United States, Department of Veterans Affairs, Board of Veterans Appeals, (Agency) and American Federation of Government Employees, National Veterans Affairs Council, Local Union No. 17 (Union)

[ v61 p422 ]

61 FLRA No. 79

UNITED STATES
DEPARTMENT OF VETERANS AFFAIRS
BOARD OF VETERANS APPEALS
(Agency)

and

AMERICAN FEDERATION
OF GOVERNMENT EMPLOYEES
NATIONAL VETERANS AFFAIRS COUNCIL,
LOCAL UNION NO. 17
(Union)

0-AR-3909

_____

DECISION

December 15, 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 Edward J. O'Connell 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.

      This case concerns the Agency's introduction of a fair share productivity performance standard in which numerical credits would be used to measure staff attorneys' productivity. The Arbitrator found that a Memorandum of Understanding (MOU) did not permit the adoption of a fair share productivity performance standard by the Agency. The Arbitrator also found that the fair share standard violated Article 26, Section 2 of the parties' collective bargaining agreement (master agreement). [n1]  For the reasons set forth below, we find that the award excessively interferes with management's rights to direct employees and to assign work under § 7106(a)(2)(A) and (B) of the Statute and thus is contrary to law. Accordingly, we set aside the award.

II.     Background and Arbitrator's Award

      This case concerns the Agency's introduction of a fair share productivity performance standard in which numerical credits would be used to measure staff attorneys' productivity levels. The Union believed that numerical goals were not permitted under the terms of a memorandum of understanding (MOU) and the master agreement and grieved the use of fair share goals. The parties failed to resolve the issue and submitted it to arbitration. The Arbitrator stated the issue before him as "whether the implementation of a production standard violated the MOU, the [m]aster [a]greement or applicable federal law." Award at 1.

      The Arbitrator found that the parties signed an MOU from which a Performance Plan for the rating of attorneys was developed. The Arbitrator also found that the parties subsequently executed a master agreement, with Article 43, Section 1 of the master agreement providing that local agreements in existence prior to the master agreement "`will continue in effect insofar as they do not conflict with the [m]aster [a]greement.'" Id. at 17.

      Based upon the above, the Arbitrator found that the Agency had entered into an enforceable agreement addressing the substantive content of performance standards. Id. at 16. In that regard, the Arbitrator found that the MOU "clearly establishes that the [p]arties reached a mutual agreement that counsel may not be rated on the basis of a numerical production standard." Id. at 17.

      With respect to the Agency's contention that the MOU conflicts with provisions of the master agreement, the Arbitrator determined that the MOU did not conflict with the master agreement regarding the establishment of performance standards, and thus was not rescinded by Article 43, Section 1 of the master agreement. Id. at 19 20.

      Regarding the Agency's management's rights arguments, the Arbitrator found that the cases cited by the Agency for the proposition that critical elements and performance standards are not mandatorily bargainable deal only with management's lack of a duty to bargain over such proposals and do not deal with matters already agreed to by the parties. The Arbitrator determined that the Agency had entered into the MOU "with full knowledge of its own rights and bargaining responsibilities." Id. at 20. The Arbitrator found that the plain language of the MOU "allows for no other interpretation than that employees will not be rated on the number of [ v61 p423 ] decisions completed." Id. As such, the Arbitrator further found that the Agency should not be "relieved of the unwelcome result of its purposeful choice in agreeing to the MOU, on the grounds that what it agreed to was a matter of management's rights outside its duty to bargain." Id.

      With respect to the parties' master agreement, the Arbitrator found that the fair share standard is "deficient" under Article 26, Section 2 of the parties' master agreement, which requires that the performance appraisal system be "fair, equitable, and solely relate[d] to job performance." See id. According to the Arbitrator, the fair share standard cannot be found to measure performance accurately and, therefore, is not fair or solely related to job performance, as required by the master agreement.

      Accordingly, the Arbitrator concluded that the parties' MOU and the master agreement did not permit the adoption of the fair share production standards by the Agency, and sustained the grievance.

