32:0102(15)NG - - FEMT Union Council of Charleston and Navy, Charleston Naval Shipyard, Charleston, SC - - 1988 FLRAdec NG - - v32 p102



[ v32 p102 ]
32:0102(15)NG
The decision of the Authority follows:


32 FLRA No. 15

UNITED STATES OF AMERICA
BEFORE THE
FEDERAL LABOR RELATIONS AUTHORITY
WASHINGTON, D.C.

 

FEDERAL EMPLOYEES METAL TRADES
UNION COUNCIL OF CHARLESTON
Union

and 

DEPARTMENT OF THE NAVY
CHARLESTON NAVAL SHIPYARD
CHARLESTON, SOUTH CAROLINA
Agency

Case No. 0-NG-1459

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 three proposals involving the Agency's implementation of a "profit sharing" plan. The threshold question raised in this dispute is whether our review of the proposals is barred by the doctrine of sovereign immunity. The negotiability of the proposals depends on whether they concern "conditions of employment" as defined in the Statute and whether the proposals are consistent with applicable law. We find that review of the proposals is not barred by the sovereign immunity doctrine. We also conclude that the proposals are negotiable because they concern "conditions of employment" and are not inconsistent with law, including management rights under section 7106 of the Statute.

II. Background

This dispute arose at a Department of Defense industrially funded activity. According to the Agency, "the [activity], rather than receiving the bulk of its funding as a direct budget allocation, obtains most of that funding through reimbursements from military 'customers.'" Statement of Position at 1. Overhead, materials, direct labor costs and other related charges are determined "in accordance with regulations." Consequently, according to the Agency's undisputed statement, the installation's budget consists principally of estimates based on a balance between anticipated costs and income from charges to "customers." Id.

In an effort to enhance efficiency and cost effectiveness in overhauling Navy submarines, the Secretary of the Navy has ordered that such work be carried out by the successful bidder in competition between Government and commercial shipyards. These negotiations arose after the installation was awarded a contract to overhaul two submarines. As an incentive to complete the projects at a lower cost than that contained in the successful bid, management implemented a profit sharing plan. The plan allocated any profit realized among investment in plant, facilities and equipment and incentive payments to employees who participated in the projects.

Under the Agency's plan, 50 percent of the realized profits was to be returned to employees in the form of incentive payments. The Union's proposals concern the amount of the profit to be paid to employees and the eligibility of certain employees for such payments.

III. Proposals 1 and 2

Proposal 1

Sharing Rate: The sharing between the shipyard and its employees for this plan shall not be determined until the 90 day guarantees [sic] period is complete and all the overhaul project costs have been reconciled. The share rate shall be: 1) 10% shipyard's plants and equipment. 2) 10% employee development. 3) 80% employees.

Proposal 2

[According to the Union, Proposal 2 was made to assure that the Agency's instruction concerning profit sharing would be revised to reflect the results of negotiations over Proposal 1. The Agency agrees that a decision on Proposal 1 will determine the disposition of Proposal 2. Statement of Position at 4.]

A. Positions of the Parties

The Agency asserts that because major fiscal and/or national defense policy decisions are involved, the doctrine of sovereign immunity bars Authority jurisdiction over these proposals. The Agency reasons that since Congress has not specifically authorized unions to bargain over proposals involving claims against the Treasury, the Union here has no right to assert such claims and the Authority has no power to review them. The Agency also contends that the proposals are nonnegotiable because they: (1) are inconsistent with law; (2) do not concern conditions of employment; (3) directly determine the conditions of employment of nonunit employees; (4) conflict with the rights under section 7106(a) of the Statute to determine the Agency's budget, to direct employees and to assign work; and (5) interfere with the right under section 7106(b)(1) to determine the methods and means of performing work.

The Union contends that the Agency cannot seek protection under the sovereign immunity doctrine. It points out that the governing law, 5 U.S.C. § 4503, establishes "flexibility" in the amount of incentive awards and that the proposals simply seek bargaining over the manner in which the statutory "flexibility" is exercised. The Union notes that 5 U.S.C. § 4503 imposes a $10,000 ceiling on individual incentive award payouts and argues that the proposals do not require the Agency to disburse any amount of money above the statutory ceiling.

