[ v27 p132 ]
The decision of the Authority follows:
27 FLRA No. 25 NATIONAL TREASURY EMPLOYEES UNION Union and INTERNAL REVENUE SERVICE Agency Case No. 0-NG-524 (14 FLRA No. 77) DECISION AND ORDER ON REMAND I. Statement of the Case This case is before the Authority pursuant to a remand from the United States Court of Appeals for the District of Columbia Circuit. The question involved is whether a proposal which seeks to establish the rate of incentive pay to be awarded bargaining unit employees is rendered nonnegotiable by sections 7103(a)(14)(C) and 7106(a)(1) of the Federal Service Labor-Management Relations Statute (the Statute). II. Background In a previous decision in this case, National Treasury Employees Union and Internal Revenue Service, 14 FLRA 463 (1984), the Authority found the following proposal, which sought to establish the rate of incentive pay for bargaining unit employees, to be nonnegotiable because it interfered with management's rights to assign work and direct employees: Proposal 5 Incentive money is paid at the rate $.09 per one-tenth of an efficiency point over 100 percent. For example, performance at 125% efficiency equals $22.50 in incentive pay. The money will be distributed on a pay period basis with the regular salary check. If the employee works overtime he/she will be paid $.04 more per one-tenth of a point otherwise payable. If employees of more than one grade work the same F/P (function and program) task then the $.09 will be increased by $.02 for each grade above the minimum grade assigned the F/P task. The Union sought review of the Authority's decision with respect to this proposal. On review, the D.C. Circuit rejected the Authority's reasoning that the management right to assign work to employees includes the right to reward superior performance of the work which has been assigned. National Treasury Employees Union v. FLRA, 793 F.2d 371 (D.C. Cir. 1986). The court held that "the level of incentive pay awarded for the performance of agency work, even work that has been 'assigned' or 'directed,' (did) not come within the nonbargainable management rights to assign work and direct employees." NTEU v. FLRA, 793 F.2d at 375. The court therefore vacated the Authority's decision and remanded the case so that the Authority could pass on the other arguments raised by the Agency but not addressed by the Authority in its decision. The Agency's other arguments were that the proposal was nonnegotiable because it: (1) concerned a pay matter which is not a condition of employment under section 7103(a)(14)(C) of the Statute; and (2) interfered with management's right to determine its budget under section 7106(a)(1) of the Statute. On remand, the Authority granted the Agency's request to file a supplemental memorandum. In granting the request, the Authority limited the Agency's arguments to the issues before it on remand. Both parties filed supplemental briefs, and the Union filed a response to the Agency's supplemental brief. Further, the Authority granted the request of the Office of Personnel Management (OPM) to file an amicus curiae brief in this case. III. Procedural Issues The Union claims that the Agency's supplemental brief contains new arguments, evidence, and reasons for nonnegotiability not previously asserted, and therefore requests the Authority to "strike" the Agency's submission. We find that, except for the arguments concerning methods and means under section 7106(b)(1) of the Statute, the Agency's supplemental brief addressed the issues set forth in the Authority's letter granting the Agency's request to file a supplemental brief. We therefore deny the Union's request to strike the Agency's arguments relating to sections 7103(a)(14)(C) and 7106(a)(1) of the Statute. We grant the Union's request to strike matters relating to section 7106(b)(1) of the Statute, since the Agency did not raise this section as a bar to negotiation of the proposal in its initial position before the Authority. IV. Positions of the Parties The Agency and OPM contend that Proposal 5 concerns matters relating to pay which are specifically provided for by federal statute -- that is, subpart D of 5 U.S.C. Sections 5101 et seq. -- and since the matter is covered by statute, it is expressly excluded from the definition of "conditions of employment" under section 7103(a)(14)(C) of the Statute and therefore outside the duty to bargain. Both claim that the proposal is an attempt by the Union to negotiate a pay or money-related fringe benefit system since under the proposal employees would receive a fixed amount of money per unit of work performed above a set efficiency point, adjusted for overtime and grade level. According to the Agency and OPM, it is this entitlement which makes the incentive money provided by this proposal a method of compensation for specific work done as distinguished from an award selectively given in appreciation of extraordinary service. In their view, therefore, the proposal would effectively create a supplemental pay system in which employees' salary levels set forth in 5 U.S.C. Section 5332 would be adjusted and supplemented based on attainment of numerical performance levels. The Agency and OPM contend that this is contrary to Chapter 53 of title 5 of the United States Code which prescribes pay rates and the means by which those rates may be adjusted. The Agency additionally argues that, by permitting the Union to negotiate specific amounts for awards, the proposal would interfere with its discretion under Chapter 45 of title 5 of the United States Code to adjust, implement, or eliminate the incentive pay awards program. Finally, the Agency and OPM contend that the