41:0224(21)AR - - HHS, SSA, Baltimore, MD and AFGE Council 220 - - 1991 FLRAdec AR - - v41 p224



[ v41 p224 ]
41:0224(21)AR
The decision of the Authority follows:


41 FLRA No. 21

FEDERAL LABOR RELATIONS AUTHORITY

WASHINGTON, D.C.

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

SOCIAL SECURITY ADMINISTRATION

BALTIMORE, MARYLAND

(Agency)

and

AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES

COUNCIL 220

(Union)

0-AR-1881

DECISION

June 13, 1991

Before Chairman McKee and Members Talkin and Armendariz.

I. Statement of the Case

This matter is before the Authority on exceptions to an award of Arbitrator Joseph M. Stone filed by the Union under section 7122(a) of the Federal Service Labor-Management Relations Statute (the Statute) and part 2425 of the Authority's Rules and Regulations. The Agency filed an opposition to the Union's exceptions.

The Agency put into effect an incentives program to encourage local managers to increase efficiency. The Union filed a grievance contending that the Agency had an obligation to bargain over the institution of the program. The Arbitrator denied the grievance.

We conclude that the award is contrary to the Statute, and we will remand the case to the parties.

II. Background and Arbitrator's Award

On October 1, 1988, the Agency put into effect the budgetary incentives pilot/gainsharing (BIP/G) program. The program was an attempt by the Agency to introduce certain incentives to local managers to increase efficiency. Under the BIP/G program each site manager was provided with a lump sum of money to allocate in large measure as the manager determined, rather than being provided with money allocated for specific purposes. Eight areas and two districts of the Agency participated in the program. Under the program, one-half of any budgetary savings would revert to the Social Security trust fund and one-half would be returned to the local areas in the form of monetary awards, both to managers and unit employees.

On September 26, 1988, the Agency's chief of field operations sent a letter to the president of the Union's National Council of Field Operations Locals announcing that the program would be put into effect beginning October 1 and including information describing the program. The Union's council president requested that the Agency bargain over the program at the council (component) level. In a letter dated October 21, 1988, the Agency's chief of field operations refused to bargain. He maintained that the Agency had no obligation to bargain because there had been no changes in conditions of employment of unit employees at the component level. He indicated that, to the extent that there were changes at the local sites of the program, notice and an opportunity to bargain would be provided at local levels below the component level.

The Union filed a grievance claiming that the Agency had violated the parties' national collective bargaining agreement and had committed an unfair labor practice under the Statute. The grievance was not resolved and was submitted to arbitration.

Before the Arbitrator, the Union contended that the Agency had an obligation to bargain over the institution of the BIP/G program because it constituted a change in conditions of employment and that the proper level of bargaining under the parties' agreement was the component level. The Union argued that the institution of the BIP/G program constituted a change in conditions of employment because of its impact on unit employees in such areas as compensation, details and reassignments, health and safety, promotions, leave, overtime, travel, training, and staffing. The Union further argued that institution of the program changed the awards program by instituting gainsharing. The Union maintained that the institution of gainsharing was fully negotiable because the criteria for gainsharing are fully negotiable under decisions of the Authority and procedures and appropriate arrangements relating to the institution of gainsharing are clearly negotiable under section 7106(b)(2) and (3) of the Statute. Consequently, the Union requested that the Arbitrator find that the Agency's refusal to bargain at the component level violated the parties' collective bargaining agreement and constituted an unfair labor practice under section 7116(a)(1) and (5) of the Statute.

The Agency contended before the Arbitrator that such management rights as the right to determine its budget under section 7106(a)(1) are not subject to bargaining. Although the Agency stated that the impact of the exercise of a management right is subject to the obligation to bargain, the Agency asserted that there was no evidence of unit employees having been adversely affected by the institution of the BIP/G program.

The Agency also contended that what the Union wanted to bargain over in this case was the basic formula established by the Agency to determine the amount of money available for employee awards. The Agency maintained that the basic formula established by the Agency was protected from interference by management's right to determine its budget under section 7106(a)(1) of the Statute and that, consequently, there was no obligation to bargain over such matters. In support of its position, the Agency cited the decisions in Charleston Naval Shipyard v. FLRA, 885 F.2d 185 (4th Cir. 1989) and Department of the Air Force, Langley Air Force Base v. FLRA, 878 F.2d 1430 (4th Cir. 1989) (unpublished opinion).