The Union denies that the proposals interfere with the Agency's budget formulation process, emphasizing that no specific amount of money is earmarked for profit sharing nor would any decrease in allocations to other programs result from the proposals. The Union asserts that the proposals are not in violation of law. Rather, in the Union's view, the proposals merely require the Agency to exercise the discretion, granted it by law, in a certain way.

The Union asserts that the proposals' effect on nonunit employees would be minimal. It uses an arithmetic example to demonstrate that its proposed distribution of funds within the unit would not diminish the incentive payments to nonunit employees where the Agency's payment plan--50 percent of the profit to be used for incentive payments--would apply. The Union notes that the proposals do not establish any particular level of performance which would make an employee eligible for incentive payments.

That determination would be made by the Agency. It also denies that the proposals interfere with the Agency's right to determine the methods and means of performing work.

B. Analysis and Conclusion

1. Sovereign Immunity Does Not Apply

The Agency asserts that we have no authority to determine the negotiability of these two proposals under the doctrine of sovereign immunity. We conclude that we do have jurisdiction to resolve the negotiability of these proposals and that the doctrine of sovereign immunity is inapplicable.

The doctrine of sovereign immunity precludes suits against the sovereign without its express consent. United States v. Testan, 424 U.S. 392, 399 (1976) The doctrine of sovereign immunity applies to litigation against the United States in all courts. United States v. Sherwood, 312 U.S. 584, 586 (1941). This matter is not pending in a court, nor does it involve a suit against the United States.

Instead of a suit against the United States, the matter before us is whether, under the Statute, these two proposals are or are not within the Agency's duty to bargain. Thus, this case requires us to discharge precisely the responsibility assigned to us by Congress in section 7105(a)(2)(E). The role and responsibility of the Authority under that section is to "resolve issues relating to the duty to bargain in good faith under 7117(c) of [the Statute.]"

The Agency's sovereign immunity claim is based on the fact that money will be expended if Proposals 1 and 2 are found to be negotiable. However, the fact that implementation of the Union proposals may require the outlay of Agency funds does not deprive the Authority of jurisdiction to determine the negotiability of the proposal nor does that fact render the proposal nonnegotiable.

The objective of the Statute is to establish and foster a viable collective bargaining system within the Federal Government. The Authority and the courts have recognized that the collective bargaining system will frequently involve the expenditure of funds. In American Federation of Government Employees, AFL-CIO and Air Force Logistics Command, Wright-Patterson Air Force Base, Ohio, 2 FLRA 604, 607 (1980), (Air Force Logistics Command), aff'd 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) we observed:

The underlying assumption of this position appears to be that a proposal is inconsistent with the authority of the agency to determine its budget within the meaning of section 7106(a)(1) if it imposes a cost upon the agency which requires the expenditure of appropriated agency funds. Such a construction of the Statute, however, could preclude negotiation on virtually all otherwise negotiable proposals, since, to one extent or another, most proposals would have the effect of imposing costs upon the agency which would require the expenditure of appropriated agency funds. Nothing in the relevant legislative history indicates that Congress intended the right of management to determine its budget to be so inclusive as to negate in this manner the obligation to bargain.

In like manner, the courts have recognized that the collective bargaining scheme established by the Statute must inevitably implicate the expenditure of funds and that such requirement did not invalidate the scheme. In American Federation of Government Employees v. FLRA, 785 F.2d 333, 338 (D.C. Cir. 1986), the court stated:

But economic hardship is a fact of life in employment for the public sector as well as the private. Such monetary considerations often necessitate substantial changes. If an employer was released from its duty to bargain whenever it had suffered economic hardship, the employer's duty to bargain would practically be non-existent in a large proportion of cases. Congress has not established a collective bargaining system in which the duty to bargain exists only at the agency's convenience or desire, or only when the employer is affluent.

The Agency here argues that we are not authorized to resolve a negotiability dispute where the resolution of that dispute potentially may require the Agency to expend funds. In agreement with the Court of Appeals for the District of Columbia Circuit, we reaffirm and conclude that Congress did not intend the Statute to apply only in circumstances involving no cost to the Government. Consequently, we find the Agency's sovereign immunity argument to be without merit and will proceed to determine the negotiability of the proposals, which is our responsibility under the Statute.

