[ v30 p616 ]
The decision of the Authority follows:
30 FLRA NO. 76 30 FLRA 616 (1987) 29 DEC 1987 NEWARK AIR FORCE STATION Activity and AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, LOCAL 2221 Union Case No. 0-AR-1374 s DECISION I. Statement of the Case This matter is before the Authority on an exception to the award of Arbitrator Jonas B. Katz filed by the Union under section 7122(a) of the Federal Service Labor - Management Relations Statute (the Statute) and part 2425 of the Authority's Rules and Regulations. The Activity filed an opposition. The Office of Personnel Management (OPM) requested and was granted permission to file a brief as amicus curiae. The issue before the Arbitrator was whether management violated law, rule, and regulation when it established the grievant's performance plan. The grievant's plan consists of performance standards and elements which management uses to 'evaluate her job performance. Applying Authority case law, the Arbitrator determined that the matter before him was not arbitrable. On review of the comprehensive briefs of the parties and the amicus and the entire record in the case, we have reconsidered that case law. We hold, based on the relevant provisions of law, that a grievance alleging that management violated applicable law when it established a grievant's performance standards and elements, but has not yet evaluated the grievant against the standards and elements, is arbitrable unless the parties have excluded it from the scope of their negotiated grievance procedure. We conclude that the parties in this case did not exclude the grievance from their negotiated grievance procedure, and that the grievance is arbitrable. Accordingly, we will remand the award to the parties to permit them the opportunity to seek a resolution of the merits of the grievance in a manner consistent with this decision by mutual settlement or by further arbitration. II. Background and Arbitrator's Award An employee filed a grievance in which she alleged that the content of her performance appraisal plan did "not meet the requirements of governing directives." Arbitrator's Award at 6. The plan had been established by management for the grievant; she had not yet been evaluated under the plan. The Activity responded that the grievance challenged the content of the grievant's performance elements and standards, and it denied the grievance on the basis of Air Force Regulation (AFR) 40-452, which prohibits grievances of that nature. The grievance was submitted to arbitration on the following stipulated issue: Did Management violate law, rule and regulation when it established the grievant's performance plan effective for the period 1 February 1986 through 31 January 1987? The Union contended before the Arbitrator that the grievant's performance elements and standards were "vague and non-objective" (Award at 8) and that they violated the requirements of 5 U.S.C. 4302, Federal Personnel Manual (FPM) Chapter 430, and AFR 40-452. Those provisions require, among other things, that performance standards will permit, to the maximum extent feasible, the accurate evaluation of job performance on the basis of objective job-related criteria and that the standards must be defined in measurable terms. The Union argued that the grievance was arbitrable because it did not challenge the Activity's right to determine the appropriate job elements and performance standards, but instead contested only the plan's validity under applicable regulatory requirements. The Union pointed out that under the FPM, the standards must be "realistic, measurable, and objective," and that while the Activity has the right to establish elements and standards as it sees fit, the resulting plans must meet applicable requirements. Award at 8. The Union submitted that the grievant's plan did not meet those requirements, and, therefore, the grievance should be granted. The Activity contended that the grievance was not arbitrable under section 7106(a)(2) of the Statute and under AFR 40-452 because it challenged the establishment of a performance appraisal plan. As to the merits of the grievance, the Activity asserted that the elements and standards established for the grievant's position were a reasonable exercise of management's judgment. The Agency argued that any review of the plan required the Arbitrator to substitute his judgment for that of the grievant's supervisor, in violation of the Activity's management rights. The Agency argued that it reasonably exercised its authority in establishing the grievant's plan, and that in doing so no law, rule, or regulation had been violated. The Arbitrator noted the Union's argument that the grievance is arbitrable pursuant to the broad scope grievance procedure established in Article 6 of the parties' agreement. He stated that the Union correctly contended that while management has the sole right to determine the content of performance appraisal plans, those plans must meet the requirements of the prevailing regulatory directives. He reviewed Authority case law and noted that the Authority consistently set aside awards which found grievances disputing the establishment of standards and the identification of elements to be arbitrable. The Arbitrator stated that the clear meaning of the Air Force regulations and section 7106(a)(2)(A) and (B) of the Statute, as interpreted by the Authority and mirrored in the parties' agreement, compel the finding that the grievance is not arbitrable. He then stated (Award at 13): (A)ny consideration by the Arbitrator of the merits of this dispute would necessarily require a substitution of his judgment concerning the establishment of proper performance elements and standards for that of management. Thus, while the Union is correct that the grievant's performance appraisal plan must satisfy the substantive requirements of the Federal Personnel Manual and the AF Regulations, the Arbitrator regrets that the law precludes the use of the contract arbitration to resolve the merits of this type of dispute. As his award, the Arbitrator denied the grievance on the basis that it was not arbitrable for the reasons given. III. The Union's Exception The Union contends that "in light of recent Federal court precedent and the language of the Statute, a performance appraisal plan (and the elements and standards contained in the plan) which has been implemented to evaluate the job performance of bargaining unit employees can be challenged by means of a grievance alleging that the performance appraisal plan is in violation of 'applicable law.'" Union's Exception at 2. The Union therefore contends that the award is contrary to law and that the Authority should reverse the award and direct the parties to select an arbitrator