40:0118(15)NG - - NAGE Local R4-26 and Air Force, Langley AFB, Virginia - - 1991 FLRAdec NG - - v40 p118



[ v40 p118 ]
40:0118(15)NG
The decision of the Authority follows:


40 FLRA No. 15

FEDERAL LABOR RELATIONS AUTHORITY

WASHINGTON, D.C.

NATIONAL ASSOCIATION OF GOVERNMENT EMPLOYEES

LOCAL R4-26

(Union)

and

DEPARTMENT OF THE AIR FORCE

LANGLEY AIR FORCE BASE, VIRGINIA

(Agency)

0-NG-1589

DECISION AND ORDER ON NEGOTIABILITY ISSUES

April 11, 1991

Before Chairman McKee and Members Talkin and Armendariz.

I. Statement of the Case

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

For the reasons stated below, we find that Proposal 1, which requires the Agency to reimburse employees for any loss of funds incurred as a result of the cancellation of leave by the Agency, concerns a condition of employment and is not inconsistent with law, rule or regulation and is, therefore, negotiable. Proposals 2 and 3 concern pay and money-related fringe benefits and are negotiable because the proposals (1) involve conditions of employment; (2) do not interfere with the Agency's right to determine its budget; and (3) do not conflict with Agency regulations for which a compelling need exists. However, to the extent that Proposal 3 would affect employees covered under the Prevailing Rate Systems Act of 1972 (Prevailing Rate Systems Act), Pub. L. No. 92-392, 86 Stat. 564 (1972) (codified as amended at 5 U.S.C. §§ 5341-5349 (1988), the proposal conflicts with that statute and is nonnegotiable. Proposal 4, to the extent that it does not concern free child care services for children at centers providing services for members of the Armed Forces, is not inconsistent with law, or Agency regulations for which a compelling need exists, and thus is negotiable. However, to the extent that Proposal 4 would require free child care services at centers for members of the Armed Forces, it is inconsistent with the Military Child Care Act of 1989 and is outside the duty to bargain. Proposal 5, which mandates that the Agency charge its patrons a 20 percent surcharge on prices for certain services rendered, does not concern a condition of employment and is, therefore, outside the duty to bargain.

II. Background

The Union represents approximately 270 nonappropriated fund (NAF) employees who are employed by nonappropriated fund instrumentalities (NAFI) at Langley Air Force Base. The NAFIs consist of seven entities. They are Officers Open Mess; Noncommissioned Officers Open Mess; Central Base Fund; Aeroclub; Class 6 Liquor Store; Yacht Club; and Nonappropriated Fund Financial Management Branch. As NAF employees, bargaining unit employees' compensation and health benefits are not established by law but, rather, by the Agency.

III. Proposal 1

Annual Leave, Section 4. The Employer agrees to reimburse employees for any loss of funds, e.g., airline tickets, hotel reservations, etc., which is caused by a cancellation of approved leave for any reason. The employee will submit written documentation of the loss.

A. Positions of the Parties

The Agency asserts that Proposal 1 does not concern a condition of employment. In this regard, the Agency contends that the second factor of the test set forth in Antilles Consolidated Education Association and Antilles Consolidates School System, 22 FLRA 235, 236-37 (1986) (Antilles), has not been met. Statement of position at 8-10. According to the Agency, the proposal requires the Agency to reimburse employees "if an employee's approved leave is cancelled for any reason and the employee can prove a loss." Id. at 9. The Agency argues that there is no direct connection between the proposal and the employees' work situation or employment relationship because the proposal concerns employees' activities during non-duty hours that are unrelated to their work situation or employment relationship. The Agency relies upon International Association of Fire Fighters, AFL-CIO, CLC, Local F-116 and Department of the Air Force, Vandenberg Air Force Base, California, 7 FLRA 123 (1981) (Vandenberg Air Force Base) (proposal that permitted employees to utilize on-base recreational facilities during off-duty hours did not concern conditions of employment); and Overseas Education Association, Inc. and Department of Defense Dependents Schools, 29 FLRA 734 (1987), aff'd as to other matters, Overseas Education Association, Inc. v. FLRA, 872 F.2d 1032 (D.C. Cir. 1988) (Overseas Education Association) (proposal that ensured employees' right to freedom of expression in their communities found not to be related to the work situation or employment relationship). The Agency distinguishes National Federation of Federal Employees, Local 1363 and Headquarters, U.S. Army Garrison, Yongsan, Korea, 4 FLRA 139 (1980) (proposal concerning ration control involved condition of employment because an agency directive conditioned overseas recruitment on ability to provide such services), stating that there are no comparable agency regulations in the instant case that could create a "direct connection between the proposal and the work situation or employment relationship." Statement of position at 9. In addition, the Agency contends that the Union has failed to identify the source of the reimbursements and that reimbursement from appropriated funds is prohibited by law. In support, the Agency asserts that the Comptroller General has final authority over the expenditure of appropriated funds and that the Comptroller General has held that an agency is not responsible for expenses which are personal, such as a forfeited deposit resulting from a cancellation of approved leave.

The Union states that the proposal is intended to provide employees with a fair and equitable leave policy so that the Agency will be held accountable for any loss of funds caused by cancellation of approved leave. The Union explains that under the proposal employees are to be reimbursed for any loss of funds because the Agency has cancelled approved leave for any reason and clarifies that the reimbursement of funds will come from nonappropriated funds. The Union maintains that the proposal concerns a condition of employment and is consistent with the Statute.

B. Analysis and Conclusions

1. The Proposal Concerns a Condition of Employment

In deciding whether a proposal concerns a condition of employment of bargaining unit employees, the Authority has considered whether: (1) "the proposal pertains to bargaining unit employees;" and (2) "the record establishes that there is a direct connection between the proposal and the work situation or employment relationship of bargaining unit employees." Antilles, 22 FLRA at 237.

In American Federation of Government Employees, Local 2761 v. FLRA, 866 F.2d 1443 (D.C. Cir. 1989) (AFGE, Local 2761), decision on remand, 35 FLRA 1105 (1990), in determining whether the matter at issue was a condition of employment, the United States Court of Appeals for the District of Columbia Circuit examined whether there was a "link" or "nexus" between that matter and the workers' employment. Id. at 9, 12. The court found that where a matter has "a direct effect on the work relationship," it concerns a condition of employment. Id. at 12.

The Union states that Proposal 1 is intended to apply to reimbursement for only those losses resulting from a cancellation of approved leave by the Agency. We conclude that the language of the proposal does not conflict with the Union's stated intent because it is reasonable to interpret the phrase "for any reason" as referring to the Agency's basis for the cancellation of approved leave. Accordingly, we adopt the interpretation given to the proposal by the Union. Under this interpretation, the proposal would not require the Agency to reimburse an employee for losses resulting from the employee's cancellation of previously approved leave for purely personal considerations, as the Agency suggests. Rather, it would result in reimbursement only when an employee, in reliance upon the Agency's approval of a leave request, has made nonrefundable payments, and therefore incurs losses solely because the Agency later withdraws its approval.

It is not disputed that the proposal pertains to bargaining unit employees and that it meets the first factor of the Antilles test. With regard to the second factor, the Agency contends that the proposal concerns only employees' activities on non-duty hours and has no direct connection with the work situation or employment relationship. We disagree. Clearly, leave is "a significant and valued benefit of employment[.]" AFGE, Local 2761, 866 F.2d at 1447. When leave has been approved, an employee is justified in believing that he or she can make plans to enjoy that work-related benefit. Often, those plans will involve expenditures that cannot be recouped. When management cancels leave approval in such circumstances and instead requires the employee to report to work, the resultant losses incurred by the employee stem directly from the work relationship even though the original expenditures were made for activities that would have taken place on non-duty time.