2. Proposals 1 and 2 Concern a Negotiable Condition of Employment and Do Not Concern a Matter Specifically Provided For by Federal Statute

a. Introduction

Section 7103(a)(14) of the Statute contains the following definition of "conditions of employment":

"Conditions of employment" means personnel policies, practices, and matters, whether established by rule, regulation, or otherwise, affecting working conditions, except that such term does not include policies, practices, and matters--

(A) relating to political activities prohibited under subchapter III of chapter 73 of this title;

(B) relating to the classification of any position; or

(C) to the extent such matters are specifically provided for by Federal statute[.]

In Antilles Consolidated Education Association and Antilles Consolidated School System, 22 FLRA 235, 236-37 (1986) (Antilles), the Authority set forth the test for determining whether a proposal involves a condition of employment of bargaining unit employees under section 7103(a)(14). The test contains two factors:

1. Whether the matter proposed to be bargained pertains to bargaining unit employees; and

2. The nature and extent of the effect of the matter proposed to be bargained on working conditions of those employees. (Emphasis in original.)

For the following reasons, we conclude that Proposals 1 and 2 satisfy both prongs of the Antilles test and are not otherwise excepted from the definition of "conditions of employment" under section 7103(a)(14).

b. The Proposals Pertain to Bargaining Unit Employees

In Antilles, 22 FLRA at 237, we stated the following about the first prong of the test to determine whether a proposal involves conditions of employment of unit employees:

For example, as to the first factor, the question of whether the proposal pertains to bargaining unit employees, a proposal which is principally focused on nonbargaining unit positions or employees does not directly affect the work situation or employment relationship of bargaining unit employees. But, a proposal which is principally focused on bargaining unit positions or employees and which is otherwise consistent with applicable laws and regulations is not rendered nonnegotiable merely because it would have some impact on employees outside the bargaining unit. (Citations omitted.)

In determining whether a proposal's impact on nonunit employees is sufficient to make the proposal nonnegotiable, the Authority balances the union's right to negotiate over conditions of employment of unit employees against the agency's right to determine the conditions of employment of nonunit employees. American Federation of Government Employees, Local 32, AFL-CIO and Office of Personnel Management, 22 FLRA 478 (1986) (OPM), petition for review filed sub nom. American Federation of Government Employees v. FLRA, No. 86-1447 (D.C. Cir. Aug. ll, 1986). A proposal which has only an indirect effect on the working conditions of nonunit employees is negotiable. Federal Union of Scientists and Engineers, National Association of Government Employees, Local R1-144 and Naval Underwater Systems Center, Newport, Rhode Island, 28 FLRA 352, 352 (1987) (Proposal 1). A proposal which has a direct and significant effect on vital interests of nonunit employees is nonnegotiable. American Federation of Government Employees, Local 12, AFL-CIO and Department of Labor, 25 FLRA 979 (1987) (Member Frazier dissenting).

Proposals 1 and 2 are intended to establish the percentage of profits realized from the overhaul projects which will be paid to unit employees. It is clear that the proposals are principally focused on unit employees.

The Agency does not dispute that the proposals are intended to apply to unit employees. However, the Agency maintains that the proposals are nonnegotiable because they "directly affect the 'vital interests' of non-unit employees[.]" Statement of Position at 37. The Agency states:

The union's proposals pertain to a specific, limited profit from specific ship overhaul work. Manifestly, each portion of that profit made available for profit sharing with unit employees becomes unavailable for sharing with non-unit employees.

Statement of Position at 35.

We agree, of course, that the amount of profits, if any, to be distributed will be finite. As such, any distribution of profits to one source--here unit employees-- will affect the amount available for distribution to other sources, including nonunit employees. The fact that the amount of profits will be finite, however, does not mean that Proposals 1 and 2 are nonnegotiable. See Overseas Education Association, Inc. and Department of Defense, Office of Dependents Schools, 27 FLRA 492, 495 (1987), petition for review filed sub nom. Overseas Education Association v. FLRA, No. 87-1279 (D.C. Cir. June 25, 1987) ("Much of collective bargaining entails the distribution of finite resources. The Agency's argument seems to presume that Congress intended to establish a system in which the duty to bargain arises only where infinite resources are available to it."). Rather, it is necessary to evaluate the nature of the effect on nonunit employees and the nature of the interests affected.