for a determination of the merits of the grievance. The Union asserts that the parties' agreement incorporates the definition of grievance and the broad scope grievance procedure set forth in the Statute. The Union recognizes that in prior cases, the Authority has indicated that a performance standard or job element cannot be grieved. The Union argues that in light of the language of the Statute, Federal Circuit decisions, and a district court decision questioning the Authority's holding that a grievance challenging a performance standard as a violation of regulation is nongrievable or nonarbitrable, the Authority should examine its rationale on the grievability/arbitrability of performance standards and elements insofar as a grievance alleges that the standard violates law, rule, or regulation. Specifically, the Union contends that the grievance in this case is not excluded from the negotiated grievance procedure under section 7121(c) of the Statute, and is grievable under section 7103(a)(9)(C)(ii) and arbitrable under section 7121(b)(3)(C). The Union cites U.S. Marshals Service v. FLRA, 708 F.2d 1417, 1421 n.5 (9th Cir. 1983) for the proposition that an arbitrator may adjudicate any grievance concerning an alleged violation, misinterpretation, or misapplication of any law or regulation affecting conditions of employment, as in this case. The Union further contends that a performance standard is not removed from coverage of the grievance procedure under section 7106(a)(2)(A) and (B) where the grievance alleges that the standard is not in accord with applicable law. citing Equal Employment Opportunity Commission v. FLRA, 744 F.2d 842, 848 (D.C. Cir. 1984), cert. dismissed, 106 S. Ct. 1678 (1986), the Union notes that management's right extends only insofar as it is exercised "in accordance with applicable laws." Therefore, the Union asserts that management actions may be challenged under the grievance procedure when management fails to act in accordance with applicable laws. The Union also contends that the Arbitrator's holding is premised on the improper assumption that arbitral authority does not exist to review the legal validity of performance standards and elements. According to the Union, this premise is not reconcilable with recent case law analyzing an arbitrator's power to review performance standards. The Union cites the decisions in Wilson v. Department of Health and Human Services, 770 F.2d 1048 (Fed. Cir. 1985) ; DePauw v. United States International Trade Commission, 782 F.2d 1564, 1565-66 (Fed. Cir. 1986); and Rogers v. Department of Defense Dependents Schools, 814 F.2d 1549, 1553 (Fed. Cir. 1987) in support of its contention that arbitrators must examine the validity of performance standards under applicable law and must apply the same standards as the Merit Systems Protection Board (MSPB) in performance standards cases. The Union also cites American Federation of Government Employees v. Calhoun, 659 F. Supp. 191 (E.D. Mo. 1987), and contends that the District Court questioned the Authority's holding that section 7106(a) of the Statute precludes the examination of performance plans by arbitrators for violation of regulations. Further, the Union disputes the contention that arbitration of the grievance in the present case would require the Arbitrator to substitute his judgment for that of management as to the content of the grievant's performance standards. The Union states that had it been successful in the arbitration, the relief it sought was not an arbitral direction to management as to what performance standards or elements were proper. Also, the Union contends that the Authority's content-application test developed in negotiability cases does not direct a finding that the present grievance is nongrievable or nonarbitrable. The Union contends that in Patent Office Professional Association and Patent and Trademark Office, Department of Commerce, 25 FLRA 384 (1987) ("POPA"), petition for review filed sub nom. Patent Office Professional Association v. FLRA, No. 87-1135 (D.C. Cir. March 26, 1987), the Authority distinguished a nonnegotiable proposal (Section 3.J) from one "which simply requires that performance standards be established 'in accordance with law' as provided in section 7106(a)(2)(A)." 25 FLRA at 394. The Union also cites General Services Administration and American Federation of Government Employees, AFL - CIO, National Council 236, 27 FLRA 3 (1987), in which the Authority held that a grievance challenging an agency reorganization as violating a regulation is grievable and arbitrable notwithstanding the agency's assertion that the grievance was nonarbitrable under section 7106. The Union asserts that a doctrine that a legally invalid performance standard cannot be grieved or arbitrated until an adverse personnel action is taken against an employee would lead to "absurd results." In the Union's view, if an invalid standard is established for 100 unit employees, the Union should be able to present a grievance at that time on behalf of all of those unit employees in one grievance; if it waited until an adverse personnel action is taken against any of the 100 employees based on the improper standard, that would lead to a multitude of grievances limited to each personnel action. This, the Union contends, would frustrate "an effective and efficient Government." See section 7101(b) of the Statute. The Union concludes that since a grievance challenging a performance appraisal plan as violating statute or regulation is not limited by section 7106, the rationale of previous Authority decisions fully supports a finding of grievability in this case. IV. The Activity's Opposition The Activity contends that the Union ignores the Authority's case law which holds that performance standards can be grieved by employees who believe they have been adversely affected by the application of management's performance standards to them. The Activity maintains that the Union errs in contending that the grievance is grievable under section 7103(a)(9) of the Statute and argues that the Union overlooks section 7106(a), which preserves management's rights and prevails over other provisions of the Statute. The Activity notes that section 7106(a) states that "nothing in this chapter shall affect the authority of any management official of any agency . . . (2) in accordance with applicable laws -- (A) to hire, assign, direct . .. employees." Activity Opposition at 3. The Activity states that in American Federation of Government Employees AFL - CIO, Local 1968 and Department of Transportation, Saint Lawrence Seaway Development Corporation, Massena, New York, 5 FLRA 70, 79 (1981), the Authority held that a negotiated grievance procedure under section 7121 of the