Vandenberg Air Force Base, relied upon by the Agency, is distinguishable from the proposal involved here. In that case the proposal permitted employees to utilize on-base recreational facilities during off-duty hours. The Authority found that a relationship between the recreational activities of off-duty employees and their dependents and employment as firefighters was not apparent from either the plain language of the proposal or the proposal's effect. Similarly, in Overseas Education Association, the proposal referred to by the Agency concerns off-duty conduct that had no relationship to the employees' work. In contrast, the proposal involved here, by its very terms, becomes operative only when the Agency cancels its approval for the employee's leave and determines that an employee is obligated to report to work. Accordingly, for the reasons stated above, we find that the proposal concerns conditions of employment of bargaining unit employees.

2.The Proposal Is Not Inconsistent with Law, Rule or Regulation

The Agency asserts that the Comptroller General has final authority over the expenditure of appropriated funds and has found that the expenditure of such funds for the purposes required by the proposal is inappropriate. However, the Union states that the funds required by the proposal are intended to be generated from nonappropriated funds. The proposal does not indicate which funds would be utilized for the reimbursement of loss expenses. Because the Union's stated intent is consistent with the language of the proposal, we find the proposal does not require that the funds be derived from appropriated funds.

Inasmuch as the funds required by Proposal 1 need not be derived from appropriated funds, we reject the Agency's arguments that the proposal is nonnegotiable under section 7117(a) because the use of appropriated funds under the circumstances is inconsistent with decisions of the Comptroller General. As the Agency has not established, and it is not otherwise apparent, that the proposal is inconsistent with law, rule or regulation, we find that the Agency has not demonstrated that Proposal 1 is outside the duty to bargain.

For the reasons set forth above, we find that Proposal 1 concerns a condition of employment and is within the duty to bargain.

IV. Proposals 2 and 3

Proposal 2

Benefits, Section 4. All employees working a regular schedule of at least 20 hours per week have the option to participate in the Air Force Insurance Plan or NAGE Health Benefit Plan. The Employer will pay the same amount for an employee toward the NAGE Health Benefit Plan as they would had the employee selected the Air Force Insurance Plan.

Proposal 3

Benefits, Section 5. All employees will receive a 6% wage increase every year for the next three years.

A. Positions of the Parties

1. The Agency

The Agency contends that Proposals 2 and 3 are nonnegotiable because the proposals (1) do not involve matters concerning conditions of employment within the meaning of the Statute; (2) interfere with management's right to determine its budget under section 7106(a)(1) of the Statute; and (3) conflict with Agency regulations for which a compelling need exists. In addition, the Agency contends that Proposal 2 is inconsistent with section 7121(c)(2) of the Statute and that Proposal 3 violates the Prevailing Rate Act,(1) Federal Manual Supplement 532-2 (FPM), and section 612 of Public L. 100-440.

In support of its contention that the proposals are inconsistent with the Statute, the Agency argues in its initial statement of position that Congress did not intend wages and fringe benefits to be subject to collective bargaining under the Statute. The Agency further argues that inasmuch as Proposal 2 is not governed by section 704 of the Civil Service Reform Act, and section 7121(c)(2) of the Statute excludes health insurance matters from coverage of negotiated grievance procedures, negotiations over Proposal 2 would be inconsistent with congressional intent and the Statute. In support, the Agency claims that bargaining unit employees have never negotiated wages or employment benefits under section 9(b) of Pub. L. No. 92-392, codified at 5 U.S.C. § 5343 (Amendments, note) (1988).

The Agency argues that Proposal 2 interferes with its right to determine its budget because it could affect its percentage contribution to the employees' health benefit plan as well as the cost of administering their participation in one or more plans, and that it would therefore directly affect the total amount of money budgeted for health benefits premiums. It contends that the proposal "will undoubtedly result in dividing the program into a multitude of different plans." Statement of position at 18. Therefore, the Agency argues that Proposal 2 would necessitate adjustments in its budgetary allocations and would result in an increase in expenditures or increases in prices, which would make the NAFI less competitive. It rests its argument on the observation that "any increase in costs must disrupt the budget." Id. at 17. In sum, the Agency argues that Proposal 2 would create increased costs and a "direct influence on the budget." Id. It also argues that the increased costs would be significant, unavoidable and not offset by compensating benefits.

The Agency argues that because Proposal 3 requires it to finance and set aside a specific amount of money at yearly intervals for three years, it clearly concerns the budget. The proposal interferes with its right to determine its budget, according to the Agency, because it does not allow the Agency to determine the specific amount required to fund expenditures. The Agency also contends that the increased costs are significant. In this regard, the Agency projects the cost of Proposal 3 as $166,287 for the first year. It notes that although that figure would result in a cost of $498,861 over the three-year period covered by the proposal, in fact it would be higher because the amount would be compounded after the first year. In a supplemental brief filed after the Supreme Court's decision in Fort Stewart Schools v. FLRA, 110 S. Ct. 2043 (1990) (Fort Stewart), the Agency states that wage and salary costs represent approximately 83.5 percent of the $7,100,000 budget for the NAFIs at Langley Air Force Base and that an increase of $166,287 for bargaining unit employees would have represented 2.34 percent of that budget, effective October 1, 1988.(2) It also indicates that if the 6 percent wage increase were granted to all NAFI employees at Langley, the cost would be $408,217, or 5.75 percent of the NAFI budget at Langley. In its original statement of position, however, the Agency recognized that the actual cost of the proposal would in fact have been less because of increases in wages and salaries the employees were due to receive under the current DoD wage and salary system and because the proposal could not by law and regulation apply to all of the employees in the bargaining unit. Applying this formulation, the Agency determined that the first-year cost of the wage increase required by the proposal, if applied in October 1988, would have been $34,138 in the bargaining unit or $110,359 if applied to all the NAFIs at Langley. On that basis, and assuming no change over the three-year period in terms of pay increases, which the Agency conceded was unlikely, the projected costs over a three-year period were $410,877 at Langley and $129,525 in the bargaining unit alone.

In its supplemental statement, the Agency also argues that the portion of the budget test that requires an inquiry as to whether the costs of a proposal are "unavoidable" and "not offset by compensating benefits" is unreasonable and contrary to the Statute. It asserts that it has not provided the Authority with any evidence regarding compensating benefits because "there is no evidence whatsoever to prove or disprove that the proposals would have any compensating benefits." Supplemental statement of position at 4 (emphasis in original). It argues that any such evidence would be speculative and unsupportable. It contends that both of these portions of the Authority's budget test make the Authority the arbiter of an agency's budget.

In support of its contention that Proposal 2 conflicts with an Agency regulation for which a compelling need exists, the Agency relies upon Air Force Regulation (AFR) 34-3, Volume VIII, paragraphs 1-7e and 4-1, which prohibits employing NAFIs from contributing premiums to any group plan other than the Air Force-sponsored group plan. The Agency contends that the regulation is essential to the accomplishment of the Agency's mission. The Agency argues that the NAFI system is self-financing and has the objectives of providing morale, welfare and recreational (MWR) activities for military personnel. The Agency claims that the cost of changing from the present health benefits plan to the system contemplated by Proposal 2 at Langley AFB would be approximately $104,707, and, if the proposal were applied throughout the DoD system, the additional cost would be $1,970,236. The Agency argues the increased cost would undermine the objectives of the NAFI system. Moreover, the Agency argues that the administration of two plans is unmanageable and would lead to system failures and errors that would create "costs in terms of employee morale and confidence in their 'pay' system." Statement of position at 21-22. In addition, the Agency asserts that permitting unions to bargain over the matter could result in two or more "contribution destinations and rates" for 160 bargaining units. Id. at 21. The Agency also contends that if the central programs become unmanageable the proposal may result in separate programs at each installation. Separate programs would result in different rates and benefits at each installation, which would "inevitably affect the performance of the available work force and the level of quality of the pool of potential employees available for that work force." Id. at 23. The Agency argues that "[t]he administrative burdens and inefficiencies inherent in attempting to track and verify submissions based on potentially 160 separate multi-rate structures throughout the Air Force" are overwhelming. Id. at 22. In regard to Langley AFB, the manpower necessary to implement the "change in the contribution rates to the group health insurance program would be in excess of 8,930 man hours." Id.