We conclude that Proposals 1 and 2 would not have direct and significant effects on vital interests of nonunit employees. First, nothing in the proposals or the record before us indicates that the Union seeks to establish the payments to be made to nonunit employees. Although the proposals will affect the amount of the profits which are available for payments to nonunit employees, that effect results simply from negotiations over the distribution of finite resources.

Second, nonunit employees have no statutory right or entitlement to receive a share of the profits. Unlike the proposal in OPM, which concerned whether and in what positions nonunit employees would be retained following a reduction-in-force, Proposals 1 and 2 do not affect such matters as continued employment or entitlements to pay for work performed.

Finally, the profit, if any, to be realized from the projects involved in this case, are yet to be determined. Therefore, there can be no concrete expectation on the part of any employee as to the amount of profits to be shared. At most, the proposals could diminish nonunit employees' level of expectation.

In sum, we find that Proposals 1 and 2 satisfy the first prong of the Antilles test. The proposals are principally focused on bargaining unit employees and do not have a sufficient impact on nonunit employees to make them nonnegotiable.

c. The Proposals Directly Affect the Working Conditions of Unit Employees

In evaluating the nature and extent of effect of the proposals on unit employees' working conditions, it is necessary to determine whether there is a "direct connection between the proposal and the work situation or employment relationship of bargaining unit employees." Antilles, 22 FLRA at 237.

The purposes of both the profit sharing plan and the Union's proposals are to increase and reward productivity on the two work projects to which unit employees are assigned. As the Agency states, the decision to establish the plan "was based on the premise that employees are an integral part of the Shipyard's effort to accomplish its mission in the most effective and efficient matter[,]" and the allocation of a portion of the profits to employees was designed to "help motivate the highest level of effort and initiative from each individual employee[.]" Statement of Position at 3.

There is a clear relationship between the proposals and unit employees' work situations. Accordingly, the proposals satisfy the second prong of the Antilles test.

d. The Proposals Do Not Concern a Matter Specifically Provided For By Federal Statute

Proposals which satisfy the requirements of the Antilles test may nevertheless be excepted from the definition of "conditions of employment" under section 7103(a)(14) if they concern a matter which is specifically provided for by Federal statute.

In National Treasury Employees Union and Internal Revenue Service, 27 FLRA 132, 132 (1987) (Proposal 5) (IRS), we considered a proposal which established the rate of incentive pay to be awarded to unit employees. We noted that "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)." Id. at 135. Similarly, we found that a proposal which established a range of percentages of salary to be used to calculate cash awards for outstanding and superior performance concerned unit employees' conditions of employment in American Federation of Government Employees, AFL-CIO, Local 3477 and Commodity Futures Trading Commission, 27 FLRA 440, 440 (1987) (Proposal 1).

We found that the proposal in IRS did not concern a matter specifically provided for by law and, as such, was not excluded from the definition of "conditions of employment" by section 7103(a)(14) of the Statute. We noted that incentive award payments were not wages or salary authorized by 5 U.S.C. §§ 5301 et seq. and, more particularly, by 5 U.S.C. § 5332. Rather, consistent with the decision in National Treasury Employees Union v. FLRA, 793 F.2d 371 (D.C. Cir. 1986), we found that incentive payments were authorized by 5 U.S.C. § 4503.

Except for the imposition of a $10,000 ceiling on individual payments, 5 U.S.C. § 4503 does not specify the dollar amounts to be paid as incentive awards. Because the amounts of the awards are within an agency's discretion, we concluded that the amounts or rates to be paid were not matters specifically provided for by Federal statute. Accordingly, we found that the proposal in IRS was negotiable. Accord Commodity Futures Trading Commission, 27 FLRA at 442-43. See also National Federation of Federal Employees, Local 1256 and Department of the Air Force, K.I. Sawyer Air Force Base, Michigan, 31 FLRA No. 107 (1988) (K.I. Sawyer Air Force Base), slip op. at 3, (a proposal concerning quality step increases, a matter provided for in the "basic pay" provisions of law, was found not to concern a matter specifically provided for by Federal statute because such increases "are substantively equivalent to incentive awards").

