United States, Department of Commerce, Patent and Trademark Office (Agency) and Patent Office, Professional Association (Union)

[ v60 p839 ]

60 FLRA No. 158

UNITED STATES
DEPARTMENT OF COMMERCE
PATENT AND TRADEMARK OFFICE
(Agency)

and

PATENT OFFICE
PROFESSIONAL ASSOCIATION
(Union)

0-AR-3904

_____

DECISION

April 13, 2005

_____

Before the Authority: Dale Cabaniss, Chairman, and
Carol Waller Pope and Tony Armendariz, Members

I.     Statement of the Case

      This matter is before the Authority on exceptions to an award of Arbitrator Laurence M. Evans filed by the Agency under § 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 found that the Agency violated the parties' agreement. To remedy the violation, he directed the Agency to attempt, through discussions with the Union, to establish an alternative to a special pay rate increase that had been requested from, but denied by, the Office of Personnel Management (OPM).

      For the following reasons, we set aside the award.

II.     Background and Arbitrator's Award

      As relevant here, the parties engaged in partnership discussions to address various issues, including eliminating the use of paper patent files as well as obtaining special pay rates for certain categories of employees. During these discussions, the Union expressed concern that special pay rates would erode over time because, under 5 C.F.R. § 531.606, employees who receive special pay rates (special rate employees) are not permitted to receive locality pay increases [ v60 p840 ] received by other employees (non-special rate employees). [n1]  Specifically, the Union pointed out that the locality pay of non-special rate employees would increase over time to the point where they would be earning as much as the special rate employees.

      As a result of these discussions, the Agency agreed to request special pay rates from OPM, and the parties agreed to Section A.2 of the Millennium Agreement (MA), which provides:

The [Agency] shall request OPM approval for the next five years to increase the special schedule so as to maintain the 10% and 15% salary differentials relative to the updated [General Schedule] rates, in a manner consistent with OPM regulations. If OPM refuses the request, the Agency shall enter into discussions with [the Union] in order to provide substantially equivalent alternatives.

Award at 4.

      Subsequently, the Agency requested -- and received -- OPM approval to provide special pay rates. In 2002, non-special rate employees received a locality pay increase. Because special rate employees did not receive such an increase, the Agency requested OPM approval for an adjustment to the special rates. When OPM denied that request, the parties entered into the "discussions" required by the second sentence of Section A.2 of the MA.

      During the discussions, the Agency stated that it could not agree to provide an alternative to a special rate adjustment without receiving additional consideration from the Union, specifically, a guarantee of increased employee productivity. The Agency also stated that any alternative to a special rate increase would apply only prospectively, leaving special rate employees without additional compensation for 2002.

      The parties terminated discussions, and the Union filed a grievance. The grievance was unresolved and was submitted to arbitration, where the parties stipulated the issue as follows: "Did management violate Section A.2 of the [MA]? If so, what should the remedy be?" Award at 10.

      The Arbitrator found that the second sentence of Section A.2 was intended to address the adverse effect of an erosion in special rates, relative to the pay received by non-special rate employees, by providing a monetary alternative to a special rate increase in the event that OPM denied a request for such an increase. The Arbitrator found that the bargaining history of Section A.2 indicated that the Agency was attempting to find a way to combat its recruitment and retention problems.

      In addition, the Arbitrator determined that the second sentence of Section A.2 required the Agency to engage in discussions in good faith in an attempt to find a monetary equivalent to the denied request for a rate increase. The Arbitrator concluded that the Agency violated the second sentence of Section A.2 because that sentence did not permit the Agency to condition agreement to a monetary equivalent on additional consideration from the Union or to insist that any monetary equivalent would apply only prospectively. Rather, the Arbitrator concluded that the second sentence required the Agency to engage in discussions with the Union with "the goal" to "find a lawful way to overcome the lost 2002 locality pay and to compensate bargaining unit members as agreed upon in the MA." Award at 16. As a remedy, the Arbitrator directed the Agency to engage in discussions with the Union "in good faith with a sincere resolve to find a way to make-up for the lost locality pay," without proposing or insisting on any other conditions. Id.