The Agency argues that the net effect of the proposal would be a reduction of services or an increase in prices for services rendered, and unpredictable variations in benefit levels among bargaining units, which would affect employee morale. The Agency claims that such an impact on employee morale eliminates both the purpose of the NAFI system and a vital recruitment and retention program. Lastly, the Agency argues that the proposal is inconsistent with standard group insurance practice. It claims that providing employees the option of having another health plan could result in the inability of the Air Force to maintain a viable separate program, which it asserts to be the more economical way to provide benefits.

The Agency raises two arguments to support its contention that Proposal 3 conflicts with an Agency regulation for which there is a compelling need. First, the Agency asserts that the proposal conflicts with DoD 1401.1-M, Chapter III and Appendix E, which requires that Crafts and Trades (CT) employees be compensated in accordance with the Prevailing Rate Act and implementing OPM regulations. The Agency contends that there is a compelling need for this regulation because DoD 1401.1-M "implement[s] a mandate to DoD under law and OPM authority which implementation is essentially nondiscretionary in nature." Id. at 30.

Secondly, the Agency contends that Proposal 3 conflicts with DoD 1401-M, Chapter III and Appendices B and E, and Paragraph 14-2 of AFR 40-7, which administratively extend certain principles of the Prevailing Rate Act and FPM Supp. 532-2 to Administrative Support (AS) and Patron Service (PS) hourly employees and establish a uniform salary system for Universal Annual (UA) employees, thereby creating a uniform, comprehensive administrative pay system for all NAF employees. The Agency argues that the uniformity prescribed by its regulations "is essential to the accomplishment of the mission and the execution of the functions of DoD in a manner which is consistent with the requirements of an effective and efficient government." Id. at 31. Additionally, the Agency argues that its regulation is necessary to ensure equitable treatment of NAF employees and the existence of the "carefully constructed wage structure for NAFIs[,]" which is consistent with prevailing rate principles. Id. at 33. Permitting the Union to negotiate wages and money-related fringe benefits would be inconsistent with principles of "equal pay for equal work" and would permit the Federal Service Impasses Panel (FSIP) or an interest arbitrator to determine wage and salary on a case by case basis, thereby nullifying the prevailing rate system for that area. Id. at 33-34. Lastly, the Agency contends that the cost of implementing Proposal 3 would be great and that the reduction of funds available to carry out the DoD MWR program would adversely affect the program and "those who benefit from the program and look to the program as a[n] employment privilege and benefit." Id. at 40.

2. The Union

The Union asserts that the proposals (1) concern a condition of employment of bargaining unit employees which is within the Agency's discretion; (2) do not interfere with the Agency's right to determine its budget; and (3) do not conflict with Agency regulations for which a compelling need exists. In regard to Proposal 2, the Union argues that the Agency would pay the same percentage toward the NAGE plan as the Agency pays towards the Air Force Insurance Plan. Citing American Federation of Government Employees, AFL-CIO, Local 997 and Department of the Air Force, Maxwell Air Force Base, Alabama, 24 FLRA 475 (1986); and American Federation of Government Employees, AFL-CIO, Local 1897 and Department of the Air Force, Eglin Air Force Base, Florida, 24 FLRA 377 (1986) (Eglin), the Union asserts that the Authority has found negotiable proposals involving health, life and accident insurance for NAF employees.

The Union argues that inasmuch as Proposal 3 concerns wages for NAF employees, a matter within the discretion of the Agency, it is consistent with sections 7117(a) and 7103(a)(14) of the Statute. In support, the Union cites to the Authority's decisions in pay and fringe benefit cases and in particular to the Authority's decision in Eglin; the decision of the U.S. Court of Appeals for the Second Circuit in West Point Elementary School Teachers Association v. FLRA, 855 F.2d 936 (2nd Cir. 1988); and the Supreme Court's decision in Fort Stewart.

B. Analysis and Conclusions

1.The Proposals Concern Conditions of Employment

Under the Statute, parties are obligated to bargain over proposals concerning conditions of employment, provided that the proposals do not conflict with law, Government-wide regulation, or an agency regulation for which there is a compelling need. Conditions of employment are defined generally in section 7103(a)(14) of the Statute as personnel policies, practices, and matters--whether established by rule, regulation, or otherwise--affecting working conditions. Matters that are specifically provided for by Federal statute are excluded from the definition of conditions of employment in section 7103(a)(14)(C) of the Statute.

The Authority applies this basic analytical framework to negotiability questions presented to it, including those that concern pay and fringe benefits. For example, Eglin. In Fort Stewart, the Supreme Court upheld the Authority's conclusion that proposals concerning pay and fringe benefits concern "conditions of employment" in circumstances where pay and fringe benefits are not specifically provided for by statute. The Court rejected contentions that (1) the term "conditions of employment," contained in the Statute, does not encompass pay; and (2) statements in the legislative history of the Statute, on which the Agency in this case relied in its initial statement of position, warrant a conclusion that pay and fringe benefit proposals are not "conditions of employment" under the Statute. Thus, under Fort Stewart and Eglin, matters concerning pay and fringe benefits that are not specifically provided for by Statute, but are left to the discretion of the agency, are conditions of employment within the meaning of section 7103(a)(14) of the Statute. See also Department of the Army, United States Support Command, Fort Schafter, Hawaii v. FLRA, 914 F.2d 1291 (9th Cir. 1990) (Fort Schafter) (fringe benefits for NAFI employees are conditions of employment within the Statute).

With the exception of the CT employees, who are covered by the Prevailing Rate Systems Act, as discussed below, the health benefits program and wage system for the NAFI employees who are involved in this case are not provided for by Federal statute or Government-wide regulation, but are governed solely by Agency regulations. Because the health benefits program and the wage system are not specifically provided for by Federal statute, they are not excepted from the definition of conditions of employment in section 7103(a)(14) of the Statute. Rather, they are matters that are within the Agency's discretion. See, for example, American Federation of Government Employees, Local 1857 and U.S. Department of the Air Force, Air Logistics Center, Sacramento, California, 36 FLRA 894, 900 (1990) (Air Logistics Center); and Eglin. The proposal in Eglin, like Proposal 2 in this case, concerned the employer's contribution to employee health insurance premiums. Based on the decisions in Fort Stewart, Eglin, and Air Logistics Center, we reject the Agency's contention that the proposals in this case do not concern conditions of employment.

The Authority also rejects the Agency's contention that section 7121(c)(2) of the Statute provides an additional basis to conclude that Congress did not intend to include the subject of Proposal 2 within the definition of conditions of employment. The mere fact that Congress excluded from the grievance procedure grievances involving "retirement, life insurance, and health insurance" does not warrant a finding that those matters are also excluded from the definition of conditions of employment subject to a duty to bargain. The Authority has recognized that the scope of a grievance procedure is not necessarily coextensive with the scope of the duty to bargain. National Treasury Employees Union, Chapter 15 and Internal Revenue Service (Los Angeles District), 33 FLRA 229, 238 (1988).

2.The Proposals Do Not Interfere with the Agency's Right To Determine Its Budget

To establish that a proposal interferes with the right to determine its budget an agency must either: (1) demonstrate that the proposal prescribes the particular programs or operations the agency would include in its budget or prescribes the amount to be allocated in the budget for them; or (2) make a substantial demonstration that the proposal entails an increase in costs that is significant and unavoidable and is not offset by compensating benefits. American Federation of Government Employees, AFL-CIO and Air Force Logistics Command, Wright-Patterson Air Force Base, Ohio, 2 FLRA 604 (1980), aff'd as to other matters sub nom. Department of Defense v. FLRA, 659 F.2d 1140 (D.C. Cir. 1981), cert. denied, 455 U.S. 945 (1982).