The Agency further maintained that the essence of the BIP/G program involved local decisionmaking. Thus, the Agency argued that if it had a bargaining obligation, the obligation was at the lower levels of the Agency and not at the component level, as claimed by the Union. Similarly, the Agency claimed that it had not committed an unfair labor practice. The Agency argued that its refusal to bargain was based on a good-faith interpretation of the parties' national agreement as to the level at which there was an obligation to bargain. The Agency asserted that such conduct does not rise to the level of an unfair labor practice.

The Arbitrator found pertinent the Authority's decision in Federal Employees Metal Trades Union Council of Charleston and Department of the Navy, Charleston Naval Shipyard, Charleston, South Carolina, 32 FLRA 102 (1988) (Charleston Naval Shipyard), in which the Authority found a proposal involving the Agency's implementation of an employee bonus incentive program to be negotiable. The Arbitrator stated that

[h]ad no appeal been taken in the Charleston Naval Shipyard case, I may well have been inclined . . . to sustain the Union's position, at least to the extent that some aspects of the BIP/G initiative warranted Component level bargaining--e.g., the 50-50 split and the "fully satisfactory" performance of the managers. However, an appeal was taken and the decision of the Federal Labor Relations Authority in the Charleston Naval Shipyard case was reversed and its bargaining order was denied enforcement.

Award at 39. On the basis of the court's decision in Charleston Naval Shipyard v. FLRA, in which the court found that the proposal interfered with management's prerogative to determine its budget, the Arbitrator ruled that "it would appear that at least in the jurisdiction of the United States Court of Appeals for the Fourth Circuit there is no Agency obligation to negotiate . . . ." Id. at 42. The Arbitrator was not prepared to conclude "that negotiation at the national Component level is warranted with respect to a gainsharing program such as is here involved and that the refusal to so negotiate constitutes an unfair labor practice." Id. Accordingly, the Arbitrator denied the grievance. In denying the grievance, the Arbitrator advised the parties "that nothing in this decision is intended to relate in any manner whatsoever to whatever bargaining obligation or grievance rights that may exist at the local level." Id.

III. Positions of the Parties

A. The Union's Exceptions

The Union contends that the award is deficient because it: (1) is contrary to the Statute; (2) fails to resolve the dispute submitted; (3) fails to draw its essence from the parties' collective bargaining agreement; and (4) is based on a nonfact.

The Union argues that the award is contrary to the Statute because the award improperly excused the Agency's failure to bargain as required by the Statute. The Union asserts that the Arbitrator inappropriately applied the court's decision in Charleston Naval Shipyard v. FLRA to resolve the grievance because the decision contradicts the position of the Authority on what constitutes interference with management's right to determine its budget and has not been adopted or acquiesced in by the Authority. The Union maintains that by failing to apply the decisions of the Authority, the Arbitrator deprived the Union of its right under the Statute to bargain over the substance of the BIP/G program.

The Union further asserts that, in any event, the award is contrary to the Statute because it deprives the Union of its right under section 7106(b)(2) and (3) of the Statute to bargain on procedures that the Agency will observe in exercising its right to determine its budget and appropriate arrangements for employees adversely affected by its exercise of its right to determine its budget. The Union maintains that, even if the Agency were exercising its right to determine its budget, when the Agency changed conditions of employment that had an impact on unit employees by instituting the BIP/G program, the Agency was obligated to bargain over the Union's proposed procedures and arrangements.

For the same reasons, the Union argues that the award is contrary to the Statute by failing to find that the Agency committed unfair labor practices under the Statute, as alleged by the Union in its grievance. The Union also argues that the award is contrary to the Statute by resolving a duty-to-bargain issue that must be resolved exclusively by the Authority under the Statute.

The Union further argues that the award is deficient because it fails to draw its essence from the collective bargaining agreement by failing to resolve the dispute as it related to the alleged violations of the agreement. The Union also argues that the award is based on a nonfact because Charleston Naval Shipyard v. FLRA does not apply to this matter.

B. The Agency's Opposition

The Agency maintains that the Union's exceptions constitute nothing more than disagreement with the reasoning and conclusions of the Arbitrator and an attempt to relitigate the matter before the Authority. The Agency contends that, for this reason, the Union's exceptions should be denied.

The Agency also contends that the Authority lacks jurisdiction to address the Arbitrator's determination that the Agency did not commit an unfair labor practice. The Agency argues that, because the Union chose to pursue its unfair labor practice allegation as a grievance, the award can only be challenged by instituting an action for judicial review of the award in accordance with section 7123(a) of the Statute.

