54:1316(111)AR - - Panama Canal Commission and International Organization of Masters, Mates and Pilots, Panama Canal Pilots Branch - - 1998 FLRAdec AR - - v54 p1316



[ v54 p1316 ]
54:1316(111)AR
The decision of the Authority follows:


54 FLRA No. 111

FEDERAL LABOR RELATIONS AUTHORITY

WASHINGTON, D.C.

_____

PANAMA CANAL COMMISSION

(Agency)

and

INTERNATIONAL ORGANIZATION OF

MASTERS, MATES AND PILOTS

PANAMA CANAL PILOTS BRANCH

(Union)

0-AR-2988

_____

DECISION

October 21, 1998

_____

Before the Authority: Phyllis N. Segal, Chair; Donald S. Wasserman and Dale Cabaniss, Members.

Decision by Member Cabaniss for the Authority.

I. Statement of the Case

This matter is before the Authority on exceptions to an award 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 Regulations. The Union filed an opposition to the Agency's exceptions.

The Arbitrator sustained a grievance regarding the Agency's failure to comply with negotiated pay rates and differentials, and also awarded the grievants backpay and interest on the amount owed.

For the following reasons, we conclude that the Agency has failed to establish that the award is deficient. Accordingly, we deny the Agency's exceptions.

II. Background and Arbitrator's Award

The grievants are grades CP04, Step 8 and CP05 Panama Canal pilots. The parties, in Appendix A to their October 1994 Memorandum of Understanding (MOU), negotiated a basic pay schedule for Canal pilots which included a provision stating that "[t]he 15 percent tropical differential will be paid where applicable." Award at 3.(1) The October 1994 MOU, without Appendix A, was subsequently incorporated into the parties' collective bargaining agreement through a second MOU in December 1994. The December 1994 MOU referenced Appendix A and provided that Appendix A would have the same effective and expiration dates as the new collective bargaining agreement. According to Agency regulations set forth in 35 C.F.R. § 251.25(a), the grievants' basic pay includes a 15 percent tropical differential, as set forth in 35 C.F.R. § 251.31. However, 35 C.F.R. § 251.25(b) sets a limit on the amount of basic pay, i.e., that it may not exceed Level V of the Executive Schedule.

In January 1995, 1996, and 1997, the Canal pilots received pay increases; however, each year the grievants received a reduction in their 15 percent differentials to the extent that their basic pay exceeded Level V of the Executive Schedule, pursuant to 35 C.F.R. § 251.25(b).

The Union filed a grievance alleging that the Agency failed to comply with the negotiated pay rates and differentials contained in Appendix A, Section 1, of the October 1994 MOU. The Agency denied the grievance, and the grievance was submitted to arbitration. In the absence of the parties' stipulation to the issue, the Arbitrator framed the issue as follows:

Whether application of 35 C.F.R. [§] 251.25(b) to Panama Canal pilots with respect to the 15 [percent] tropical differential is a violation of Appendix A, section 1(b) of the December 1, 1994 Memorandum of Understanding.

Award at 1.

According to the Arbitrator, the Union contended that the Authority has held that these particular Agency regulations are not Government-wide rules and regulations and that collective bargaining proposals which conflict with them are negotiable. The Union argued that the negotiated pay rates provided in Appendix A supersede 35 C.F.R. § 251.25(b). The Agency contended, before the Arbitrator, that although Appendix A constitutes a valid, binding agreement on the parties on rates of pay for pilots, it is not part of the parties' collective bargaining agreement, and therefore, does not overrule existing Agency regulations. Additionally, the Agency argued that there is no conflict between Appendix A, section 1(b) and any of the relevant regulations.

The Arbitrator found that "[t]he December 1, 1994 [MOU] was the vehicle through which Appendix A . . . was placed in the [collective bargaining] [a]greement." Award at 8. Moreover, the Arbitrator determined that there was "no merit in the [Agency's] asserted distinction between a bargained contract provision and a negotiated binding agreement which, while not a contract provision, is a valid agreement between the parties." Id. The Arbitrator concluded that because Appendix A, section 1(b) "clearly and unambiguously provides for payment of the 15 percent tropical differential to pilots[,] [t]he parties' adoption of the [Agency's] proposal which contained the phrase 'where applicable' is reasonably construed as their agreement on the general principle of payment of the 15 percent differential to pilots." Id. at 11.