III.      Positions of the Parties

A.      Agency's Exception

      The Agency argues that the MOU is unenforceable in arbitration. In this regard, the Agency argues that nothing in the Statute, including the statutorily mandated grievance procedure, can interfere with management's rights under § 7106 of the Statute. The Agency relies on Dep't of the Treasury, IRS v. FLRA, 494 U.S. 922 (1990) (IRS). Moreover, the Agency alleges that an arbitrator may not construe or enforce an agreement provision in any way that violates management's rights by specifying the substantive content of a performance standard, because to do so would "abrogate" an agency's rights to direct employees and assign work by determining the quantity, quality, and timeliness of work, and the development of performance standards. Additionally, the Agency asserts that an arbitrator's review of a performance standard is limited to ascertaining the standard's compliance with statutes outside the Statute.

      According to the Agency, an arbitrator has no power to establish a performance standard or to construe an agreement provision in a way that does so as a remedy. The Agency contends that, by construing the MOU to prohibit the establishment of a productivity standard, the award specified the content of the Agency's performance standard. Further, the Agency argues that by prohibiting a productivity standard, the award abrogates the Agency's § 7106(a) rights to direct employees and to assign work.

      The Agency argues that its rights to direct employees and assign work include the rights to determine the quantity, quality and timeliness of work, and the development of performance standards. The Agency asserts that attempts to specify the content of performance standards impermissibly interfere with these management rights. The Agency contends that union proposals ruling out changes in performance standards violate management rights. The Agency maintains that changing a performance standard requires only impact and implementation bargaining because the content of the performance standard is substantively not subject to bargaining.

      The Agency also asserts that the award is contrary to Article 26, Section 2 of the parties' master agreement. In this regard, the Agency contends that requirements that performance standards be fair or job-related substantively restrict management's right to establish performance standards and violate § 7106. See Exception at 15. The Agency also claims that the award fails to draw its essence from the parties' master agreement.

B.      Union's Opposition

      The Union states that while review of an award on a legal issue is de novo, the Authority will defer to an arbitrator's underlying factual findings. The Union asserts that pursuant to 5 U.S.C. § 4302, agencies must establish performance appraisal systems that, to the maximum extent feasible, permit the accurate evaluation of performance on the basis of objective, job-related criteria. As such, the Union asserts that arbitrators have the authority to determine whether performance standards comply with applicable legal requirements. Therefore, according to the Union, there is nothing prohibiting an arbitrator from finding an entire performance appraisal system invalid. Accordingly, the Union contends that the Arbitrator was within his authority to find the fair share performance standards inaccurate and arbitrary.

      Moreover, the Union argues that the fair share performance standard violates § 4302 because the standard is "unfair, inaccurate and not job-related[,]" as reflected by the Arbitrator's findings. Opposition at 16. As such, the Union argues that the record in this case supports the Arbitrator's conclusion that the fair share performance standard violates applicable law.

      The Union also argues that the award does not violate § 7106 because the MOU is both an arrangement for employees adversely affected by the exercise of management rights under § 7106(b)(3) of the Statute, and an agreement on methods and means of performing work [ v61 p424 ] under § 7106(b)(1), which does not impermissibly conflict with the Agency's ability to implement performance appraisal standards. The Union asserts that the agreement to refrain from using such standards is narrowly tailored to address these concerns and thus does not impermissibly conflict with or unduly interfere with management's § 7106 rights.

IV.      Analysis and Conclusions  [n2] 

     The Award Is Contrary to Law because It Impermissibly Conflicts
      with Management's § 7106 Rights  [n3] 

      The Agency contends that the award abrogates the Agency's § 7106 rights to direct employees and to assign work. We will analyze the Agency's "abrogates" argument as an assertion that the award is contrary to law because the award excessively interferes with the Agency's rights under § 7106(a) of the Statute. [n4] 

      The Authority's role in reviewing arbitration awards depends on the nature of the exceptions raised by the appealing party. See United States Customs Serv. v. FLRA, 43 F.3d 682, 686 (D.C. Cir. 1994). In NTEU, Chapter 24, 50 FLRA 330, 332 (1995), the Authority stated that if the arbitrator's decision is challenged, as it is here, on the ground that it is contrary to any law, rule, or regulation, the Authority will review the legal question de novo. 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. NFFE, Local 1437, 53 FLRA 1703, 1710 (1998). In making that assessment, the Authority defers to the arbitrator's underlying factual findings. See id.