Statute cannot deny an agency's authority to exercise its rights under section 7106. Therefore, the Activity argues that the Union improperly relied on the statutory definition of grievance in section 7103(a)(9) to support the arbitrability of a matter which the Authority has found to be nongrievable and nonarbitrable as an illegal interference with section 7106 management rights. Activity Opposition at 3-4. The Activity contends that employees who are adversely affected by the application of established performance standards are able to challenge those standards. The Activity cites NTEU and Department of the Treasury, Bureau of the Public Debt, 3 FLRA 769, 780 (1980), in which the Authority held that: In the context of negotiated grievance procedures it would be possible for an employee against whom action has been taken for unacceptable performance to grieve such actions, contending that the performance standard as applied to the grievant pursuant to which the discipline was imposed is improper, or impossible of performance, under requirements of law or the parties' agreement. The Activity also contends that the case law cited by the Union is consistent with the Arbitrator's award. The Activity notes that Wilson, 770 F.2d 1048, was an appeal of an MSPB decision in which a job standard had already been applied in such a way as to adversely affect the employee, and the court decided that the content of the job standard was insufficient to support a removal action. The Agency contrasts that situation to the present case, in which there is no application of the job standard, no rating, and no adverse action against the grievant. Activity Opposition at 5. The Activity contends that once the job standard is applied and there has been some alleged adverse effect on the grievant, there can be a challenge of management's right to establish performance standards under requirements of law or the parties' agreement. According to the Activity, the Authority's decisions preclude the arbitration of the content of job standards until those standards have been applied. As to the Union's citation of AFGE v. Calhoun, the Activity points out that the court found that it did not have jurisdiction in the matter. The Activity argues that finding the grievance in this case to be arbitrable would result in the substitution of the Arbitrator's judgment for that of management on the content of performance standards. The Activity states that the Arbitrator specifically found that he was being asked to substitute his judgment in reviewing the content of performance standards. Activity Opposition at 6. The Activity cites the Authority's decision in POPA as establishing that the review of performance standards and critical elements under a substantive criterion is impermissible, although an arbitrator may review management's application of its already established standards and elements to an employee in a performance appraisal. The Activity contends that the Authority's content-application test does not support the arbitrability of the grievance in this case and asserts that the Union misconstrues the purpose of the test as set forth in POPA. The Activity maintains that the test concerns the negotiability of performance standards and does not directly indicate whether a matter is grievable and arbitrable. Activity Opposition at 8. The Activity disputes the Union's reliance on the following passage from POPA (25 FLRA at 394-95): (W)e are not presented with a proposal which simply requires that performance standards be established 'in accordance with law' as provided in section 7106(a)(2). Rather, the proposals here present precisely the circumstances covered by Saint Lawrence Seaway and subsequent cases, namely, they provide a contractual standard which authorizes arbitral review of the content of performance standards. The Activity contends that the decision in POPA must be understood in the context of Saint Lawrence Seaway, which would not allow the negotiation of any proposal which would deny an agency's authority to exercise its rights under section 7106. The Activity concludes that there is ample opportunity for the grievant in this case to challenge her performance standards and elements under existing precedent. V. The Amicus Brief of the Office of Personnel Management OPM contends that in addition to basing his award on provisions of law, the Arbitrator based his award on the parties' agreement which he found excluded the arbitration of grievances over the validity of performance standards. OPM contends that apart from the question of law presented, this case is merely one of contract interpretation and the Union is merely disagreeing with the Arbitrator's interpretation and application of the agreement. As to the question of law presented, OPM maintains that there is no statutory employee right to challenge the content of a performance rating or any other aspect of the appraisal process unless an agency-initiated personnel action has occurred, in which case the employee is covered by the procedures provided in 5 U.S.C. 4304. OPM contends that the Union cannot rely simply on the broad definition of grievance contained in section 7103(a)(9) of the Statute. Brief at 6-7. Rather, according to OPM, all matters pertaining to the establishment of performance standards, plans, appraisals, and performance-based actions are covered by 5 U.S.C. Chapter 43, and the legislative history indicates that Congress intended that there be no appeal of such matters before application to an employee. OPM stresses that "it is only at the point when action is taken against an employee that he may grieve or appeal the action under 5 U.S.C. 7121; not before." Brief at 9. OPM maintains that Wilson, 770 F.2d 1048 and Rogers, 814 F.2d 1549, cited by the Union, are not applicable in the present case because those cases concerned employees' appeals to MSPB following adverse performance-based actions. OPM therefore contends that the grievant in this case, who had not been affected by a performance-based action, had no standing to challenge the validity of her performance plan. In response to the Union's contention that the exercise of management rights must be in accordance with law, OPM contends that any challenge to a matter involving a performance appraisal system is subject to the statutory procedures set forth in 5 U.S.C. 4303. OPM argues that those procedures do not apply until an action has been taken against an employee. Brief at 11. OPM also maintains that the Union ignores Authority precedent in this area which supports the Arbitrator's award. OPM disagrees with the Union's contention that arbitration of the grievance would not require the substitution of the Arbitrator's judgment for management's