III.     Positions of the Parties

A.     Agency Exceptions

      The Agency argues that the award is contrary to management's right to retain employees under § 7106(a)(2)(A) of the Statute. Specifically, the Agency contends that the right to retain employees includes the right to establish policies or practices that encourage of discourage employees from remaining employed by an agency, and that "the award requires the Agency to adopt a specific practice or policy (an increased special pay rate) to encourage employees to remain employed by the Agency[.]" Exceptions at 12. The Agency also contends that Section A.2 of the MA does not constitute an appropriate arrangement under § 7106(b)(3) of the Statute. In this connection, the Agency asserts that Section A.2 is not an arrangement because rather than alleviating the adverse effects of the exercise of a management right, it provides a benefit to employees. Further, the Agency claims that Section A.2 excessively interferes with management's right to retain. Finally, the Agency argues that the award is contrary to 5 C.F.R. §§ 530.302, 530.303, and 531.606. [n2]  [ v60 p841 ]

B.     Union Opposition

      The Union argues that the award is not contrary to management's right to retain employees through the use of special rates. In addition, the Union contends that Section A.2 is "an appropriate arrangement for employees who were adversely affected by [the Agency's] decision to eliminate the paper patent files on which unit employees relied to conduct patent searches, and to include a customer service element in the employee[s'] performance plans." Opp'n at 13-14. Further, the Union asserts that the Authority has found special pay rates to be negotiable. See id. at 13 (citing United States Patent & Trademark Office, 45 FLRA 1090 (1992) (PTO), enforcement denied, 991 F.2d 790 (4th Cir. 1993) (Table), and NTEU, 37 FLRA 147 (1990)). Finally, the Union claims that the award is not contrary to 5 C.F.R. §§ 530.302, 530.303, and 531.606.

IV.     Analysis and Conclusions

      The Agency argues that the award is contrary to management's right to retain employees under § 7106(a)(2)(A) of the Statute. The Authority reviews questions of law de novo. See NTEU, Chapter 24, 50 FLRA 330, 332 (1995) (citing United States Customs Serv. v. FLRA, 43 F.3d 682, 686-87 (D.C. Cir. 1994)). In applying a standard of de novo review, the Authority determines whether the arbitrator's legal conclusions are consistent with the applicable standard of law. See NFFE, Local 1437, 53 FLRA 1703, 1710 (1998). In making that determination, the Authority defers to the arbitrator's underlying factual findings. See id.

      In resolving whether an arbitrator's award violates management's rights under § 7106 of the Statute, the Authority first determines whether the award affects management's rights. See United States Small Bus. Admin., 55 FLRA 179, 184 (1999). If the award affects management's rights, then the Authority applies the two-prong test established in the Authority's decision in United States Dep't of the Treasury, Bureau of Engraving & Printing, Wash., D.C., 53 FLRA 146 (1997) (BEP), which is set forth in section IV.B. below.

A.     Effect on management's right

      The right to retain employees under § 7106(a)(2)(A) is "the right to establish policies or practices that encourage or discourage employees from remaining employed by an agency." AFGE, Local 1827, 58 FLRA 344, 346 (2003) (Chairman Cabaniss concurring in part and Member Armendariz dissenting in part on other grounds). Further, "management's rights under [§] 7106 include the right to refrain from acting as well as the right to act." United States EPA, 38 FLRA 1328, 1330 (1991) (citation omitted). Accord, e.g., NFFE, Local 2192, 59 FLRA 868, 870 (2004) (citation omitted) (Chairman Cabaniss dissenting in part on other grounds) (right to assign work encompasses right to refrain from assigning work). Thus, management's right to retain employees includes, as relevant here, the right to refrain from establishing policies that encourage employees to remain employed by the Agency.

