[ v37 p938 ]
The decision of the Authority follows:
37 FLRA No. 79
FEDERAL LABOR RELATIONS AUTHORITY
TIDEWATER VIRGINIA FEDERAL EMPLOYEES
METAL TRADES COUNCIL
U.S. DEPARTMENT OF THE NAVY
NORFOLK NAVAL SHIPYARD
DECISION AND ORDER ON NEGOTIABILITY ISSUES
October 12, 1990
Before Chairman McKee and Members Talkin and Armendariz.
I. Statement of the Case
This case is before the Authority on a negotiability appeal filed by the Union under section 7105(a)(2)(E) of the Federal Service Labor-Management Relations Statute (the Statute). The appeal concerns the negotiability of two proposals.
Proposal 1 addresses situations in which management is unable to evaluate employees' performance because the employees have not performed the work of their assigned positions for the minimum period of time for which performance ratings can be assigned. The proposal also prescribes the manner in which such employees will be treated in the event of a reduction-in-force (RIF). Proposal 2 prescribes monetary awards to be paid to employees who attain specified levels of performance.
For the following reasons, we find that sections (C) and (E) of Proposal 1, and Proposal 2 are nonnegotiable under section 7117(a)(1) of the Statute because they are inconsistent with applicable Government-wide regulations. We find that the balance of Proposal 1 is negotiable.
II. Proposal 1
In cases where an employee does not perform for a minimum of 90 days during the appraisal period under approved performance standards and does not receive a rating (e.g., union representatives, military duty, leave of absence of an employee engaged in activities which are beneficial to the government, etc.) the following procedures will be used.
(A) The employee's appraisal period will be extended until such time as the employee performs for a minimum of 90 days under approved performance standards.
(B) The last three (3) official ratings of record will be retained in the employee's file or other appropriate place as determined by management.
(C) These three (3) performance ratings will be used in the event of a reduction-in-force.
(D) Once an appraisal is issued under #A above, the oldest rating on file will be destroyed.
(E) The most recent rating on file will be used in the case performance awards.
(F) Employees in the above category will have the PARS form annoted [sic] with the following statement:
Employee not rated due to (reason) Appraisal period extended until such time as employee performs for a minimum of 90 days under these (or other) approved performance standards.
A. Positions of the Parties
The Agency characterizes Proposal 1 as a "procedure to be used when an employee, for any reason, has not performed the duties of his or her position for at least 90 days during an appraisal period." Statement of Position at 1-2. The Agency asserts that the proposal "would require the [A]gency to continue to use the employee's last performance appraisal as the rating of record for as long as the individual is not performing his or her regular duties, even though this period could last for many years." Id. at 6.
That requirement, the Agency asserts, is inconsistent with Government-wide regulations, issued by the Office of Personnel Management (OPM), governing the performance evaluation system. The Agency argues that the Union's position that the proposal is an appropriate arrangement under section 7106(b)(3) is without merit because section 7106(b)(3) does not apply when a proposal violates Government-wide regulations. The Agency also contends that the proposal's requirement that an employee's last appraisal be continued as a current rating of record for an indefinite period interferes with its rights to direct employees and to assign work under section 7106(a)(2)(A) and (B).
The Union asserts that Proposal 1 constitutes "an appropriate arrangement," within the meaning of section 7106(b)(3) of the Statute, for certain "protected employees" in the bargaining unit. Reply Brief at 2. The Union identifies "protected employees" as those eligible for restoration to duty under 5 C.F.R. part 353, employees on extended leave under the provisions of 5 C.F.R. part 630, and employees serving for extended periods as Union representatives under section 7102 of the Statute. The Union also asserts that the Government-wide regulations on which the Agency relies do not bar negotiations because the regulations "are virtually mere restatements of management prerogatives already established under Title VII of the Statute." Id.
B. Analysis and Conclusions
5 C.F.R § 430.206(e) provides:
When an agency cannot prepare a rating of record at the time specified in the plan, the appraisal period shall be extended for the amount of time necessary to meet the minimum appraisal period at which time a rating of record shall be prepared.
