United States Securities and Exchange Commission (Respondent) and National Treasury Employees Union (Charging Party)

[ v62 p432 ]

62 FLRA No. 82

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
(Respondent)

and

NATIONAL TREASURY
EMPLOYEES UNION
(Charging Party)

WA-CA-03-0127
WA-CA-03-0130

_____

DECISION AND ORDER

May 30, 2008

_____

Before the Authority: Dale Cabaniss, Chairman and
Carol Waller Pope, Member

I.     Statement of the Case

      This case is before the Authority on exceptions to the attached decision of the Administrative Law Judge (Judge) filed by the Respondent. The General Counsel (GC) filed an opposition to the Respondent's exceptions.

      The complaint alleges that the Respondent violated § 7116(a)(1) and (5) of the Federal Service Labor-Management Relations Statute (the Statute) by instituting a new pay system for employees and by terminating the previous system for within-grade increases (WIGIs) and quality-step increases (QSIs) without bargaining with the Charging Party (the Union) to the extent required by the Statute. The Judge found that the Respondent violated § 7116(a)(1) and (5) of the Statute when it failed to bargain to the extent provided for by the Statute.

      Upon consideration of the Judge's decision and the entire record, we adopt the Judge's findings, conclusions, and recommended Order, to the extent consistent with this decision.

II. Background and Judge's Decision

A.      Background

      The Respondent "is an independent Federal regulatory agency whose mission is to administer and enforce the Federal securities laws in order to protect investors and maintain fair, honest and efficient markets." Judge's Decision at 2. In this capacity, the [ v62 p433 ] Respondent deals with complex financial concerns and employs a large percentage of its workforce as attorneys, accountants, financial analysts, and securities examiners to carry out its mission. Id. at 2-3.

      The Judge found that the Respondent has experienced problems retaining employees within certain professions since the 1980s. To address these retention problems, the Respondent began in the 1990s to utilize "special legal provisions to pay large numbers of employees recruitment bonuses, retention allowances, superior qualification appointments, quality step increases and performance awards." Id. at 4. Additionally, in 2001, the Respondent used special rate increases in an attempt to retain employees in hard-to-fill positions by increasing their pay. Id. at 4, 27.

      On January 16, 2002, [n1]  the Investor and Capital Markets Fee Relief Act, Pub. L. No. 107-123, 115 Stat. 2390 (2002) (Pay Parity Act), was enacted. Under its terms, the Respondent may "set and adjust[]" pay rates "without regard to the provisions of chapter 51 or subchapter III of chapter 53" of title 5 of the United States Code. Id. at 5 (quoting section 8(c) of the Act, codified at 5 U.S.C. § 4802(c)). After the enactment, the Union sent a letter to the Respondent requesting immediate negotiations over setting pay. Id. at 6. Prior to responding to the Union's request for negotiations, the Respondent submitted to Congress a pay parity implementation plan, in which it set forth "the new salary and pay rate structure that it had developed[.]" Id. at 5-6. The Respondent also notified Congress that it needed $25 million to begin implementing pay parity in fiscal year (FY) 2002 and $76 million to fully implement pay parity in FY 2003. Id. at 6.

      Subsequently, the Respondent held an initial briefing with, and began negotiations with, the Union. At the same time, the Respondent's Chairman notified employees that whether or not the Respondent and the Union agreed upon a pay system, non-unit employees would be placed in the new system as of May 19. The parties were unable to reach agreement and sought mediation, which was unsuccessful. On May 15, the Union sought the assistance of the Federal Service Impasses Panel (the Panel). Two days later, the Respondent notified its employees that it would implement its pay plan on May 19 for all employees, including bargaining unit employees.

      Under the terms of the plan implemented on May 19, employees working in "securities industry (SI) positions" were to receive on average a 16-percent pay increase, while non-securities industry employees were to receive on average a 14-percent increase. Under the plan, employees were no longer eligible for WIGIs or QSIs, and the Respondent's pay parity implementation plan stated that these pay increases would place employees' salaries "toward the lower end" of those that the Respondent had analyzed, specifically those of regulatory agencies governed by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Pub. L. No. 101-73, 103 Stat. 183 (1989). [n2]  Id. at 7.

