U.S. Federal Labor Relations Authority

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32:0607(88)NG - - NAGE Locals R4-26 and R4-106 and Air Force, Langley AFB, Virginia - - 1988 FLRAdec NG - - v32 p607

[ v32 p607 ]
The decision of the Authority follows:

32 FLRA No. 88






Case No. 0-NG-1506


I. Statement of the Case

This case is before the Authority because of a negotiability appeal filed under section 7105(a)(2)(E) of the Federal Service Labor-Management Relations Statute (the Statute). It concerns the negotiability of three proposals submitted by the Union in response to changes in the Agency's Performance Management Program (Air Force Regulation 40-452).(1) The proposals require that cash awards be given to employees based on their performance ratings. For the following reasons, we find that the proposals are negotiable.

II. Proposals

Proposal 2

2. Performance awards will be cash and based on the employee's rating of record.

Proposal 3

3. Employees rated superior or excellent will be recognized; fully successful will be recognized with a 1% performance award provided the employee

exceeded at least one critical element of the performance plan.

Proposal 5

5. The following range of cash performance awards will be issued to unit employees:

a. A fully successful rating that exceeds at least one critical element of the performance plan will receive 1%.

b. An excellent rating will receive from 1 1/2% - 2 1/2%.

c. A superior rating will receive from 3% - 5%.

A. Positions of the Parties

The Agency contends that the proposals are nonnegotiable under section 7117(a)(1) of the Statute because they are inconsistent with law and Government-wide regulation. In particular, the Agency argues that the proposals are inconsistent with the following provisions of law and Government-wide regulations: (1) 5 U.S.C. § 4302, 5 C.F.R. §§ 430.203, 430.204, and 430.206(b), because the proposals require the Agency to consider funding limitations in the performance rating process; (2) 5 C.F.R. §§ 430.503(c)(1), (f) and 430.506(a), because the proposals prevent the Agency from considering the availability of funds in its review of performance awards; and (3) 5 C.F.R. § 430.503, because the proposals would prevent the Agency from conducting an internal review of performance awards. Finally, the Agency asserts that National Treasury Employees Union, Chapter 245 and Department of Commerce, Patent and Trademark Office, 30 FLRA 1219 (1988) (Proposal 1), which is relied on by the Union, is not applicable because it does not address the issues raised in this case.

The Union contends that the proposals are consistent with Subpart E of chapter 430 of title 5 of the Code of Federal Regulations entitled "Performance Awards." The Union also argues that the proposals are procedures by which the Agency will grant performance awards. Finally, relying on the Authority's decision in Patent and Trademark Office, the Union argues that the proposals are negotiable because they do not interfere with the Agency's right to establish the performance standards which employees must meet in order to be entitled to a cash award.

B. Discussion

The disputed proposals would: (1) require the Agency to grant cash performance awards based solely on an employee's performance rating; and (2) establish the amount of an individual award by specifying the percentage of an employee's salary, including a range of percentages for excellent or superior ratings, which constitutes the award. Under the proposals, employees must be given a cash award if they receive a performance rating of outstanding, superior, or fully successful, provided that they exceed at least one critical element of the performance plan.

We find that the proposals are negotiable.

1. Whether the Proposals are Inconsistent with Law--5 U.S.C. § 4302--and Government-wide Regulations--5 C.F.R. §§ 430.203, 430.204, and 430.206(b)

Performance ratings must be based solely on performance standards which permit the accurate evaluation of an employee's job performance. 5 U.S.C. § 4302; 5 C.F.R. §§ 430.203, 430.204, 430.206(b).(2) The Agency claims that it has a limited performance awards budget. The Agency argues that in order to comply with the mandatory awards required by the proposals and still keep performance awards within its budget, performance ratings must be based on consideration of funding limitations as well as performance standards. Agency Statement of Position at 7-8. The Agency contends, therefore, that the proposals are inconsistent with law and regulation because they would require management to base performance ratings on funding considerations and employee performance, rather than on employee performance alone.

