretion of the agency; the issuance of the Treasury Directive did not interfere with bargaining relationships between the Union and IRS and Customs; and Treasury had a "compelling need" to issue Directive 35-03.F.

If a violation of the Statute was found to exist, Counsel for the General Counsel requests that Treasury be required to rescind the directive to IRS and Customs and post an appropriate "Notice." The Union urges that a remedy include an order requiring IRS and Customs restore the status quo ante regarding the procedures for paycheck delivery to unit employees. Respondent strongly argues against the imposition of a status quo ante remedy.

In Mare Island and Navy Commissary Stores, supra, and numerous cases thereafter, the Authority has stated its position that matters concerning the manner of paycheck distribution to employees involve the methods or means by which an agency performs work under section 7106(b)(1) of the Statute and are therefore bargainable only at the election of the agency. Tidewater Virginia Federal Employees Metal Trades Council, AFL - CIO and Navy Public Works Center, Norfolk, Virginia, 20 FLRA 800 (1985); United States Department of Defense, Department of the Army, McAlester Army Ammunition Plant, 20 FLRA 606 (1985); National Association of Government Employees, Locals R4-1, R4-97 and R4-103 and Department of the Navy, Naval Weapons Station, Yorktown, Virginia, 20 FLRA 186 (1985); Department of the Navy, Washington, D.C., et al., 19 FLRA 52 (1985); Department of Transportation, 19 FLRA 3 (1985); Department of the Navy, Office of the Secretary, Washington, D.C., et al., 18 FLRA 802 (1985). Department of Defense, Department of the Navy, Navy Public Works Center, Norfolk, Virginia, 18 FLRA 666 (1985); and Department of the Navy, Washington, D.C., 18 FLRA 638 (1985). Notwithstanding the decision of the Ninth Circuit in Mare Island and Navy Commissary Stores, supra, I am bound by the decisions of the Authority as to the negotiability of delivering paychecks to employees until such time as the Authority specifically revises its position on the matter or it becomes apparent that the Authority will no longer adhere to its articulated position. Department of the Air Force Headquarters, Air Force Logistics Command, Wright - Patterson Air Force Base, Ohio 23 FLRA No. 54 (1986). Thus, even though my independent evaluation of the matter might lead to a contrary conclusion, e.g. Department of Transportation, supra, and Department of Defense, Department of the Navy, Navy Public Works Center, supra, since the decisions of the Authority have clearly and continuously found that an agency's selection of the method of paycheck distribution concerns the methods and means of performing work within the meaning of section 7106(b)(1) of the Statute and therefore is negotiable only at the election of the agency, I conclude Treasury's alleged interference between NTEU and IRS and Customs did not constitute a violation of section 7116(a)(1) and (5) of the Statute.

Assuming arguendo that the matter was substantively negotiable, I would find that the issuance of the Treasury directive interfered with the bargaining relationships between NTEU and Treasury's bureaus, IRS and Customs. By its term the Treasury directive of August 27, 1985 clearly and most definitely mandated that hand delivery of paychecks would cease effective January 13, 1986 and only the options set out in the directive would be acceptable. IRS and Customs, as subordinates of Treasury, were bound by the terms of the directive ad no discretion to deviate from its specific requirements. 11 The directive sets forth a procedure for agencies to grant exceptions for its terms and, with regard to dealing with a collective bargaining representative, provides only that the heads of bureaus "(s)atisfy obligations with all appropriate labor organizations on implementation of (the) Directive." Emphasis added. Thus the directive permitted no discretion as to the substantive matters encompassed therein, save a limited provision on exceptions, and allowed only limited discretion as to satisfy collective bargaining obligations as to matters concerning the implementation of the substantive terms of the directive. In my view the directive from Treasury to its subordinate bureaus was tantamount to an order directing the change of a past practice and, in essence, forbidding negotiations on the substance of the directive and IRS and Customs indeed had no had no choice but to ministerially follow the dictates of Treasury. Cf. Department of the Interior, Water and Power Resources Service, Grand Coulee Project, Grand Coulee, Washington, et al., 9 FLRA 385 (1982) and Department of Health and Human Services, Social Security Administration, Region VI, et al., 10 FLRA 26 (1982). 

Respondent argues that with regard to IRS the change in paycheck distribution was not the product of Treasury fiat but was initiated by IRS independently, although it was ultimately implemented in a manner consistent with the Treasury directive. However, although IRS notified the Union of its intention to revise the system of hand delivering paychecks and related documents, no specific implementation plan was announced until after Treasury issued its draft directive to its subordinate bureaus. I find the issuance of the draft directive and subsequently the final directive by Treasury to all its subordinate bureaus, which the record reveals Treasury would not vary, mandated the imposition of a precise method of paycheck, etc. delivery complete with an implementation date effectively precluded and superseded any independent IRS action on the matter. 12 Thus, IRS was no longer free to independently change its position on the negotiability of the proposals or develop its own specific plan but was obligated to comply with the requirements of the Treasury directive. The conversation between Cooper of IRS and Kaplan of NTEU on November 4, 1985, supra, supports the conclusion. In these circumstances I would reject Respondent's argument that Treasury did not interfere with IRS' bargaining relationship with NTEU.