The Agency here acknowledges that the profit sharing plan is authorized by section 4503: "Statutory authority for the Shipyard's profit sharing program is found at 5 U.S.C. § 4503." Statement of Position at 3. In fact, the Agency characterizes employees' portions of the profit distribution as "incentive compensation[.]" Statement of Position at 2-3. We conclude, therefore, that Proposals 1 and 2 concern incentive awards.

Because the Agency's profit sharing plan is established under 5 U.S.C. § 4503 and concerns incentive awards, our decisions in IRS and Commodity Futures Trading Commission are relevant. As in those cases, the Agency here has discretion to fix the amounts of incentive awards. The Agency does not contend and the record does not otherwise indicate that the proposed payments would exceed the statutory ceiling in section 4503. Accordingly, consistent with our decisions in IRS and Commodity Futures Trading Commission, we conclude that Proposals 1 and 2 do not concern matters which are specifically provided for by Federal statute.

Proposals 1 and 2 satisfy both prongs of the Antilles test and do not concern a matter which is specifically provided for by Federal statute. Therefore, Proposals 1 and 2 concern "conditions of employment" within the meaning of section 7103(a)(14) of the Statute.

3. Proposals 1 and 2 Do Not Interfere with Management Rights to Assign Work and Direct Employees

The question of whether a proposal which would establish levels of incentive payments interfered with management's rights to assign work and to direct employees was examined by the court in National Treasury Employees Union v. FLRA. There, 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." 793 F.2d at 375. In so holding, the court further examined the scope of the right to direct employees and to assign work, stating:

. . . while the assignment of work includes, as we have said earlier, designation of the category of duties an employee is to perform, it also includes (if the agency chooses to be so specific) designation of the precise quantity and quality of those duties--which is unquestionably achieved by performance standards that must be met to avoid disciplinary action. Id.

We adopted the court's position in Internal Revenue Service, 27 FLRA at 135, stating, "a proposal such as the disputed proposal determining the level of incentive award for the performance of agency work does not constitute an exercise of management's right to direct employees and assign work under section 7106(a)(2)(A) and (B) of the Statute." Likewise, we adopted the court's holding in Commodity Futures Trading Commission, 27 FLRA at 442. There, the proposal sought to determine the level of incentive pay for above-normal performance of assigned work.

The court's holding is also applicable to the dispute here. The proposals seek to establish the percentage of profit to be paid to unit employees in recognition of above-average performance in overhauling the two submarines. They do not prescribe the type of work unit employees will perform nor do they establish the performance level necessary to avoid disciplinary action. Accordingly, based on National Treasury Employees Union v. FLRA, and our decisions in Internal Revenue Service and Commodity Futures Trading Commission, the proposals do not interfere with management's rights to direct employees and to assign work under section 7106(a)(2)(A) and (B).

4. Proposals 1 and 2 Do Not Interfere with the Agency's Right to Determine its Budget

A proposal is inconsistent with an agency's right to determine its budget under section 7106(a)(1) if the proposal, by its terms, prescribes a particular program or amount of funds to be included in the agency's budget. In addition, even if the proposal does not prescribe a particular program or amount to be included in the agency's budget, the proposal may be found to be nonnegotiable if the agency can make a substantial showing that the proposal would cause a significant and unavoidable increase in costs which could not be offset by compensating benefits. Air Force Logistics Command, 2 FLRA 604.

The Agency contends that although the proposals are made in percentage terms, they become specific dollar amounts as soon as a definite amount of profit is realized by the Agency. Thus, the Agency concludes, because the proposals will require the Agency to set aside a specific amount of money to fund plant and equipment, employee development and incentive pay, the proposals prescribe a particular program or amount to be included in the Agency's budget in violation of section 7106(a)(1).

