46:1063(97)AR - - Treasury, IRS, Washington, DC and NTEU - - 1992 FLRAdec AR - - v46 p1063
[ v46 p1063 ]
The decision of the Authority follows:
46 FLRA No. 97
FEDERAL LABOR RELATIONS AUTHORITY
U.S. DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
NATIONAL TREASURY EMPLOYEES UNION
December 31, 1992
Before Chairman McKee and Members Talkin and Armendariz.
I. Statement of the Case
This matter is before the Authority on exceptions to awards of Arbitrator Jerome H. Ross filed by the Agency 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 Union filed an opposition to the Agency's exceptions.
The Arbitrator sustained a grievance filed by the Union on behalf of Revenue Officers who are paid at rates higher than GS-10, Step 1, and who had been declared exempt by the Agency from coverage under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., for purposes of overtime pay. In his award on the merits (merits award), the Arbitrator found that the primary duties of Revenue Officers constituted production work of the Agency and did not constitute duties that would qualify those employees as bona fide administrative employees exempt from FLSA coverage under section 213(a) of the FLSA and regulations of the Office of Personnel Management (OPM).
In a subsequent proceeding to determine a remedy, the Arbitrator issued a supplemental opinion and award (remedy award) ordering the Agency to pay the affected employees backpay for lost overtime wages plus an equal amount as liquidated damages. The Agency has filed exceptions to both awards. For the following reasons, we will deny the Agency's exceptions.(1)
II. Background and Arbitrator's Awards
A. Merits Award
The Union filed a grievance alleging that the Agency had improperly declared Revenue Officers paid at rates higher than GS-10, Step 1, exempt from coverage under the FLSA on the ground that they were bona fide administrative employees. The grievance was not resolved and was submitted to arbitration on the following stipulated issues:
1. Whether [the Agency] properly determined that [Agency] Revenue Officers, GS-1169-9/11/12, are employed in a bona fide administrative capacity, as provided for at section 213(a)(1) of the FLSA, and therefore are exempt from the overtime pay provisions set forth in section 207 of the FLSA.
2. If Revenue Officers are not employed in a bona fide administrative capacity, whether the violation was willful so as to add one year to the FLSA statute of limitations.
3. If Revenue Officers are not employed in a bona fide administrative capacity, whether [the Agency] acted in good faith with reasonable grounds for believing that its failure to pay Revenue Officers overtime did not violate the FLSA.
Merits award at 1-2.
The Agency contended before the Arbitrator that it properly exempted Revenue Officers at the GS-9/11/12 level from FLSA coverage in accordance with the FLSA regulations issued by OPM that are applicable to Federal employees. The Agency also contended that the regulations issued by the Department of Labor (DOL) were not applicable in this case. The Agency argued that the Revenue Officers at the GS-9/11/12 level performed duties that made them bona fide administrative employees under section 213(a)(1) of the FLSA and 5 C.F.R. § 551.205. The Union contended that the Revenue Officers were not bona fide administrative employees under either DOL or OPM regulations. The parties made "extensive stipulations of fact" as to the duties performed by Revenue Officers. Id. at 4. The Arbitrator noted that "the primary duty of all Revenue Officers is to collect delinquent accounts, secure delinquent tax returns, conduct tax investigations, participate in compliance programs and counsel taxpayers as to their obligations." Id. at 5.
The Arbitrator first rejected the Agency's contention that the grievance was not arbitrable because the Union had failed to obtain written consent forms from any of the Revenue Officers who were grievants as required under section 216(b) of the FLSA. The Arbitrator noted that under Carter v. Gibbs, 909 F.2d 1452 (Fed. Cir.), cert. denied sub nom. Carter v. Goldberg, 111 S. Ct. 46 (1990), the negotiated grievance and arbitration procedure under section 7121(a) of the Statute is the proper forum for adjudicating FLSA claims by Federal employees. He ruled that the consent form requirement is applicable only to FLSA claims brought outside the negotiated grievance procedure. Consequently, he found that the grievance in this case was arbitrable.