Contrary to the Agency's argument, the proposals do not require that employee performance ratings be based on anything other than employee performance. The proposals concern the procedures for granting awards, not the procedures for determining employee performance ratings.

The proposals take effect only after the rating procedures have been completed. Therefore, the proposals would not preclude management from conducting employee appraisals as required by law and regulation. Moreover, as discussed below, governing regulations provide a separate procedure for reviewing budgetary limitations and, therefore, there is no need for budgetary considerations to affect the rating process. We conclude, therefore, that the proposals are not inconsistent with legal and regulatory requirements that employee performance appraisals be based solely on employee performance.

2. Whether the Proposals are Inconsistent with Government-wide Regulations--5 C.F.R. §§ 430.503(c)(1), 430.503(f) and 430.506(a)

The regulations cited by the Agency: (1) require agencies to establish procedures for the review of performance awards by an official with responsibility for managing the performance awards budget (5 C.F.R. § 430.503(c)(1)); (2) encourage agencies, within existing appropriated funds, to establish and administer performance awards and programs (5 C.F.R. § 430.503(f)); and (3) require the head of each agency, within existing appropriated funds, to establish a performance awards program as a component of an agency's Performance Management System (5 C.F.R. § 430.506(a)).(3) In short, these regulations require an agency to establish a performance awards program which includes procedures for reviewing performance awards so as to ensure that the program is administered within existing appropriated funds.

The Agency contends that under the proposals, the decision to give an employee a rating of fully successful, excellent, or superior is also a decision to grant that employee a performance award. Therefore, the Agency argues that the proposals prevent it from reviewing awards, as required by the regulations, to determine whether there are funds available for the awards.

The Agency argues that the proposals are inconsistent with 5 C.F.R. § 430.503(c)(1) for an additional reason. The Agency interprets 5 C.F.R. § 430.503(c)(1) as providing for "a distinct separate review [from] the review required by 5 C.F.R. 430.206(c) of performance ratings of record." Agency Statement of Position at 12. According to the Agency, the proposals render the review process required by 5 C.F.R. § 430.503(c)(1) meaningless because the rating decision is also a decision to grant a performance award.

Contrary to the Agency's argument, the proposals would not prevent management from reviewing the performance awards required by the proposals for consistency with applicable budgetary limitations. Nothing in the plain wording of the proposals would prohibit the Agency from reviewing performance awards to determine whether the awards are consistent with its awards budget. Further, except for awards for fully successful ratings, which under the proposal must constitute 1 percent of an employee's salary, the proposals establish a range of percentages of employee salaries within which the awards must fall. The Agency may adjust awards within the ranges established in the proposals in order to ensure that the awards remain within limitations established by existing appropriated funds. Finally, the Agency does not argue, and it is not otherwise apparent, that management is precluded by law or regulation from reallocating funds to increase the amount available in its awards budget to comply with the proposals should that be necessary.

We conclude, therefore, that the proposals are not inconsistent with the requirements of applicable regulations. We also conclude, contrary to the Agency's argument, that our decision in Patent and Trademark Office, 30 FLRA 1219, is directly applicable to this case. Not only did we find generally in Patent and Trademark Office that the amount of performance awards is negotiable, but we specifically concluded that proposals prescribing the amount of such awards did not preclude the review procedures required by 5 C.F.R. § 430.503(c).

III. Order

The Agency must upon request, or as otherwise agreed to by the parties, bargain on Proposals 2, 3 and 5.(4)

Issued, Washington, D.C.,

Jerry L. Calhoun, Chairman
Jean McKee, Member


5 U.S.C. § 4302 provides:

§ 4302. Establishment of performance appraisal systems (a) Each agency shall develop one or more performance appraisal systems which--

(1) provide for periodic appraisals of job performance of employees;
(2) encourage employee participation in establishing performance standards; and
(3) use the results of performance appraisals as a basis for training, rewarding, reassigning, promoting, reducing in grade, retaining, and removing employees[.} [Footnote omitted.]