We disagree. As we stated at III.B.1 of this decision, the Authority and the courts have recognized that the collective bargaining system will frequently involve the expenditure of funds. The Statute was not intended to apply only in circumstances involving no cost to the Government. Consequently, these proposals are not nonnegotiable merely because they contemplate that the Agency may be required to expend funds on items such as employee development and incentive awards. Moreover, these proposals do not require the Agency to establish in its budget any particular program or specified level of funding. These proposals only concern the distribution of any profit realized from shipyard overhaul projects.

The Agency also claims that the proposals interfere with the budget formulation process as follows:

In its planning for the fiscal year in which the overhaul profit was to be realized, the Shipyard based its budget submission on the premise that part of the funds to be allocated for capitalization of industrial plant, facilities and equipment would come from profit on the overhaul work. Accordingly, Shipyard management allocated a portion of that profit to employee profit sharing and a portion to plant, facilities and equipment. Consequently, its budget request for plant, facilities and equipment was less than it otherwise would have been. [Statement of Position at 11].

In our view, the Agency's financial estimates are based on speculation on the amount of profit to be realized from the overhaul projects. Nothing in Proposals 1 and 2 prescribe the amount of funds to be included in the Agency's budget for plant, facilities and equipment. Rather, as we stated above, these proposals concern only the distribution of any profit realized from shipyard overhaul projects. Thus, we find that the proposals do not interfere with the Agency's right to determine its budget merely because they specify the programs or the percent of funds to be distributed from profits derived from the overhaul projects.

The Agency also argues that the proposals interfere with its right to determine its budget because they would result in significant, unavoidable increased costs without offsetting benefits. However, the Agency's position is advanced without knowledge of the amount of profit to be realized from the projects, if any, or the amounts that would be expended for the items specified in the proposals. In addition, the Agency does not address the possibility that the larger employee share proposed in the Union's scheme might induce a higher level of performance resulting in a greater profit than otherwise might have been attainable. Furthermore, we note the proposals pertain to profits and not operating costs of the projects.

Accordingly, we find that the Agency has not substantiated its claim that Proposals 1 and 2 would prescribe a particular program or amount of funds to be included in the Agency budget or would result in significant, unavoidable increased costs which are not offset by compensating benefits. Consequently, we conclude that the proposals do not interfere with the Agency's right to determine its budget under section 7106(a)(1) of the Statute.

5. Proposals 1 and 2 Do Not Affect the Methods and Means of Performing Work

The Agency points out that it introduced profit sharing "to motivate improvements in quality and productivity directly contributing to accomplishment of the agency's mission." Statement of Position at 46. Proposals 1 and 2 do not conflict with the Agency's objective in introducing profit sharing. They concern only the percentage of profit to be shared with unit employees. Because the proposals do not conflict with the Agency's stated objective, they do not affect the management right to determine the methods and means of performing work under section 7106(b)(1) of the Statute. See United States Department of Justice, Immigration and Naturalization Service and National Border Patrol Council, Local 1613, AFGE, 18 FLRA 29 (1985).

The Agency also argues that the proposals interfere with its right to determine the methods and means of performing work on another basis. The Agency asserts that the proposals would reduce the amount of profits the Agency had earmarked for capital improvements, thereby hampering the ability to introduce new and improved equipment and techniques. Therefore, according to the Agency, the proposals would interfere with its right to determine its methods and means by reducing the ability to acquire new equipment.

The difficulty with the Agency's position is that the amount of money available for capital improvements under either the Agency's or the Union's scheme cannot be ascertained until the 90-day guarantee periods have expired and a full accounting has been performed. Therefore, neither we nor the Agency can say accurately that the Union's proposed distribution will not produce sufficient funds to make needed improvements. Nor can the Agency establish that the Agency's scheme will produce enough money to meet management's requirements. Consequently, we find the Agency's argument in this regard to be unpersuasive.

For the above reasons, we find Proposals 1 and 2 to be negotiable.

IV. Proposal 3

Retirees who leave before the end of the 90 day guarantee period shall be prorated on the days they were in the shipyard in accordance with eligibility for the plan.