In Wright-Patterson, the Authority noted that neither the Statute nor the legislative history contains a definition of "budget." The Authority concluded, therefore, that it was appropriate to give the term "budget" its "common or dictionary definition." 2 FLRA at 607-08. Using the dictionary definition, the Authority found that an "agency's authority to determine its budget extends to the determination of the programs and operations which will be included in the estimate of proposed expenditures and the determination of the amounts required to fund them." Id. at 608. The first budget test stems from this finding. Under the first test, a proposal is nonnegotiable if it "prescribe[s] the particular programs or operations the agency would include in its budget or . . . prescribe[s] the amount to be allocated in the budget for them[.]" Id.

Even if a proposal does not require that an agency's budget include (1) specified programs or operations, or (2) specified amounts to be allocated to those programs, it may be nonnegotiable under the Authority's second test. The second test is used when an agency claims that a proposal conflicts with its right to determine its budget because the proposal would result in increased costs. In Wright-Patterson, the Authority noted the following about agency allegations that a proposal would result in increased costs:

[T]o 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.

Id. at 607.

To deal with proposals that do not by their terms prescribe a particular program or amount to be included in an agency's budget but are alleged to violate the agency's right to determine its budget because of increased cost, the Authority established the second budget test:

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.

Id.

The second budget test has three parts. To establish that a proposal interferes with its right to determine its budget, an agency must make a substantial demonstration that the proposal would lead to increased costs that are: (1) significant, (2) unavoidable, and (3) not offset by compensating benefits.(3)

In sum, under the first test, a union may not specify the programs to be included in an agency's budget or the amounts to be allocated to those programs. This test safeguards the agency's right to determine its budget under the literal definition of budget. Under the second test, the proposal is nonnegotiable if it would result in unavoidable increased costs of such a magnitude as to implicitly determine the agency's budget. The second test depends on balancing whatever significant increased costs would unavoidably result from the proposal against the benefits of the proposal to determine whether the "net" costs of the proposal are significant and would, in effect, determine the agency's budget.

The Agency's argument that "any increase in costs must disrupt the budget" and would interfere with management's right to determine its budget was considered and rejected in Air Logistics Center, 36 FLRA at 903. In that case we found that the adoption of the agency's construction of section 7106 would require the Authority to find nonnegotiable all proposals for which a "cost" can be determined, thereby sharply curtailing the scope of collective bargaining, a result we believe to be inconsistent with congressional intent. Id.

a. The First Budget Test

The first budget test is a narrow one. It withdraws from bargaining only those proposals addressed to the budget per se, not those that would result in expenditures by an agency and, consequently, have an impact on the budget process. See, for example, Fort Stewart, 110 S. Ct. at 2052-53 (Marshall, J., concurring); National Association of Government Employees, Local R-144, Federal Union of Scientist and Engineers and U.S. Department of the Navy, Naval Underwater Systems Center, Newport, Rhode Island, 38 FLRA 456, 479-80 (1990), application for review pending, No. 91-1045 (D.C. Cir. Jan. 24, 1991). Proposals that simply have cost ramifications cannot be said to inject a union directly into the budget formulation process that is protected from bargaining under the first budget test. See, for example, Air Logistics Center, 36 FLRA at 904.

Proposals 2 and 3 in this case do not involve the Union in the budgetary process itself but are limited to requiring the Agency to make available to employees the option of participation in a non-Air Force-sponsored health benefit plan and specifying the percentage of increase in wages employees would receive. Id. They do not prescribe a program or operation to be included in the Agency's budget, nor do they prescribe an amount to be included in the Agency's budget. The proposals leave to the Agency the judgment as to how the proposals will be financed. For example, the Agency is not foreclosed from seeking to offset the increases in costs that might otherwise result from the proposals by altering the existing program. Therefore, we conclude that the proposals do not specify a program or operation to be included in the Agency's budget.

Proposal 2 does not require an increase in the cost of health benefits. Rather, it requires the Agency to allow the employee the option of participating in another health benefit plan. The proposal specifically states that the Agency will pay the same amount toward the NAGE Health Benefit Plan as it pays toward the Air Force Insurance Plan. Although Proposal 3 could affect the amount that the Agency budgets for wages, it does not require that a specific amount be allotted in the budget for wages. Consequently, the proposals do not prescribe the amount to be allocated in the Agency's budget for its employee health insurance program or wages.

b. The Second Budget Test

The Agency fails to provide any evidence as to the specific cost of Proposal 2. Therefore, the Agency has failed to demonstrate that the increased costs, if any, associated with Proposal 2 are significant.

In addition, the Agency has failed to make a substantial demonstration that the cost increases it projects in administering Proposal 2 are "unavoidable." Thus, the Agency has not provided any detailed support for its statements that increased administrative costs will result from Proposal 2 other than to state that the outcome of the proposal "will undoubtedly result in dividing the [health benefits] program into a multitude of different plans." Statement of position at 18. Therefore, we need not reach the arguments made in the Agency's supplemental statement that it is unreasonable and contrary to the Statute to require a showing that the costs of a proposal are either unavoidable or not offset by compensating benefits.

The Agency projects that Proposal 3 would have resulted in increases totaling 2.34 percent of its NAFI budget at Langley Air Force Base if applied to the bargaining unit effective October 1988, or 5.75 percent of that budget if applied to all NAFI employees at Langley. We do not find an increase of either 2.34 percent or 5.75 percent of a $7,100,000 budget to be "significant." See, for example, Fort Stewart, 110 S. Ct. at 2050; American Federation of Government Employees and U.S. Department of Defense, Army and Air Force Exchange Service, Dallas, Texas, 38 FLRA 282, 291-92 (1990). Further, by the Agency's own admission, these figures would have been offset by regularly scheduled wage and salary increases, thereby resulting in far smaller percentage increases in wage and salary increases directly attributable to the proposal. Indeed, the projected increase of $34,138 resulting from applying the proposal to bargaining unit employees in October 1988 after deducting the costs of regularly scheduled wage and salary increases amounts to less than one-half percent of the overall NAFI budget, hardly a significant amount under any calculation. Based on this disposition of the issue, we need not reach the Agency's arguments that it is unreasonable and contrary to the Statute to require a showing that the costs of a proposal are either unavoidable or not offset by compensating benefits.

In conclusion, the Agency has failed to (1) demonstrate that the proposals prescribe a particular program or operation to be included in its budget or prescribe the amount to be allocated in the budget for them; or (2) demonstrate that the proposals would entail significant increases in costs.

Accordingly, we conclude that the proposals do not conflict with the Agency's right to determine its budget.

3. The Proposals Do Not Conflict with an Agency Regulation for Which a Compelling Need Exists

An agency asserting compelling need as a bar to negotiation of a proposal bears the burden of demonstrating that there is an overriding need for the uniform application of the policies reflected in the agency regulation for which it asserts a compelling need. See, for example, American Federation of Government Employees, AFL-CIO, Local 3804 and Federal Deposit Insurance Corporation, Chicago Region, Illinois, 7 FLRA 217, 220 (1981). To establish a compelling need for an agency regulation, an agency must: (1) identify the Agency-wide regulation; (2) show that there is a conflict between its regulation and the proposal; and (3) demonstrate that its regulation is supported by a compelling need with reference to the standards set forth in section 2424.11 of the Authority's regulations. See American Federation of Government Employees, AFL-CIO, Local 1928 and Department of the Navy, Naval Air Development Center, Warminster, Pennsylvania, 2 FLRA 451, 454-55 (1980). Generalized and conclusionary reasoning is not enough to support a finding of compelling need. American Federation of Government Employees, AFL-CIO, Local 3804 and Federal Deposit Insurance Corporation, Madison Region, 21 FLRA 870, 881 (1986) (FDIC, Madison Region).