      Although the Respondent implemented its pay plan on May 19, the Respondent's payroll office was unable to process the new plan until August. On November 8, the Panel resolved the parties' bargaining impasse by ordering the adoption of a modified version of the Respondent's final offer. [n3]  Securities and Exch. Comm. and NTEU, 02 FSIP 122 (2002) (NTEU). The Union filed an unfair labor practice charge, and the GC issued a complaint, alleging that the Respondent unilaterally instituted a new pay system for unit employees and ceased granting employees WIGIs or QSIs without completing bargaining as required by the Statute.

B.      Judge's Decision

      As relevant here, the Judge found that the Respondent failed to demonstrate that implementation of the pay system on May 19 was justified. [n4]  He determined [ v62 p434 ] that to justify such implementation, the Respondent needed to demonstrate not only that the implementation was necessary to its effective functioning, but also that delaying implementation would have undermined the effective functioning of the Respondent. In this regard, the Judge stated that the necessary functioning test cannot be met unless "the evidence demonstrates that `a delay in implementation would have impeded the agency's ability to effectively and efficiently carry out its mission.'" Judge's Decision at 24 (quoting United States Dep't of Justice, Immigration and Naturalization Serv., 55 FLRA 892, 904 (1999) (Chairman Cabaniss and Member Wasserman dissenting as to other matters) (INS)). The Judge also explained, as follows:

[I]t is apparent that the individual facts and circumstances justifying an agency's unilateral change must be carefully examined. But the most significant guiding principle evident throughout these decisions is that agency management must demonstrate not merely that the change is necessary to its effective functioning, but also that delaying implementation . . . would undermine the effective functioning of the agency.

Id. at 25 (emphasis in original).

      Accordingly, the Judge framed the question before him as whether the necessary functioning of the Respondent depended on implementing the new pay system in May 2002. He concluded that it did not.

      In so concluding, the Judge first noted that the Respondent acted contrary to its claim that the necessary functioning of the Respondent depended on implementing the new pay system on May 19. In the Judge's view, the Respondent could have rewarded employees in an effort to retain them and could have continued to pay WIGIs had it so chosen past May 19, but chose not to do either. The Judge found that the fact that previous pay increases had already closed the pay gap between many employees of the Respondent and those in FIRREA agencies diminished the Respondent's claim that it needed to act immediately. Moreover, the Judge noted that the Respondent's plan paid employees at the "lower end" of FIRREA agencies and that Respondent's "employees are still paid considerably less than FDIC employees, among others." Id. at 27. Accordingly, the Judge determined that "even if the [Respondent's] calculation was correct that a substantial pay raise would alleviate attrition," its raise was not as substantial as the Respondent asserted. Id.

      As further support, the Judge found that the Respondent's claim that it needed to implement its plan in May was undercut by several facts. First, the Judge found that the employees did not actually receive additional compensation until August. Second, the Judge rejected the Respondent's assertion that it needed to use $25 million in reprogrammed funds in FY 2002 for employee pay, or face the prospect of losing this money in FY 2003. In rejecting the assertion, the Judge relied on the testimony of the Respondent's executive director who stated that the funds could be "kicked forward into the next fiscal year as well." Id. at 29. The Judge also rejected the Respondent's claim that it wanted to reduce costs of implementation by implementing the pay plan for both unit and non-unit positions simultaneously. The Judge found that, to the contrary, had the Panel adopted the Union's final offer proposal or made modifications to the Respondent's final offer, the costs would have increased because the Respondent would have had to rework implementation of the payroll system for the bargaining unit.

      In rejecting the claim that immediate implementation was necessary, the Judge also determined that the Respondent "manipulated the timing of events in this case to suit its own convenience." Id. at 30. In this respect, the Judge found that if implementation was as urgent as suggested by the Respondent, then the Respondent could have begun negotiations in January, when first requested by the Union, rather than waiting until April.

