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The decision of the Authority follows:
17 FLRA No. 145 SOCIAL SECURITY ADMINISTRATION Agency and LOCAL 1760, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO Union Case No. 0-AR-731 DECISION This matter is before the Authority on exceptions to the award of Arbitrator Susan T. Mackenzie filed by the Agency and the Union under section 7122(a) of the Federal Service Labor-Management Relations Statute and part 2425 of the Authority's Rules and Regulations. The parties submitted to arbitration the issue of whether the Activity's decision to withhold the within-grade increase of the grievant was proper. The Arbitrator found that the Activity had sustained its determination that the grievant's performance was not at an acceptable level of competence (the negative determination). However, the Arbitrator also found that the Activity had violated the parties' collective bargaining agreement by not affording the grievant a minimum of 60 days in which to improve before deciding to withhold the within-grade increase and that the violation constituted harmful error. As her award, the Arbitrator therefore directed that the grievant be given a new 60-day period to demonstrate improvement and that should she demonstrate during this period that she is performing at an acceptable level of competence, the grievant be granted retroactive to February 7, 1983, a within-grade increase. In its exceptions to the award, the Agency primarily contends that by providing for the granting retroactively of a within-grade increase to the grievant, the award is contrary to 5 U.S.C. 5335(a) and Sec. 5596. 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 denying 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 withholding or denying 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, as has been noted, the Arbitrator did find that the Activity had violated the parties' collective bargaining agreement. However, the Arbitrator also found that the Activity had sustained its negative determination, and the Arbitrator did not find that but for the Activity's failure to afford the grievant a minimum of 60 days in which to improve, 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 Arbitrator's provision for a retroactive within-grade increase is contrary to 5 U.S.C. 5335(a) and Sec. 5596 and must be modified. /1/ In its exception to the award the Union contends that the award is deficient as contrary to 5 U.S.C. 7701(c) because the Arbitrator was required to grant the grievant the within-grade increase on finding that the Activity's violation of the collective bargaining agreement was harmful error and because the Arbitrator found that the Activity had sustained its negative determination by using the standard of substantial evidence rather than the standard of preponderance of the evidence, which the Union claims is required by section 7701(c)(1)(B). /2/ The Authority however concludes that the Union fails to establish that the award is deficient in these respects. In this regard the Authority has previously held that section 7701(C) expressly pertains only to the appellate procedures of the Merit Systems Protection Board (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, /3/ an arbitrator in certain matters is governed by the standards set forth in section 7701(c). 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) applies in this case. Consequently, contrary to the argument of the Union, and in view of the findings necessary to a proper award of a retroactive within-grade increase discussed with respect to the Agency's exception, the Arbitrator correctly did not grant a retroactive increase on finding harmful error alone, and the award therefore is not deficient in this respect. Similarly, contrary to the contention of the Union respecting the standard of proof, with neither section 7701(c) nor its standards applicable to this case, no specific standard of proof is required by law. In this regard the Authority has held that unless a specific standard of proof is required, an arbitrator may establish whatever standard the arbitrator considers appropriate and the award is not subject to being found deficient on that basis. Department of Defense Dependent Schools, Europe and Overseas Education Association, 4 FLRA 412 (1980). Furthermore, the Union has additionally failed to establish that section 7701(c)(1) requires the application of the standard of preponderance of the evidence of section 7701(c)(1)(B) applies to denials of within-grade increases. Although three U.S. courts of appeal have held that the standard of preponderance of the evidence of section 7701(c)(1)(B) applies to denials of within-grade increases, /4/ the standard determined by MSPB and the U.S. Court of Appeals for the Federal Circuit, the court of appeals with exclusive jurisdiction in the review of MSPB decisions, to be required by section 7701(c)(1) is substantial evidence. Parker v. Defense Logistics Agency, 1 MSPB 489 (1980); Gordon v. Veterans Administration, No. 84-1327 (Fed. Cir. Dec. 11, 1984). For these reasons the Union's exception provides no basis for finding the award deficient. Accordingly, the Union's exception is denied, and on the basis of the Agency's exception the award is modified by striking "retroactive to February 7, 1983" and inserting "prospectively." /5/ Issued, Washington, D.C., May 13, 1985 Henry B. Frazier III, Acting Chairman William J. McGinnis, Jr., Member FEDERAL LABOR RELATIONS AUTHORITY --------------- FOOTNOTES$ --------------- /1/ The Authority has previously noted that 5 C.F.R. 430.202(e) (1984 Supp.), which implements 5 U.S.C. 4301(3), requires the denial of a within-grade increase when an employee's performance in any critical element is below a minimum standard. See American Federation of State, County and Municipal Employees, AFL-CIO, Local 2027 and Action, Washington, D.C., 12 FLRA 643, 646-47 (1983). /2/ Section 7701(c) pertaining to the appellate procedures of the Merit Systems Protection Board pertinently provides: (1) Subject to paragraph (2) of this subsection, the decision of the agency shall be sustained under subsection (b) only if the agency's decision-- (A) in the case of an action based on unacceptable performance described in section 4303 of this title, is supported by substantial evidence, or (B) in any other case, is supported by a preponderance of the evidence. (2) Notwithstanding paragraph (1), the agency's decision may not be sustained under subsection (b) of this section if the employee or applicant for employment-- (A) shows harmful error in the application of the agency's procedures in arriving at such decision(.) /3/ 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." /4/ Ommaya v. National Institutes of Health, 726 F.2d 827 (D.C. Cir. 1984); White v. Department of the Army, 720 F.2d 209 (D.C. Cir. 1983), Stankis v. EPA, 713 F.2d 1181 (5th Cir. 1983); Schramm v. Department of Health and Human Services, 682 F.2d 85 (3d Cir. 1982). /5/ In view of this decision, it is not necessary to address the Agency's other exception to the award.