judgment concerning the content of performance standards. Finally, OPM contends that to allow performance plans to be grieved before application would hinder agencies from taking performance-based actions, contrary to the intent of Congress. Brief at 13. VI. Union Reply to OPM Amicus Brief In its reply, the Union contends that the matter in this case is one of law as well as contract interpretation and that the Arbitrator improperly relied on section 7106(a) of the Statute to find that the grievance was nonarbitrable. The Union contends that OPM fails to establish that: (1) the conformance of performance standards to applicable law is not grievable under section 7103(a)(9); and (2) Chapter 43 restricts the scope of grievability in the performance area. The Union asserts that the fact that the validity of performance ratings can be grieved, as demonstrated by Warner Robins Air Logistics Center, Robins Air Force Base, Georgia and American Federation of Government Employees, Local 987, 28 FLRA 652 (1987), indicates that the grievability in the performance area is not limited to demotions and removals appealable to the MSPB under 5 U.S.C. 4303. The Union states that under section 7106(a)(2), there is no right to establish a performance standard that is not "in accordance with applicable laws." Reply at 5. The Union also disputes the contention that allowing performance standards to be grieved would hinder management's ability to direct employees. The Union argues that allowing standards to be grieved would permit the unified processing of many grievances and would prevent grievances over application of faulty performance plans. VII. Discussion The issue in this case is whether a grievance which asserts that an employee's performance standards and elements are not in accordance with governing directives--that is, applicable law, rule, or regulation--is grievable and arbitrable under the Statute. Resolution of this issue begins with consideration of the statutory framework which Congress established for arbitration in Federal sector labor management relations. A. Arbitration Under the Statute The Statute requires parties' collective bargaining agreements to provide procedures for the settlement of grievances, including questions of arbitrability. 5 U.S.C. 7121(a)(1). See U.S. Marshals Service v. FLRA, 708 F.2d 1417, 1419 (9th Cir. 1983) (section 7121 recognizes "the centrality of arbitration" under the Statute). Negotiated grievance procedures must be fair and simple, provide for expeditious processing, and include procedures that provide that any grievance not satisfactorily settled under the negotiated grievance procedure shall be subject to binding arbitration. 5 U.S.C. 7121(b). The term "grievance" is defined in section 7103(a)(9) of the Statute as any complaint: (A) by any employee concerning any matter relating to the employment of the employee; (B) by any labor organization concerning any matter relating to the employment of any employee; or (C) by any employee, labor organization, or agency concerning-- (i) the effect or interpretation, or a claim of breach, of a collective bargaining agreement; or (ii) any claimed violation, misinterpretation, or misapplication of any law, rule, or regulation affecting conditions of employment(.) Five subjects itemized in section 7121(c) of the Statute must be excluded from the scope of the grievance procedure: (1) any claimed violation of subchapter III of chapter 73 of title 5, relating to prohibited political activities; (2) retirement, life insurance, or health insurance; (3) a suspension or removal under section 7532 of title 5; (4) any examination, certification, or appointment; and (5) the classification of any position which does not result in the reduction in grade or pay of an employee. Additionally, parties' collective bargaining agreements may "exclude any matter from the application of the grievance procedures which are provided for in the agreement." 5 U.S.C. 7121(a)(2). The wording of these statutory provisions reflects Congress' intent that "(a)ll matters that under the provisions of law could be submitted to the grievance procedures shall in fact be within the scope of any grievance procedure negotiated by the parties unless the parties agree as part of the collective bargaining process that certain matters shall not be covered by the grievance procedures." Joint Explanatory Statement of the Committee on Conference, H.R. Rep. No. 95-1717, 95th Cong. 2d Sess. 157 (1978), U.S. Code Cong. & Admin. News 1978, 2723, 2891. Agreements that exclude from the negotiated grievance procedure only the five subjects specified in section 7121(c) are referred to as "broad scope" agreements; those that additionally exclude other subjects are "limited scope" agreements. American Federation of Government Employees, Locals 225, 15O4 and 3723 v. FLRA, 712 F.2d 640, 642 (D.C. Cir. 1983). The parties have the responsibility to determine the scope of their negotiated grievance procedure. Scope is a mandatory subject of bargaining. Id. at 649. "(S)ection 7121(a) singles out grievance procedures for special attention. The first part of the section indicates a broad scope grievance procedure as the standard arrangement, but the second part permits the parties to negotiate limited scope agreements in the course of bargaining." Id. If the parties do not exclude subjects from the scope of their grievance procedure, grievances regarding those subjects are within the scope, if they are not mandatorily excluded by section 7121(c) and if they meet the definition of "grievance" in the Statute. 1 As is evident from the wording of section 7103(a)(9), the Statute defines the term "grievance" expansively. Id. at 645. See also General Services Administration and American Federation of Government Employees, AFL - CIO, National Council 236, 27 FLRA 3 (1987), in which the Authority held that an arbitrator properly found arbitrable a grievance which sought to enforce a negotiated requirement that certain agency actions, including an agency reorganization, be taken in accordance with laws, rules, regulations, and the parties' agreement. That decision reaffirmed the Authority's previous holding in American Federation of Government Employees, Local 1904, AFL - CIO and United States Army Communications and Electronics Materiel Readiness Command, 16 FLRA 358 (1984), that the definition of grievance in section 7103(a)(9) is "expansive" and that a complaint that an agency failed to comply with law and regulation governing contracting out was covered by the parties' grievance procedure. The grievance in this case alleged that the grievant's performance appraisal plan containing the performance elements and standards for the grievant's position violated 5 