The minimum appraisal period is defined in 5 C.F.R. § 430.205(b) as "at least 90 days but not more than 120 days."
The requirement in section (A) of Proposal 1 that the appraisal period be extended so that an employee will have performed his or her assigned duties for a minimum of 90 days before assignment of a rating of record is consistent with the above-cited regulation. As no other basis for finding section (A) nonnegotiable is asserted by the Agency or apparent to us, we find that section (A) of Proposal 1 is within the Agency's duty to bargain.
Section (B) of Proposal 1 requires that an employee's last three official ratings of record be maintained "in the employee's file or other appropriate place as determined by management." The Agency has not provided any specific grounds for finding that section to be nonnegotiable. As no basis to find section (B) nonnegotiable is apparent to us, we find that section (B) is negotiable.
Section (C) requires that, if an employee has not served in his or her current position for the minimum rating period, the employee's last three ratings of record be used in determining the employee's retention standing in the event of a RIF. In agreement with the Agency, we find that this section is nonnegotiable.
Credit for additional service, based on performance, for RIF purposes is addressed in 5 C.F.R. § 351.504, which is a Government-wide regulation within the meaning of section 7117(a)(1) of the Statute. See American Federation of Government Employees, Local 32 and Office of Personnel Management, 16 FLRA 948 (1984). 5 C.F.R. § 351.504(b) provides that:
[a]n employee's entitlement to additional service credit for performance under this subpart shall be based on the employee's last three annual performance ratings of record received during the 3-year period prior to the date of issuance of specific reduction-in-force notices.
If an employee has not received three ratings of record during the 3-year period immediately prior to the RIF notice, 5 C.F.R. § 351.504(c) requires the employee to be credited with assumed ratings of fully successful in lieu of the ratings not received during the 3-year period.
Section (C) of Proposal 1 requires the use of three prior ratings of record in RIF situations, without regard to the dates those ratings were assigned. Thus, under that section, prior ratings of record would be used in calculating an employee's entitlement to additional service credit, regardless of whether any or all of the ratings were assigned more than 3 years before the issuance of the RIF notice. By requiring, in certain circumstances, that ratings of record assigned prior to 3 years preceding the date of RIF notice be used to establish retention standing, section (C) conflicts with 5 C.F.R. § 351.504(c), a Government-wide regulation. Accordingly, section (C) is nonnegotiable under section 7117(a)(1) of the Statute.
Section (D) requires that the oldest rating on file be destroyed after assignment of a current rating of record. The Agency has not advanced any specific grounds for finding that section to be nonnegotiable. As no basis for finding section (D) nonnegotiable is otherwise apparent to us, we find that section (D) is negotiable.
Section (E) requires that the most recent rating of record on file be used "in the case of performance awards." We construe that section to mean that performance awards would be issued based on the last performance rating of record, regardless of the age of that rating.
5 C.F.R. § 430.503(b) provides that a performance award "shall be based on the employee's rating of record for the current appraisal period for which performance awards are being paid." Section (E) does not require that the rating of record for the current appraisal period be used for performance awards. Further, in view of the context of Proposal 1 as a whole, section (E) would appear to encompass use of ratings of record covering periods prior to the current rating period in rewarding performance. We find, therefore, that section (E) conflicts with 5 C.F.R. § 430.503(b). Section 430.503(b) is a Government-wide regulation within the meaning of section 7117(a)(1) of the Statute. See American Federation of State, County and Municipal Employees, AFL-CIO, Local 2027 and ACTION, Washington, D.C., 12 FLRA 643, 646-47 (1983). Consequently, section (E) is nonnegotiable under section 7117(a)(1).
The Agency does not cite any specific grounds for finding section (F) of Proposal 1 to be nonnegotiable. There being no otherwise apparent basis for finding nonnegotiable the requirement that employees' "PARS" forms be annotated to show why they have no current ratings of records, we find that section (F) is within the Agency's duty to bargain.