      Finally, the Judge emphasized that implementation of the pay system was not an exercise of a management right because the Respondent was required to bargain over the substance of the new pay system, which distinguished this case from Dep't of Justice, United States Immigration and Naturalization Serv., United States Border Patrol, Laredo, Tex., 23 FLRA 90 (1986) (Border Patrol), on which the Respondent relied. The Judge also noted that Border Patrol involved a question concerning representation (QCR).

      Accordingly, the Judge concluded that the Respondent violated § 7116(a)(1) and (5) of the Statute by implementing its pay system on May 19. To remedy the violation, the Judge awarded retroactive WIGIs to employees entitled to such increases between May 19 and November 8, and ordered the Respondent to recalculate their placement on the new pay schedule. In addition, the Judge ordered the Respondent to "make whole" these employees by paying backpay and interest. [n5]  [ v62 p435 ] Id. at 39. The Judge further ordered the Respondent to cease and desist from changing unit employees' conditions of employment without first completing bargaining and from "interfering with, restraining, or coercing employees in the exercise of the rights assured by Statute." Id. at 38.

III.       Positions of the Parties

A.      Respondent's Exceptions

      The Respondent contends that the Judge erred when he concluded that it committed an unfair labor practice by implementing its new pay system on May 19, and that the Judge "erroneously placed a burden on the [Respondent] to show that delayed pay increases would have been disastrous for the Agency." Exceptions at 26. Contrary to the conclusion of the Judge, the Respondent claims that it showed that the implementation was necessary for it to carry out its mission efficiently and effectively. Specifically, the Respondent asserts that its evidence showed that it was suffering a severe staffing crisis that was impairing its ability to fulfill its law enforcement mission, that an immediate pay raise was necessary to stem attrition and to attract qualified employees, and that implementation on May 19 was necessary because delay could have caused it to lose the funding it had received to raise salaries in FY 2002.

      The Respondent maintains that the Judge disregarded this evidence and, instead, erred by finding that it would have been able to use FY 2002 funding in FY 2003. The Respondent also maintains that the Judge "assumed, without any basis in the record, that the salary increases [it] proposed to and the [Panel] adopted would have been higher, and therefore more effective in curbing attrition, if [it] had waited to implement the new system until after . . . employees had received their [FY] 2002 WIGIs. Id. at 15. The Respondent further maintains that the Judge erred by requiring it to essentially meet a burden of showing that without immediate salary increases it would cease functioning and by judging its actions in light of the later Panel decision that it could not have predicted. The Respondent also maintains that the Judge erred by failing to take into account its law enforcement mission. The Respondent cites the Authority's decision in Border Patrol and argues that because the delayed implementation would have impaired the Respondent's enforcement of the securities law, the Judge should have concluded that implementation on May 19 was consistent with the necessary functioning of the Respondent.

      Additionally, the Respondent argues that the Judge erred in finding speculative its judgment that in the absence of implementation on May 19, employee attrition would remain high. In this respect, it states that the General Accounting Office (now the Government Accountability Office) concluded that "inadequate compensation was the primary reason for the [Respondent's] attrition and recruitment problems[.]" Id. at 22. The Respondent maintains that "Congress certainly found the evidence persuasive" that the Respondent needed authority to raise employee pay. Id. at 23 (citing H.R. Rep. No. 107-52, at 44-45 (2001)).

      The Respondent also argues that the Judge erred by reviewing its decision to implement in "hindsight, rather than in light of the facts as they appeared in early 2002." Id. The Respondent argues that "the ALJ erred by requiring [it] to show that it was necessary to begin paying its employees more money as of May 19, rather than wait until the [Panel] made its decision." Id. The Respondent claims that it had no way of "knowing when the proceedings before the [Panel] would conclude." Id. (emphasis in original). The Respondent also claims that if the Panel had reached a different conclusion in November, then it could have taken several more months to implement the pay raise. Id. at 24.