U.S.C. 4302, FPM Chapter 430, and AFR 40-452. Therefore, the grievance clearly concerns a complaint by an employee concerning a claimed violation by management of law, rule, or regulation affecting conditions of employment within the meaning of section 7103(a)(9) of the Statute. Moreover, the grievance does not address one of the mandatorily excluded subjects in section 7121(c) of the Statute. Finally, it is clear from the record in this case that the parties did not agree to exclude the grievance from the scope of the parties' negotiated grievance procedure. Applying solely these provisions of the Statute to the issue before us would lead to the conclusion that the grievance is arbitrable. Before we are able to make that determination, however, we must consider the effect, if any, of the following on the arbitrability of the grievance: (1) the statutory framework establishing performance appraisal requirements and administrative and court decisions interpreting those requirements and (2) Authority case law discussing the relationship between management's rights and the arbitrability of grievances like the one in this case. B. Performance Appraisal System Requirements Under 5 U.S.C. 4302(b)(1), each performance appraisal system must provide for establishing performance standards "which will, to the maximum extent feasible, permit the accurate evaluation of job performance on the basis of objective criteria (which may include the extent of courtesy demonstrated to the public) related to the job in question for each employee or position under the system(.)" The regulations which implement the statutory provisions pertaining to performance appraisal systems provide, among other things, that these systems must establish a minimum appraisal period of not less than 90 calendar days; critical elements, non-critical elements and performance standards must be in writing, reviewed and approved by higher level supervisors; and performance ratings must be in writing. 5 C.F.R. 430.204. Guidance on performance appraisal is contained in Federal Personnel Manual Chapter 430. Several decisions of the Federal Circuit have established and discussed the principles to be applied in determining whether performance standards comply with law. As recognized by those decisions, arbitrators as well as the MSPB have the authority to apply these principles and to determine whether performance standards meet applicable legal requirements. In Wilson v. Department of Health and Human Services, 770 F.2d 1048 (Fed. Cir. 1985), the court addressed the issue of what meaning was to be given to the statutory requirement that performance standards contain objective evaluation criteria permitting accurate job evaluation to the maximum extent feasible, as well as the "subissue" of what is the proper measure by which to judge the sufficiency of contested standards. Id. at 1050. After reviewing pertinent legislative history and MSPB decisions, the court stated: We wholly agree with the Board's formulation . . . that under the statute's objectivity requirement performance standards must be reasonable, sufficient in the circumstances to permit accurate measurements of the employee's performance, and adequate to inform the employees of what is necessary to achieve a satisfactory or acceptable rating. If the performance standards satisfy this test, then they further the congressional purpose. Id. at 1052. The court went on to reject the contention that employees must be provided with precise quantitative or numerical standards. The court noted that such standards would be "unrevealing, bizarre, or counter-productive" for many positions, and that the "rigidity of an obligation for numerical or quantitative standards" was inconsistent with Congress' expressed intent to allow agencies "great flexibility" to choose their own systems and appraisal methods best suited to their needs. Id. The court stated that "(o)f course, the agency must always live up to the statutory demand that the standard allow for reasonably accurate measurement of performance and protect employees against arbitrary treatment." Id. Applying these principles to the cases before it, the court concluded that one standard was invalid under the statutory mandate because it was "so vague and inexact that it is impossible to apply in a verifiable fashion or to discover the level of proficiency which the (agency) actually intended by the phrase." Id. at 1053. With respect to another employee's standard, the court found that the standard, which allowed for some subjective managerial judgment, was "within the statute, adequately gauged and informative to (the employee), and readily attainable." Id. at 1055-56. The court also noted that the fact that a more precise standard could be written does not invalidate an existing standard; "Congress did not mandate the most exact standard conceivable but left discretion to the agency so long as it created an 'objective' and 'adequate' standard 'to the maximum extent feasible(.)'" Id. at 1056 n.6 (emphasis added by court). See also Adkins v. Department of Housing and Urban Development, 781 F.2d 891 (Fed. Cir. 1986). In Rogers v. Department of Defense Dependents Schools, Germany Region, 814 F.2d 1549 (Fed. Cir. 1987), an employee was removed for unacceptable performance. He appealed that decision to an arbitrator in lieu of the MSPB. The arbitrator sustained the agency's decision and held that he lacked jurisdiction to review whether the performance standards complied with law. The Federal Circuit stated that the employee "argues, citing Wilson v. Department of Health and Human Services, 770 F.2d 1048, 1051-52 (Fed. Cir. 1985), and the agency concedes, that he was entitled, in the arbitration proceeding, to challenge his performance standards as failing to meet the requirements of 4302(b)(1). We agree that the arbitrator erred in ruling that he lacked authority to review those standards." 814 F.2d at 1553. The court independently examined the standards and determined that they adequately complied with law, and affirmed the arbitrator's decision. Id. at 1553-55. Further, in DePauw v. United States International Trade Commission, 782 F.2d 1564 (Fed. Cir. 1986), cert. denied, 107 S. Ct. 69 (1986), an employee removed from his position for unacceptable performance requested arbitration. The arbitrator sustained the removal. The court noted that under Cornelius v. Nutt, 472 U.S. 648 (1985), the arbitrator was bound to apply the same substantive rules that the MSPB would apply. 