Sections (C) and (E) of Proposal 1 are nonnegotiable because they are inconsistent with applicable Government-wide regulations. Accordingly, it is not necessary to address whether those parts of the proposal are appropriate arrangements under section 7106(b)(3). Section 7106(b)(3) is inapplicable when a determination is made that a proposal violates a Government-wide rule or regulation. See National Treasury Employees Union and Department of the Treasury, Internal Revenue Service, 28 FLRA 1052, 1055 (1987)(Internal Revenue Service). In addition, because we find that sections (C) and (E) of Proposal 1 are inconsistent with Government-wide regulations, we do not address the Agency's contentions that those sections conflict with management's rights. See Hawaii Federal Employees Metal Trades Council, AFL-CIO and U.S. Department of the Navy, Pearl Harbor Naval Shipyard, Pearl Harbor, Hawaii, 34 FLRA 873, 876 (1990).
Finally, we reject the Union's assertion that the applicable regulations may not bar negotiations because the regulations are "mere restatements" of management rights. Reply Brief at 2. The regulations barring negotiations over sections (C) and (E) do not restate rights reserved to management by section 7106(a) of the statute. Instead, they prescribe procedures an agency must follow in exercising certain rights. Accordingly, the case cited by the Union, American Federation of Government Employees, AFL-CIO, Local 32 and Office of Personnel Management, 29 FLRA 380, 400 (1987) (opinion of Chairman Calhoun), affirmed sub nom. Office of Personnel Management v. FLRA, 864 F.2d 165 (D.C. Cir. 1988), does not apply.
III. Proposal 2
In an effort to motivate employees to increase individual and organizational effectiveness and to ensure the accomplishment of the goals and mission of [the Agency], covered employees will be awarded performance awards as follows:
|Rating||PA||Percent of Salary|
|O||Yes||20% but no less than 10%|
|EFS||Yes||10% but no less than 5%|
|FS||Yes||5% but no less than 2%|
A. Positions of the Parties
1. The Agency
The Agency contends Proposal 2 is nonnegotiable because pay and fringe benefits are not "conditions of employment" within the meaning of section 7103(a)(14) of the Statute. The Agency argues that the Statute's legislative history reflects Congress' intention to exclude pay and fringe benefits from the scope of bargaining.
The Agency also contends that Proposal 2 is inconsistent with its right under section 7106(a)(1) of the Statute to determine its budget. The Agency points out that the proposal would establish a minimum and maximum level of cash awards to be paid to all unit employees attaining performance levels of fully successful or higher. The Agency states that, on the basis of the previous distribution of performance rating levels, "the instant proposal would require that management budget an amount in excess of two percent of salaries of bargaining unit employees to pay for the required cash awards." Statement of Position at 13. In the Agency's view, it was the Congressional intention "that agencies be free to set funding priorities without mandatory involvement of unions." Id. The Agency further asserts that, "[w]hile it is difficult to precisely define the budgetary implications of the proposal, obviously in a bargaining unit of 7700 employees, if management were deprived of much of its discretion to determine which employees would receive awards and the amount of the awards, the dollar implications would be significant." Id. at 14.
The Agency states:
The [U]nion . . . claims that the purpose of the proposal is to motivate productivity by rewarding employees whose productivity deserves appropriate recognition. Under the [U]nion's proposal only employees rated minimally successful or unacceptable would not receive at least a two percent cash award every year. It is difficult to envision how such a system, where the vast majority of employees would be guaranteed an award every year, for even satisfactory performance, could serve as such a strong motivational factor that it would offset the great expense involved.
Id. at 14-15. The Agency notes that in National Association of Government Employees, Locals R4-26 and R4-106 and Department of the Air Force, Langley Air Force Base, Virginia, 32 FLRA 607 (1988) (Proposal 5) (Langley Air Force Base), the Authority found a similar proposal to be negotiable.(1) The Agency states, however, that the decision in Langley Air Force Base should be reconsidered here.