      Special rates are, by law, a means to ameliorate recruitment and retention problems. See 5 C.F.R. § 530.303(a) ("OPM may increase the minimum rates otherwise payable under the pay schedules . . . to the extent it considers necessary to overcome existing or likely significant handicaps in the recruitment or retention of well-qualified personnel . . . .") Additionally, the Arbitrator found that the negotiations that resulted in Section A.2 of the MA were prompted by concerns regarding recruitment and retention. See Award at 11. Further, the Arbitrator found that the second sentence of Section A.2 was intended to address the adverse effect of special rate erosion by providing a monetary alternative to a special rate increase in the event that OPM denied the request for such an increase. See id. at 12. Thus, Section A.2 was intended to be, as relevant here, a means to encourage special rate employees to remain employed by the Agency.

      The award directs the Agency to engage in good faith discussions required by the second sentence of Section A.2. As interpreted by the Arbitrator, the second sentence of Section A.2 effectively requires the Agency to agree to an alternative to a special rate increase if the parties are able to devise a lawful alternative and if the Agency has sufficient funds to provide that alternative. [ v60 p842 ]

      As special rates are a means to encourage retention of employees, and as the award effectively requires the Agency to agree to an alternative to special rates, the award effectively requires the Agency (with the limited conditions discussed above) to agree to provide compensation that will encourage special rate employees to remain employed by the Agency. Accordingly, we find that the award affects management's right to retain employees, and we apply the analysis set forth in BEP.

B.     BEP

      Under prong I of BEP, the Authority examines whether the award provides a remedy for a violation of either an applicable law, within the meaning of § 7106(a)(2) of the Statute, or a contract provision that was negotiated pursuant to § 7106(b) of the Statute. 53 FLRA at 153. If it does, then under prong II of BEP, the Authority examines whether the arbitrator's remedy reflects a reconstruction of what management would have done if management had not violated the law or contractual provision at issue. Id. at 154.

      Applying prong I, it is undisputed that the Arbitrator was enforcing the parties' agreement, not an applicable law. Accordingly, it is necessary to determine whether the second sentence of Section A.2 of the MA was negotiated pursuant to § 7106(b) of the Statute. As the only subsection of § 7106(b) raised by the Union is § 7106(b)(3) of the Statute, we address only that subsection. See NLRB, 60 FLRA 576, 579-80 (2005) (Chairman Cabaniss concurring and Member Pope dissenting in part on other grounds) (Authority addressed only subsections of § 7106(b) raised by union). Cf. United States Dep't of the Army, Corps of Eng'rs, N.W. Div. & Portland Dist., 60 FLRA 595, 597 (2005) (citation omitted) (Authority declined to address whether provision was negotiated under § 7106(b) where union did not raise § 7106(b)).

      In determining whether a contract provision constitutes an appropriate arrangement under § 7106(b)(3), the Authority first determines whether the provision is an arrangement. See NTEU, 59 FLRA 978, 981 (2004). An arrangement must seek to mitigate adverse effects flowing from the exercise of a management right. See Ass'n of Civilian Technicians, R.I. Chapter, 55 FLRA 420, 426 (1999). The claimed arrangement must also be sufficiently "tailored" to compensate or benefit employees suffering adverse effects attributable to the exercise of such right. Id. In this regard, § 7106(b)(3) brings within the duty to bargain proposals and provisions that provide "balm" to be administered "only to hurts arising from" the exercise of management rights. Id. (citation omitted). If the provision is an arrangement, then the Authority determines whether it is appropriate, or whether it is inappropriate because it excessively interferes with the relevant management right. [n3]  See NTEU, 59 FLRA at 981. In doing so, the Authority weighs the benefits afforded to employees under the provision against the intrusion on the exercise of management's rights. See id.

      As discussed previously, the Arbitrator found that the second sentence of Section A.2 effectively requires the Agency to provide an alternative to special pay rates, as long as the alternative is lawful and the Agency has sufficient funds to provide it. The Arbitrator also found that Section A.2 was intended to address the adverse effect of special rate erosion that would occur over time as non-special rate employees received locality pay increases. See Award at 12. This adverse effect does not result from the exercise of any management right, but by the operation of law, specifically, the fact that under 5 C.F.R. § 531.606, special rate employees are not permitted to receive locality pay adjustments. Accordingly, Section A.2, as interpreted and enforced by the Arbitrator, ameliorates adverse effects that result from the operation of law, not the exercise of a management right.