To establish a compelling need under section 2424.11(a) of the Authority's regulations, an agency must demonstrate that its regulation is essential, as distinguished from helpful or desirable, to the accomplishment of its mission or execution of its functions in a manner that is consistent with the requirements of an effective and efficient Government. The Agency has not met its burden of establishing that the regulations in question are "essential" to carrying out the mission of the NAFIs at Langley Air Force Base. That is, we find that the requirements that the Agency contribute only to the Air Force-sponsored group health benefit plan and that there be a uniform wage system is not essential to the accomplishment of the mission of the NAFIs in providing for the morale, welfare and recreation of active duty members, their families and retirees. The Agency does not rely on section 2424.11(b) for a compelling need argument. With respect to the Agency's assertion that a compelling need exists for DoD Manual 1401.1-M under section 2424.11(c), we find it unnecessary to address that argument for the reasons stated in note 5, below.

a. Air Force Regulation 34-3, Vol.VIII, Paragraph 1-7e and 4-1

The Agency asserts that Proposal 2 in this case conflicts with AFR 34-3, Vol. VIII, paragraph 1-7e and 4-1. That regulation provides in pertinent part:

1-7. Established Insurance Coverages. The following coverages are provided through centrally established programs and, therefore, are not authorized to be locally purchased;

. . . . . . .

e. Group life and health insurance (see chapter 4).

4-1. Purpose. This program provides eligible USAF NAFI employees a group plan of life, accidental death and dismemberment (AD&D), and comprehensive medical expense insurance benefits. It is the only Air Force-sponsored group plan for which employing NAFIs are authorized to contribute on behalf of NAFI employees. It may include a qualified Health Maintenance Organization (HMO) alternative plan, however, upon AFWB (Air Force Welfare Board) approval and completion of a contract between the HMO and the affected NAFIs through the appropriate contracting officer. If an HMO alternative plan proposal is received, the proposal is referred to AFWB (NAF Insurance) for further advice and guidance.

The Agency contends that there is a compelling need for this provision under section 2424.11(a) of the Authority's Rules and Regulation.(4)

The Agency makes three interrelated arguments to support its contention that AFR 34-3, Vol. VIII, Paragraphs 17e and 4-1, is essential to the continued efficiency and viability of the NAFI system. The Agency argues that the regulation is necessary to (1) control operating costs; (2) preserve administrative efficiency; and (3) preserve employee morale and mobility. In support of these arguments, the Agency argues that it operates a centrally administered group health insurance program that is cost efficient and manageable. The Agency claims that the proposal would result in a multitude of health plans, resulting in an increase of cost and employee dissatisfaction. Any increase in operating costs undermines the ability of the NAFI system to provide MWR activities to military personnel, the Agency argues. The Agency further asserts that finding the proposals negotiable would create the potential for more than 160 rate structures for employee health benefits premiums throughout the Air Force, the administration of which would be inefficient and error-prone so as to negatively affect employee morale and, consequently, the Agency's ability to retain employees. Finally, the Agency contends that the regulation is necessary to avoid morale and mobility problems which would result from similarly situated NAFI employees receiving different compensation.

For the following reasons, we reject each of the Agency's three arguments in support of its assertion of compelling need for AFR 34-3, Vol. VIII, Paragraphs 1-7e and 4-1.

First, we reject the Agency's argument that there is a compelling need for AFR 34-3, Vol. VIII, paragraphs 1-7e and 4-1 because the regulation is necessary to control operating costs. The logical extension of the Agency's argument is that any agency regulation that allows an agency to control operating costs should bar negotiations over otherwise negotiable conditions of employment. As we discussed in conjunction with the Agency's budget arguments, many proposals concerning conditions of employment will affect an agency's "operating costs."

Financial considerations are relevant to determining whether an agency regulation satisfies the compelling need criterion set forth at section 2424.11(a). However, other considerations are also pertinent. The wording and legislative history of the Statute support our conclusion that a broad balancing of factors is appropriate in evaluating compelling need assertions. It is clear that Congress intended a regulation to bar negotiations only on narrow grounds. Cost factors alone do not justify finding a compelling need for an agency regulation. Lexington-Blue Grass Army Depot, Lexington, Kentucky and American Federation of Government Employees, AFL-CIO, Local 894, 24 FLRA 50 (1986).

Our conclusion that cost factors alone do not justify finding a compelling need for an agency regulation is consistent with the holding of the U.S. Court of Appeals for the District of Columbia Circuit in American Federation of Government Employees v. Federal Labor Relations Authority, 785 F.2d 333, 337-38 (D.C. Cir. 1986) (per curiam), where the court stated the following:

[E]conomic 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.

In addition, even assuming that a finding of compelling need could be based on cost alone, we reject the Agency's contention that the costs associated with the utilization of a health benefit plan other than one sponsored by the Air Force plan would be so enormous that the NAF system would be unable to meet its mission to provide MWR programs in an effective and efficient manner. The only costs alleged to result from the utilization of a different health benefits plan at Langley Air Force Base are administrative expenses for administering the additional plan. The Agency provides no substantiation for its assertions that the proposal will result in additional administrative expenses. In the absence of substantial factual support for its claims, these assertions cannot form a basis for finding a compelling need for the Agency's regulation. See, for example, FDIC, Madison Region, 21 FLRA at 881 (an agency must provide facts to support a compelling need claim). The Agency's claim that over 160 plans will emerge as a result of Proposal 2 is speculative and not a basis for finding a compelling need for the regulations.

Second, the Agency has not shown that AFR 34-3, Vol. VIII, paragraphs 1-7e and 4-1, is essential to the preservation of administrative efficiency. The Agency's arguments that the proposal would result in errors in the administration of the employee health benefits system that would adversely affect employee morale and the Agency's ability to retain employees are rejected. There is nothing in the record to indicate that such errors could not be avoided. Moreover, as noted above, the Agency's argument that the proposal would result in a multitude of plans is merely speculative. Therefore, we reject the Agency's argument that these provisions of AFR 34-3 are essential to the preservation of administrative efficiency.

Third, we reject the Agency's contention that uniformity in its health benefits plan is essential to employee morale and, consequently, to maintaining an efficient and effective work force. In fact, the regulation permits the utilization of an HMO plan, which undercuts an argument that the current health benefits system is uniform in nature. See Air Logistics Center, 36 FLRA at 910. Moreover, the benefit structure currently provided for NAF employees is not uniform. Service Employees International Union, Local 556 and U.S. Department of the Navy, Navy Exchange, Pearl Harbor, Hawaii, 37 FLRA 320, 338 (1991) (Navy Exchange). There is nothing in the record to establish that the different components of DoD administer uniform benefit programs. Indeed, the prevailing rate pay system produces differences in the pay NAFI employees receive, based on locality. In view of these existing differences within the NAFI pay and benefits programs, the Agency has not demonstrated that its regulation is essential, as opposed to helpful and desirable, to the preservation of employee morale and mobility. Additionally, the Agency fails to take into account the potential that more affordable health benefits may have for positive effects on employee morale, retention, and productivity.

Based on the foregoing, we find that the Agency has failed to demonstrate that the provision of AFR 34-3 that prohibits employing NAFIs from contributing to a group plan that is not sponsored by the Air Force is essential, as distinguished from helpful or desirable, to the accomplishment of its mission or the execution of its functions in a manner consistent with the requirements of an effective and efficient Government.

b. DoD Manual 1401.1-M, Chapter III and Appendices B and E and AFR 40-7, Paragraph 14-2

DoD 1401.1-M, Chapter III and Appendices B and E administratively extend certain principles of the Prevailing Rate Systems Act, which applies to the CT employees, to the AS and PS hourly employees, establish a uniform system for UA salaried employees, and thereby create a uniform comprehensive administrative pay system for all NAF employees. AFR 40-7, Paragraph 14-2, acknowledges DoD's administrative extensions of prevailing rate principles to AS and PS positions and provides instructions implementing DoD's regulations.

The Agency alleges that Proposal 3 conflicts with DoD 1401.1-M, and raises three arguments to support its contention that DoD 1401.1-M, Chapter III, Appendices B and E are essential to the continued efficiency and viability of the NAFI system. The Agency argues that the regulations are necessary to (1) preserve the uniform pay system which was mandated by Congress; (2) control costs; and (3) ensure equitable treatment of NAF employees. For the reason stated below, the Authority rejects the Agency's argument that a compelling need exists for these regulations.