      In addition, the Respondent contends that the Judge erred when he determined that "early implementation resulted in `diluted' pay raises[.]" Id. (quoting Judge's Decision at 28). It maintains that the Judge wrongly assumed that it would have "presented exactly the same proposal for pay raises to the [Panel] after the within-grade increases had been awarded." Id. (emphasis in the original).

      Further, the Respondent argues that if it failed to pay its employees the increased pay in FY 2002, then it could not guarantee to retroactively pay employees that same pay using FY 2003 funds. Id. at 25. In this respect, it claims that "there was a real risk that the $25 million that OMB had reprogrammed to fund the new pay system in fiscal year 2002 would not be available to fund the new pay system in fiscal year 2003." Id. The Respondent argues that Comptroller General decisions do not authorize retroactive salary payments under these circumstances. Id. at 25 n.8 (citing Matter of Wirth - Retroactive Personnel Action, B-228711, 1988 WL 228302 (Comp. Gen. 1988); Matter of Levy - Arbitration of Retroactive Promotion and Backpay, B-190408, 1997 WL 11716 (Comp. Gen. 1997)). In addition, the Respondent maintains that the Judge misunderstood the [ v62 p436 ] testimony of the Respondent's executive director, as it pertained to use of the funds in FY 2003. The Respondent claims that the executive director "was responding in the context that the new pay system had already been implemented in fiscal year 2002." Id. at 26 n.9.

      Finally, the Respondent argues that the Judge's recommended remedy is contrary to the Back Pay Act. Id. at 27. It maintains that it committed "no unjustified or unwarranted personnel action" because both the Panel and the Authority found its actions justified. Id. at 27-28 (citing NTEU; United States Securities and Exch. Comm., Washington, D.C., 61 FLRA 251 (2005) (SEC)). Moreover, the Respondent asserts that it cannot implement the Judge's remedy of granting retroactive WIGIs because it would "in effect, force [it] to violate the Panel's Decision and Order." Id. at 28. Additionally, the Respondent claims that there was no withdrawal or reduction of pay, allowances or differentials, as no employee lost money. According to the Respondent, the Judge's recommended remedy is not necessary because it goes beyond a "make-whole" remedy insofar as every employee received a substantial pay raise. Id. at 34.

B.      GC's Opposition

      The GC contends that the Authority should adopt the Judge's recommended order because the Respondent has not shown that the Judge erred.

      The GC argues that the Judge did not err in finding that the Respondent failed to sustain its burden of proving that implementation of the new pay system on May 19 was necessary for the functioning of the Respondent, or in finding speculative the Respondent's claim that such implementation would provide significant relief for its recruitment and retention problem between implementation on May 19 and the Panel's decision in November. The GC asserts that the record fully supports the Judge's conclusion that the benefits that were derived from implementation May 19 were not as great as the Respondent alleged. The GC also asserts that the testimony of the Respondent's executive director fully supports the Judge's finding that the Respondent would have had no difficulty in using the reprogrammed funds from FY 2002 in FY 2003.

      The GC further argues that the Judge did not err in finding that the new pay system diluted the raises that some employees received. The GC maintains that the finding is based on the pay proposal that the Respondent actually presented to the Panel and that the Panel ordered the parties to adopt. The GC also disputes the Respondent's claim that the Judge required the Respondent to establish that delaying the pay increases would have been "disastrous" to the agency. Exceptions at 26.

      Contrary to the Respondent's exception, the GC maintains that the Judge properly awarded make-whole relief, including backpay, to unit employees. It argues that the Authority did not resolve the issue of backpay in SEC and that the Panel did not resolve the issue of backpay in NTEU. Further, it contends that because unit employees failed to receive WIGIs between May 19 and November 8, employees lost pay within the meaning of the Back Pay Act. Finally, the GC contends that to the extent the Respondent claims it may have offered a different pay proposal had it been necessary to pay employees a WIGI for the period between May 19 and November 8, such assertion is speculative.