The Arbitrator reviewed the history of the FLSA overtime provisions and noted that those provisions became applicable to Federal employees in 1974 and that OPM's predecessor agency, the Civil Service Commission (CSC), was charged with administering the FLSA with respect to Federal employees. He noted that the applicable OPM regulations concerning the exemption of employees from FLSA coverage on the ground that they are bona fide administrative employees are contained in 5 C.F.R. § 551 and Federal Personnel Manual (FPM) Letter 551-7.(2) The Arbitrator found that the Agency had applied the OPM regulations to exempt the Revenue Officers from FLSA coverage. He noted the parties' stipulation that the "exemptions must be narrowly construed" and he added that OPM's FLSA regulations must be applied in a manner that is consistent with the DOL regulations. Id. at 16.
The Arbitrator agreed with the Agency that the Revenue Officers would be exempt from the FLSA "if their primary duty consists of work that 'significantly affects the . . . execution of management policies or programs.'" Id. at 17, citing 5 C.F.R. § 551.205(a)(1) (footnote omitted). Noting that those terms were not defined by OPM, the Arbitrator stated that "it is appropriate, in interpreting the OPM regulations, to look to judicial and administrative rulings with respect to the DOL's interpretation and application of the administrative employee exemption in the non-[F]ederal public sector." Id. at 18. The Arbitrator found that DOL and OPM used similar language in defining administrative employees as those employees engaged in primary duties directly related to the administrative operations and management policies of a business. He noted that DOL distinguishes employees engaged in "production work" from those engaged in administrative work. Id. at 19. Applying that distinction to the case at hand, the Arbitrator concluded that if the duties of a Federal employee are primarily concerned with the production work of an agency, then that employee is not exempt from coverage under the FLSA. The Arbitrator stated that "a [F]ederal employee's 'primary duty' does not consist of work that 'significantly affects the . . . execution of management policies or programs' within the meaning of [5 C.F.R. § 551.205] if that employee is primarily performing line activities that carry out the mission and day-to-day functions of the agency, i.e., is primarily engaged in the 'production' work of the agency." Id. at 22 (emphasis deleted).
The Arbitrator specifically rejected the testimony of an employee of OPM appearing as an Agency witness at the hearing that "'management policies or programs' within the meaning of [5 C.F.R. § 551.205] include the agency's mission itself -- in the case of the [Agency], the collection of taxes." Id., n*. The Arbitrator stated that the testimony of the OPM witness "is rejected as contrary to the accepted administrative/production distinction followed by the DOL and to the CSC's statement in [FPM Letter No. 551-7] that its interpretations of the FLSA exemptions are intended to be consistent with the DOL's interpretations of the exemptions." Id.
The Arbitrator stated that "the primary duty of a Revenue Officer involves the ongoing day-to-day 'production' operations" of the Agency and does not constitute "work that 'significantly affects the . . . execution of management policies or programs . . . .' within the meaning of [5 C.F.R. § 551.205]." Id. at 23-24 (footnote omitted). He concluded that the Agency had applied the OPM regulation "too broadly, in a manner inconsistent with the intended scope of the regulation." Id. at 24 (footnote omitted). The Arbitrator sustained the grievance and reserved jurisdiction to resolve any disputes over the appropriate remedy.
B. Remedy Award
The Arbitrator issued a supplemental opinion and award to establish a remedy for the Agency's violation of the FLSA. The Union claimed that the grievants were entitled to receive liquidated damages in an amount equal to the amount of backpay for overtime to which they were entitled. The Agency argued that liquidated damages are not permitted under the Statute, and, even if they were permitted, the Agency denied that it had failed to act in good faith in finding Revenue Officers exempt from FLSA coverage.
The Arbitrator stated that he was acting under the authority given arbitrators in Carter v. Gibbs as "the exclusive forum for [F]ederal employees subject to a collective bargaining agreement to enforce their FLSA rights." Remedy award at 1-2. He noted that section 216 of the FLSA provides for liquidated damages for FLSA violations unless the employer can show that the violation was made in good faith and was not willful. The Arbitrator found that nothing in the Civil Service Reform Act (CSRA) precluded the imposition of a remedy provided by the FLSA from being enforced and that "the granting of liquidated damages is properly viewed as awarding compensation arising out of the FLSA violation, as opposed to a remedy which supplements any established CSRA remedial system." Id. at 2.