The Arbitrator determined that there are "more specific considerations attendant to the application of 35 C.F.R., such as the 35 C.F.R. § 251.31 criteria concerning the continuous incumbency of an essential position and the employment status of a pilot's spouse[,]" which provide that specific criteria be applied to the circumstances of individual employees. Id. However, the Arbitrator found "no indication that the parties intended such specificity under the Appendix." Id. Additionally, the Arbitrator noted that if the Agency had intended to refer to the regulations, "it should have included the phrase 'in accordance with agency regulations,' . . . or some variation thereof, in its proposal." Id. at 11-12. The Arbitrator concluded that to the extent that 35 C.F.R. § 251.25(b) reduces the tropical differential below 15 percent, such regulations are inconsistent with Appendix A, and thus, Appendix A, section 1(b) supersedes the Agency's regulations.

As his award, the Arbitrator determined that by failing to pay the negotiated differentials and rates under Appendix A, the Agency violated the terms of Appendix A. The Arbitrator granted backpay and interest to the grievants.

III. Positions of the Parties

A. Agency's Exceptions

The Agency contends that the award granting payment in excess of Level V is inconsistent with the Agency's controlling regulation, 35 C.F.R. § 251.25(b), which explicitly proscribes payment of basic pay which exceeds Level V of the Executive Schedule. According to the Agency, in Fort Stewart Schools v. FLRA, 495 U.S. 641, 645 (1990) (Fort Stewart), the Supreme Court acknowledged "the dominance of agency rules and regulations." Exceptions at 3-4.

Additionally, the Agency alleges that the Arbitrator's finding that Appendix A is a valid bargained agreement which supersedes 35 C.F.R. § 251.25(b) fails to draw its essence from the parties' collective bargaining agreement. According to the Agency, the parties' "[collective bargaining agreement] does not address, much less control, the compensation matter grieved." Exceptions at 6. The Agency maintains that, in International Organization of Masters, Mates and Pilots, Marine Division, Panama Canal Pilots Branch and Panama Canal Commission, 52 FLRA 251, 255 (1996) (IOMMP), the Authority found only that Appendix A is a "valid binding agreement." According to the Agency, because Appendix A was negotiated during informal discussions during the pendency of a negotiability appeal before the Authority, it was not the product of collective bargaining under the Statute. The Agency claims that because Appendix A is not a part of the parties' collective bargaining agreement and was not negotiated within the meaning of the Statute, "it is impermissible to find that the [A]gency negotiated away its pre-existing agency regulation." Exceptions at 11. Therefore, the Agency argues that Appendix A does not supersede 35 C.F.R. § 251.25(b).

Alternatively, the Agency contends that the award does not draw its essence from the plain language or the bargaining history of Appendix A. The Agency asserts that "Appendix A was never intended to comprehensively cover the subject of basic pay" or the tropical differential and does not address the fundamental issue of basic pay limitation. Exceptions at 6. The Agency maintains that an exception to the pay cap was never negotiated. The Agency claims that there is no conflict between Appendix A and the Agency's regulations because the comprehensive rules regarding the tropical differential are set forth in 35 C.F.R. § 251, and therefore, the phrase "'where applicable' could only be a reference to the existing, long standing agency regulations." Id. at 12. According to the Agency, the award finds that the 'where applicable' language of Appendix A incorporates some of the regulations, such as 35 C.F.R. §§ 251.31 and 251.25(a), but negotiated away the pay limitation as set forth in 35 C.F.R. § 251.25(b). See id.

The Agency also claims that the Arbitrator did not resolve any ambiguity in Appendix A in accordance with the accepted rules of contract interpretation. Specifically, the Agency maintains that the Arbitrator did not consider the Agency's past practice and bargaining history to resolve any ambiguity between the agreement and the regulations.

B. Union's Opposition

The Union contends that the grievants are among those employees who may collectively bargain over wages, as acknowledged by the Supreme Court in Fort Stewart, 495 U.S. at 644. Moreover, the Union asserts that the Authority, in IOMMP, 52 FLRA at 255, held that "Appendix A constitutes a valid binding agreement by the parties on rates of basic pay for Canal pilots." The Union maintains that the "longstanding, uniformly and consistently applied practice" reducing the amount of the tropical differential, as referred to by the Agency, was applied to managerial pilots outside the bargaining unit, not to those pilots in the bargaining unit. Opposition at 3, n.1.