IV.      Analysis and Conclusions

A.      The Judge did not err in concluding that the Respondent violated the Statute. [n6] 

      The Respondent excepts to the Judge's finding of a violation on two grounds. First, it contends that the Judge erred when he concluded that it committed an unfair labor practice by implementing its new pay system on May 19. Second, it contends that the remedy is contrary to law. For the reasons that follow, we agree with the Judge that the Respondent did not demonstrate that implementation of its new pay system on May 19 was necessary.

      The Judge framed the question before him as whether the necessary functioning of the Respondent depended on implementing the new system in May 2002. To establish "necessary functioning," the Respondent was required to show that a delay in implementation would have impeded its ability to effectively and efficiently carry out its mission. E.g., INS, 55 FLRA at 904. In support of his conclusion that the Respondent's implementation of the pay system was not necessary, the Judge found that past pay raises had resulted in only short-term reductions in attrition, that the Respondent could use other financial inducements to retain employees, and that this pay raise was at the low end of the pay scale when compared to other financial [ v62 p437 ] regulatory agencies. The Judge also found that for the purposes of employee retention, the Respondent had already narrowed the pay gap between it and other financial regulatory agencies with its pay increase in 2001. In addition, the Judge found that employees did not actually receive increased pay until August, and that the fact that the Respondent withheld WIGIs between May 19 and the Panel's decision in November, contradicts the Respondent's assertion that it needed to increase employee pay as quickly as possible. Furthermore, the Judge credited the testimony of the Respondent's executive director that $25 million in FY 2002 funds could have been used in FY 2003 for purposes of pay implementation. The Judge concluded that the Respondent's pay implementation date was nothing but a "totally artificial creation of management." Judge's Decision at 31.

      These findings fully support the Judge's conclusion that the Respondent did not show that a delay in implementation of the pay system would have impeded its ability to effectively and efficiently carry out its mission. None of the Respondent's arguments establishes otherwise.

      The Respondent argues that the Judge did not properly consider the uncertainty the Respondent faced by waiting for the Panel to resolve this issue. However, the Respondent has provided no support for its claim that in applying the necessary functioning test, the Judge was required to have considered how long a Panel resolution might take. The issue is not how long the Panel resolution might take; the issue is whether implementation of the pay system on May 19 was justified.

      Next, the Respondent argues that the Judge's finding that it could have administratively prepared to implement its pay system while the matter was before the Panel was "speculation" given the uncertainty of the Panel's decision. Exceptions at 24. It argues that the Judge also speculated in finding that the Respondent would have presented exactly the same pay system to the Panel even if it had continued to grant employees WIGIs between May 19 and the Panel's decision in November.

      Even if the Authority were to view these findings as speculative, the Respondent has not demonstrated that the Judge erred in concluding that it was not necessary for the functioning of the Agency to implement its pay plan on May 19. In this respect, the Respondent voluntarily chose to eliminate the payment of WIGIs, and it did not provide employees with any increase in pay until 3 months after implementation. The Judge's conclusion is fully supported even if his findings regarding the Respondent's ability to administratively prepare the pay system while this matter was pending before the Panel and what pay system it would have presented to the Panel are viewed as speculative.

      The Respondent also claims that the Judge erred in finding that it could have used $25 million from FY 2002 to pay employees in FY 2003. We reject the claim. The Comptroller General decisions on which the Respondent relies for the proposition that such retroactive funding would not have been available are distinguishable because they involve retroactive promotions under the General Schedule, not implementation of a new pay system based on a Congressional authorization. To the extent that the Respondent disputes the Judge's understanding of the testimony of the executive director, we conclude that the Judge's factual finding is sufficiently supported.