      As the Agency asserts that the award violates management's rights, 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 a management right, the Authority assesses the legality of the award under the analytical framework developed in United States Dep't of the Treasury, Bureau of Engraving & Printing, Washington, D.C., 53 FLRA 146, 151-54 (1997) (BEP), and which the Authority developed in light of the Supreme Court's decision in IRS, 494 U.S. 922.

      Management's rights to direct employees and to assign work under § 7106(a)(2)(A) and (B) of the Statute encompass the authority to identify critical elements of performance and to establish performance standards. See NFFE, Local 2096, 36 FLRA 834, 845 (1990) (NFFE, Local 2096). An award that restricts an agency's authority to determine the content of performance standards and critical elements affects management's rights to direct employees and to assign work. See NTEU, 42 FLRA 964, 974-75 (1991); NFFE, Local 2096, 36 FLRA at 845.

      The Arbitrator found that the parties had entered into an MOU which provided that employees will not be rated on the number of decisions completed, and negotiated a master agreement provision (Article 26, Section 2) which required the Performance Appraisal System to be "fair, equitable, and solely relate[d] to job performance." See Award at 20. The Arbitrator further found that the fair share program violated the MOU and the master agreement, and required the Agency to discontinue use of the fair share production performance standard. In this regard, the Arbitrator's award restricts the Agency's ability to establish a particular performance standard and, therefore, affects management's rights to direct employees and to assign work under § 7106(a)(2)(A) and (B) of the Statute. Accordingly, we apply the analysis set forth in BEP, 53 FLRA at 151-54.

      Under prong I of BEP, the Authority must first determine whether the MOU and Article 26, Section 2 were negotiated pursuant to § 7106(b)(3) of the Statute. United States Dep't of Def., Def. Logistics Agency, Red River Army Depot, Texarkana, Tex., 55 FLRA 523, 526 (1999). [n5]  In order to determine whether a provision, as interpreted and applied by the arbitrator, was negotiated under § 7106(b)(3), as the Union here alleges, the Authority assesses, pursuant to the standard set forth in [ v61 p425 ] BOP Oklahoma City, whether the collective bargaining provision: (1) constitutes an arrangement under § 7106(b)(3); and (2) excessively interferes with the exercise of a management right. See United States Dep't of Justice, Fed. Bureau of Prisons, Fed. Corr. Complex, Coleman, Fla., 58 FLRA 291, 293 (2003); United States Dep't of Justice, Fed. Bureau of Prisons, Fed. Corr. Inst., Sheridan, Or., 58 FLRA 279, 282 (2003).

      A collective bargaining provision constitutes an arrangement within the meaning of § 7106(b)(3) of the Statute if it is intended to ameliorate the adverse effects flowing from the exercise of a management right. Fed. Aviation Admin., Washington, D.C., 55 FLRA 1233, 1236-37 (2000). In this case, the MOU provides that employees' performance would not be evaluated on the number of decisions completed because such a numeric total would not fairly evaluate all of the work produced by the employees. In this regard, the Arbitrator found plausible the conclusion that the fair share performance standard would improperly fail to consider the many other tasks performed by the affected employees. Also, Article 26, Section 2 of the parties' master agreement requires that the performance appraisal system be fair, equitable, and solely related to job performance. In this connection, the Arbitrator concluded that the fair share performance standard would not take into consideration the fact that employees' cases are not of equal length or complexity and, therefore, are not equal in time-consumption or difficulty. See Award at 20. Thus, we find that the MOU's ban on numeric production performance standards, and Article 26, Section 2's requirement for a fair performance system, constitute arrangements because they are intended to ameliorate the adverse effects flowing from the exercise of a management right.

