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The decision of the Authority follows:
17 FLRA No. 143 NATIONAL TREASURY EMPLOYEES UNION Union and INTERNAL REVENUE SERVICE Agency Case No. 0-AR-769 DECISION This matter is before the Authority on exceptions to the award of Arbitrator John Kagel filed by the Agency under section 7122(a) of the Federal Service Labor-Management Relations Statute and part 2425 of the Authority's Rules and Regulations. The Union filed an opposition. The grievance in this case involved the determination that the grievant was not performing at an acceptable level of competence (the negative determination) and the Agency's denial to her of a within-grade increase. The grievant's requested reconsideration of the negative determination was denied, and the grievance was thereafter filed and submitted to arbitration. The Arbitrator found that the file required to be prepared when an employee requests reconsideration was not fully prepared as required and was not prepared in a fashion which allowed the grievant to appropriately present her defense. He ruled that these actions by the Agency constituted a violation of the parties' collective bargaining agreement and that under decisions of the Merit Systems Protection Board (MSPB) applying 5 U.S.C. 7701(c)(2)(A) /1/ to this type of case, these actions constituted harmful error requiring the overturning of the denial of the increase to the grievant. Accordingly, the Arbitrator directed that the grievant be granted her within-grade increase retroactively. In its exceptions, the Agency contends, among other things, that the award is contrary to law. The Authority agrees. The Authority has uniformly held that in order for an award of backpay to be authorized under the Back Pay Act, 5 U.S.C. 5596, there must be not only a determination that the aggrieved employee was affected by an unwarranted personnel action, but also a determination that such unwarranted action directly resulted in the withdrawal or reduction in the pay, allowances, or differentials that the employee would otherwise have earned or received. E.g., American Federation of Government Employees, Local 51 and U.S. Department of the Mint, Old Mint Building, Customer Service Division, 15 FLRA No. 164 (1984). In addition, with respect to the denial or withholding of a within-grade increase, the Authority has recognized under 5 U.S.C. 5335(a) that in order for an employee to be entitled to the increase, the work of the employee must be determined to be at an acceptable level of competence. Social Security Administration and American Federation of Government Employees, AFL-CIO, 16 FLRA No. 76 (1984). Thus, in order for an award by an arbitrator of a retroactive within-grade increase to be authorized, the arbitrator must find that agency action in connection with the denying or withholding of the increase was unwarranted and that but for the unwarranted action, the grievant otherwise would have received the within-grade increase. In this regard the arbitrator must find either that the negative determination was not sustained or that due to some action or failure to take action on the part of the agency, the work of the grievant was determined not to be at an acceptable level of competence when it otherwise would have been. See id. at 2. In terms of this case, although the Arbitrator found that the Agency's actions violated the collective bargaining agreement, constituting the unwarranted action, the Arbitrator did not find that but for this violation, the grievant's work otherwise would have been determined to have been at an acceptable level of competence which would have resulted in the granting of the within-grade increase. Consequently, the award is contrary to the Back Pay Act and 5 U.S.C. 5335(a). Furthermore, the award is not authorized by 5 U.S.C. 7701(c). Contrary to the finding of the Arbitrator and the argument of the Union in opposition to the Agency's exceptions, the grievant's showing of harmful error within the meaning of section 7701(c)(2)(A) did not authorize the Arbitrator's overturning of the Agency's denial of the within-grade increase and did not authorize his granting of that increase retroactively. In this regard, the Authority has previously held that section 7701(c) expressly pertains only to the appellate procedures of MSPB in reviewing agency decisions in any action appealed to MSPB and that accordingly section 7701(c) is not applicable to grievances submitted to arbitration. E.g., Naval Weapons Station, Yorktown, Virginia and National Association of Government Employees, Local R4-96, 13 FLRA 133 (1983). At the same time, the Authority recognized that under section 7121(e)(2) of the Statute, /2/ an arbitrator in certain matters is governed by the standards set forth in section 7701(c). Id. at 134. However, that section of the Statute does not pertain to the denying or withholding of within-grade increases, and therefore neither that section nor the standards set forth in section 7701(c) apply in this case. Consequently, the Authority concludes that the Arbitrator was not authorized under the terms of section 7701(c)(2)(A) or otherwise to overturn the Agency's action solely on finding harmful error. Thus, the Arbitrator's granting of a retroactive within-grade increase is deficient as contrary to 5 U.S.C. 5335(a) and Sec. 5596 and is not otherwise authorized by 5 U.S.C. 7701(c)(2)(A). Accordingly, the award is modified by striking the granting of the increase. /3/ Issued, Washington, D.C., May 13, 1985 Henry B. Frazier III, Acting Chairman William J. McGinnis, Jr., Member FEDERAL LABOR RELATIONS AUTHORITY --------------- FOOTNOTES$ --------------- /1/ Section 7701(c)(2)(A) pertinently provides that MSPB may not sustain the agency's decision in any action appealed to MSPB if the employee shows harmful error in the application of the agency's procedures in arriving at such decision. /2/ Section 7121(e)(2) provides: "In matters covered under sections 4303 and 7512 of (title 5) which have been raised under the negotiated grievance procedure in accordance with this section, an arbitrator shall be governed by section 7701(c)(1) of (title 5), as applicable." /3/ In view of this decision, it is not necessary that the Authority address the other exceptions to the award.