Contrary to the Agency's claim, we find that there is not a compelling need for a uniform pay system for Langley Air Force Base NAF employees. The Agency's argument is primarily based on its contention that Congress mandated that there be a uniform pay system among NAF employees. However, the Authority rejected a similar argument in Navy Exchange. In finding that the agency's desire to have a uniform benefit program did not justify a finding that there was a compelling need for a regulation that precluded intermittent employees from participation, the Authority rejected the agency's argument that the only way to meet the congressional mandate to create an all-NAF personnel system is to uniformly provide the same level of compensation and fringe benefits to similar categories of NAFI employees wherever they may be assigned. 37 FLRA at 341-42. There is no basis in the Authority's rules to support a finding of a compelling need for a regulation on a claimed need to establish a uniform personnel policy where there has been no demonstration that uniformity is essential to the accomplishment of the agency's mission. Id. at 338.

We disagree with the Agency that to allow the Union to negotiate over pay matters would permit third parties, i.e. an interest arbitrator or the FSIP, to set pay practices contrary to prevailing rate principles. In National Treasury Employees Union, Chapter 83 and Department of the Treasury, Internal Revenue Service, 35 FLRA 398, 414-15 (1990), we concluded that "the possibility that the FSIP may, in fulfilling its mandated role to resolve negotiation impasses, impose a proposal on parties provides no basis for finding that proposal nonnegotiable" because "[s]uch action by the FSIP is wholly consistent with the collective bargaining process provided by Congress under the Statute."

In addition, as previously stated, financial considerations alone do not justify finding a compelling need for an agency's regulation. Second, the Agency has not shown that, even if uniformity were essential to the functioning of the Agency, it could not accomplish this objective by means other than these regulations. Finally, we reject the Agency's argument that because the regulations ensure equitable treatment of its employees, both within each NAFI and across NAFI lines, they thereby promote its recruitment and retention efforts. The Agency has not demonstrated that pay parity among local NAF employees and with the private sector would ensure a reasonable number of qualified applicants for Federal employment. Nor has it established that the application of prevailing rate principles is the only way by which the Agency may attract qualified applicants or that retention of its current workforce would be significantly affected if pay matters for two groups of those employees were subject to negotiations. Indeed, as a result of collective bargaining over such matters, those bargaining unit positions could become more attractive. Accordingly, the Agency has not demonstrated that its regulation is essential, as opposed to helpful and desirable, to the preservation of employee morale and mobility.(5)

4. Application to Employees Covered Under the Prevailing Rate Systems Act

The Authority has held that all aspects of pay-setting under the prevailing rate system are specifically provided for by law and, therefore, are excluded from the definition of conditions of employment under section 7103(a)(14)(C) of the Statute. American Federation of Government Employees, AFL-CIO and Department of Defense, Department of the Army and Air Force, Headquarters, Army and Air Force Exchange Service, Dallas, Texas, 32 FLRA 591, 599-600 (1988) (opinion of then-Member McKee). The Agency alleges, and the Union does not dispute, that the Prevailing Rate Systems Act applies to CT employees employed at the Langley Air Force Base. The Agency also asserts, without contradiction, that these employees are not covered by section 9(b) of the Prevailing Rate Systems Act and section 704 of the Civil Service Reform Act. To the extent that Proposal 3 applies to employees covered under the Prevailing Rate Systems Act, who are not covered by section 9(b) and section 704, the proposal is nonnegotiable and not within the duty to bargain.

5. Summary

Proposals 2 and 3 concern conditions of employment; do not interfere with the Agency's right to determine its budget under section 7106(a)(1); and do not conflict with agency regulations for which a compelling need exists. To the extent that Proposal 3 applies to CT employees, however, it is nonnegotiable because it is inconsistent with the Prevailing Rate Systems Act. With that exception, Proposals 2 and 3 are within the duty to bargain.

V. Proposal 4

Child Care, Section 1. The Employer will provide free child care services for unit employees children when the employee is in a duty status.

A. Positions of the Parties

1. The Agency

In its statement of position, the Agency contends that the proposal is nonnegotiable under section 7117(a) of the Statute because the proposal conflicts with legal limitations on the use of funds for child care under 10 U.S.C. § 2809. The Agency asserts that the proposal could require the Agency to contract for the construction, management and operation of a facility for child care services. Therefore, the Agency argues, the proposal ignores the limitations imposed in 10 U.S.C. § 2809, which requires the Secretary of Defense to include a proposed facility in the DoD budget, to justify the need for the facility and to submit an economic analysis demonstrating the project's cost effectiveness. The Agency relies upon a Comptroller General decision, Comp. Gen. No. B-222989 (June 9, 1988), to support its contention.

The Agency further contends that the proposal conflicts with an agency regulation for which there is a compelling need. Paragraph 4g of Air Force Regulation 215-1, provides as follows:

No one, including MWR assigned personnel, is authorized individual discounts on MWR merchandise, services, or fees, unless specifically authorized by Air Force 215 series publications. (For example, meals may be provided at reduced prices for open mess employees as specified in AFR 215-11.) This does not preclude special sales or promotions conducted by an MWR activity for all its authorized patrons.

The Agency argues that under this regulation, it could not provide free child care services to bargaining unit employees, because to do so would create "fiscal chaos." Statement of position at 42. Thus, relying upon the cost arguments raised in regard to Proposals 2 and 3, the Agency asserts that there is a compelling need for the regulation. The Agency further argues there is a compelling need based on the necessity to maintain employee morale among nonbargaining unit employees and to attract the best qualified personnel for those positions.

In a supplemental brief, the Agency argues that pursuant to the Military Child Care Act of 1989 (Child Care Act), 103 Stat. 1589-1594 (1989), which was enacted subsequent to the Agency's filing of its initial statement of position, parental fees must be charged for children attending military child care centers. It argues that the Child Care Act mandates that the Secretary of Defense prescribe regulations establishing parental fees for the attendance of children at military child development centers and requires that those regulations be uniform for the military departments.

The Agency also asserts that Proposal 4 conflicts with an Agency policy for which there is a compelling need pursuant to section 7117(a)(2) of the Statute and section 2424.11(a) and (c) of the Authority's Rules and Regulations. The Agency asserts that the child care centers are essential to the Agency's military mission and the execution of its MWR functions. The Agency argues that its policy, set forth in DoD Instruction 6060.2, provides for a sliding fee scale based upon total family income and that because it guarantees the funds necessary to carry out the vital community activity of child development for military personnel, the policy ensures that such services will be provided and that they will be provided in the most effective and efficient manner within the available resources. Moreover, the Agency contends that the Agency policy involved here was specifically mandated by congressional enactment of the Child Care Act, which requires that such regulations be prescribed establishing fees to be charged for the attendance of children at military child development centers.

2. The Union

The Union argues that the Authority has previously found that an agency must bargain over a proposal to provide space and facilities for a day care center for children of bargaining unit employees. In support, the Union cites National Treasury Employees Union and Family Support Administration, Department of Health and Human Services, 30 FLRA 677 (1987) (the Authority rejected the agency's argument that 20 U.S.C. § 2564 precluded negotiation and found that the agency was obligated to negotiate to the extent that it had discretion); American Federation of Government Employees, AFL-CIO Local 32 and Office of Personnel Management, Washington, D.C., 6 FLRA 423 (1981) (the Authority found that the proposal was not nonnegotiable simply because the agency needed to get the approval for the expenditure from OMB); and American Federation of Government Employees AFL-CIO and Air Force Logistics Command, Wright-Patterson Air Force Base, Ohio, 2 FLRA 604 (1980). The Union also relies upon the Comptroller General's decision in Comp. Gen. Dec. No. B-222989 (June 9, 1988).