The Agency also contends that Proposal 2 is inconsistent with applicable Government-wide regulations. The Agency cites 5 C.F.R. § 430.503(c), which provides that performance award determinations will consist of a higher level review of the initial decision including review by the "official(s) with responsibility for managing the performance awards budget within the agency." Noting that Proposal 2 provides for automatic minimum award determinations based on performance ratings, the Agency states that "no meaningful review could take place except for decisions related to granting an award in excess of the minimum amount." Statement of Position at 17. The Agency also asserts that Proposal 2 conflicts with 5 C.F.R. § 430.503(a), which provides that the purpose of performance awards "is to motivate employees by recognizing and rewarding those who attain high levels of performance." The Agency argues that the proposal, "which would reward approximately 89% of all employees every year, cannot be viewed as conforming with the requirement to reward only those who attain high levels of performance." Statement of Position at 17.
2. The Union
The Union points out that the shipbuilding and repair industry is currently in "a state of crisis," and that Proposal 2 "seeks to strengthen . . . employees' job security by improving productivity." Petition for Review at 6. The Union asserts that the proposal is like proposals which the Authority held to be negotiable in at least four cases. The Union contends that the Agency "attempts to rely upon arguments previously rejected by the Authority" and that the Agency's position on Proposal 2 merely reflects its disagreement with prior Authority rulings. Reply Brief at unnumbered page identified as Union Position/Proposal #15.
The Union argues that the Agency's contention that "'the Union's proposal would require a major restructuring of the activity's budget for awards', is purely speculative and a vain attempt to try and convince the Authority it has no duty to bargain." Id.
B. Analysis and Conclusions
1. Proposal 2 Concerns Conditions of Employment
Under the Statute, parties are obligated to bargain over proposals concerning conditions of employment, provided that the proposals do not violate law, Government-wide regulation, or an agency regulation for which there is a compelling need. Conditions of employment are defined as personnel policies, practices, and matters, whether established by rule, regulation, or otherwise, affecting working conditions. 5 U.S.C. § 7103(a)(14). Matters that are specifically provided for by Federal statute are excluded from the definition of conditions of employment. 5 U.S.C. § 7103(a)(14)(C).
Recently, the Supreme Court upheld the Authority's conclusion that proposals concerning pay and fringe benefits concern "conditions of employment" in circumstances where pay and fringe benefits are not specifically provided for by statute. Fort Stewart Schools v. FLRA, 110 S. Ct. 2043 (1990) (Fort Stewart). In Fort Stewart, the Court held that the Authority's conclusion that a proposal concerning pay related to "conditions of employment" within the meaning of the Statute was a permissible construction of the Statute. The Court rejected contentions that (1) the term "conditions of employment" does not encompass pay; and (2) statements in the legislative history of the Statute, on which the Agency in this case relies, warrant a conclusion that pay and fringe benefit proposals are not "conditions of employment" under the Statute.
Thus, under Fort Stewart, matters concerning pay and fringe benefits that are not specifically provided for by statute, but are left to the discretion of an agency, constitute conditions of employment within the meaning of section 7103(a)(14) of the Statute. See National Treasury Employees Union and Internal Revenue Service, 27 FLRA 132, 135-38 (1987) (IRS) (holding that the rate at which incentive award money is payable is not specifically provided for by law and, accordingly, concerns a condition of employment under section 7103(a)(14)(C) of the Statute). See also American Federation of Government Employees, Local 1857 and U.S. Department of the Air Force, Air Logistics Center, Sacramento, California, 36 FLRA 894 (1990) (Air Logistics Center). Accordingly, Proposal 2, delineating the ranges of performance awards payable to unit employees for the attainment of various levels of performance, concerns a condition of employment.