proposal is nonnegotiable because it infringes on management's right under section 7106(a)(1) to determine its budget. They concede that the proposal does not by its express terms prescribe the particular program or amounts to be included in the Agency's budget as a line item, but contend that it would result in a substantial and unavoidable increase in the expenditure of Agency funds which would not be offset by compensating benefits. The Union asserts that although the proposal concerns money, it is not pay as that term is used in the federal sector. It contends that the proposal has no relation to the pay schedules set forth in 5 U.S.C. Sections 5331 et seq. and 5 C.F.R. Sections 531 et seq. Rather, the Union contends that the proposal concerns money distributed through the provisions of 5 U.S.C. Sections 4501 et seq. and 5 C.F.R. Sections 451 et seq., which are discretionary with the Agency, and therefore not excluded from the definition of condition of employment by section 7103(a)(14)(C) of the Statute. The Union contends that its proposal does not prescribe a particular program or a particular amount of funds to be included in the Agency's budget. The Union also contends that the Agency has not made a substantial demonstration of a significant and unavoidable increase in costs which would not be offset by compensating benefits. Therefore, the Union concludes, the proposal is not inconsistent with the Agency's right to determine its budget. V. Analysis and Conclusion We adopt the court's holding, as stated in Section II, that a proposal such as the disputed proposal determining the level of incentive pay awarded for the performance of Agency work does not constitute an exercise of management's rights to direct employees and assign work under section 7106(a)(2)(A) and (B) of the Statute. Pursuant to the court's direction, we turn our attention to whether Proposal 5 is rendered nonnegotiable by sections 7103(a)(14)(C) and 7106(a)(1) of the Statute. The issues presented here are limited solely to the rate of incentive award money to be paid to employees and do not in our view concern management's rights under section 7106 of the Statute to set levels of performance for employees to receive a particular rating. A. Whether the Proposal Concerns a Matter which is Specifically Provided for by Federal Statute so as not to be a Condition of Employment within the Meaning of Section 7103(a)(14)(C) of the Statute In our view the rate at which incentive award money is payable to employees under the Agency's productivity plan concerns those employees' conditions of employment within the meaning of section 7103(a)(14). The issue on remand, however, is whether the proposal concerns a condition of employment which is specifically provided for by federal statute so as to be excluded from the scope of the duty to bargain under section 7103(a)(14)(C) of the Statute. We find that Proposal 5 is not a condition of employment which is specifically provided for by federal statute so as to be excluded from the duty to bargain under section 7103(a)(14)(C) of the Statute. The incentive award money which is the subject of the Union's proposal is not paid to employees pursuant to 5 U.S.C. Sections 5301 et seq. It is not wages or salary authorized by these provisions, in particular 5 U.S.C. Section 5332. Rather, as indicated by the record and as found by the court, the incentive award money payable to employees here is authorized pursuant to 5 U.S.C. Section 4503. /1/ OPM itself has acknowledged that money paid to employees pursuant to that provision is not properly considered pay within the meaning of Chapter 53. In revising its regulations governing the Performance Management System, OPM moved the provisions concerning incentive awards from 5 C.F.R. Chapter 531, pertaining to pay systems, to 5 C.F.R. Chapter 430, pertaining to performance appraisals. /2/ OPM explained its action by distinguishing incentive awards from pay, stating particularly: /3/ Two agencies believe that the performance awards provisions should be moved from Part 531 to another part (of) Title 5, (C.F.R.) because awards are not additions to basic pay. These agencies think that Part 531 should only include pay-setting regulations. . . . . . . . OPM concurs that performance awards provisions are inappropriately placed in Part 531 because these awards are not increases to basic pay. . . . . . . . (P)art 531, Subpart F has been moved to Part 430, Subpart E . . . Because incentive award money is not paid to employees pursuant to 5 U.S.C. Sections 5301 et seq., the Agency's and OPM's contention that incentive rates are specifically provided for by these statutory provisions, particularly 5 U.S.C. Section 5332, is without merit. Moreover, the rates at which incentive award money is to be paid to employees under the incentive system established by the Agency are not matters specifically provided for under 5 U.S.C. Section 4503 so as to be excluded from conditions of employment concerning which the Agency has an obligation to bargain. Section 4503 provides the Agency with authority to award employee performance, but it does not specify the amount to be paid as an award. /4/ It is clear from the legislative history of section 7103(a)(14) of the Statute that only those matters specifically provided for by other federal statutes are excepted from the obligation to negotiate under that provision. /5/ As the Agency acknowledges, the amount to be awarded as incentive money is left to the Agency's discretion pursuant to 5 U.S.C. Section 4503. See the Agency's Statement of Position in Response to the Union's Petition for Review at 12 and 13. Thus, the rate at which incentive