782 F.2d at 1565 n.2. The court affirmed the arbitrator's decision and found that the employee's performance standards met the statutory criteria. Thus, it is clear that like the MSPB and the Federal Circuit, arbitrators have the power to consider whether performance standards comply with applicable legal requirements. The cases which we have discussed all arose in the context of employees' terminations or other adverse actions for performance reasons. However, that fact simply reflects the jurisdictional limitations on what sorts of cases can come before the MSPB and the Federal Circuit; it does not demonstrate that an inquiry by a third-party into the legal validity of performance standards can occur only in that context. As we discussed in detail above, under the Statute grievances are not restricted to performance-based actions; rather, they may allege violations of law as to conditions of employment generally. Thus, if a grievance is filed by an employee who believes that he or she has been adversely affected by management's application of performance standards in a performance appraisal to that particular employee, an arbitrator could sustain a grievance alleging that management applied standards in violation of law or regulation. Bureau of Engraving and Printing, U.S. Department of the Treasury and Washington Plate Printers Union, Local No. 2 IPDEU, AFL - CIO, 20 FLRA 380, 383 (1985). However, we find no provision in the Statute which would allow the question of the standards' conformity with law to be addressed only after the grievant has been evaluated against the standards, as opposed to at the time the standards have been established for the employee and he or she will be expected to perform under and be evaluated against those same standards. In either situation, the question is the same: whether the standards themselves comply with law. As the Federal Circuit stated in Wilson, "the agency must always live up to the statutory demand that the standard allow for reasonably accurate measurement of performance and protect employees from arbitrary treatment." 770 F.2d at 1052. The requirement that standards comply with law does not arise only at the time at which an employee is evaluated against those standards; the standards must comply with law at the time that management establishes them for employees. C. Management's Rights Under Section 7106 of the Statute The primary argument raised by the Activity and OPM in opposition to the arbitrability of the grievance in this case relates to the claimed interference with the exercise of management's rights if the grievance is found to be arbitrable. Relying on section 7106 of the Statute and Authority case law, the essence of the argument is the following: (1) management has the right under section 7106 to establish performance standards and critical elements for positions; (2) an arbitrator may not act in such a way as to deny management its rights under section 7106; and (3) finding a grievance which alleges that the establishment of standards and elements violates law to be arbitrable would be impermissible because an arbitrator would be substituting his or her judgment for that of management as to what the standards and elements should be. However, the Activity and OPM acknowledge that, as we discussed above, an arbitrator may examine the content of standards and elements for consistency with law after an employee has been evaluated under them and has been adversely affected by the rating (for example, by being terminated for performance reasons). We believe that this argument must be rejected because it fails to take into account the distinction between an arbitrator's decision as to the arbitrability of a grievance and an arbitrator's decision (including remedy) resolving the substantive issue presented by a grievance. In rejecting this argument, we will no longer follow certain Authority decisions in the performance standard area that, in our view, also did not properly take this distinction into account. Additionally, the argument does not explain satisfactorily why an arbitrator has the power to examine the content of standards and elements for consistency with law after an employee has had a performance-based action taken against him or her, but should not have that same authority before that point. In Marine Corps Logistics Support Base, Pacific, Barstow, California and American Federation of Government Employees, AFL - CIO, Local 1842, 3 FLRA 397 (1980), the issue before the arbitrator was whether the work assignment which gave rise to the grievance was a grievable matter. The arbitrator ruled that it was not arbitrable because management has the right to assign work under section 7106 and therefore the assignment of personnel is not subject to grievance and arbitration. On review, the Authority held that the award was deficient. The Authority stated (3 FLRA at 398-99): (T)he arbitrability question submitted to the arbitrator concerned whether the dispute in this case, which involved a work assignment and allegations by the union that such assignment was made in violation of specific provisions of the parties' negotiated agreement, could be properly subject to arbitration. Section 7106 of the Statute, on which the arbitrator relied in finding the dispute nonarbitrable, specifies and enumerates rights which are reserved to management. However, nothing in section 7106 precludes an arbitrator from reaching the merits of a grievance where, as in this case, the union has alleged a violation of certain specified provisions of a collective bargaining agreement. Thus, while an arbitrator may find, on the merits of the grievance, that there has been no violation of the specified provisions of the agreement because the actions taken by management which gave rise to the grievance were within the ambit of the rights reserved under section 7106, or that, while there has been a violation, the scope and nature of possible remedies available to the arbitrator is limited by section 7106, nothing in section 7106 in and of itself prevents an arbitrator from deciding if there has been a violation of a particular contract provision. The principle of Barstow was not followed in subsequent Authority decisions addressing the nature of arbitral review in the performance standard area. For example, the Authority held that bargaining proposals which would subject management's determinations concerning the identification of critical elements of a position and the content of performance standards to the grievance procedure and arbitral review constitute improper interference with management's rights. American Federation of Government Employees, AFL - CIO, Local 1968 and Department of Transportation, Saint Lawrence Seaway Development Corporation, Massena, New York, 5 FLRA 70, 79-80 (1981) (Proposal 4), aff'd sub nom. AFGE, Local 1968 v. FLRA, 691 F.2d 565 (D.C. Cir. 1982), cert. denied, 461 U.S. 926 (1983). The Authority also held that permitting arbitrators