The Arbitrator stated that "[a]lthough [F]ederal agencies are required to follow the regulations of [OPM] regarding the FLSA, the record reflects that the Agency made no effort to request OPM guidance on whether Revenue Officers should be exempted--even following issuance of the opinion letters of the Secretary of Labor applying the administrative employee exemption criteria to public employees." Id. at 3. He concluded that the Agency's failure to seek such guidance "indicates a lack of good faith, notwithstanding [the Agency's] opinion that the matter involved close questions of fact and law." Id. The Arbitrator ordered the Agency to pay the grievants liquidated damages.
III. Positions of the Parties
A. The Agency
1. Exceptions to Merits Award
The Agency contends that the Arbitrator's merits award is contrary to the FLSA and OPM Government-wide regulations. The Agency asserts that the Arbitrator exceeded his authority by not following OPM's interpretation of its FLSA regulations and by modifying those regulations with the Arbitrator's own interpretation. The Agency disagrees with the Arbitrator's determination that the duties performed by Revenue Officers are not administrative duties as defined in 5 C.F.R. § 551.205. The Agency contends that the Arbitrator improperly rejected the testimony of the OPM witness at the hearing and maintains that the Arbitrator improperly applied the regulations of DOL to determine that the Revenue Officers are not exempt from FLSA coverage because their duties constitute production work of the Agency.
The Agency contends that OPM is entitled to a high degree of deference in its interpretation of its regulations, particularly "when it exercises its special function of applying and administering the FLSA." Memorandum in Support of Exceptions at 7 (footnote omitted). The Agency asserts that in this case there was no dispute of fact as to the duties performed by Revenue Officers and the grievance constituted a challenge to OPM's interpretation of its regulations governing exemption from FLSA coverage. The Agency contends that the Arbitrator "failed to afford OPM the deference required by law, and instead . . . extended the interpretation of [DOL] regulations to OPM regulations." Id. at 8. The Agency contends that the Arbitrator's award "clearly modifies and invalidates a [G]overnment-wide regulation." Id. at 10 (footnote omitted).
2. Exceptions to Remedy Award
The Agency contends that the Arbitrator's award of liquidated damages is contrary to 29 U.S.C. §§ 204(f) and 216(b). With respect to section 216(b) of the FLSA, the Agency contends that that provision provides for liquidated damages for FLSA violations only when actions are brought in Federal or state courts and that there is no provision for liquidated damages in arbitration proceedings. The Agency maintains that section 216(b) constitutes a waiver of the sovereign immunity of the United States only for actions brought in Federal and state courts and that Congress did not intend for sovereign immunity to be waived in arbitrations. The Agency asserts that there is no provision for liquidated damages in arbitration proceedings in either the FLSA or the CSRA and that there is no legal basis for the Arbitrator's award of liquidated damages in this case.
The Agency also contends that the award is contrary to section 204(f) of the FLSA because the award erroneously finds that the Agency did not seek guidance from OPM. The Agency maintains that it followed the OPM regulations in determining that Revenue Officers paid at levels above GS-10, Step 1, were exempt from FLSA coverage. The Agency states that it "reviewed the exemption status of Revenue Officers when the SPDs [standard position descriptions] were prepared, as part of the classification process and [the Revenue Officers'] FLSA status is reflected on the SPDs." Exceptions to remedy award at 6 (citation omitted). The Agency contends that it had no obligation to seek an advisory opinion from OPM and argues that, even if it had sought an advisory opinion, the opinion would have been prepared by the same OPM official who appeared as an Agency witness at the arbitration hearing. Citing Amos v. United States, 13 Cl. Ct. 442, 451 (1987) (Amos), the Agency contends that its "failure to secure an advisory opinion does not mean that [its] actions were willful." Id. at 7. The Agency asserts that its decision to exempt the Revenue Officers from FLSA coverage was made openly and in good faith. The Agency also denies that it had any obligation to consider the letters issued by the Secretary of Labor giving an advisory opinion concerning the exemption of administrative employees under the non-Federal administration of the FLSA.
B. The Union
1. Merits Award
The Union contends that the Arbitrator's award finding that the Agency improperly exempted Revenue Officers from FLSA coverage is not deficient and that the Arbitrator correctly applied the applicable OPM regulations. The Union denies the Agency's contention that the Arbitrator improperly modified the OPM regulations and rejected the testimony of the OPM witness at the hearing. The Union maintains that the Arbitrator was performing his proper function of interpreting the OPM regulations and examining the Agency's application of those regulations. The Union contends that the circumstances in this case are similar to those in U.S. Department of Health and Human Services, Social Security Administration, Baltimore, Maryland and American Federation of Government Employees, 44 FLRA 773 (1992) (HHS), and that HHS is determinative of this case.