award money will be paid to employees under the Agency's incentive program is not specifically provided for by statute and is within the duty to bargain. See also National Treasury Employees Union, Chapter 6 and Internal Revenue Service, New Orleans District, 3 FLRA 748 (1980); March Air Force Base, Riverside, California, 13 FLRA 255 (1983); compare American Federation of Government Employees v. FLRA, 653 F.2d 669 (D.C. Cir. 1981) (where the court affirmed the Authority's decision that the agency in that case had no duty to bargain over a union proposal concerning overtime rate of compensation because the matter was specifically provided for by federal statute, 5 U.S.C. Section 5542(a), so as to be excluded from the definition of conditions of employment under section 7103(a)(14)(C) of the Statute). Further, Proposal 5 would not prevent the Agency from eliminating the program. The proposal only addresses the rate of incentive pay. As explained by the Union, the proposal is only intended "to address the rate of incentive pay once the (A)gency determines that it will have an incentive pay program. Nothing in this proposal requires perpetuating the program forever." Union's Response to Agency's Supplemental Brief at 4-5. In the absence of any indication to the contrary, we accept the Union's explanation of the proposal's meaning. Finally, the Agency contends that certain portions of the legislative history of the Statute support its position that Congress did not intend to include the subject of pay or money-related fringe benefits in the scope of conditions of employment. However, as we have shown, the proposal does not concern wages or salaries. Further, the Agency has not shown nor do we find that incentive awards are the kinds of matters which are referred to in statements relied on by the Agency, for example, wages and salaries, retirement, life and health insurance, and leave. /6/ These matters are all statutory entitlements of federal employees. There is no such entitlement to an incentive award. Rather, the Agency has discretion under 5 U.S.C. Sections 4502 and 4503 to decide the conditions under which it will award that money to employees. The terms under which incentive award money is given to employees in this case have been prescribed by the Agency itself in its incentive program. Thus, the proposal in this respect is like Proposals 2 and 3 in American Federation of Government Employees, AFL-CIO, Local 3477 and Community Futures Trading Commission, 21 FLRA No. 18 (1986), remanded as to other matters, No. 86-1286 (D.C. Cir. July 3, 1986), which concerned the amount of money to be awarded to employees for suggestions. The Authority found that those proposals were not inconsistent with 5 U.S.C. Sections 4502 and 4503 and were within the duty to bargain. The money to be awarded under the Agency's incentive awards program in this case is authorized under the same provisions as in that case. In our view the money awarded under this program is unlike the money-related fringe benefits mentioned above but rather is similar to money awarded to employees for suggestions under an agency's suggestion program. B. Whether the Proposal Interferes with Management's Right to Determine its Budget under Section 7106(a)(1) of the Statute The Agency has not demonstrated that implementation of the Union's proposal would directly interfere with management's right to determine its budget under the test set forth in American Federation of Government Employees, AFL-CIO and Air Force Logistics Command, Wright-Patterson Air Force Base, Ohio, 2 FLRA 604 (1980), enforced as to other matters sub nom. Department of Defense v. FLRA, 659 F.2d 1140 (D.C. Cir. 1981), cert. denied sub nom., AFGE v. FLRA, 455 U.S. 945 (1982). In that case, the Authority stated generally that it would find a proposal inconsistent with an agency's right to determine its budget if the proposal by its terms prescribed a particular program or an amount of funds to be included in the agency's budget or if the agency made a substantial demonstration that the proposal would result in a significant and unavoidable increase in costs which would not be offset by compensating benefits. It is clear from the record in this case, as recognized by the Agency and OPM, that Proposal 5 does not prescribe either a particular program or operation or an amount of funds to be included in the Agency's budget. The Agency projected the cost of hiring a certain number of persons as data entry operators and argued that the Union's proposal would infringe on its right to determine a certain percentage of its budget related to data operators at the Philadelphia Service Center. The figures provided by the Agency are speculative at best, because it is impossible to determine at this point the number of employees the Agency will actually hire or how many employees will participate in the incentive awards program, and if so at what level. Moreover, Proposal 5 does not specify a dollar amount to be budgeted for the program but simply addresses the rate at which incentive award money will be paid to employees who qualify for an award under the program. Further, the Agency has not demonstrated that implementation of Proposal 5 would result in a significant and unavoidable increase in costs which would not be offset by compensating benefits. In fact, the proposal specifically links the amount of incentive money to be awarded to increases in an employee's productivity, which would directly benefit the Agency's "objective of greater efficiency in Government." /7/ We therefore find that Proposal 5 does not directly interfere with management's right to determine its budget under section 