to review discretionary judgments by management concerning the content of critical elements and performance standards would improperly require arbitrators to substitute their judgment as to how the agency should be run for that of management. National Treasury Employees Union and Department of Health and Human Services, Region 10, 13 FLRA 732, 734 (1983), aff'd sub nom. NTEU v. FLRA, 767 F.2d 1315 (9th Cir. 1985). See also, for example, Bureau of Engraving and Printing, U.S. Department of the Treasury and Washington Plate Printers Union, Local No. 2, IPDEU, AFL - CIO, 20 FLRA 380 (1985) and Bureau of Prisons, Department of Justice and American Federation of Government Employees, Local 148, 21 FLRA 74 (1986) (an arbitrator may not determine that a grievance directly challenging an agency's identification of job elements or establishment of performance standards is grievable or arbitrable and may not render an award substituting his or her judgment concerning job elements and performance standards for that of management); The American Federation of Government Employees, Local 1917 and United States Immigration and Naturalization Service, 15 FLRA 781 (1984) (a grievance which alleged that an agency's establishment of performance standards was not in accordance with law and regulation was not arbitrable). However, the Authority has also recognized a similarity between bargaining proposals concerning review of performance plans for legal sufficiency and arbitral review of other matters, such as the legal conformance of contracting out proposals with applicable regulations. For example, citing American Federation of Government Employees, AFL - CIO, National Council of EEOC Locals and Equal Employment Opportunity Commission, 10 FLRA 3 (1982), enforced sub nom. EEOC v. FLRA, 744 F. 2d 842 (D.C. Cir. 1984), cert. dismissed, 106 S. Ct. 1678 (1986) (per curiam), the Authority found that a bargaining proposal "limited to requiring that performance standards be established in accordance with applicable laws would be within the duty to bargain." AFGE Local 1940 and Department of Agriculture, 16 FLRA 816, 820 n.6 (1984). See also General Services Administration and American Federation of Government Employees, AFL - CIO, National Council 236, 27 FLRA 3 (1987) (finding arbitrable a grievance relating to agency's right to determine its organization). In our view, the reasoning set forth in Barstow applies as well to this case. The grievance in this case alleged a violation of applicable law and regulation in management's establishment of the grievant's performance standards and elements. The right of management to identify particular critical elements of positions and to establish performance standards is derived from its rights under section 7106(a)(2)(A) and (B) of the Statute to direct employees and to assign work in accordance with applicable laws. National Treasury Employees Union and Department of the Treasury, Bureau of the Public Debt, 3 FLRA 769 (1980), affirmed sub nom. NTEU v. FLRA, 691 F.2d 553 (D.C. Cir. 1983). The proper phase of the arbitration proceeding in which to determine the impact or application of section 7106 is not at the outset so as to preclude by law an arbitrator from having jurisdiction over the matter. Rather, the determination as to the impact or application of section 7106 is to be made in connection with the arbitrator's consideration of the substantive issue presented by the grievance and any possible remedy. See U.S. Marshals Service v. FLRA, 708 F.2d at 1421 n.5 (citing the definition of grievance in section 7103(a)(9), and stating that the management rights section of the Statute is a law affecting conditions of employment and its meaning was properly before the arbitrator in that case). A determination that the grievance in this case is arbitrable is not in any way inconsistent with the provision in section 7106 that "nothing in (the Statute) shall affect the authority" of management under section 7106(a)(2) to exercise its rights in accordance with applicable laws. Rather, section 7106 must be addressed in conjunction with an arbitrator's consideration of the substantive issue and any possible remedy. See General Services Administration, 27 FLRA 3 at 9-10 (in finding that a grievance was arbitrable, the Authority noted that arbitrators' awards "which resolve the merits of disputes involving the exercise of management's rights are also subject to the requirements of the Statute and the scope of an arbitrator's remedial authority in such cases may be limited"). We conclude therefore that the grievance in this case, which alleges a violation of applicable law in the establishment of the grievant's performance appraisal plan, is arbitrable. Of course, this finding does not affect the established rights of employees adversely affected by the application of performance standards to grieve that application as an appropriate arrangement resulting from management's exercise of its rights under section 7106(a) of the Statute. See, for example, Bureau of Prisons, Department of Justice and American Federation of Government Employees, Local 148, 21 FLRA 74 (1986). Further, our decision does not affect previous cases in which it has been held that bargaining proposals which would impose requirements on management in the performance standards area over and above those specified by law are outside the duty to bargain. See, for example, American Federation of Government Employees, Local 3748 v. FLRA, 797 F.2d 612 (8th Cir. 1986), affirming American Federation of Government Employees, Local 3748, AFL - CIO and Agricultural Research Service, Northern States Area and American Federation of Government Employees, AFL - CIO Local 3365 and Department of Agriculture, Forest Service, Black Hills National Forest, 20 FLRA 495 (1985). To the extent that Saint Lawrence Seaway and other Authority decisions such as The American Federation of Government Employees, Local 1917 and United States Immigration and Naturalization Service, 15 FLRA 781 (1984) and Veterans Administration, St. Louis, Missouri and American Federation of Government Employees, Local 2192, 19 FLRA 248 (1985) have precluded the arbitrability of grievances like the one in this case, those decisions will no longer be followed. Those decisions attempted to protect management's discretion in establishing performance standards and elements by precluding as a matter of law all arbitral review instead of focusing on arbitrators' awards in particular cases. As we have discussed above, that approach is unwarranted. Additionally, we note that the concern with arbitrators' "substituting their judgment" for that of management presents no basis on which to preclude the arbitrability of grievances challenging