      The Union claims that Section A.2 is an arrangement for employees adversely affected by the decision to eliminate paper files and to include a customer service element in the performance plans. Specifically, the Union asserts that elimination of the paper files adversely affects employees by requiring them to "spend virtually their entire work day tethered to a computer screen[,]" that computer images of patents are "inferior to" paper copies, that there are problems with conducting "key word" searches of old patents on computers, and that computer patents do not include "examiners' notes" that were in paper patents and which "facilitated the patent search" for examiners. Opp'n at 2-3.

      Although the Arbitrator found that the Agency was generally concerned during negotiations about eliminating paper files and improving customer service, see Award at 2, the Arbitrator made no findings that the second sentence of Section A.2 was intended to ameliorate the alleged adverse effects cited by the Union. Additionally, [ v60 p843 ] there is no basis in the wording of the second sentence of Section A.2 to support such a conclusion. Further, although the Union cites hearing testimony asserting the adverse effects of eliminating paper files, the Union provides no evidence that the second sentence of Section A.2 was intended to ameliorate such adverse effects. For these reasons, we reject the Union's claim as unsupported.

      Finally, the Authority decisions cited by the Union -- PTO, 45 FLRA 1090, and NTEU, 37 FLRA 147 -- do not support a conclusion that the second sentence of Section A.2, as interpreted by the Arbitrator, is enforceable. In this regard, neither PTO nor NTEU addressed the negotiability or enforceability of proposals or provisions requiring management to attempt to establish alternatives to special rate increases that have been denied by OPM. Contrary to the assertion of the Union, PTO, an unfair labor practice case, did not address the enforceability of individual special rate proposals, see 45 FLRA at 1108, and the proposals at issue in NTEU would have required only that the agency request approval to increase special rates, see 37 FLRA at 149. Accordingly, PTO and NTEU do not support a conclusion that the second sentence of Section A.2, as interpreted by the Arbitrator, is enforceable.

      For the foregoing reasons, we conclude that the second sentence of Section A.2, as interpreted and enforced by the Arbitrator, does not constitute an appropriate arrangement under § 7106(b)(3) of the Statute. As noted previously, the Union does not raise other subsections of § 7106(b) and, as a result, we do not address those subsections. See NLRB, 60 FLRA at 579-80. Thus, the award does not satisfy prong I of BEP, and we do not address prong II of BEP. Accordingly, we set aside the award as contrary to management's right to retain employees under § 7106(a)(2)(A) of the Statute. [n4] 

V.     Decision

      The award is set aside.



Footnote # 1 for 60 FLRA No. 158 - Authority's Decision

   5 C.F.R. § 531.606 provides, in pertinent part:

(a) An employee shall receive the greatest of--
(1) His or her rate of basic pay, including any applicable special salary rate . . .; [or]
(4) A locality rate of pay under this subpart, where applicable.

Footnote # 2 for 60 FLRA No. 158 - Authority's Decision

   5 C.F.R. § 530.302 provides: "In lieu of the pay schedules identified in § 530.301 of this part, the Office of Personnel Management (OPM) may establish, and agencies shall pay, special salary rates under section 5305 of title 5, United States Code, Executive Order 12748, and this subpart."

5 C.F.R. § 530.303 provides, in pertinent part:

     (a) OPM may increase the minimum rates otherwise payable under the pay schedules . . . to the extent it considers necessary to overcome existing or likely significant handicaps in the recruitment or retention of well-qualified personnel . . . .
     (c) An agency may propose to OPM that special salary rates be established or adjusted. . . .
     (e) In establishing or adjusting special salary rate schedules, OPM shall consider [certain specified factors] . . . .

5 C.F.R. § 531.606 is set forth supra, note 1.


Footnote # 3 for 60 FLRA No. 158 - Authority's Decision

   Because this case was litigated after the Authority determined to apply the excessive interference standard in resolving exceptions to arbitration awards, Member Pope agrees that it is appropriate to apply the excessive interference standard here. See United States Dep't of Veterans Affairs, Augusta, Ga., 59 FLRA 780, 786 n.1 (2004) (citat