42:1333(92)NG - - NTEU and Treasury, Bureau of the Public Debt - - 1991 FLRAdec NG - - v42 p1333



[ v42 p1333 ]
42:1333(92)NG
The decision of the Authority follows:


42 FLRA No. 92

FEDERAL LABOR RELATIONS AUTHORITY

WASHINGTON, D.C.

NATIONAL TREASURY EMPLOYEES UNION

(Union)

and

U.S. DEPARTMENT OF THE TREASURY

BUREAU OF PUBLIC DEBT

(Agency)

0-NG-1516

(32 FLRA 975 (1988))

DECISION AND ORDER ON REMAND

October 31, 1991

Before Chairman McKee and Members Talkin and Armendariz.

I. Statement of the Case

This case is before the Authority on remand from the United States Court of Appeals for the District of Columbia Circuit. Department of Treasury, Bureau of Public Debt v. FLRA, No. 88-1753 (D.C. Cir. July 27, 1990) (order). In the earlier decision in this case, the Authority had concluded that the provision at issue, which requires the Agency to comply with OMB Circular A-76 and other applicable laws and regulations concerning contracting out, was within the duty to bargain. While the Agency's appeal of that decision was pending, the Supreme Court issued a decision that concerned a proposal that is similar to the provision that is at issue in this case. Department of the Treasury, Internal Revenue Service v. FLRA, 110 S. Ct. 1623 (1990) (IRS v. FLRA). Following the Supreme Court's decision, the Court of Appeals for the District of Columbia Circuit granted a motion for remand of this case to the Authority.

II. The Provision

Article 41; Section 1

The Employer agrees to comply with OMB Circular [No.] A-76 and other applicable laws and regulations concerning contracting out.

III. Background

In the previous decision in this case, the Authority rejected the Agency's arguments that this provision violates management's right to make determinations with respect to contracting out under section 7106(a)(2)(B) of the Federal Service Labor-Management Relations Statute (the Statute). The Agency had contended that OMB Circular A-76 is not: (1) an "applicable law" under section 7106 that creates any enforceable right, or (2) a "law, rule or regulation" under section 7103(a)(9), which can be enforced through grievance arbitration. Additionally, the Agency asserted that the part of the provision requiring the Agency to comply with "'other applicable laws and regulations concerning contracting out'" is invalid because "arbitral review of contracting out matters is confined by [section] 7106(a) to application of statutes 'prescribing employee rights and benefits - particularly procedural rights in conjunction with adverse personnel actions.'" Agency statement of position at 11 (emphasis in original).

The Authority held that under section 7106(a) of the Statute, the Agency is required to exercise its management right to contract out in accordance with all applicable laws and regulations. Consequently, the Authority held that the provision did not place any requirements on the Agency that did not already exist and that any constraints on management's right to contract out were imposed not by the provision, but by laws and regulations, such as OMB Circular A-76. The Authority specifically rejected the Agency's argument that OMB Circular A-76 did not constitute a law, rule, or regulation within the meaning of section 7103(a)(9)(C)(ii) and held that matters related to contracting out, including Agency compliance with OMB Circular A-76, may be included within the scope of a grievance procedure negotiated under section 7121 of the Statute. In rejecting this argument, the Authority concluded that for purposes of section 7103(a)(9)(C)(ii), rule and regulation encompasses official declarations of policy that are binding on officials and agencies to which they apply and that OMB Circular A-76 meets this definition.

In rejecting the Agency's argument that arbitral review of contracting out matters is confined by section 7106(a) to the application of statutes prescribing employee rights and benefits, the Authority noted that the provision would recognize contractually external limitations on management's right but would not establish any substantive limitations on management.

As noted earlier, while the appeal of this earlier decision was pending before the Court of Appeals for the District of Columbia Circuit, the Supreme Court issued a decision in IRS v. FLRA, a case that concerned issues similar to those raised in this case. That decision addressed the Authority's decision in National Treasury Employees Union and Department of the Treasury, Internal Revenue Service, 27 FLRA 976 (1987) (NTEU and IRS I). In NTEU and IRS I, the Authority found that a proposal was negotiable that would allow the Union to grieve matters arising out of the agency's decision to contract out, when those matters concern an alleged failure to comply with applicable laws, regulations and established procedural processes. According to the Authority, proposals that would allow the Union to grieve matters arising from the agency's contracting out determinations on the basis that those determinations did not comply with law and regulation would not change the statutorily prescribed scope and coverage of the parties' negotiated grievance procedure. That is, disputes involving conditions of employment arising from the application of OMB Circular A-76 would be covered by the negotiated grievance procedure even in the absence of the contractual provision. In NTEU and IRS I, the Authority stated that "such grievances require nothing that is not required by section 7106(a)(2) of the Statute itself, namely, that determinations as to contracting-out must be made 'in accordance with applicable laws[.]'" NTEU and IRS I, 27 FLRA at 979.