IV. Analysis and Conclusions

A. The Authority Has Jurisdiction To Resolve the Union's Exceptions

Contrary to the claim of the Agency, we confirm our jurisdiction to resolve all of the Union's exceptions, including the claims related to the alleged unfair labor practices under the Statute. We conclude that, under the clear language of section 7122(a) of the Statute, we have jurisdiction to resolve exceptions filed to an arbitration award relating to statutory unfair labor practices under section 7116 of the Statute, and the courts have no jurisdiction under section 7123(a) of the Statute to directly review such arbitration awards.

Section 7122(a) pertinently provides:

Either party to arbitration under this chapter may file with the Authority an exception to any arbitrator's award pursuant to the arbitration (other than an award relating to a matter described in section 7121(f) of this title).

Clearly, the Statute specifically provides for the filing of exceptions to any arbitration award except for those relating to the matters described in section 7121(f). The matters described in section 7121(f) are those matters covered by 5 U.S.C. §§ 4303 and 7512, relating to serious adverse actions and performance-based actions, and similar actions that arise in another personnel system. Therefore, under the language of section 7122(a), exceptions may be filed to all other awards, including those relating to unfair labor practices.

Section 7123(a) provides for judicial review of final orders of the Authority. There is no provision in section 7123(a) or elsewhere authorizing the institution of an action for direct judicial review of an arbitration award because it relates to an unfair labor practice. To the contrary, as the courts have made clear, the only way to obtain judicial review of an arbitration award involving an unfair labor practice is to seek judicial review of the final order of the Authority on exceptions to that award. For example, Overseas Education Association v. FLRA, 824 F.2d 61, 63 (D.C. Cir. 1987).

B. The Award Is Deficient

We conclude that the award is contrary to the Statute and that this case must be remanded to the parties for further processing. We find that the Arbitrator inappropriately relied on Charleston Naval Shipyard v. FLRA to deny the grievance.

In Charleston Naval Shipyard, the agency had implemented a profit-sharing bonus plan as an incentive to complete overhaul projects at a lower cost. The plan allocated certain profits as a bonus to employees. Under the agency's plan, 50 percent of the profits would be returned to employees in the form of incentive payments. The union proposed that, instead, 80 percent of the profits would be returned to employees in the form of incentive payments. The Authority, among other determinations, determined that the proposal did not interfere with the agency's right to determine its budget under section 7106(a)(1) of the Statute. Specifically, the Authority determined that the proposal did not require the agency to establish in its budget any particular program or specified level of funding because the proposal concerned only the distribution of any profit realized from the shipyard projects. In the Authority's view, the budgetary programs had already been established by the agency and were untouched by the proposal. The Authority emphasized that both it and the courts have recognized that the collective bargaining system frequently involves the expenditure of funds and that the Statute was not intended to apply only in circumstances involving no cost to the Government. Consequently, the Authority refused to hold that the proposal was nonnegotiable merely because the proposal contemplated that the agency may be required to expend funds. The Authority also noted that the agency's arguments were based on speculation of what the amount of profit would be.

In Charleston Naval Shipyard v. FLRA, the court noted that the Authority determines the negotiability of proposals that allegedly interfere with management's budgetary prerogatives according to a two-prong test set forth in American Federation of Government Employees, AFL-CIO and Air Force Logistics Command, Wright-Patterson Air Force Base, Ohio, 2 FLRA 604 (1980), 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) (Wright-Patterson). 885 F.2d at 187. Under Wright-Patterson, in order to establish that a proposal directly interferes with management's right to determine its budget, an agency must demonstrate that the proposal either: (1) prescribes the particular programs to be included in the budget or the amount to be allocated in the budget for those programs; or (2) entails an increase in costs that is significant and unavoidable and is not offset by compensating benefits. Id. The court described the Authority's decision as reasoning that the proposal did not prescribe a particular amount to be allocated for the incentive program because the amount of profits was only speculative and because the proposal only concerned the percentage distribution of the profits. The court stated that, on this basis, the Authority determined that the proposal did not run afoul of the first prong of the test in Wright-Patterson.

The court rejected the Authority's reasoning. The court concluded that, even though the proposals were not phrased in terms of dollar amounts, once the profits became certain, the proposal would dictate a dollar amount. Therefore, the court held that the proposal did run afoul of the first prong of the test in Wright-Patterson because the proposal would have the effect of prescribing the use of agency funds. The court concluded that the proposal completely divested management of discretion and control over the allocation of the profits to be realized and that it is this discretion and control over agency funding decisions that Congress expressly reserved to managers in section 7106(a)(1) of the Statute. Id. at 188. Because the court found that the proposal prescribed a specific amount to be allocated in the agency's budget and violated prong one, the court reversed the Authority's decision and did not address the Authority's conclusion that the proposal also was not nonnegotiable under the second prong of the budget test. Id. at 187 n.2.