7106(a)(1) of the Statute. See, for example, Commodity Futures Trading Commission, 21 FLRA No. 18 (1986) (Proposals 2 and 3) (proposals prescribing the amounts to be paid for suggestion awards did not directly interfere with management's right to determine its budget); United States Department of the Treasury, Internal Revenue Service and United States Department of the Treasury, Internal Revenue Service, Houston District, 25 FLRA No. 70 (1987), petition for review filed sub nom. National Treasury Employees Union v. FLRA, No. 87-1165 (D.C. Cir. April 15, 1987) (proposal providing for free or low cost parking for unit employees did not interfere with the agency's right to determine its budget). VI. Conclusion Based on the above, we find that Proposal 5 is not a condition of employment which is specifically provided for by federal statute so as to be excluded from the duty to bargain under section 7103(a)(14)(C) of the Statute. Moreover, the proposal does not interfere with management's right to determine its budget under section 7106(a)(1) of the Statute. It therefore is within the Agency's duty to bargain. VII. Order The Agency must upon request, or as otherwise agreed to by the parties, bargain concerning Proposal 5. /8/ Issued, Washington, D.C., May 29, 1987. /s/ Jerry L. Calhoun, Chairman /s/ Henry B. Frazier III, Member /s/ Jean McKee, Member FEDERAL LABOR RELATIONS AUTHORITY --------------- FOOTNOTES$ --------------- (1) 5 U.S.C. Section 4503 provides: Section 4503. Agency awards The head of an agency may pay a cash award to, and incur necessary expense for the honorary recognition of, an employee who -- (1) by his suggestion, invention, superior accomplishment, or other personal effort contributes to the efficiency, economy, or other improvement of Government operations or achieves a significant reduction in paperwork; or (2) performs a special act or service in the public interest in connection with or related to his official employment. (2) In NTEU v. FLRA, at n.2, the court noted that the regulations issued to implement 5 U.S.C. Section 4503 divide awards into two categories: "'Performance Awards,' 5 C.F.R. Part 531, Subpart F (based on performance within the scope of job responsibilities) (which is involved in this case) and 'Special Awards,' 5 C.F.R. Part 451, Subpart B (based on employee suggestions, inventions and actions)." These regulations were changed by OPM. See 51 Fed. Reg. 8396 (March 11, 1986). Title 5 C.F.R. Part 531, Subpart F was moved to 5 C.F.R. Part 430, Subpart E and 5 C.F.R. Part 451, Subpart B was revised and redesignated as 5 C.F.R. Part 451, Subpart A. See 51 Fed. Reg. 8407, 8417 and 8418 (March 11, 1986). (3) 51 Fed. Reg. 8409 (March 11, 1986). (4) See also 5 U.S.C. Section 4502, which provides in pertinent part: . . . . . . . (d) A cash award to, and expense for the honorary recognition of, an employee may be paid from the fund or appropriation available to the activity primarily benefiting or the various activities benefiting. The head of the agency concerned determines the amount to be paid by each activity for an agency award under section 4503 of this title. (5) See statement of Congressman Clay concerning that portion of the bill passed by the House (the "Udall substitute") which excluded matters specifically provided for by other federal statutes from the obligation to bargain, which portion was enacted as section 7103(a)(14)(C): Mr. CLAY. . . . . . . . Section 7103(a)(14)(D), removing from subjects of bargaining those matters specifically provided for by federal statute, was adopted by the committee and retained in the Udall substitute with the clear understanding that only matters "specifically" provided for by statute would be excluded under this subsection. Thus, where a statute merely vests authority over a particular subject with an agency official with the official given discretion in exercising that authority, the particular subject is not excluded by this subsection from the duty to bargain over conditions of employment. 124 Cong. Rec. 29,187 (1978). (6) See, for example, the Report accompanying the House Committee bill (H.R. 11280) which states that "Federal pay will continue to be set in accordance with the pay provisions of title 5, and fringe benefits, including retirement, insurance, and leave, will continue to be set by Congress" (emphasis added). H.R. Rep. No. 1403, 95th Cong., 2d Sess. 12 (1978), reprinted in Legislative History of the Federal Service Labor-Management Relations Statute, Title VII of the Civil Service Reform Act of 1978 at 682 (hereinafter referred to as "Legislative History"). See also id. at 377, where Congressmen Clay and Ford, the primary sponsors of the labor-management relations bill, stated in Supplementary comments to the staff report accompanying their bill that "Among the collective bargaining rights not included in this bill are: . . . (2) (t)he right to bargain collectively over pay and money-related fringe benefits such as retirement benefits and life and health insurance" (emphasis added) (Legislative History at 721); and 124 Cong. Rec. 29,182 (1978), where Congressman Udall, whose substituted version of the Ford-Clay bill formed the basis for the legislation enacted by Congress, stated: "All these major regulations about wages and hours and retirement and benefits will continue to be established by law through congressional action" (emphasis added) (Legislative History at 923). (7) See Philadelphia Service Center Incentive Pay System Guide at 1 (set forth as Attachment 1 to the Union's Reply Brief). (8) In finding this proposal to be within the duty to bargain, the Authority makes no judgment as to its merits.