      A provision excessively interferes with a management right if the benefits afforded employees under the provision are outweighed by the intrusion on the exercise of management's rights. BOP Oklahoma City, 58 FLRA at 111. Here, the MOU benefits employees by ensuring that lengthy and complex cases worked on by the employees are not credited equally with shorter, simpler cases, and Article 26, Section 2 of the master agreement requires that the performance appraisal system be fair, equitable and solely related to job performance. However, the MOU and Article 26, Section 2 also severely restrict the Agency's ability to direct employees and assign work. In fact, these provisions completely preclude the Agency from establishing the performance standards it wishes to use to assess its employees' performance. We conclude that this complete preclusion of the Agency's proposed performance standards outweighs the benefits to employees established by the MOU and Article 26, Section 2. Accordingly, we find that the award excessively interferes with management's rights to direct employees and to assign work under § 7106(a)(2)(A) and (B) of the Statute. Thus, the award must be set aside. See AFGE, Nat'l Council of Field Labor Locals, Local 2139, 57 FLRA 292, 294 (2001) (proposal that precluded agency's proposed establishment of criteria governing employee performance (which includes performance standards) excessively interfered with rights to assign work and direct employees); Patent Office Prof'l Ass'n, 48 FLRA 129, 138 (1993), aff'd 47 F.3d 1217 (D.C. Cir. 1995) (proposals burden on agency's right to determine content of performance standards outweighed benefit to employees and excessively interfered with rights to assign work and direct employees).

V.      Decision

      We find that the award fails prong I of the BEP test because it excessively interferes with management's rights to direct employees and to assign work under § 7106(a)(2)(A) and (B) of the Statute. Therefore, we set aside the award. [n6] 



Footnote # 1 for 61 FLRA No. 79 - Authority's Decision

   Article 26, Section 2 of the parties' master agreement provides:

In its entirety and application, the Performance Appraisal System must be fair, equitable, and solely related to job performance.

Award at 2.


Footnote # 2 for 61 FLRA No. 79 - Authority's Decision

   We do not consider the Union's 5 U.S.C. § 4302 contention as the Arbitrator found no violation of that statute in his award. See, e.g., AFGE, Council 236, 58 FLRA 582, 582 n.1 (2003) (as arbitrator resolved matter without addressing agency's arguments, Authority did not address the union's contention regarding these arguments); United States Dep't of the Army, Corpus Christi Army Depot, Corpus Christi, Tex., 56 FLRA 1057, 1064 (2001) (as arbitrator did not award environmental differential pay on the basis that there was no safe level of exposure to asbestos, the Authority did not address the parties' arguments regarding that issue).


Footnote # 3 for 61 FLRA No. 79 - Authority's Decision

   Chairman Cabaniss would find that the Union's § 7106(b)(1) and § 7106(b)(3) arguments could have been raised by the Union before the Arbitrator but were not. Thus, under § 2429.5 of the Authority's Regulations, Chairman Cabaniss would not consider these arguments.


Footnote # 4 for 61 FLRA No. 79 - Authority's Decision

   The Authority no longer applies the abrogation standard. In United States Dep't of Justice, Fed. Bureau of Prisons, Fed. Transfer Ctr., Oklahoma City, Okla., 58 FLRA 109, 110 (2002) (BOP Oklahoma City) (Chairman Cabaniss and Member Armendariz concurring; Member Pope concurring as to result), the Authority held that in determining whether an award is consistent with § 7106 because it has enforced a contract provision negotiated pursuant to § 7106(b)(3), the Authority will examine whether the contract provision, as interpreted and applied by the arbitrator, excessively interferes with the exercise of a management right, not whether it abrogates the exercise of a management right.


Footnote # 5 for 61 FLRA No. 79 - Authority's Decision

   The Union contends that the MOU constitutes an agreement on the methods and means of performing work under § 7106(b)(1) of the Statute, but provides no support for its assertion. Consistent with Authority precedent, the Union's claim constitutes a bare assertion and