In response to the Agency's contention that the proposal is inconsistent with the Child Care Act, the Union argues that the Child Care Act grants the Secretary of Defense the authority to reduce child care fees for parents who participate in the parent participation program and that as the Secretary has the discretion to lower rates, the Agency has the discretion to provide free child care services. In addition, the Union argues that the proposal is not inconsistent with any Government-wide rule or regulation. It asserts that inasmuch as the Act permits the Secretary to lower rates, the compelling need argument should be dismissed.

B. Analysis and Conclusions

1. The Military Child Care Act

The Child Care Act regulates the operation of all military child care centers. Section 1501(b)(1) of the Child Care Act defines those centers as "a facility on a military installation (or on property under the jurisdiction of the commander of a military installation) at which child care services are provided for members of the Armed Forces or any other facility at which such child care services are provided that is operated by the Secretary of a military department." Inasmuch as the language of section 1501(b)(1) specifically limits the Child Care Act's coverage to facilities at which child care services are provided for members of the Armed Forces, child care centers fall within the ambit of the Child Care Act if they provide services to members of the Armed Forces. This conclusion is consistent with other references in the Child Care Act that apply exclusively to military personnel. For example, the term "child care fee receipts" is defined under section 1501(a)(4) as those "fees paid by members of the Armed Forces for child care services." Moreover, language in the congressional reports indicated the concern of Congress to address the child care problems facing military personnel. H.R. Rep. No. 121, 101st Cong., 1st Sess., Title VII at 307-08, reprinted in 1989 U.S. Code Cong. & Admin. News 928-29; H.R. Conf. Rep. No. 331, 101st Cong., 1st Sess, Title V, reprinted in 1989 U.S. Code Cong. & Admin. News 1119.

It is not clear from the record whether or not Proposal 4 was intended to require the Agency to provide free child care services for civilian employees' children at centers that are operated for members of the Armed Forces. Therefore, to the extent that Proposal 4 is not intended to require the Agency to provide free child care services at facilities where such services are being provided for members of the Armed Forces, it is not inconsistent with the Child Care Act.

To the extent that the proposal is intended to require the Agency to provide free child care services for civilian employees at facilities where such services are provided for members of the Armed Forces, however, it is inconsistent with the Child Care Act. It is clear that the Child Care Act requires, and Congress intended, that fees be charged for child care services. The relevant provisions of the Child Care Act state:

SEC. 1504 PARENT FEES

The Secretary of Defense shall prescribe regulations establishing fees to be charged parents for the attendance of children at military child development centers. Those regulations shall be uniform for the military departments and shall require that, in the case of children who attend the centers on a regular basis, the fees shall be based on family income.

SEC. 1506. PARENT PARTNERSHIPS WITH CHILD DEVELOPMENT CENTERS

. . . . . . .

(b) Parent Participation Programs.--The Secretary of Defense shall require the establishment of a parent participation program at each military child development center. As part of such program, the Secretary of Defense may establish fees for attendance of children at such a center, in the case of parents who participate in the parent participation program at that center, at rates lower than the rates that otherwise apply.

Thus, pursuant to the plain language of the Child Care Act, the Secretary of Defense must establish fees to be charged parents for attendance at military child development centers and shall require, for children who regularly attend the centers, that fees be based on family income. The regulations must also be uniform for all military departments. The only exception to the requirement that fees be based on family income for children who regularly attend the centers is that fees may be lowered for children whose parents participate in a parent participation program.

Proposal 4 precludes the Agency from charging fees for child care service for children of bargaining unit employees who are in a duty status. Due to the uniformity requirement of the Child Care Act, Proposal 4 would thus require the Agency to provide free child care service for all children attending military child care centers whose parents are in a duty status. Providing free child care services to all parents who are in a duty status and uniformly extending those free services to all children at the centers would be inconsistent with the requirement that regulations be prescribed to establish fees for child care services for children of military personnel based on family income. Therefore, Proposal 4, to the extent that it requires free child care services at centers operated for members of the Armed Forces, is inconsistent with the Child Care Act.

2. 10 U.S.C. § 2809

We reject the Agency's contention that the proposal is inconsistent with 10 U.S.C. § 2809 because the proposal ignores the requirement in that statute that the Agency may not enter into a contract for the construction, management and operation of child care facilities without congressional approval. 10 U.S.C. § 2809 provides that the Secretary of the Air Force may enter into contracts for the construction, management or operation of a facility on or near a military base for child care services if the Secretary has identified the proposed project in the budget submitted to Congress and has determined that the facility can be more economically provided under a long-term contract than by conventional means. There is nothing in the proposal or in the record that would preclude the Agency from making these determinations.

The fact that the Agency might be required to obtain prior budgetary approval in order to implement the proposal does not render the proposal nonnegotiable. The Authority has held that section 7114(b)(5) of the Statute provides that the duty of an agency to negotiate in good faith includes the obligation "to take such steps as are necessary to implement" any agreement reached between the parties. American Federation of Government Employees, AFL-CIO, Local 32 and Office of Personnel Management Washington, D.C., 6 FLRA 423 (1981) (OPM). Thus, even though an agency might be unable to directly or completely implement an agreement reached through negotiations because of a limitation on its discretion, an otherwise negotiable proposal would not necessarily be outside the duty to bargain. Rather, in those circumstances the agency would be obligated to take such steps as are within its discretion, including making an appropriate request to third parties, to implement the agreement. Accordingly, the Authority rejects the Agency's contention that the proposal conflicts with 10 U.S.C. § 2809.

We also reject the Agency's contention that Proposal 4 is inconsistent with the Comptroller General's decision in Comp. Gen. No. B-222989 (1988) because the proposal ignores the limitations imposed by that decision on the use of appropriated funds for child care facilities. As noted in that decision, the Secretary of the Air Force has authority under section 139 [of Public L. No. 99-190 Stat. 1185, 1323 (1985)] codified at 40 U.S.C. § 490B (Supp. III 1985), to "provide support for child care centers for the children of civilian employees by authorizing the allotment of space under his control in government buildings, . . . and may do so without charge. The support provided may include the cost of making space suitable for child care facilities, including the cost of renovation, modification or expansion of existing government-owned or leased space." Comp. Gen. Dec. at 1. In that decision, the Comptroller General further noted that the legislative history of section 139 makes it clear that the intent of the law was to encourage the General Services Administration and user agencies to make free space and services for day care facilities more rapidly available. Although section 139 precludes the Agency from leasing space solely for child care facilities, there is nothing in the proposal that requires the Agency to do so. Accordingly, we find that Proposal 4 is not inconsistent with the cited Comptroller General decision.

3. Agency Regulations for Which a Compelling Need Exists

The Agency argues that the proposal is inconsistent with Agency policy for which a compelling need exists under sections 2424.11(a) and (c) of the Authority's Rules and Regulations. The policy that is alleged to be inconsistent with the proposal is set forth in a DoD Memorandum entitled Implementing Guidance Required by the Military Child Care Act of 1989, dated March 23, 1990. While the policy implementing the requirements of the Child Care Act appears to apply only to military child care centers, these regulations appear to modify preexisting regulations that governed all child care centers. To the extent that the regulations apply to child care centers operated for civilian employees, we find that there is no compelling need for the regulations. The DoD Memorandum states, in relevant part, as follows:

. . . . . . .

D. Child Development Center Fees:

1. Developmental care shall be provided in child development center programs for reasonable fees and shall be made affordable to lower income families and hardship cases.

2. A sliding fee scale based upon total family income will be established for use at child development center programs. This fee scale shall be used when children attend the child development center programs on a regular basis, including those regularly participating in scheduled part-day programs. Fees will include all meals.

. . . . . . .

b. Family income will be verified on an annual basis and individual fees adjusted accordingly. The adjusted gross income as reported on the most recent Federal Income Tax Return will be used to determine fees. Parents who are not willing to divulge family income will be required to pay the maximum fees.