The Union asserts that the Arbitrator properly applied the OPM regulations to determine that the primary duty of Revenue Officers "does not consist of work that significantly affects the formulation or execution of management policies and programs[,]" and that the Arbitrator properly distinguished production work from staff work to find those employees nonexempt from FLSA coverage. Opposition at 8. The Union cites Adam v. United States, 26 Cl. Ct. 782 (1992) (Adam) in support of its position that the Arbitrator properly considered the DOL regulations in making his award. The Union contends that the Arbitrator correctly applied FPM Letter 551-7 and the principle that FLSA exemptions must be narrowly construed. The Union also contends that the Arbitrator properly rejected the testimony of the OPM witness because that witness did not speak officially for OPM. The Union asserts that there is no merit to the Agency's argument that the OPM witness' testimony is entitled to deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (Chevron).
2. Remedy Award
The Union denies that the award of liquidated damages is contrary to section 216(b) of the FLSA. The Union asserts that that provision applies to the Federal Government as an employer as well as to other employers in the private and non-Federal public sectors. The Union maintains that the Arbitrator's award of liquidated damages is permissible under both the FLSA and the Statute. The Union denies that section 216(b) of the FLSA applies only to Federal and state courts and maintains that Congress' waiver of sovereign immunity in enacting section 216(b) is enforceable in arbitration proceedings as well as in the courts. The Union argues that to deny an arbitrator the power to award liquidated damages under section 216(b) "would undermine FLSA enforcement in the [F]ederal sector." Opposition at 22.
The Union asserts that the Arbitrator properly found that liquidated damages were warranted in this case because the Agency failed to demonstrate that it acted in good faith when it declared the grievants exempt from FLSA coverage. The Union asserts that under the FLSA, "liquidated damages are compensatory and not penal in nature. . . . [and] are intended to reimburse employees for the losses they may have suffered as a result of not receiving timely payment of their lawful wage." Id. at 24 (emphasis and citations omitted). The Union maintains that the Agency failed to meet its heavy burden of showing that it acted in good faith and failed to present evidence bearing on its decision to declare the Revenue Officers exempt from FLSA coverage.
IV. Analysis and Conclusions
A. Merits Award
For the reasons set forth below, we conclude that the Agency has failed to demonstrate that the Arbitrator's merits award is deficient. The Agency has not shown that the Arbitrator's determination that it improperly designated the Revenue Officer grievants as bona fide administrative employees is contrary to law or regulation.
In HHS, which involved an issue substantively similar to the issue in this case, we discussed in detail the legal framework governing the application of the OPM regulations concerning the exemption of Federal employees from coverage under the FLSA. See 44 FLRA at 789-94. We held that the arbitrator in that case properly found that the OPM FLSA regulations were incorrectly applied by the agency when it declared certain employees exempt from FLSA coverage on the ground that those employees were administrative employees under section 213(a) of the FLSA. We specifically rejected the agency's argument that the arbitrator was required to accept the testimony of the same OPM witness who testified at the hearing in the present case. We also rejected the agency's contention that the arbitrator failed to give proper deference to OPM's interpretation of those regulations as set forth by the witness. We found that the arbitrator had appropriately applied the OPM regulations in 5 C.F.R. § 551.205(a) and the guidelines for application of the regulations contained in FPM Letter 551-7 when he concluded that the agency had improperly exempted the grievants from FLSA coverage as administrative employees.
In HHS, we found that the arbitrator had properly compared the administrative employee definition established by OPM to the actual work performed by the grievants and that he had properly declined to accept the opinions of OPM and agency witnesses in reaching his decision that the grievants were not exempt from FLSA coverage because they were administrative employees. We rejected the agency's contention that the case was governed by Chevron. We found that the case did not concern the validity or the interpretation of OPM's regulations governing exemptions from the FLSA but, rather, the agency's application of those regulations.