A. Positions of the Parties

The Agency does not specifically address the negotiability of Proposal 3. Therefore, we will assume that its arguments concerning the first two proposals are considered by the Agency also to be applicable to this proposal. Those arguments are as follows: (1) the doctrine of sovereign immunity bars Authority jurisdiction over the proposals; (2) the proposals are inconsistent with law; (3) the proposals do not concern conditions of employment; (4) the proposals directly determine the conditions of employment of nonunit employees; (5) the proposals conflict with the rights under section 7106(a) of the Statute to determine the Agency's budget, to direct employees and to assign work; and (6) the proposals interfere with the right under section 7106(b)(1) to determine the methods and means of performing work.

The Union also does not address any specific arguments to the negotiability of Proposal 3. It only notes that the proposal "merely concerns itself with the retirement of employees who have served the shipyard loyally for many years, especially when those employees can no longer remain employed, for whatever reason." Reply Brief at 2-3.

B. Analysis and Conclusion

Like Proposals 1 and 2, Proposal 3 arose when management announced that it would institute a profit sharing plan for overhaul projects of two submarines. The record indicates that the overhaul projects were either to begin or were partly underway when negotiations were initiated; the parties both acknowledged that the amount of profits, if any, from the overhaul projects had not yet been ascertained.

As previously stated, neither party specifically addressed Proposal 3. Nevertheless, the record establishes that under the profit sharing plan developed by the Agency, employees would be eligible for profit sharing if they had been employed by the activity for 270 continuous days ending at the end of the 90-day guarantee period for the overhaul projects. See Statement of Position at Attachment 2, Employee Eligibility. Proposal 3, however, provides that retirees who leave before the end of the 90-day guarantee period will be permitted to participate in the profit sharing plan on a prorated basis. We conclude that Proposal 3 is intended to establish that members of the bargaining unit who had worked on the overhaul projects but who retire before the overhaul projects are completed and a profit, if any, is identified, would be eligible to participate in the profit sharing plan.

Although the Agency made no specific claims concerning Proposal 3, we have assumed that the arguments raised as to Proposals 1 and 2 are applicable here. To reiterate those arguments, the Agency claimed the following: (1) the doctrine of sovereign immunity bars Authority jurisdiction over the proposals; (2) the proposals are inconsistent with law; (3) the proposals do not concern conditions of employment; (4) the proposals directly determine the conditions of employment of nonunit employees; (5) the proposals conflict with the rights under section 7106(a) of the Statute to determine the Agency's budget, to direct employees and to assign work; and (6) the proposals interfere with the right under section 7106(b)(1) to determine the methods and means of performing work.

In section III.B.1. of this decision, we rejected the Agency's claim that the doctrine of sovereign immunity barred Authority jurisdiction over Proposals 1 and 2. For the reasons more fully set forth in section III.B.1. of this decision, we find that the doctrine of sovereign immunity is also inapplicable to the dispute concerning Proposal 3 and, thus, we have jurisdiction to resolve the negotiability of Proposal 3.

In section III.B.2. of this decision we concluded that it was clear that Proposals 1 and 2, which established the percentage of profit realized from overhaul projects to be paid to bargaining unit employees, were principally focused on and directly affects the working conditions of bargaining unit employees. Proposal 3 merely concerns which current bargaining unit employees will remain eligible to participate in the profit sharing plan even if they retire before the profit sharing plan can be implemented. Thus, we find that Proposal 3, like Proposals 1 and 2, is also principally focused on and directly affects the working conditions of bargaining unit employees.

The Agency argued, however, that Proposals 1 and 2 were nonnegotiable because they directly affected the vital interests of nonunit employees. In support, the Agency stated that "each portion of that profit made available for profit sharing with unit employees becomes unavailable for sharing with nonunit employees." Statement of Position at 35. In section III.B.2 of this decision, we rejected the Agency's claim. We concluded that Proposals 1 and 2 would not have direct and significant effects on vital interests of nonunit employees. Therefore, we found that the proposals satisfied the first prong of the Antilles test.

Proposal 3 would allocate a portion of the profits to former bargaining unit employees. Thus, the Agency's argument concerning the effect of Proposals 1 and 2 on the working conditions of nonunit employees is equally applicable to Proposal 3. Consistent with our determination in section III.B.2. of this decision, we find that Proposal 3 would not have direct and significant effects on vital interests of nonunit employees. Thus, Proposal 3 is not nonnegotiable because of its effect on working conditions outside the unit. Like Proposals 1 and 2, Proposal 3 satisfies both prongs of the Antilles test.