According to the Union, the Arbitrator found that Appendix A was a part of the parties' collective bargaining agreement by way of the December 1994 MOU. The Union maintains that the Agency is objecting to the Arbitrator's interpretation of the agreement. The Union cites Department of Defense, Defense Mapping Agency, Aerospace Center, St. Louis, Missouri and National Federation of Federal Employees, Local 1827, 43 FLRA 147, 153 (1991) for the proposition that an award that is based solely on an arbitrator's interpretation of the contract is not subject to review. The Union also claims that the Arbitrator applied a widely accepted rule of contract interpretation by finding that as the Agency was the drafter of section 1(b) of Appendix A, the language must be construed against the Agency. In response to the Agency's contention that there is no evidence that the parties negotiated an exemption to the pay cap, the Union asserts that "the written promise to pay 15 [percent] differential on top of base salary is all the evidence that is needed." Opposition at 8.

The Union alleges that despite the Agency's admission in its brief to the Arbitrator that "'Appendix A constitutes a valid binding agreement on rates of basic pay for Canal pilots,'" the Agency contends that Appendix A is not a valid binding agreement. Opposition at 9. The Union points out that the Authority, in IOMMP, 52 FLRA at 255, found that Appendix A was a valid binding agreement. The Union argues the Agency's claim that Appendix A was not negotiated within the meaning of the Statute contradicts the Authority's decision in IOMMP. According to the Union, the "Statute is a comprehensive statutory labor scheme, [and] any agreement negotiated between a Federal agency and an exclusive representative of its employees is, by definition, negotiated pursuant to the Statute." Opposition at 11. The Union also contends that the Arbitrator "correctly determined that Appendix A supersedes conflicting Agency regulations regardless of whether it is part of 'the' [parties'] agreement or merely 'a' collectively bargained agreement." Id. at 12.

Finally, the Union cites U.S. Department of the Army, Fort Campbell District, Third Region, Fort Campbell, Kentucky and American Federation of Government Employees, Local 2022, 37 FLRA 186, 195 (1990) (Fort Campbell), for the proposition that the Authority will only overturn an award that conflicts with "agency rules and regulations that are mandatory and prescriptive in their application." According to the Union, the Agency regulation at issue here is not mandatory and prescriptive, as the Agency is permitted to waive the pay cap when it would create practical difficulties or undue hardships.

IV. Analysis and Conclusions

A. The Award is Not Contrary to 35 C.F.R. § 251.25(b).

Under section 7122(a)(1) of the Statute, an arbitration award will be found deficient if it conflicts with any law, rule or regulation. Overseas Education Association and U.S. Department of Defense Dependents Schools, Arlington, Virginia, 51 FLRA 1246, 1251 (1996). As the Agency's exceptions involve the award's consistency with applicable regulations, the Authority reviews questions of law raised by the award and the Agency's exceptions de novo. National Treasury Employees Union, Chapter 24 and U.S. Department of the Treasury, Internal Revenue Service, 50 FLRA 330, 332 (1995). In applying a standard of de novo review, the Authority assesses whether an arbitrator's legal conclusions are consistent with the applicable standard of law. National Federation of Federal Employees, Local 1437 and U.S. Department of the Army, Army Research, Development and Engineering Center, 53 FLRA 1703, 1710 (1998). In making that assessment, the Authority defers to the arbitrator's underlying factual findings. See id.

Under section 7122(a)(1) of the Statute, the Authority will find an award deficient when it conflicts with a governing rule or regulation. For the purposes of section 7122(a)(1), the Authority has defined rule or regulation to include both Government-wide and governing agency rules and regulations. See U.S. Department of Defense, Army and Air Force Exchange Service, Dallas, Texas and American Federation of Government Employees, 53 FLRA 20, 26 (1997); Fort Campbell, 37 FLRA at 192. However, it is well established that parties' agreements, rather than agency regulations, govern the disposition of matters to which they both apply. E.g. United States Department of the Treasury, United States Customs Service, New York, New York and National Treasury Employees Union, Chapter 153, 51 FLRA 743, 746 (1996); Fort Campbell, 37 FLRA at 194.

In the instant case, the Agency's exception assumes that limitation of the pay to Level V of the Executive Schedule as set forth in 35 C.F.R. § 251.25(b) is dispositive of the issue concerning the inclusion of the full 15 percent tropical differential in the grievant's basic rate of pay. The Arbitrator found that both Appendix A, a valid binding agreement between the parties, and 35 C.F.R. § 251.25(b), an Agency regulation, pertain to the 15 percent tropical differential for Canal pilots. The Arbitrator, by finding that Appendix A was a "bargained contract provision[,]" essentially determined that Appendix A was a collectively bargained agreement. Award at 8. The Arbitrator interpreted Appendix A as establishing a basic rate of pay to include the full 15 percent tropical differential for the grievants. Consistent with Authority precedent, the Arbitrator correctly concluded that because Appendix A directly conflicted with the Agency regulation pertaining to payment of the 15 percent tropical differential, Appendix A superseded the Agency regulation.