      In determining whether a judge's factual findings are supported, we look to the preponderance of the record evidence. E.g., United States Dep't of Justice, Fed. Bureau of Prisons, Fed. Corr. Inst., Marianna, Fla., 59 FLRA 3, 5 (2003). The Judge found that the executive director testified that the Respondent could have used $25 million in reprogrammed funding from its FY 2002 budget for the implementation of the pay system the following year. Specifically, as noted by the Judge, the executive director testified that the $25 million would "still be there" if not used in FY 2002 and that "it would be an easy matter . . . to have it then kicked forward into the next fiscal year as well[.]" Judge's Decision at 29 (quoting Tr. at 244-45). There is no indication in the record that this testimony was in the context of the new pay system having been implemented in FY 2002, as claimed by the Respondent. The preponderance of the record evidence supports the understanding and finding of the Judge. Moreover, the executive director further testified that even if that money were lost, he thought it "was highly likely" that the pay system would be funded from FY 2003 regular appropriations. Tr. at 249. Consequently, the executive director's testimony directly contradicts the Respondent's claim that implementation of the pay system on May 19 was necessary to assure its funding.

      The Respondent further argues that the Judge required it to prove that a delay in implementation would be "disastrous for the functioning of the [Respondent]." Exceptions at 26. We disagree. Although the Judge used the term "disastrous" at the hearing, the Respondent does not establish that the Judge applied [ v62 p438 ] such a standard in reaching his ultimate conclusions in this case. [n7] 

      Finally, the Respondent's reliance on Border Patrol is misplaced. As noted by the Judge, Border Patrol involved implementation of a change during the pendency of a QCR. In finding the change necessary for the functioning of the agency in Border Patrol, the judge emphasized that the QCR had been pending for nearly 6 years. In addition, although the judge noted that the changes concerned the agency's law enforcement mission of effectively policing the border, the judge in Border Patrol in reaching that result also emphasized that the disputed change was an exercise of a management right and that the union could not have negotiated the substance of the change. In contrast, in this case, the Judge was presented with the question of whether the implementation of the negotiable salary system in May was necessary for the functioning of the Agency. Border Patrol is distinguishable from this case and does not support the Respondent's exception.

B.      The remedy is not contrary to the Back Pay Act.

      In his recommended order, the Judge awarded retroactive WIGIs to those employees who would have been entitled to such increases between May 19 and November 8, and ordered the Respondent to recalculate their placement on the new pay schedule. Accordingly, the Judge ordered the Respondent to make these employees whole by paying them backpay and interest. The Respondent excepts to the recommended order on the grounds that it committed no unjustified or unwarranted personnel action and that no employees actually lost money once the conversion to the new pay system was made.

      The Authority has long held that under the Back Pay Act, backpay is authorized when employees have been affected by an unjustified or unwarranted personnel action that has resulted in the withdrawal or reduction of their pay, allowances or differentials. E.g., United States Dep't of Transportation, Fed. Aviation Admin., Atlanta, Ga., 60 FLRA 985, 986 (2005) (Chairman Cabaniss concurring). A personnel action under the Back Pay Act specifically includes a failure to take an action or confer a benefit. 5 C.F.R. § 550.803. Moreover, the Authority has expressly ruled that employees have been affected by an unjustified or unwarranted personnel action "when it is determined that [employees] w[ere] affected by an unfair labor practice under the Statute." Fed. Aviation Admin., Washington, D.C., 27 FLRA 230, 232-33 (1987).

      As the Respondent committed an unfair labor practice by violating § 7116(a)(1) and (5) of the Statute, employees were affected by an unjustified or unwarranted personnel action within the meaning of the Back Pay Act. Moreover, it is undisputed that employees who would have otherwise received increases in pay through WIGIs prior to the Panel's decision did not receive those WIGIs. Accordingly, the Judge properly concluded that backpay was warranted under the Act because the employees entitled to a WIGI between May 19 and November 8 did not receive them and because they were converted into the new pay system at lower pay than they would have received had they received a WIGI. The Respondent's assertion that it would have submitted a different plan to the Panel if it had been necessary to pay these WIGIs provides no basis for rejecting the Judge's remedy that is warranted on the basis of the plan it actually submitted to the Panel and the plan ordered adopted by the Panel.