Therefore, under the Agency regulations, child care fees are based solely upon family income and not on the duty status of the parent. The one exception, which is not applicable under the terms of Proposal 4, is for parents who are a part of a parent participation program. Inasmuch as the proposal requires the elimination of fees based on the duty status of the parent, as opposed to the family income, it is inconsistent with these Agency regulations.

The question thus becomes whether there is a compelling need for the regulations. Under section 2424.11(a) of the Authority's Rules and Regulations, a compelling need exists for an agency rule or regulation if "[t]he rule or regulation is essential, as distinguishable 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 requirement of an effective and efficient government."

We recognize the importance of child care services and the need to have the necessary funding for those services. Compelling need is not established based on the desirability of a regulation, however. American Federation of Government Employees, Local 1501 and U.S. Department of the Air Force, Airlift Military Command, McChord Air Force Base, Washington, 38 FLRA 1515, 1522 (1991) (Airlift Military Command). Section 2424.11(a) of the Authority's Rules and Regulations specifically provides that, to support a funding of compelling need, the regulation must be "essential," as distinguished from helpful or desirable, to the accomplishment of the mission of the Agency. There is nothing in the record to indicate that additional funds could not be acquired to replace parental fees in order to meet the necessary financial requirements to properly operate a child care center for NAF employees only.

Thus, the Agency has failed to demonstrate how the regulation is essential to the fulfillment of the Agency's mission. Therefore, we conclude that there is no compelling need for the regulations under section 2424.11(a) of the Authority's Rules and Regulations.

Under section 2424.11(c) of the Authority's Rules and Regulations, a compelling need exists for an agency rule or regulation if "[t]he 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." See generally, Navy Exchange, 37 FLRA at 341-42. In support of its claim that its regulation meets the requirement for compelling need set forth in section 2424.11(c), the Agency argues that in the Child Care Act Congress mandated that regulations be prescribed establishing fees for child care services based on family income at centers operated for members of the Armed Forces.

While we find that Congress had such a mandate for child care centers operated for members of the Armed Forces, there is nothing in the record or the Child Care Act to support a finding that Congress had a similar mandate for centers not operated for members of the Armed Forces. As previously noted, Proposal 4 can be interpreted to apply only to child care centers not operated for members of the Armed Forces. Accordingly, we conclude that there is no compelling need under section 2424.11(c) of the Authority's Rules and Regulations for the Agency's policy requiring fees for child care services at centers operated for non-members of the Armed Forces.(6)

Finally, for the reasons stated in regard to Proposals 2 and 3, the Authority rejects the Agency's argument that there is a compelling need for AFR 215-1 based on the costs associated with the proposal. As noted, cost factors alone do not justify a compelling need for an agency regulation. In addition, as previously noted, there is no reason to conclude that the Agency could not obtain the necessary funding for child care services from other sources. Moreover, we find speculative and unsupported the Agency's arguments that the proposal would result in decreased morale among nonunit employees or an inability to attract the best qualified people to fill those jobs. See Airlift Military Command, 38 FLRA at 1523.

Accordingly, Proposal 4, to the extent that it applies to child care centers operated for non-members of the Armed Forces, is negotiable and thus is within the duty to bargain. However, to the extent that it applies to child care centers operated for members of the Armed Forces, it is inconsistent with the Child Care Act and is outside the duty to bargain.

VI. Proposal 5

Miscellaneous, Section 16. Management agrees that a 20% service charge will be applied on all Special Functions. All employees who work the Special Functions will receive 15% of the service charge. Waiters and waitresses will receive 90% of the above service charge. All other employees who work the Special Function will receive 10%.

A. Positions of the Parties

The Agency argues that the proposal is not specific and delimited in form and content so as to permit the Authority to determine whether it is negotiable and that the proposal is "internally inconsistent." Agency statement of position at 44. The Agency argues that insofar as the Union has failed to create a record upon which the Authority can render a decision, the petition should be dismissed with respect to this proposal. The Agency further argues that the proposal (1) does not concern a condition of employment; (2) is inconsistent with the Statute; (3) violates the Prevailing Rate Systems Act, and the FPM Supplement 532-2; and (4) interferes with management's rights to determine its budget and to determine the Agency's mission.

The Union explained that the proposal requires the Agency to charge its patrons a 20 percent service fee for special functions, of which 5 percent would be retained by the Agency and the remainder would go to the employees who worked on the function, distributed as follows: waiters and waitresses would receive 90 percent of the employees' share of the service fee; and the other workers would receive the remaining 10 percent. The Union argues that the Fair Labor Standards Act permits agency discretion as to the "tip offset" deduction and, thus, that the matter is negotiable. The Union further argues that the proposal will not affect in any way the existing special schedules or "the executive and other pay plans approved by the ASD (FM&P)." Union's response at 10.

B. Analysis and Conclusions

Based on the language of the proposal, its intended meaning, as explained by the Union, and the record as a whole, we find that Proposal 5 is sufficiently specific and delimited to enable us to provide the parties with a negotiability determination. Thus, it is clear from the Union's stated intent that under the proposal the Agency would add a 20 percent surcharge to its charge for all special functions, all but 5 percent of which would be paid, as specified in the proposal, to the employees who worked on that special function.

We conclude that under the Antilles test, discussed above, the first sentence of Proposal 5 is not a condition of employment because it does not concern a matter that has a sufficient nexus to the employment relationship or work situation of the unit employees. See, for example, National Association of Government Employees, Local R1-134 and U.S. Department of the Navy, Naval Underwater Systems Center, Newport, Rhode Island, 38 FLRA 589, 596-98 (1990). Thus, although the proposal in its entirety seeks to benefit unit employees who work on special functions by providing them with additional compensation for time spent in such work, the first sentence of the proposal requires the Agency to increase the prices charged for such functions by 20 percent. There is no direct connection between the prices the Agency charges for its services and the work situation or employment relationship of the bargaining unit employees. Antilles, 22 FLRA at 237. Rather, the Agency's pricing mechanism is integrally related to its business of providing affordable services to the personnel of the Armed Forces through its MWR program, a matter that is solely within the Agency's control. Although the second and third sentences of Proposal 5, standing alone, appear to involve a condition of employment within the meaning of Antilles, those sentences are inextricably intertwined with the first sentence of the proposal. Accordingly, we conclude that the entire proposal is nonnegotiable.

In finding this proposal to be nonnegotiable, we note that it is clearly distinguishable from Proposal 2 in American Federation of Government Employees, AFL-CIO, Local 987 and Headquarters, Warner Robins Air Force Logistics Command, Robins Air Force Base, Georgia, 8 FLRA 667 (1982), reversed as to other matters sub nom. United States Air Force v. FLRA, 727 F.2d 1502 (11th Cir. 1984). In that case, the Authority found negotiable a proposal concerning the tip offset percentage the agency could establish for tipped employees. That case, in contrast to the one before us, did not concern the agency's pricing mechanism or any other matter relating solely to its managerial prerogatives. Indeed, in that case the Authority held that the agency had been granted sufficient discretion under the Fair Labor Standards Act to comply with the proposal. Further, regulations promulgated by the Office of Personnel Management in 1990 specifically require negotiations over tip offsets where tipped employees are represented by a labor organization holding exclusive recognition. 5 C.F.R. § 532.283(d) (1991).

Accordingly, we find that Proposal 5, read in its entirety, does not involve a condition of employment of bargaining unit employees under the Statute, and we will dismiss the petition as to that proposal. In so holding, we find it unnecessary to address the other arguments made by the Agency.

VII. Order

The Agency shall, upon request, or as otherwise agreed to by the parties, bargain concerning Proposals 1 and 2, Proposal 3, to the extent that it does not involve employees covered under the Prevailing Rate Systems Act, and Proposal 4, to the extent it does not require free child care services at centers operated for members of the Armed Forces.(7)The petition is dismissed as to Proposal 5.




FOOTNOTES:
(If blank, the decision does not have footnotes.)
 

1. In citing the Prevailing Rate Act the Agency apparently is referring to the Prevailing Rate Systems Act.

2. In its supplemental statement, the