2. The Agency Has Not Established that Proposal 2 Interferes with Its Right To Determine Its Budget
In American Federation of Government Employees, AFL-CIO and Air Force Logistics Command, Wright-Patterson Air Force Base, Ohio, 2 FLRA 604, 606-08 (1980) (Wright-Patterson), aff'd as to other matters sub nom. Department of Defense, Army Exchange Service v. FLRA, 659 F.2d 1140 (D.C. Cir. 1981), cert. denied, 455 U.S. 945 (1982), the Authority established two separate tests for determining whether a proposal conflicts with an agency's right to determine its budget. The Authority held that, to establish that a union proposal directly interferes with management's right to determine its budget, an agency must either: (1) demonstrate that the proposal prescribes the particular programs or operations the agency would include in its budget or prescribes the amount to be allocated in the budget for them; or (2) demonstrate substantially that the proposal entails an increase in costs that is significant and unavoidable and is not offset by compensating benefits. See Fort Stewart, 110 S. Ct. at 2049.
a. The Agency Has Not Satisfied the First Budget Test
The first budget test is a narrow one. It makes nonnegotiable only those proposals addressed to the budget per se, not those that would result in expenditures by an agency and, consequently, have an impact on the budget process. See, for example, Fort Stewart, 110 S. Ct. at 2052-53 (Marshall, J., concurring). See also Air Logistics Center, 36 FLRA at 903. Proposals that simply have cost ramifications cannot be said to inject a union directly into the budget formulation process that is protected from bargaining under the first budget test.
Proposal 2 does not involve the Union in the budgetary process itself but is limited to specifying the ranges of cash awards to be paid to unit employees upon attaining various levels of performance. The proposal does not prescribe a program or operation to be included in the Agency's budget nor does it prescribe an amount to be included in the Agency's budget. The proposal leaves to the Agency the judgment as to how the proposal will be accommodated in the budget. See IRS, 27 FLRA at 139. Consequently, Proposal 2 does not conflict with the Agency's right to determine its budget under the first budget test.
b. The Agency Has Not Satisfied the Second Budget Test
Based on performance ratings previously received by unit employees, the Agency asserts that the proposal would: (1) result in "an 'annual bonus' of at least two percent for virtually all bargaining unit employees, in addition to any other pay increases based on the normal pay fixing process"; and (2) "cost the activity approximately 6.4 million dollars a year." Statement of Position at 10, 15. The Agency points out that the total awards budget of the Agency for 1988, which included an additional 4300 employees not in the unit, "was approximately 2 million dollars." Id. at 15.
The Agency's cost estimates are based on the assumption that Proposal 2 divests management of any control over awards. As the Authority stated in National Treasury Employees Union, Chapter 245 and Department of Commerce, Patent and Trademark Office, 30 FLRA 1219, 1223 (1988), however:
[M]anagement has the right to establish the performance standards that an employee must meet in order to achieve a particular performance rating which, under the proposal, would result in an automatic award. Therefore, management retains control over the fundamental, underlying criteria which affect employee performance ratings and, derivatively, awards under this proposal. Consequently, we cannot find that negotiation of the proposal would result in an unavoidable increase in costs.
In Fort Stewart, 110 S. Ct. at 2050, the Court rejected the agency's contention that a proposal calling for a 13.5 percent salary increase "would necessarily result in a 'significant and unavoidable' increase" because the agency "placed nothing in the record to document its total costs or even its current total teachers' salaries." The Court concluded that the Authority had "reasonably determined that it could not conclude from an increase in one budget item of indeterminate amount whether [the agency's] costs as a whole would be 'significant[ly] and unavoidabl[y]' increased."
The Agency's sole claim concerning costs is that Proposal 2 would result in a $4.4 million dollar increase in its awards budget. That figure, however, assumes continuation of current levels of performance and no adjustment in performance criteria, which, as noted, the Agency remains free to revise. The Agency offers no information concerning the impact of Proposal 2 on its overall budget. Consistent with Fort Stewart, therefore, we find that the Agency has failed to support its claim that Proposal 2 would result in significant and unavoidable increases in costs to the Agency.(2)
Additionally, the Agency dismisses the Union's position that the proposal provides benefits which would offset any increased costs. The Agency states that it is difficult to envision "how such a system, where the vast majority of employees would be guaranteed an award every year, for even satisfactory performance, could serve as such a strong motivational factor that it would offset the great expense involved." Statement of Position at 15. The Agency's position denies that the potential for increases in income would motivate employees to improve their performance and productivity. However, laws and regulations establishing and implementing quality step increases and other incentive pay programs contradict the Agency's argument. See, for example, 5 C.F.R. § 430.503(a).