The Authority's decision in NTEU and IRS I was affirmed by the Court of Appeals for the District of Columbia Circuit. Department of the Treasury, Internal Revenue Service v. FLRA, 862 F.2d 880 (D.C. Cir. 1988). However, in IRS v. FLRA the Supreme Court reversed and remanded that decision.

The Court stated that the Authority's position that section 7121 of the Statute empowers a union to negotiate and enforce procedures for resolving any grievance is "flatly contradicted by the language of § 7106(a)'s command that 'nothing in this chapter' . . . shall affect the authority of agency officials to make contracting-out determinations in accordance with applicable laws." IRS v. FLRA, 110 S. Ct. at 1627 (emphasis omitted). The Court interpreted section 7106(a) to mean that management is free to exercise its rights under section 7106(a) if it acts within the limits of external legal limitations--that is, laws outside the Statute. According to the Court, "there are no 'external limitations' on management rights, insofar as union powers under § 7106(a) are concerned, other than the limitations imposed by 'applicable laws.'" Id. at 1629 (emphasis in original).

The Court rejected the Authority's position that the term "applicable laws" in section 7106(a) "is coextensive with the phrase 'any law, rule, or regulation,' {in section 7103(a)(9)(C)(ii) of the Statute]" and, therefore, that any claimed violation of the Circular would, by definition, constitute a grievance within the meaning of section 7103(a)(9)(C)(ii). Id. The Court stated that "[i]t cannot be true . . . that all actions not in accordance with a 'law, rule, or regulation' under § 7103(a)(9) are, by definition, also actions not 'in accordance with applicable laws' in § 7106(a)." Id. (emphasis in original). However, the Court found that the Authority's decision could be sustained under a "permissible (though not an inevitable) construction of the [S]tatute that the term 'applicable laws' in § 7106(a) extends to some, but not all, rules and regulations[.]" Id. (footnote omitted).

Because the issue of the scope of the term "applicable laws" in section 7106(a) had not been decided either by the District of Columbia Circuit or the Authority, the Court remanded the decision to the District of Columbia Circuit to consider the issue or "await [the Authority's] specification, on remand, of the particular permissible interpretation of 'applicable laws' (if any) it believes embraces the Circular." Id. at 1630.

The District of Columbia Circuit remanded the case to the Authority for further proceedings to determine whether the OMB Circular is an "applicable law" and for such other consideration consistent with the decision of the Supreme Court. We issued a Decision and Order on Remand in National Treasury Employees Union and U.S. Department of the Treasury, Internal Revenue Service, 42 FLRA 377 (1991) (NTEU and IRS II), holding that insofar as management rights under section 7106(a)(2) are concerned, proposals that require compliance with applicable laws do not interfere with the exercise of such rights. Compare American Federation of Government Employees, Department of Education Council of AFGE Locals and U.S. Department of Education, Washington, D.C., 38 FLRA 1068, 1075-76 (1990) (Department of Education), request for reconsideration denied, 39 FLRA 1241 (1991), petition for review filed sub nom. enforced sub nom. U.S. Department of Education v. FLRA, No. 91-1219 (D.C. Cir. May 10, 1991) (proposals requiring management to exercise its rights under section 7106(a)(1) of the Statute in accordance with applicable laws directly interfere with the exercise of such rights).

We also held, for reasons discussed fully in NTEU and IRS II, that the term "applicable laws" in section 7106(a)(2) includes provisions in the U.S. Code and other lawfully enacted statutes; the U.S. Constitution; controlling judicial decisions, judgments, and decrees; and certain Presidential executive orders. 42 FLRA at 389-90. In addition, we held that the term "applicable laws" in section 7106(a)(2) includes rules and regulations that have "the force and effect of law." Id. at 390-91. We held that agency regulations must have certain substantive and procedural characteristics in order to constitute regulations having the force and effect of law. Specifically, agency regulations have the force and effect of law and constitute applicable laws if they: (1) are issued pursuant to an explicit or implicit delegation of legislative authority by Congress, (2) affect individual rights and obligations, and (3) are promulgated in accordance with applicable procedural requirements. Id. at 391-93. We concluded in NTEU and IRS II that OMB Circular A-76 has the force and effect of law and is an applicable law within the meaning of section 7106(a)(2) of the Statute. Id. at 393-99.