(b) Under regulations which the Office of Personnel Management shall prescribe, each performance appraisal system shall provide for--

(1) 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;
(2) as soon as practicable, but not later than October 1, 1981, with respect to initial appraisal periods, and thereafter at beginning of each following appraisal period, the communicating to each employee the performance standards and critical elements of the employee's position;
(3) evaluating each employee during the appraisal period on such standards; (4) recognizing and rewarding employees whose performance so warrants; (5) assisting employees in improving unacceptable performance; and (6) reassigning, reducing in grade, or removing employees who continue to have unacceptable performance but only after an opportunity to demonstrate acceptable performance.

5 C.F.R. § 430.203 provides:

§ 430.203 Definitions.

In this subpart, terms are defined as follows--

"Appraisal" means the act or process of reviewing and evaluating the performance of an employee against the described performance standard(s).
"Appraisal period" means the period of time established by an appraisal system for which an employee's performance will be reviewed.
"Appraisal system" means a performance appraisal system established by an agency or component of an agency under subchapter I of chapter 43 of title 5, U.S.C. and this subpart which provides for identification of critical and non-critical elements, establishment of performance standards, communication of elements and standards to employees, establishment of methods and procedures to appraise performance against established standards, and appropriate use of appraisal information in making personnel decisions.
"Critical element" means a component of a position consisting of one or more duties and responsibilities which contributes toward accomplishing organizational goals and objectives and which is of such importance that unacceptable performance on the element would result in unacceptable performance in the position.
"Non-critical element" means a component of an employee's position which does not meet the finition of a critical element, but is of sufficient importance to warrant written appraisal. Non-critical elements are optional and may be used at agency discretion.
"Performance" means an employee's accomplishment of assigned work as specified in the critical and non-critical elements of the employee's position.
"Performance Appraisal System": see Appraisal system.
"Performance Management Plan" means the description of the agency's methods which integrate performance, pay, and awards systems with its basic management functions for the purpose of improving individual and organizational effectiveness in the accomplishment of agency mission and goals. The Performance Management Plan, which includes the performance appraisal plan, must be submitted to OPM for review and approval as required by Subpart A of this part.
"Performance plan" means the aggregation of all of an employee's written critical and non-critical elements and performance standard(s).
"Performance standard" means a statement of the expectations or requirements established by management for a critical or non-critical element at a particular rating level. A performance standard may include, but is not limited to, factors such as quality, quantity, timeliness, and manner of performance.
"Progress review" means a review of the employee's progress toward achieving the performance standards and is not in itself a rating.
"Rating": see Summary rating.
"Rating of record" means the summary rating required at the time specified in the Performance Management Plan or at such other times as the Plan specifies for special circumstances.
"Summary rating" means the written record of the appraisal of each critical and non-critical element and the assignment of a summary rating level (as specified in § 430.204(g) and (h) of this subpart).

5 C.F.R. § 430.204 provides:

§ 430.204 Agency performance appraisal systems.
(a) Each agency shall develop one or more performance appraisal systems for employees covered by this subpart.
(b) Under each appraisal system, critical elements must be included and non-critical elements may be included in individual performance plans. An employee must be appraised on each critical and non-critical element in the employee's performance plan, unless the employee has had insufficient opportunity to demonstrate performance on the element. A summary rating level, as specified in paragraph (h) of this section, must be assigned.
(c) Each appraisal system shall encourage employee participation in establishing performance plans. This may be accomplished by means including, but not limited to, the following:
(1) Employee and supervisor discuss and develop performance plan together;
(2) Employee provides to supervisor a draft performance plan;
(3) Employee comments on draft performance plan prepared by supervisor; and
(4) Performance plan is prepared by a group of employees occupying similar positions, with supervisor's approval.