Consequently, we find that the Agency's contention that the award is contrary to Agency regulations does not provide a basis for finding the award deficient as contrary to law.

B. The Award Does Not Fail to Draw Its Essence from Appendix A of the Parties' MOU.

1. Appendix A Constitutes an Agreement.

In order for an award to be found deficient because it does not draw its essence from the collective bargaining agreement, a party must show that the award: (1) cannot in any rational way be derived from the agreement; (2) is so unfounded in reason and fact and so unconnected with the wording and the purpose of the agreement as to manifest an infidelity to the obligation of the arbitrator; (3) evidences a manifest disregard for the agreement; or (4) does not represent a plausible interpretation of the agreement. See United States Department of Labor (OSHA) and National Council of Field Labor Locals, 34 FLRA 573, 575-76 (1990) (OSHA).

The Agency acknowledged that in IOMMP, 52 FLRA at 255, the Authority found that "Appendix A is a valid binding agreement by the parties on basic rates of pay for Canal pilots." Nevertheless, the Agency now argues that Appendix A was not intended to comprehensively cover the subject of basic rate of pay for the Canal pilots. Specifically, the Agency contends that the award fails to draw its essence from Appendix A because Appendix A is neither a part of the parties' collective bargaining agreement nor a collectively bargained agreement.

Furthermore, the Arbitrator concluded that there was no distinction between a bargained contract provision and a negotiated binding agreement, which, although not a contract provision, is a valid agreement between the parties. Thus, the Arbitrator interpreted Appendix A as a collectively bargained agreement by which the Agency relinquished its right to limit the grievants' basic rate of pay by reducing the 15 percent tropical differential. To the extent that the Agency's argument is premised on its disagreement with the Arbitrator's factual findings, the argument does not demonstrate that the award is deficient because the Authority defers to arbitral findings of fact. See Social Security Administration, Baltimore, Maryland and American Federation of Government Employees, 54 FLRA 600, 605 (1998) (where an agency disagrees with an arbitrator's factual findings, the Authority defers to the arbitrator's findings of fact); see also U.S. Department of the Air Force, Lowry Air Force Base, Denver, Colorado and National Federation of Federal Employees, Local 1497, 48 FLRA 589, 593-94 (the Authority will accord deference to an arbitrator's factual findings). Accordingly, we defer to the Arbitrator's finding of fact that Appendix A constitutes a collectively bargained agreement between the parties.

2. The Award Does Not Fail to Draw Its Essence from Appendix A.

Cases in which an award has been found to fail to draw its essence from the agreement contain a conflict between the arbitrator's interpretation of the agreement and an express provision of the agreement or an internal inconsistency between the Arbitrator's interpretation and a provision of the agreement. See OSHA, 34 FLRA at 576. The instant case involves an agreement addressing the basic pay rate of the grievants, which the parties submitted to arbitration for the Arbitrator's application and interpretation. It is this type of case that the Supreme Court addressed in United Paperworkers International v. Misco, Inc., 484 U.S. 29 (1987) (Misco). In Misco, the Court advised that when the parties have agreed to have their dispute settled by an arbitrator, it is the arbitrator's view of the meaning of the agreement they have agreed to accept. See id. at 37-38.

The Authority, following the Court in Misco, has held that an award will not be found to fail to draw its essence from the agreement merely because a party believes that the arbitrator misinterpreted the agreement. See OSHA, 34 FLRA at 576. The question of the interpretation of the parties' agreement is a question solely for the arbitrator because it is the arbitrator's construction of the agreement for which the parties have bargained. See id. Here, the Arbitrator found that the phrase "where applicable," in Appendix A is "construed as [the parties'] agreement on the general principle of payment of the 15 percent differential to pilots." Award at 11. The Arbitrator determined that the Agency, as the drafter of the proposal which became Appendix A, chose to use the general language, "where applicable" rather than the specific language, "in accordance with existing agency regulations," because the Agency did not "intend such specificity under the Appendix." Id. at 11-12. Consequently, the Arbitrator interpreted the Appendix as providing the full 15 percent tropical differential payment to the pilots.

The Agency's argument that the award fails to draw its essence from Appendix A constitutes a dispute with the Arbitrator's interpretation and application of the agreement. The Agency has not shown that the award is an irrational or implausible interpretation of Appendix A. Therefore, we find that the Agency has failed to show that the award does not draw its essence from Appendix A.

V. Decision

The Agency's exceptions are denied.




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