With regard to Customs, since I have credited McEleney's testimony I would find the Union made it abundantly clear to Customs that it desired to negotiate on the change in how paychecks were distributed but Customs precluded negotiations on the matter by taking the position it had no latitude to bargain in view of the requirements of the Treasury directive. Even prescinding from the testimony of McEleney and Lewis, Customs' October 7 letter to McEleney notifying him of the elimination of designated agents, supra, indicates Customs wished only proposals concerning impact and implementation of the change, not its substance. In such circumstances and given the notoriety of the Authority's Mare Island and Navy Commissary Stores decisions in the federal labor relations community, I conclude the import of the October 7 letter was that Customs would not bargain on the substance of the change and presenting  specific bargaining proposals would in the circumstances herein have been a futile gesture on NTEU'S part.

Nor would I find that Respondent has met its burden of establishing a compelling need to issue Directive 35-0.3F. Section 7117(a)(2) of the Statute provides:

"(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 . . . only if the Authority has determined . . . that no compelling need (as determined under regulations prescribed by the Authority) exists for the rule or regulation."

Section 2424.11 of the Authority's Rules and Regulations states:

"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.

"(b) The rule or regulation is necessary to insure the maintenance of basic merit principles.

" (c) The rule or regulation implements a mandate to the agency or primary national subdivision under law or other outside authority, which implementation is essentially nondiscretionary in nature." 

Respondent contends that elimination of hand delivery of employee paychecks and Savings Bonds would allow for more efficient cash management practices by increasing the efficiency of the payroll distribution process, reducing distribution costs and reducing instances of lost checks and bonds and thus establish a compelling need for the directive. Respondent relies on the Authority's decision in National Association of Government Employees, Local R14-62 an U.S. Army Dugway Proving Ground, Dugway Utah, 18 FLRA 307 (1985) to support the proposition that a compelling need is established where an agency's rule has been adopted for the purpose of saving money and thereby insuring its mission is performed in an effective and efficient manner. However, around the time briefs were filed herein, the Authority issued its decision in Lexington - Blue Grass Army Depot, Lexington, Kentucky and American Federation of Government Employees, AFL - CIO, Local 894, 24 FLRA No. 6 (1986) specifically reversing Dugway, holding inter alia;

"We do not believe that effectiveness and efficiency are to be measured solely in monetary terms. Financial considerations, of course, can be relevant to a determination whether an agency regulation satisfies the compelling need criterion set forth in section 2424.11(a) of the Authority's regulations. See National Treasury Employees Union, Chapter 207 and FDIC, Washington, D.C., 21 FLRA No. 36 (1986)(finding a compelling need under section 2424.11(a) for agency regulations establishing a uniform system for determining employee salaries). However, in determining whether an agency's regulation is essential, as distinguished from helpful or desirable to effective and efficient agency operations, other considerations are also pertinent. Compare, for example, American Federation of Government Employees, AFL - CIO and Air Force Logistics Command, Wright - Patterson Air Force Base, Ohio, 2 FLRA 604, 608 (1980), aff'd on other grounds, 659 F.2d 1140 (D.C. Cir. 1981), cert. denied, 455 U.S. 945 (1982) (only where an agency makes a substantial demonstration that an increase in costs is significant and unavoidable and is not offset by compensating benefits can an otherwise negotiable proposal be found to violate the agency's right to determine its budget under section 7106(a) of the Statute)." 

Respondent also suggests that it had a compelling need to issue Directive 35-0.3F since "Treasury is committed to reducing the Government's reliance on paper checks by converting its payments to electronic transfer." Respondent relies on a 1985 "Strategic Plan" for the Financial Management Service (FMS), a Treasury bureau, where in FMS managers undertook to formulate a "vision" of that bureau in the 1990's. The plan considered not only activities FMS was currently engaged in but also "the expanded financial management role it envisions for itself in the future" (Emphasis added.) 13 The "Strategic Plan" also provided, inter alia:

"By the mid-1990's, production of checks will no longer be the focal point of Regional Financial Center activities; payments will be made primarily by electronic funds transfer (EFT). FMS will support a variety of new applications of technology as it moves in to an increasingly electronic future, including the use of plastic cards, integration benefit payments, and home computers.

"Payment information will be transmitted via the service's nationwide telecommunications network for reporting, claims, and reconciliation. It will be reported to a data base of Federal financial information and will be available on-line. . .