IV. Analysis and Conclusions

A. OMB Circular A-76

For the reasons discussed fully in NTEU and IRS II, we reiterate that OMB Circular A-76 is an applicable law within the meaning of section 7106(a)(2) of the Statute. Consequently, insofar as the provision at issue in this case requires that the Agency comply with OMB Circular A-76 in exercising its management right to make determinations with respect to contracting out, it does not directly interfere with management's right to make determinations with respect to contracting out under section 7106(a)(2) of the Statute.

OMB Circular A-76 constitutes a "law, rule, or regulation" within the meaning of section 7103(a)(9)(C)(ii) of the Statute. Additionally, we continue to adhere to the position stated in the Authority's original decision in this case that rules and regulations when referred to in various places in the Statute include "'official declarations of policy of an agency which are binding on officials and agencies to which they apply.'" 32 FLRA at 979-80. In NTEU and IRS II, we found that OMB Circular A-76 establishes Federal policy regarding the performance of commercial activities and that agencies' compliance with OMB Circular A-76 is mandatory. 42 FLRA at 397-98. Consequently, we conclude that OMB Circular A-76, in general, constitutes an official declaration of policy that is binding on officials and agencies to which it applies and, consequently, also falls within the ambit of the term "rule[] or regulation" that appears in section 7103(a)(9)(C)(ii) of the Statute, as well as the term "applicable laws" that appears in section 7106(a)(2).

B. Other Applicable Laws and Regulations Concerning Contracting Out

As to the portion of the provision relating to other applicable laws and regulations concerning contracting out, the Agency, relying on a dissenting opinion in U.S. Department of Health and Human Services v. FLRA, 822 F.2d 430 (4th Cir. 1987) (Wilkinson, J., dissenting) (DHHS v. FLRA), argues that arbitral review of contracting out matters is confined to application of statutes "'prescribing employee rights and benefits -- particularly procedural rights in conjunction with adverse personnel actions.'" Agency statement of position at 11-12 (emphasis in original) (quoting DHHS v. FLRA, 822 F.2d at 450).

Adopting the Agency's argument would require interpreting the term "applicable laws" that appears in section 7106(a)(2) as limited to statutes that prescribe employee rights and benefits. There is no basis, however, for interpreting that term so narrowly. Had Congress intended such a narrow interpretation, it easily could have used terms that reflected such an intent in section 7106(a)(2). Rather, it used the broad term "applicable laws." Contrary to the interpretation suggested by the Agency, a more natural reading of that term is that it refers to all "laws" that apply to, or are relevant to, the subjects set forth in section 7106(a)(2) insofar as those subjects relate to the conditions of employment of unit employees. This is the interpretation that we adopt.

This broader reading of the term is consistent with the purposes and policies of the Statute that relate to enabling employees to participate through labor organizations in decisions that affect them. See 5 U.S.C. § 7101. To meet this objective, Congress provided for a collective bargaining relationship and a scope of collective bargaining that extend to matters affecting the conditions of employment of unit employees and are not limited to employee benefits and rights.

Accordingly, we reject the Agency's argument that arbitral review of contracting out matters is confined to application of statutes "prescribing employee rights and benefits." Such a narrow interpretation of the term "applicable laws" in section 7106(a)(2) is neither warranted by the term "applicable laws" nor consonant with the Statute as a whole.

For the following reasons, we conclude that the aspect of the provision that applies to applicable laws and regulations concerning contracting out, other than OMB Circular A-76, is not inconsistent with section 7106 of the Statute. Insofar as the provision refers to laws and regulations that have the force and effect of law, we find that the provision does not directly interfere with management's right to make determinations with respect to contracting out. Based on our decision in NTEU and IRS II, such laws and regulations constitute enforceable external limitations on the Agency's exercise of its rights under section 7106(a)(2), and the provision would require only that the Agency comply with enforceable external limitations.

To the extent that the provision requires compliance with regulations that do not have the force and effect of law but would impose substantive limitations on management's right to make determinations with respect to contracting out, we find that it directly interferes with that management right. However, for the reasons discussed below, it constitutes a negotiable appropriate arrangement under section 7106(b)(3) of the Statute.