Final authority for establishing such plan rests with the supervising officials.
(d) (1) Each appraisal system shall provide for establishing performance elements and standards based on the requirements of the employee's positions, providing written performance plans to employees at the beginning of each appraisal period (normally within 30 days), and appraising employees based on a comparison of performance with the standards established for the appraisal period.
(2) Accomplishment of organizational objectives should, when appropriate, be included in performance plans by incorporating objectives, goals, program plans, work plans, or by other similar means that account for program results.
(e) Each appraisal system shall provide for a minimum of three rating levels for each critical element. Performance standards must be written at the "Fully Successful" level for all critical and non-critical elements and may be written at other levels. The absence of a written standard at a given rating level shall not preclude the assignment of a rating at that level.
(f) Each appraisal system shall provide that performance plans shall be in writing and shall be reviewed and approved at the beginning of the appraisal period by a person at a higher level in the organization than that of the appraising official. Agencies may describe exceptions to higher level review and approval of performance plans in their Performance Management Plans.
(g) Each appraisal system shall include a method for deriving a summary rating level from performance appraisals of critical elements and, at agency discretion, appraisals of non-critical elements. If appraisals of non-critical elements are considered in deriving summary rating levels, the derivation method must show that more weight will be given to critical elements than non-critical elements.
(h) Each appraisal system shall provide for five summary rating levels. The rating levels must include an "Unacceptable" level, a level between "Unacceptable" and "Fully Successful," a "Fully Successful" level, and two levels which are above"Fully Successful." For purposes of this part,"Unacceptable" is referred to as level 1, the level between "Unacceptable" and "Fully Successful" is level 2, "Fully Successful" is level 3, the level one level above "Fully Successful" is level 4, and the level two levels above "Fully Successful" is level 5.
(i) Each appraisal system shall provide for assisting employees in improving performance rated at a level below the "Fully Successful" level.Such assistance may include but is not limited to formal training, on-the-job training, counseling, and closer supervision.
(j) Except with respect to employees occupying positions in Schedule C as authorized by § 213.3301 of this chapter--
(1) Each appraisal system shall provide for reassigning, reducing in grade, or removing any employee whose performance is "Unacceptable," but only after affording the employee a reasonable opportunity to demonstrate acceptable performance, as required by 5 U.S.C. 4302(b)(6).
(2) At the time that an agency identifies the critical element(s) for which performance is "Unacceptable," the employee must be informed of the performance standards that must be reached in order to be retained.
(3) If, at the conclusion of the opportunity period referred to in paragraph (j)(1) of this section, the employee's performance continued to be "Unacceptable," the agency must initiate reassignment, reduction in grade, or removal, subject to the provisions of 5 U.S.C. 4303.
(k) When an employee's position under any Federal pay system is converted to a pay system covered by this subpart, and when there is no change of duties and responsibilities, the employee's rating of record will be considered to have been derived under 5 U.S.C. 4302 and from the position which the employee now occupies.

5 C.F.R. § 430.206(b) provides:

§ 430.206 Ratings

. . . . . . .

(b). Appraisal of each critical and non-critical element. Employees must be appraised on each critical element and non-critical element of the performance plan(s) on which the employee has had a chance to perform.

5 C.F.R. § 430.503(c)(1) and (f) provide:

§ 430.503 Policy.

(c)(1) Agency procedures for making performance awards determinations must include a requirement for review and approval of each determination by an official of the agency who is at a higher level than the official who made the initial decision, unless there is no official at a higher level inthe agency, and also by the official(s) with responsibility for managing the performance awards budget within the agency.

. . . . . . .

(f) OPM encourages agencies to make maximum use of their authorities under chapters 43 and 45 of title 5, United States Code, within existing appropriated funds to establish and administer performance awards programs that best support and enhance agency and national goals and meet employee recognition needs.

5. C.F.R. § 430.506(a) provides:

§ 430.506 Agency responsibilites.

(a) The head of each agency shall, within existing appropriated funds, establish a performance awards program as a component of the Performance Management System.

(If blank, the decision does not have footnotes.)

1. The Union's petition for review contained five proposals. The Agency states that it does not contest the negotiability of Proposals 1 and 4. Agency Statement of Position at 2. Those proposals will not be considered in this decision.

2. The text of the cited law and Government-wide regulations is contained in the Appendix to this decision.

3. The text of 5 C.F.R. §§ 430.503(c)(1), 430.503(f) and 430.506(a) is contained in the Appendix to this decision.

4. In finding that Proposals 2, 3 and 5 are within the duty to bargain, we make no judgment as to their merits.