We reject the Agency's contention that HHS is not applicable to the present case. The Agency contends that HHS concerned a question of fact, while this case concerns the Arbitrator's interpretation of the OPM regulations. However, we find that, as in HHS, the Arbitrator determined that the duties performed by the grievants did not satisfy the definition of administrative employee for purposes of determining exemption from FLSA coverage under section 213(a) of the FLSA. We find no deficiency in the Arbitrator's determination that the Agency had applied the OPM regulations incorrectly when it declared the Revenue Officers GS-9, 11, and 12 exempt from FLSA coverage.
We also reject the Agency's argument that the Arbitrator exceeded his authority and improperly modified and invalidated OPM's regulations when he considered the DOL regulations applicable to section 213(a) exemptions from FLSA coverage in making his award. In that regard, we agree with the Union that the United States Claims Court disposed of that issue in Adam when the court ruled as follows concerning the effect of the DOL regulations on the OPM regulations:
Even short of an outright conflict as between the two agencies, however, the DOL regulations can be used to shed light on the [FLSA]. Other than the statute itself, the OPM regulations are obviously the first point of reference that [F]ederal employers must use in implementing the FLSA. But in construing those regulations, the court is not barred, but rather is encouraged to consider the DOL's regulations and other interpretations of the statute. Although the OPM regulations are presumptively controlling, both sets of regulations are of value to the court. . . . For these reasons, we believe the Labor Department materials provide guidance helpful to our construction of not only the FLSA, but also the OPM regulations.
26 Cl. Ct. at 786 (citations omitted).
Under the precedent established in Adam and HHS, the Arbitrator in this case could properly consider the DOL regulations defining administrative employees in determining whether the Agency had properly applied the OPM regulations. The Agency has not shown that the Arbitrator's award is contrary to law or regulation. The Agency is merely disagreeing with the Arbitrator's evaluation of the evidence in deciding the issue before him, which provides no basis for finding the award deficient. See HHS, 44 FLRA at 797. Accordingly, we will deny the Agency's exceptions to the Arbitrator's merits award.
B. Remedy Award
We conclude that the Agency has failed to demonstrate that the Arbitrator's award of liquidated damages is contrary to law. Accordingly, we will deny the Agency's exceptions to the Arbitrator's remedy award.
The FLSA provides that "any employer who violates [the overtime provisions of the FLSA] shall be liable to the employee or employees affected in the amount of their . . . unpaid overtime compensation . . . and in an additional equal amount as liquidated damages." 29 U.S.C. § 216(b). Further, the FLSA provides: "An action to recover the liability [for overtime compensation and liquidated damages] may be maintained against any employer (including a public agency) in any Federal or State court of competent jurisdiction . . . ." Id. The United States Government is an "employer" and is a "public agency" for purposes of the FLSA. 29 U.S.C. § 203(d) and (x). Therefore, the United States Government, including the Agency in this case, can be held liable for the payment of liquidated damages to remedy a violation of the FLSA.
We reject the Agency's contention that there has been no waiver of sovereign immunity under this section of the FLSA on the ground that 29 U.S.C. § 216(b) applies only to suits brought in Federal or state courts. We addressed an issue similar to this in U.S. Department of Defense, Army and Air Force Exchange Service and American Federation of Government Employees, 45 FLRA 674, 685-90 (1992) (AAFES). In AAFES, the Authority found a waiver of sovereign immunity based on the Prevailing Rate Systems Act of 1972 (5 U.S.C. §§ 5341-5349) and AR 60-21/AFR 147-15. We concluded that an arbitrator's award based on the Prevailing Rate Systems Act, which provided a substantive right to money damages, was enforceable against the United States. Noting the decision in Carter v. Gibbs, we found that there was no basis on which to sustain the claim of sovereign immunity simply because the exclusivity of the negotiated grievance procedure precludes access to Federal courts by unit employees. See 45 FLRA at 686. Thus, we concluded that where claims are covered by a negotiated grievance procedure and compensation is payable under the Back Pay Act, appropriate authorities, including arbitrators, enforcing a statute that explicitly authorizes damage claims against the United States have jurisdiction to award compensation.