      The Respondent's arguments that the Panel's decision precludes the payment of WIGIs and that the Union is getting a "second bite at the apple" are also unsupported. Exceptions at 33. The Panel does not resolve unfair labor practice allegations. The Panel is responsible for providing "assistance in resolving negotiation impasses between agencies and exclusive representatives." 5 U.S.C. § 7119(c)(1). Furthermore, although the Panel rejected WIGIs and QSIs as part of the pay system that it ordered adopted, it is clear that the system was ordered adopted prospectively, and not retroactively, as claimed by the Respondent.

      Likewise, the Authority's decision in SEC did not preclude the Judge from concluding that the implementation of the pay system on May 19 was an unjustified or unwarranted action. The Respondent overstates the application of SEC when it claims that the Authority held that the implementation of the pay system complied with the Pay Parity Act. In SEC, the Authority addressed the narrow issue of whether the arbitrator erred by finding that the pay system reduced employee base pay in violation of the Pay Parity Act. The Authority's conclusion that the award was deficient was limited to the determination that locality pay may be considered part of base pay under the Pay Parity Act. This narrow holding has no preclusive application to the Judge's conclusion that the Respondent committed an unjustified or unwarranted personnel action when it instituted the pay system and terminated the previous system for WIGIs and QSIs without bargaining with the Union to the extent required by the Statute.

      [ v62 p439 ] Finally, the Respondent's assertion that the Judge's award of backpay goes beyond a make-whole remedy is also unsupported. Contrary to the claim of the Respondent, and as discussed above, employees  were affected by an unwarranted action that resulted in a reduction of pay, allowances, or differentials - specifically, employees who were not granted WIGIs that they otherwise would have received and who, because of this, were converted into the new pay system at lower pay than they would have been had they received a WIGI. The Judge's award of backpay does no more than make these employees whole.

V.      Order

      Pursuant to section 2423.41(c) of the Authority's Regulations and § 7118 of the Federal Service Labor-Management Relations Statute (the Statute), it is hereby ordered that the United States Securities and Exchange Commission (SEC) shall:

      1.      Cease and desist from:

           (a)      Changing the conditions of employment, including changes to the rates of compensation and the methods and procedures for adjusting compensation, of bargaining unit employees without first completing bargaining with the National Treasury Employees Union, the exclusive representative of its employees, to the extent required by law with respect to any proposed changes.

           (b)      In any like or related manner, interfering with, restraining, or coercing employees in the exercise of the rights assured by the Statute.

      2.      Take the following affirmative action in order to effectuate the purposes and policies of the Statute:

           (a)      Grant longevity-based, within-grade step increases retroactively to bargaining unit employees who were entitled to such increases between May 19 and November 8, 2002. The following procedure should be used to identify employees entitled to such increases:

     (1)      Review employee personnel files to ascertain which employees met the time-in-grade and other longevity requirements for a step increase between May 19 and November 8, 2002;
     (2)      For those employees who met the longevity requirements during that period, review their performance appraisals for the corresponding period to ascertain which employees performed at an acceptable level of competence;
     (3)      Grant one-step increases, under the SEC's pay schedule in existence prior to May 19, 2002, to all employees who meet the two criteria above, retroactive to the date each employee met the longevity requirements;
     (4)      Taking into account the step increases given to those employees identified above, determine the appropriate placement of those employees in the new pay schedule implemented by the SEC in 2002 and adjust such employees' pay and benefits as of the date each employee qualified for such step increase.

           (b)      Make whole the employees identified above by paying them backpay, with interest, for all pay they lost because of the SEC's failure to give them step increases prior to conversion to the new pay schedule, between the date they qualified for step increases until the date of compliance.

           (c)      Post at its headquarters, regional and district office facilities copies of the attached Notice on forms to be furnished by the Federal Labor Relations Authority. Upon receipt of such forms, they shall be signed by the Chairman of the SEC and shall be posted and maintained for 60 consecutive days thereafter, in conspicuous places, including all bulletin boards and other places where notices to employees are customarily posted. Reasonable steps shall be taken to ensure that such Notices are not altered, defaced, or covered by any other material.