We also concluded in section III.B.2. of this decision that Proposals 1 and 2 were not excluded from the definition of "conditions of employment" because they concerned a matter specifically provided for by Federal statute. We noted that the Agency had acknowledged that the profit sharing plan was authorized by 5 U.S.C. § 4503. We found that because 5 U.S.C. § 4503 did not specify the dollar amounts to be paid as awards, the proposals did not concern a matter specifically provided for by law and, thus, the proposals were not excluded from the definition of "conditions of employment" by section 7103(a)(14)(C) of the Statute. We found further, that since nothing in Proposals 1 and 2 required the payment of awards in amounts exceeding the maximum permitted by 5 U.S.C. § 4503, the proposals did not violate law.

As noted above, Proposal 3 merely concerns which current bargaining unit employees will remain eligible to participate in profit sharing even if they retire before the profit sharing plan is implemented. Thus, like Proposals 1 and 2, nothing in Proposal 3 specifies the amount to be paid to employees as incentive awards or requires the payment of an incentive award in excess of maximum permitted by 5 U.S.C. § 4503. Consequently, for the reasons more fully set forth in section III.B.2. of this decision we conclude that Proposal 3 also is not inconsistent with Federal statute.

We concluded in section III.B.3. of this decision that Proposals 1 and 2 did not interfere with management's rights under section 7106(a) to assign work and to direct employees because the proposals did not prescribe the type of work employees will perform or establish the performance level necessary to avoid discipline. Similarly, nothing in Proposal 3 prescribes the type of work employees will perform or establishes the performance level necessary to avoid discipline. Thus, for the reasons more fully set out in section III.B.3. of this decision, Proposal 3 does not interfere with management's rights under section 7106(a)(2)(A) and (B) to assign work and to direct employees.

In section III.B.4. of this decision we concluded that Proposals 1 and 2 did not interfere with the Agency's right to determine its budget under section 7106(a)(1). We found that the Agency had not sustained its claim that the proposals prescribed a particular program or amount of funds to be included in its budget or would result in significant, unavoidable increased costs which are not offset by compensating benefits. Similarly, there is nothing in Proposal 3 which prescribes a particular program or amount to be included in the Agency's budget. In addition, no claim was made that Proposal 3 would result in significant, unavoidable increased costs not offset by compensating benefits. Thus, for the reasons set out in section III.B.4. of this decision, we find that Proposal 3 also does not interfere with the Agency's right to determine its budget under section 7106(a)(1).

We also rejected the Agency's final claim concerning Proposals 1 and 2 that the proposals affected the methods and means of performing work under section 7106(b)(1). We found in section III.B.5. of this decision that the proposals did not conflict with the Agency's stated objective in establishing profit sharing "to motivate improvements in quality and productivity." We also found that the Agency had not sustained its additional claim that the proposals interfered with its right to determine its methods and means by reducing its ability to acquire new and improved equipment as a result of reducing the amount of profits the Agency had earmarked for that purpose. Thus, based on the reasons more fully set out in section III.B.5. of this decision, we find that Proposal 3 also does not interfere with the Agency's right to determine its methods and means under section 7106(b)(1).

In our view, Proposal 3 is similar to the one presented in K. I. Sawyer Air Force Base, 31 FLRA No. 107. The proposal in that case sought, among other things, to define the pool of employees who could be considered for quality step increases. We found the proposal's effect in defining the pool of employees eligible to be considered for quality step increases was "wholly procedural in nature." Therefore, that aspect of the proposal did not conflict with matters provided for by law. Similarly, Proposal 3's limited objective is to establish the criterion for eligibility to receive incentive pay and to establish the extent to which those employees might share in such payments. Based on K. I. Sawyer Air Force Base, we likewise find that Proposal 3 is "wholly procedural in nature" and thus, within the duty to bargain.

V. Order

The Agency must upon request, or as otherwise agreed to by the parties, bargain on the proposals.(*)

Issued, Washington, D.C.,

___________________________
Jerry L. Calhoun, Chairman
Jean McKee, Member
FEDERAL LABOR RELATIONS AUTHORITY




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