27 FLRA NO. 109


NATIONAL TREASURY EMPLOYEES UNION

              Union

         and

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

              Agency

Case No. O-NG-1350

DECISION AND ORDER ON NEGOTIABILITY ISSUES

I. Statement of the Case

This case is before the Authority because of a negotiability appeal filed under section 7105(a)(2)(E) of the Federal Service Labor - Management Relations Statute (the Statute), and concerns the negotiability of two Union proposals.

II. Proposal 1

The Internal Appeals Procedure shall be the parties' grievance and arbitration provisions of the Master Agreements.

A. Positions of the Parties

The Agency contends that Proposal 1 is nonnegotiable under section 7117(a) (1) of the Statute because it is inconsistent with OMB Circular A-76, a Government-wide rule or regulation. The Agency argues that the proposal conflicts with OMB Circular A-76 because it would broaden the scope of permissible challenges to contracting-out actions under the regulation and would replace the forum where such challenges can be heard under the regulation with the negotiated grievance procedure. The Agency also contends that Proposal 1 is inconsistent with management's right to contract out under section 7106(a)(2)(B) of the Statute. It argues that the grievance procedure established by the Statute may not be used to challenge the exercise of management's reserved right to contract out. 

The Union contends that Proposal 1 is not barred by a Government-wide regulation. The Union also states that Proposal 1 requires the Agency to use the parties' negotiated grievance procedure as the mechanism for resolving all grievable disputes concerning OMB Circular A-76. The Union contends that Proposal 1 in no way encompasses or establishes a right for the Union to grieve the substance of the Agency's decision to contract out. It asserts that the proposal merely seeks to enforce conformity with applicable law, regulations and the procedural processes established by policy or practice and therefore does not violate management's rights.

B. Analysis

1. Proposal 1 is Not Inconsistent with a Government - Wide Rule or Regulation

Contrary to the Union, and for reasons stated more fully in American Federation of Government Employees, Local 225, AFL - CIO and Department of the Army, U.S. Army Armament Research and Development Command, Dover, New Jersey, 17 FLRA 417, 420 (1985), we find that OMB Circular A-76 constitutes a Government-wide rule or regulation within the meaning of section 7117(a)(1) of the Statute. As to whether Proposal 1 is inconsistent with the Circular, in American Federation of Government Employees, AFL - CIO, National Council of EEOC Locals and Equal Employment Opportunity Commission, 10 FLRA 3 (1982) (Proposal 1), enforced sub nom. EEOC v. FLRA, 744 F.2d 842 (D.C. Cir. 1984), cert. dismissed, 106 S.Ct. 1678 (1986) (per curiam), the Authority considered and rejected arguments similar to those asserted by the Agency in this case. The Authority found that the right to file grievances concerning contracting-out decisions which affect conditions of employment is created by the Statute. The Authority therefore held that the Circular cannot limit the statutorily prescribed scope and coverage of the parties' negotiated grievance procedure. See EEOC, 10 FLRA at 4, American Federation of Government Employees, AFL - CIO, Local 1923 and Department of Health and Human Services, Office of the Secretary, Office of the General Counsel, Baltimore, Maryland, 22 FLRA No. 106 (1986), enforced sub nom. U.S. Department of Health and Human Services v. FLRA, No. 86-2619 (4th Cir. June 23, 1987). See also EEOC v. FLRA, 744 F.2d at 851-52; DHHS v. FLRA, No. 86-2619, slip op. at 21-23. Similarly, for the reasons stated in EEOC and DHHS, Office of the Secretary, we reject the Agency's argument in this case and find that Proposal 1 is not inconsistent with OMB Circular A-76. 

2. Proposal 1 is Not inconsistent with Law

The Agency states three grounds for its contention that matters pertaining to contracting-out under OMB Circular A-76 are not subject to the negotiated grievance procedure. First, the Agency argues that OMB Circular A-76 is an internal policy directive and not a law, rule or regulation "within the normal meaning." Agency Statement of Position at 6. The Agency contends that there can be no "grievance" within the meaning of section 7103(a)(9) on a violation, misinterpretation or misapplication of the Circular since the Circular is not a law, rule, or regulation. We reject the Agency's argument for the reason we rejected the Union's similar argument above. See Section II, B.1 of this decision. OMB Circular A-76 is a Government-wide rule or regulation and grievances concerning its interpretation and application fall within the statutorily prescribed scope and coverage of the parties' negotiated grievance procedure.

Second, the Agency contends that even if OMB Circular A-76 is a Government-wide regulation, contracting-out does not concern employees' conditions of employment and therefore is not a matter which is subject to the grievance procedure. This argument must also be rejected. An Agency's contracting-out determination has the potential for affecting employees' working conditions even to the extent of costing employees their jobs. The potential loss of employment due to a decision to contract out bargaining unit work, or a decision to reassign or reallocate the duties and functions of bargaining unit positions, at a minimum, affects the conditions of employment of the employees who perform those duties and functions.

Lastly, the Agency contends that the exercise of management's right to contract out is not subject to the grievance procedure. The Agency's arguments in this case are essentially the same as those rejected by the Authority in finding similar proposals negotiable in DHHS, Office of the Secretary, 22 FLRA No. 106 and EEOC, 10 FLRA 3. In those cases the Authority held that proposals which required management to comply with applicable laws and regulations, including specifically OMB Circular A-76, in exercising its right to make contracting-out determinations did not directly interfere with section 7106 (a)(2)(B) of the Statute because the proposals would only contractually recognize external limitations on management's right. The Authority found that the proposals themselves would not establish any particular substantive limitation on management in the exercise of that right. See also EEOC v. FLRA 744 F.2d at 848-49, DHHS v. FLRA, No. 86-2619, slip op. at 6-21. 1 The Authority also specifically rejected in those cases the agencies' assertion that contractual provisions which subject management's contracting-out decisions to any type of grievance or arbitral review are nonnegotiable. See DHHS, Office of the Secretary, 22 FLRA No. 106, slip op. at 3.

Proposal 1 in this case would allow the Union to grieve matters arising out of the Agency's decision to contract out, where those matters concern an alleged failure to comply with applicable laws, regulations and established procedural processes. Union's Response to Agency's Statement of Position at 3. The Authority has found that the Statute requires grievance procedures negotiated under section 7121 of the Statute to cover all matters that under the provisions of law could be submitted to the grievance procedure, unless the parties exclude them through bargaining. See DHHS, Office of the Secretary, 22 FLRA No. 106, slip op. at 3-4; EEOC v. FLRA, 774 F.2d at 849-51; DHHS v. FLRA, No. 86-2619, slip op. at 15-21. A proposal which would allow the Union to grieve matters arising from an agency's contracting-out determination on the basis that they are not in compliance with law and regulation would not, therefore, change the statutorily prescribed scope and coverage of the parties' negotiated grievance procedure. Disputes involving conditions of employment arising from the application of OMB Circular A-76 would be covered by the negotiated grievance procedure, even in the absence of such a contractual provision. Id. Moreover, such grievances require nothing that is not required by section 7106(a)(2) of the Statute itself, namely, that determinations as to contracting-out must be made "in accordan