We also conclude that the Agency's reliance on Amos is misplaced. In Amos, the court addressed two aspects of the consequences of the agency's violation of the FLSA. The first concerned the application of a 3-year instead of a 2-year statute of limitations under 29 U.S.C. § 255, which provides that an FLSA cause of action "arising out of a willful violation" is subject to the longer statute of limitations. The second matter addressed by the court in Amos concerned liquidated damages under 29 U.S.C. § 260, which permits a court to waive liquidated damages where an employer can show that an FLSA violation was made in good faith. The court held with regard to the statute of limitations issue that the agency's designation of certain employees as exempt from FLSA coverage was not willful and stated that "[t]he fact that a formal ruling or opinion was not sought by the [agency] from the CSC or OPM does not necessarily mean that the [agency's] actions were willful." 13 Cl. Ct. at 451. In addressing the issue of liquidated damages, the court held that the agency's action, although erroneous, "was not intentional error in spite of the fact that there was no specific advance ruling obtained by the defendant in conjunction with the determination of exempt status for cook foremen." Id. The court noted that "[m]uch of the evidence . . . is in direct conflict." Id.
The Agency in this case is attempting to apply the court's statements in Amos to the Arbitrator's consideration of the issue of liquidated damages in a different situation. The Arbitrator had the authority under 29 U.S.C. § 260 to find that liquidated damages were not warranted if the Agency had demonstrated to the Arbitrator that its exemption of the Revenue Officers was done in good faith. The Agency did not do that. The Arbitrator specifically ruled that the Agency's failure to secure guidance from OPM "indicates a lack of good faith." Remedy award at 3. The Agency has not shown that the Arbitrator's conclusions concerning the Agency's good faith are contrary to law. The Agency's exceptions constitute disagreement with the Arbitrator's findings and conclusions, and as such provide no basis for finding the award deficient. For example, National Association of Government Employees, Local R4-78 and U.S. Department of Veterans Affairs, Medical Center, Martinsburg, West Virginia, 46 FLRA 631, 637 (1992). Accordingly, we will deny the Agency's exceptions to the Arbitrator's remedy award.
The Agency's exceptions to the Arbitrator's merits and remedy awards are denied.
29 U.S.C. § 203(d) provides, in relevant part:
"Employer" includes any person acting directly or indirectly in the interest of an employer in relation to an employee and includes a public agency . . . .
29 U.S.C. § 203(x) provides:
"Public agency" means the Government of the United States; the government of a State or political subdivision thereof; any agency of the United States (including the Unites States Postal Service and Postal Rate Commission), a State, or a political subdivision of a State, or any interstate governmental agency.
29 U.S.C. § 204(f) provides, in relevant part:
Notwithstanding any other provision of this Chapter, or any other law, the Director of the Office of Personnel Management is authorized to administer the provisions of this Chapter with respect to any individual employed by the United States . . . .
29 U.S.C. § 216(b) provides, in relevant part:
Any employer who violates the provisions of section 206 or section 207 of this title shall be liable to the employee or employees affected in the amount of their . . . unpaid overtime compensation . . . and in an additional equal amount as liquidated damages. . . . An action to recover the liability prescribed in either of the preceding sentences may be maintained against any employer (including a public agency) in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. . . .
29 U.S.C. § 255 provides, in relevant part:
Any action commenced on or after May 14, 1947, to enforce any cause of action for . . . unpaid overtime compensation, or liquidated damages, under the Fair Labor Standards Act of 1938 . . .
(a) . . may be commenced within two years after the cause of action accrued,. . . except that a cause of action arising out of a willful violation may be commenced within three years after the cause of action occurred.
29 U.S.C. § 260 provides, in relevant part:
In any action . . . to recover . . . unpaid overtime compensation, or liquidated damages, under the Fair Labor Standards Act of 1938, as amended, . . . if the employer shows to the satisfaction of the court that the act or omission giving rise to such action was not a violation of the Fair Labor Standards Act of 1938, as amended, the court may, in its sound discretion, award no liquidated damages or award any amount thereof not to exceed the amount specified in section 216 of this title.
5 C.F.R. § 551.205 provides:
§ 551.205 Administrative exemption criteria.
An administrative employee is an advisor, assistance [sic], or representative of management, or a specialist in a management or general business function or supporting service who meets all of the following criteria:
(a) The employee's primary duty consists of work that--
(1) Significantly affects the formulation or execution of management policies or programs; or
(2) Involves general management or business functions or supporting services of substantial importance to the organization serviced; or
(3) Involves substantial participation in the executive or administrative functions of a management official.