Based on the foregoing, we conclude that Proposal 2 does not interfere with the Agency's right under section 7106(a)(1) of the Statute to determine its budget.
3. Proposal 2 Conflicts with a Government-wide Regulation
5 C.F.R. § 430.503(c)(1) provides as follows:
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 in the agency, and also by the official(s) with responsibility for managing the performance awards budget within the agency.
As pertinent here, the plain wording of the regulation requires two things. First, in addition to a review of the determination by an agency official at a higher level than the recommending official, each determination also must be reviewed and approved by the agency manager of the performance awards budget. Second, the review and approval process must encompass "each" determination.
In our view, the expressed authority to review and approve inherently encompasses the authority to review and disapprove. That is, we are unable to conclude that the review and approval process mandated by the regulation would be satisfied if, after reviewing awards determinations, the budget official were required to approve the awards. Moreover, as noted, "each" award must be reviewed and approved. As such, providing for overall review of the awards scheme established by Proposal 2 would not, in our view, meet the requirements of the regulation.
Proposal 2 expressly provides that "covered employees will be awarded performance awards . . . ." In addition, the proposal specifies the range of the mandatory awards, including the minimum award to be awarded at each covered performance level. Nothing in the Union's submissions in this case supports a conclusion that the proposal means anything other than what it expressly states. As such, the proposal would require the Agency to provide at least the minimum specified performance awards to all employees who attained the specified levels of performance.
As Proposal 2 would require approval of performance awards in situations where, under 5 C.F.R. § 430.503, Agency officials are authorized to disapprove those awards, we conclude that Proposal 2 is inconsistent with 5 C.F.R. § 430.503(c). Accord Department of Air Force, Langley Air Force Base v. FLRA, 878 F.2d 1430 (4th Cir. 1989) (unpublished opinion). The regulations published by OPM at 5 C.F.R., part 430 are Government-wide regulations within the meaning of section 7117(a)(1) of the Statute. See Internal Revenue Service, 28 FLRA at 1055. Accordingly, as Proposal 2 is inconsistent with 5 C.F.R. 430.503(c), it is nonnegotiable under section 7117(a)(1) of the Statute.
Finally, we reject the Agency's contention that the proposal conflicts with 5 C.F.R. § 430.503(a), which provides that "[t]he purpose of performance awards is to motivate employees by recognizing and rewarding those who attain high levels of performance." This regulatory provision does not define or limit "high levels of performance," and, as we noted earlier in this decision, there is no basis on which to conclude that Proposal 2 would frustrate the clear objective of performance awards program: motivation of employees to attain high levels of performance.
As Proposal 2 conflicts with 5 C.F.R. § 430.503(c)(1), it is nonnegotiable. We note, however, that Proposal 2 concerns conditions of employment of unit employees, does not directly interfere with the Agency's right to determine its budget, and does not conflict with 5 C.F.R. § 430.503(a). Accordingly, based on the record before us, we conclude that, if Proposal 2 were revised so as to eliminate the conflict with 5 C.F.R. § 430.503(c)(1), it would be negotiable.
The petition for review is dismissed insofar as it pertains to sections (C) and (E) of Proposal 1 and to Proposal 2. The Agency shall upon request, or as otherwise agreed to by the parties, bargain over the balance of Proposal 1, which includes the introductory paragraph, and sections (A), (B), (D) and (F).(3)
(If blank, the decision does not have footnotes.)
1. Subsequent to the Agency's filing of its statement of position, and prior to the Supreme Court's decision in Fort Stewart Schools v. FLRA, 110 S. Ct. 2043 (1990), the Fourth Circuit granted the Agency's request for review and denied the Authority's petition for enforcement of Langley Air Force Base. 878 F.2d 1430 (unpublished decision).
2. We express no view on the continued viability of this test, see Air Logistics Center, 36 FLRA at 902 n.4, or on whether the "compensating benefits" portion of the test should include monetary benefits only.
3. In finding the identified sections of Proposal 1 to be negotiable, we make no judgment as to the merits of the negotiable matters.