As noted by the Union, the Authority has not adopted the court's decision in Charleston Naval Shipyard v. FLRA. With regard to the case before us, we disagree with the court's interpretation and application of section 7106(a)(1) and the first prong of the budget test in Wright-Patterson. Therefore, we find the award to be deficient because it relies on the court's decision.

In Wright-Patterson, the Authority noted that whether a proposal directly affects an agency's determination of its budget depends upon the definition of "budget" as used in the Statute. The Authority stated that, in the absence of a definition in the Statute or its legislative history, it was appropriate to give the term its common or dictionary definition. Accordingly, the Authority adopted the dictionary's definition of "budget" as "a statement of the financial position of a body for a definite period of time based on detailed estimates of planned or expected expenditures during the period and proposals for financing them." 2 FLRA at 608. From this definition, the Authority developed its two-prong test for determining whether a proposal directly interferes with management's right to determine its budget.

Under the first prong of this test, in order for an agency to demonstrate that a proposal directly interferes with management's right to determine its budget, the agency must show either that the proposal prescribes the programs and operations to be included in the agency's budget or prescribes the amount to be allocated for them. We adhere to the interpretation and application of the first prong of the budget test and the established meaning of the term "budget," as interpreted and applied by the Authority in Charleston Naval Shipyard. Accordingly, we reject the court's conclusion in Charleston Naval Shipyard v. FLRA that an agency's "discretion and control over an agency's funding decisions" equates to management's right to determine its budget pursuant to section 7106(a)(1) of the Statute. 885 F.2d at 188.

Applying the Authority's established interpretation of the first prong of the budget test and the established meaning of the term "budget," we find, as the Authority found with respect to the similar proposal in Charleston Naval Shipyard, that the distribution formula for gainsharing under the BIP/G program does not prescribe a program to be included in the budget or an amount to be allocated in the budget for a particular program. Consequently, bargaining over the institution of the BIP/G program is not nonnegotiable under the first prong of the budget test. Because the distribution formula for gainsharing does not involve a budgetary program, it is distinguishable from proposals that would prescribe in percentage terms the amount to be allocated in an agency's budget for a particular established budgetary program, such as Proposal 7 in National Association of Government Employees, Local R1-144, Federal Union of Scientists and Engineers and U.S. Department of the Navy, Naval Underwater Systems Center, Newport, Rhode Island, 38 FLRA 456 (1990) (Naval Underwater Systems Center), petition for review filed sub nom. U.S. Department of the Navy, Naval Underwater Systems Center, Newport, Rhode Island v. FLRA, No. 91-1045 (D.C. Cir. Jan. 24, 1991). In contrast to Charleston Naval Shipyard and this case, Proposal 7 in Naval Underwater Systems Center prescribed that 1.5 percent of base aggregate payroll be allocated in the budget for performance awards. Because the proposal clearly prescribed an amount to be allocated for an established budgetary program, we found that the proposal directly interfered with management's right to determine its budget under section 7106(a)(1) of the Statute under the first prong of the budget test.

In this case, the award, in applying Charleston Naval Shipyard v. FLRA, conflicts with section 7106(a)(1) of the Statute, as we have interpreted and applied management's right to determine its budget. Furthermore, in applying Charleston Naval Shipyard, the Arbitrator failed to address the obligation to bargain over procedures and appropriate arrangements under section 7106(b)(2) and (3) when an agency changes conditions of employment that constitutes the exercise of a management right. See U.S. Department of Veterans Affairs Medical Center, Providence, Rhode Island and Laborers' International Union of North America, Local 1056, 37 FLRA 566, 568-69 (1990) (and cases cited in the decision.) Accordingly, we reject the Arbitrator's application of Charleston Naval Shipyard v. FLRA to conclude that there was no bargaining obligation over the institution of the BIP/G program because of the Agency's right to determine its budget under section 7106(a)(1) of the Statute.

In sum, the Arbitrator's conclusion that he was constrained to deny the grievance based on Charleston Naval Shipyard is deficient as contrary to the Statute. See American Federation of Government Employees, Local 2145 and U.S. Department of Veterans Affairs Medical Center, Richmond, Virginia, 39 FLRA 1045, 1048-50 (1991) (AFGE, Local 2145) (the arbitrator's conclusion that he was constrained to deny the grievance based on a particular court decision was deficient as inconsistent with law); U.S. Department of the Treasury, Internal Revenue Service, Brookhaven Service Center and National Treasury Employees Union, Chapter 99, 37 FLRA 1176, 1185-86 (1990) (based on our review of the record evidence, we determined that the award did not directly interfere with management's right to determine its budget under secti