The Union does not argue specifically in this case that this provision constitutes an appropriate arrangement. However, in other recent decisions we have concluded that proposals that require management to comply with regulations in exercising management rights constitute appropriate arrangements that are negotiable under section 7106(b)(3) of the Statute. See American Federation of Government Employees, AFL-CIO, Department of Education Council of AFGE Locals and U.S. Department of Education, 42 FLRA 527 (1991), petition for review filed sub nom. United States Department of Education v. FLRA, No. 91-1510 (D.C. Cir. Oct. 18, 1991) (AFGE and Education) (proposal requiring that the agency comply with its own regulations governing personnel policies and practices and working conditions was negotiable as an appropriate arrangement); National Association of Government Employees, SEIU, AFL-CIO and Veterans Administration, Veterans Administration Medical Center, Department of Memorial Affairs, 40 FLRA 657, 677-82 (1991) (Veterans Administration) (provision that would require an agency to exercise its management right to grant sick leave in accordance with applicable Government-wide regulations was negotiable as an appropriate arrangement); American Federation of Government Employees, Department of Education Council of AFGE Locals and U.S. Department of Education, Washington, D.C., 38 FLRA 1068, 1076-77 (1990), decision on reconsideration, 39 FLRA 1241, 1242-46 (1991) (Department of Education), petition for review filed sub nom. United States Department of Education v. FLRA, No. 91-1219 (D.C. Cir. May 10, 1991) (proposal requiring that the agency comply with, among other things, all applicable rules and regulations in establishing and administering its drug testing program was negotiable as an appropriate arrangement).

We find that the reasoning in AFGE and Education, Veterans Administration and Department of Education is applicable to the provision in this case because this provision also involves the issue of agency compliance with regulations in the exercise of management rights. To ignore those cases in our consideration of this provision would lead to conflicting and anomalous results in similar provisions. See, for example, American Federation of Government Employees, AFL-CIO, Local 3457 and U.S. Department of the Interior, Minerals Management Service, New Orleans, Louisiana, 39 FLRA 1276, 1278 (1991), petition for review filed sub nom. U.S. Department of the Interior, Minerals Management Service, New Orleans, Louisiana, No. 91-1218 (D.C. Cir. May 10, 1991).

We find that this provision would serve as an arrangement for employees who are adversely affected by management's decision to contract out. By providing a mechanism to ensure Agency compliance with applicable regulations when contracting out, the provision would mitigate the adverse effect on employees of being deprived of the protections otherwise afforded by applicable regulations.

We also find that the arrangement is appropriate because it does not excessively interfere with management's right to contract out under section 7106(a)(2)(B) of the Statute. The provision would benefit employees by providing them with some assurance that contracting out would be conducted consistent with the applicable regulations. Moreover, the provision would enable employees to challenge alleged noncompliance through the negotiated grievance and arbitration procedures. Providing access to negotiated grievance and arbitration procedures to challenge an agency's compliance with its regulations constitutes a significant benefit. See AFGE and Education, 42 FLRA at 540.

On the other hand, the provision would merely require the Agency to comply with applicable regulations when contracting out. As we have previously stated, "the existence of applicable laws, rules and regulations already serves to limit agency action and indicates that an agency's interest in being able to act without regard to those provisions and without challenge to the legality of its action, such as in arbitration procedures, is negligible." Department of Education, 38 FLRA at 1078. Additionally, as we have noted, "[i]t is a familiar rule of administrative law that an agency must abide by its own regulations." AFGE and Education, 42 FLRA at 540, quoting Fort Stewart Schools v. FLRA, 110 S. Ct. 2043, 2051 (1990). Moreover, like the proposal at issue in AFGE and Education, this provision neither precludes the Agency from revising or rescinding any issued regulations over which it has control nor obligates the Agency to issue any regulations. We find, therefore, that the provision does not excessively interfere with management's right to contract out. See AFGE and Education, 42 FLRA at 539-41; Veterans Administration, 40 FLRA at 681-82; Department of Education, 38 FLRA at 1078. Accordingly, we conclude that the provision constitutes a negotiable appropriate arrangement under section 7106(b)(3) of the Statute to the extent that it concerns regulations not having the force and effect of law.

C. Summary

The provision does not directly interfere with management's right to make determinations with respect to contracting out to the extent that it concerns laws and regulations that have the force and effect of law, including OMB Circular A-76. The provision constitutes an appropriate arrangement within the meaning of section 7106(b)(3) of the Statute to the extent that it concerns regulations that do not have the force and effect of law. Consequently, the provision is negotiable.

V. Order

The Agency shall rescind its disapproval of the provision.(*)

 




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

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