the legality of performance standards before an employee is evaluated against those standards. Resolution of the grievance in this case by an arbitrator would not require an arbitrator to do anything other than what arbitrators do routinely in resolving other disputes, including those involving the exercise of other management rights such as discipline. An arbitrator would simply be examining an action by management to determine whether that action was lawful; that is, whether the performance standards established by management complied with law, as it is beyond dispute that they must. This sort of examination entails no more of a "substitution of judgment" than does a similar inquiry by arbitrators, MSPB, or the Federal Circuit in proceedings following performance-based actions against employees. This is precisely one of the functions that arbitrators perform, and that Congress intended that arbitrators perform, under the Statute. In requiring parties to negotiate grievance procedures that result in binding arbitration, and in broadly defining what grievances could encompass, Congress fully expected arbitrators to review a wide variety of actions, including actions taken by management pursuant to section 7106. The argument that merely by permitting arbitrators to resolve disputes like the one in this case would somehow allow an impermissible substitution of judgment cannot serve as a per se bar to arbitrability. If grievances like the one in this case are to be excluded from the scope of parties' negotiated grievance procedures, such exclusions will have to result from the parties' negotiations pursuant to section 7121(a)(2) of the Statute, not automatically by operation of law. The question of any impermissible arbitral interference with management's rights must be directed to the merits, including remedy, of an arbitration decision relating to performance standards' consistency with law. Although this case does not involve the merits of an award, we note the following limitations on an arbitrator's inquiry into the conformance of an employee's performance plan with applicable legal requirements. In deciding the merits of a grievance like the one in this case, an arbitrator may examine the performance standards and elements established by management for the grievant only in order to determine whether they comply with applicable legal and regulatory requirements, notably the provisions of 5 U.S.C. 4302 and 5 C.F.R. Chapter 430. If an arbitrator were to find that a grievant's performance plan did not comply with applicable legal requirements, the appropriate remedy would be for the arbitrator to direct the Agency to establish a plan which complies with applicable legal requirements. This type of remedy best effectuates Congress' dual intent that management comply with the statutory requirements and that it retain the flexibility to determine which lawful standards best serve its needs. An arbitrator may not determine what the content of the employee's plan should be and may not establish new performance standards. Further. an arbitrator could not impose requirements on an agency beyond those mandated by applicable law and regulation. See POPA, 25 FLRA 384, 394 (1987) (in which the Authority held nonnegotiable a proposal that would establish criteria governing the objectivity of performance standards and would authorize arbitrators to review whether the agency's standards complied with those criteria because the proposal was more restrictive than the requirements of law and thus did not merely implement existing legal requirements for the establishment of performance standards). Further, in our view, an arbitrator's award which addresses whether an employee's performance standards comply with applicable law should be consistent with the principles set forth in relevant MSPB and Federal Circuit cases, including those discussed above in section B. We would expect parties to present relevant case law and other materials to an arbitrator to assist in the resolution of any dispute concerning this issue. Our review of exceptions to an arbitrator's award on such a matter would be limited to the narrow grounds set forth in section 7122(a) of the Statute--that is, an award would be found deficient only (1) if it is contrary to any law, rule, or regulation, or (2) on other grounds similar to those applied by Federal courts in private sector labor-management relations. Finally, we reject the other assertions made by the Activity and OPM as to why the grievance in this case should not be found to be arbitrable. Contrary to those arguments, we do not find that Chapter 43 of title 5 or its legislative history demonstrates that grievances like the one in this case must by law be excluded from the scope of the negotiated grievance and arbitration procedure permitted by the Statute. If a party desires to exclude from the scope of the negotiated grievance procedure grievances alleging that an employee's performance standards do not comply with law, it is up to that party to seek to accomplish that result through the collective bargaining process by negotiating for such an exclusion. Moreover, we reject OPM's argument that the Arbitrator's award was based on the parties' agreement and that the Union's exception taking issue with that contract interpretation therefore provides no basis for finding the award deficient. It is clear that the Arbitrator based his award on an interpretation of the Statute. VIII. Conclusion We recognize that in rendering his award, the Arbitrator relied on existing Authority precedent, including cases which we have expressly overruled in this decision. Upon consideration of the entire record in this case, including the thorough discussions in the Arbitrator's award and the briefs of the parties and the amicus, we conclude that the award finding that the grievance in this case was not arbitrable is contrary to law; that is, it is contrary to sections 7103(a)(9) and 7121(b)(3)(C) of the Statute. We hold that a grievance alleging that management violated applicable law when it established a grievant's performance standards and elements, whether or not it has evaluated the grievant against the standards and elements, is arbitrable unless the parties have excluded it from the scope of their negotiated grievance procedure. The award is remanded to the parties to permit them the opportunity to seek a resolution of the merits of the grievance in a manner consistent with this decision by mutual settlement or by further arbitration. Issued, Washington, D.C., December 29, 1987 Jerry L. Calhoun, Chairman Jean McKee, Member FEDERAL LABOR RELATIONS AUTHORITY FOOTNOTES Footnote 1 The effect of section 7106 in this area is discussed in Part C of our discussion, below.