"To the extent possible, the collections system of the 1990's will use electronic funds transfer systems for the collection of funds and for the transmission of collection information. Collections will flow into a consolidated Treasury account at each financial institution in the collections systems, and the timing of deposits will be controlled by specific cutoffs for deposit at financial institutions and for subsequent deposit with the Federal Reserve Bank (FRB)." 

Testimony revealed that by the mid-1990'S Treasury's goal is to have 50 percent of payments to be made electronically. This would include Social Security and salary payments, grant and vendor payments, and tax refunds. The plan acknowledges that it is "an ambitious vision" of FMS's future operations and will require cooperation and shared responsibility with other central financial agencies such as the office of "management and Budget and the General Accounting Office.

Admittedly the plan is something that the agency "would like to see," not necessarily what Treasury must accomplish to fulfill its mission. In my view compliance with the broad visionary objectives of FMS managers reflected in the rather speculative "Strategic Plan" is too tenuous to meet the specific criteria for concluding that Treasury Directive 35-0.3F is essential, as distinguished from helpful or desirable, to the accomplishment of the mission or execution of functions of Treasury. Accordingly, I would reject Respondent's contention that it had a compelling need to issue Directive 35-03.F.

Lastly, were I to find that Treasury violated the Statute as alleged, I would recommend that Treasury be required to order IRS and Customs to restore the status quo ante. See Veterans Administration, West Los Angeles Medical Center, Los Angeles, California, 23 FLRA No. 37 at fn. 2 (1986); Department of Health and Human Services, Social Security Administration, Baltimore, Maryland, 16 FLRA 674 (1984); and Department of Health and Human Services, Social Security Administration Region VI et al., supra.

However, having concluded, supra, that based upon existing Authority precedent Respondent has not violated the statute by having engaged in the conduct found herein, I recommend the Authority issues the following:

ORDER

IT IS HEREBY ORDERED that the Complaint in Case Nos. 3-CA-60291 and 3-CA-60325 be, and hereby is, dismissed.

SALVATORE J. ARRIGO
Administrative Law Judge

Dated: January 15, 1987
         Washington, D.C.

FOOTNOTES

Footnote 1 The Union filed a negotiability appeal with the Authority over IRS' allegations of nonnegotiability. In National Treasury Employees Union and Department of the Treasury, Internal Revenue Service, 25 FLRA No. 69 (1987), we ordered IRS to bargain on the Union's proposals on paycheck distribution.

Footnote 2 See also our Decision and Order on Remand in Department of the Navy, Washington D.C. and Department of the Navy, U.S. Naval Supply Center, Oakland, California, 25 FLRA No. 81 (1987) ; United States Department of Defense, Department of the Army, McAlester Army Ammunition Plant, 26 FLRA No. 20 (1987); and Department of Transportation, 26 FLRA No. 32 (1987).

Footnote 3 Designated agents would still distribute an employee's final check prior to separation of employment and in certain other situations not relevant herein.

Footnote 4 The "Purpose" sections of the directive stated: "This Directive establishes Department of the Treasury policy, standards and procedures for distributing paychecks and U.S. savings bonds." The "Scope" section stated: "This Directive applies to the Office of the Secretary and all bureaus of the Department of the Treasury."

Footnote 5 Kaplan and Cooper conducted a telephone negotiation on granting administrative leave to employees to make necessary bank arrangements sometime in mid-November.

Footnote 6 The meeting was presumably held by virtue of NTEU'S national consultation rights.

Footnote 7 Section 7106(b)(1) of the Statute provides in relevant part: " 7106. Management rights (b) Nothing in this section shall preclude any agency and any labor organization from negotiating -- (1) at the election of the agency . . . on the technology, methods, and means of performing work(.)"

Footnote 8 On February 28, 1986 IRS sent a letter to NTEU declaring its bargaining proposals of September 26, 1985 to be nonnegotiable. NTEU filed a negotiability appeal with the Authority on March 3, 1986 and that appeal is still pending before the Authority.

Footnote 9 McEleney testified to having numerous discussions with Lewis on the matter at issue between July 1985 and January 1986. Lewis denied having any such conversation save one in January 1986. Although McEleney's testimony was at times imprecise as to dates and somewhat difficult to follow, I did not receive the impression that he was attempting to deceive the court and he held up well under cross-examination. However, I found some of Lewis' answers to be phrased so as to be misleading, particularly with regard to his response as to his contacts with McEleney and his familiarity with the hand delivery of paychecks issue. While the matter is not free from doubt, I conclude from my observations that the testimony of McEleney is more reliable than that of Lewis.

Footnote 10 McEleney placed the date as early August although the first Treasury directive was dated August 27, 1986.

Footnote 11 Treasury Assistant Secretary Rogers' refusal in November 1985, supra, to make the directive discretionary by bureaus as it had been in the past supports this conclusion.

Footnote 12 Respondent offered no evidence