(b) The employee performs office or other predominantly nonmanual work which is--
(1) Intellectual and varied in nature: or
(2) Of a specialized or technical nature that requires considerable special training, experience, and knowledge.
(c) The employee must frequently exercise discretion and independent judgment, under only general supervision, in performing the normal day-to-day work.
(d) In addition to the primary duty criterion that applies to all employees, General Schedule employees classified at GS-5 or GS-6 (or the equivalent in other white collar systems) must spend 80 percent or more of the worktime in a representative workweek on administrative functions and work that is an essential part of those functions.
29 C.F.R. § 541.205(a) provides:
§ 541.205 Directly related to management policies or general business operations.
(a) The phrase "directly related to management policies or general business operations of his employer or his employer's customers" describes those types of activities relating to the administrative operations of a business as distinguished from "production" or, in a retail or service establishment, "sales" work. In addition to describing the types of activities, the phrase limits the exemption to persons who perform work of substantial importance to the management or operation of the business of his employer or his employer's customers.
29 C.F.R. § 541.206(a) provides, in relevant part:
§ 541.206 Primary duty.
(a) The definition of "administrative" exempts only employees who are primarily engaged in the responsible work which is characteristic of employment in a bona fide administrative capacity. Thus, the employee must have as his primary duty office or nonmanual work directly related to management policies or general business operations of his employer or his employer's customers[.]
Attachment to FPM Letter 551-7, provides, in relevant part:
A. Definitions of Executive, Administrative and Professional Employees
. . . .
2. Administrative Employees: An administrative employee is an advisor, assistant or representative of management, or a specialist in a management or general business function or supporting service whose position meets the criteria in subsections a. through e., below:
a. The employee's primary duty consists of work that:
(1) Significantly affects the formulation or execution of management policies or programs; or
(2) Involves general management or business functions or supporting services of substantial importance to the organization serviced; or
(3) Involves substantial participation in the excutive or administrative functions of a management official.
. . . .
B. General Guidance to Application of Executive, Administrative and Professional Exemption Definitions
1. Meaning of Terms:
. . . .
g. Formulation or execution of management policies or programs: Management policies and programs range from broad national goals that are expressed in statutes or Executive Orders to specific objectives of a small field office. Employees may actually make policy decisions or participate indirectly, through developing proposals that are acted on by others. Employees who significantly affect the execution of management policies or programs typically are those whose work involves obtaining compliance with such policies by other individuals or organizations, within or outside of the Federal Government, or making significant determinations in furtherance of the operation of programs and accomplishment of program objectives.
Administrative employees engaged in formulation or execution of management policies or programs typically perform one or more phases of program management (i.e., planning, developing, promoting, coordinating, controlling, or evaluating operating programs of the employing organization or of other organizations subject to regulation or other controls). Some of these employees are classified in occupations that reflect these functions (e.g., program analyst) but many are classified in subject matter occupations.
h. General management, business, or supporting services: This element brings into the general administrative category a wide variety of specialists who provide general management, business, or other supporting services as distinguished from production functions. The administrative employees in this category provide support to line managers by:
(1) Providing expert advice in specialized subject matter fields, such as that provided by management consultants or systems analysts;
(2) Assuming facets of the overall management function, such as safety management, personnel management, or budgeting and financial management;
(3) Representing management in such business functions as negotiating and administering contracts, determining acceptability of goods or services, or authorizing payments; or
(4) Providing supporting services, such as automated data processing, communications, or procurement and distribution of supplies.
Neither the organizational location nor the number of employees performing identical or similar work changes general management, business or servicing functions into production functions. However[,] to warrant exemption, each employee's work must involve substantial discretion on matters of enough importance that the employee's actions and decisions have a noticeable impact on the effectiveness of the organization advised, represented, or serviced.
(If blank, the decision does not have footnotes.)
1. The Agency's exceptions to the Arbitrator's award on the merits have been given Authority docket number 0-AR-2287. The Agency's exceptions to the Arbitrator's award of a remedy have been given Authority docket number 0-AR-2294. The cases have been consolidated for decision.
2. The relevant portions of applicable statutory and regulatory provisions are set forth in the Appendix to this decision.