           (d)      Pursuant to Section 2423.41(e) of the Authority's Regulations, notify the Regional Director of the Washington Region, Federal Labor Relations Authority, 1400 K Street, N.W., 2nd Floor, Washington, D.C. 20424-0001, in writing, within 30 days of the date of this Order, as to what steps have been taken to comply herewith. [ v62 p440 ]


NOTICE TO ALL EMPLOYEES
POSTED BY ORDER OF THE
FEDERAL LABOR RELATIONS AUTHORITY

The Federal Labor Relations Authority has found that the United States Securities and Exchange Commission (SEC) violated the Federal Service Labor-Management Relations Statute (the Statute), and has ordered us to post and abide by this Notice.

WE HEREBY NOTIFY EMPLOYEES THAT

WE WILL NOT change the conditions of employment, including changes to the rates of compensation and the methods and procedures for adjusting compensation, of bargaining unit employees without first completing bargaining with the National Treasury Employees Union, to the extent required by law with respect to any proposed changes.

WE WILL NOT, in any like or related manner, interfere with, restrain, or coerce our employees in the exercise of the rights assured them by the Statute.

WE WILL grant longevity-based, within-grade step increases retroactively to bargaining unit employees who were entitled to such increases between May 19 and November 8, 2002, and recalculate their proper placement on the new pay schedule implemented by the SEC in 2002, taking such step increases into account.

WE WILL make whole all bargaining unit employees entitled to such step increases by paying them backpay, with interest, for all pay they lost because of the SEC's failure to give them step increases prior to conversion to the new pay schedule, between the date they qualified for step increases until the date of compliance.

                                    ________________________________
                              United States Securities and Exchange
                              Commission

Date: _________     By: _____________________
                                    Chairman

This Notice must remain posted for 60 consecutive days from the date of posting and must not be altered, defaced, or covered by any other material.

If employees have any questions concerning this Notice or compliance with any of its provisions, they may communicate directly with the Regional Director, Federal Labor Relations Authority, Washington Regional Office, whose address is: 1400 K Street, N.W., 2nd Floor, Washington, D.C. 20424-0001.


File 1: Authority's Decision in 62 FLRA No. 82
File 2: ALJ Decision


Footnote # 1 for 62 FLRA No. 82 - Authority's Decision

   All dates herein are from 2002 unless stated otherwise.


Footnote # 2 for 62 FLRA No. 82 - Authority's Decision

   In 1989, Congress passed FIRREA, which authorized certain financial agencies to determine their own "compensation and benefit levels for their employees, without regard to the limitations of the General Schedule." Judge's Decision at 4. Those agencies include the Federal Deposit Insurance Corporation, National Credit Union Association, Office of the Comptroller of the Currency, and Office of Thrift Supervision.


Footnote # 3 for 62 FLRA No. 82 - Authority's Decision

   A significant aspect of the Respondent's final offer was that it abolished WIGIs and QSIs in favor of pay for performance. In ordering the adoption of a modified version of the Respondent's final offer, the Panel rejected the Union's proposal of step increases and cash awards based only on a determination that the employee was performing at an acceptable level of competence as constituting a mandatory entitlement to merit pay contrary to prior Panel decisions.


Footnote # 4 for 62 FLRA No. 82 - Authority's Decision

   The Judge also found that this matter: (1) does not involve classification; (2) does involve a negotiable condition of employment; (3) does involve a matter over which the Respondent had a duty to bargain; (4) does involve a matter in which the change to conditions of employment was more than de minimis; and (5) does not involve a matter that was covered by the parties' agreement. Judge's Decision at 9-23. No exceptions were filed to these findings. Accordingly, we adopt these findings without precedential significance under § 2423.41 of the Authority's Regulations. E.g., Fed. Bureau of Prisons, Fed. Corr. Inst., Bastrop, Tex., 55 FLRA 848, 852 n.9 (1999).


Footnote # 5 for 62 FLRA No. 82 - Authority's