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The decision of the Authority follows:
38 FLRA No. 41
FEDERAL LABOR RELATIONS AUTHORITY
U.S. SMALL BUSINESS ADMINISTRATION
AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES
November 27, 1990
Before Chairman McKee and Members Talkin and Armendariz.
I. Statement of the Case
This matter is before the Authority on exceptions to the award of Arbitrator Roger A. Mateer. The Arbitrator, in a bench decision and a subsequent Clarification of Bench Decision and Supplemental Award, upheld a settlement agreement between the Union and the Agency.
The Agency filed exceptions 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 Union filed an opposition to the exceptions.
We conclude that the award is deficient, and we will set the award aside.
II. Background and Arbitrator's Award
On June 10, 1988, a document entitled "Settlement Agreement" was executed. The parties to the settlement agreement were listed as: "Potential Grievants: AFGE Council 228/Local 2532 (Union) and bargaining unit employees" and "Employer/Agency: Office of Minority Small Business Outreach, U.S. Small Business Administration, Washington, D.C." Settlement Agreement at 1. The settlement agreement was signed for the "Employer" by Dean Stanton, Deputy Director, Office of Minority Small Business Outreach, Minority Small Business/Capital Ownership Development, and for the "AFGE" by Robert Wildberger, Jr., President, AFGE Council 228 and Local 2532. Id. at 12. At the time Stanton executed the settlement agreement, he was under a notice of proposed removal for insubordination.
The parties to the settlement agreement agreed to numerous terms and conditions in settlement of several "grievances of AFGE Council 228/Local 2532 and bargaining unit employees." Id. at 1. Initially, the parties agreed to empower Roger A. Mateer to arbitrate disputes related to the settlement agreement. The parties agreed "to waive the grievance procedure and immediately proceed to arbitration should either party fail to implement any provision of th[e] Settlement Agreement." Id.
Among the terms and conditions of the settlement agreement was the Agency's agreement to contribute $6.7 million to AFGE Local 2532 for "Union overhead or operating expenses." Id. The settlement agreement provided that an invoice prepared and signed by the President of AFGE Council 228 and/or Local 2532 would constitute all the documentation the Agency would require from the Union in order to process the payment. The parties agreed that this payment and other payments under the settlement agreement did not violate the Agency's right to determine its budget. The parties further agreed that, in accordance with 4 C.F.R. § 22.7, these payments would be conclusive in the settlement of these accounts. The parties also agreed that these payments did not adversely affect the authority of the Agency to determine the mission, organization, number of employees, and internal security of the Agency and that such management rights arguments by the Agency could not be used to "obstruct or prevent the payments of funds required under the terms of th[e] Settlement Agreement." Id. at 2. The parties also agreed that these payments did not amount to improper assistance to the Union.
As part of the settlement agreement, the parties also agreed "that the U.S. Small Business Administration is a racketeer influenced and corrupt organization in desperate need of rehabilitation." Id. Other terms and conditions included the Union's agreement to conduct or sponsor research related to public administration, public policy, and personnel issues that may have an impact on Federal employees and the Agency's agreement not to restrict the use of official time of Union officials to direct, assist, or publish such research including their participation in college courses or other training that the Union determined to be related to this broad research effort.
As part of the settlement agreement, the Agency further agreed to expand the current Central Office location of AFGE Local 2532 with the expansion to include a minimum of 4,000 square feet modified to the Union's specifications, including telephone lines. The Agency also agreed to provide the Union with 25,000 square feet of office space in the new location if the Central Office is relocated.
Among the terms and conditions of the settlement agreement were provisions relating to official time. Unless the President of AFGE Council 228 and/or Local 2532 were to determine that fewer representatives were necessary, the parties agreed that a minimum of 35 bargaining unit employees designated by, and including, the President of AFGE Council 228 and/or Local 2532 would be entitled to 100 percent official time. The parties further agreed that these representatives would not be required to keep a log of any kind or complete representational time forms and that the Agency could not place a Union representative in a nonpay status under any circumstances because of a dispute related to official time.
The Agency also agreed in the settlement agreement to recognize any Union official designated by the President of AFGE Council 228 and Local 2532. The agreement obligated the Agency to do so even if another AFGE local appeared to have jurisdiction and even if the Agency received contrary advice from the National Office of AFGE.
The settlement agreement contained numerous terms and conditions relating to individual employees. The Agency agreed to promote eight employees; seven of the employees were promoted retroactively with backpay and three of the employees received multiple promotions. With respect to all of these promotions, the Agency agreed that the positions were currently established and properly classified and that the individual employees were qualified for the positions.
The Agency also agreed to provide certain relief to other individual employees. The Agency agreed to reverse the previous reprimand and suspension of a former employee and to pay her backpay and interest related to the suspension. The Agency further agreed to purge all records of any and all personnel actions against her. The Agency conceded that it was wrong in all disciplinary actions taken against her and that she was a victim of harassment and retaliation for her involvement in protected activities. The Agency further agreed that the suspension of a management official related to a settlement agreement was wrong and obviously had a chilling effect on unit employees. The Agency, therefore, agreed to reverse the suspension and pay him backpay and interest. The Agency agreed to reinstate with backpay another former employee, who was removed in 1985.
The Agency agreed that the removal of yet another employee was improper and agreed to reinstate him with backpay. The Agency also agreed to promote him to a GS-12 management analyst position, retroactive with backpay to June 1983, to a GS-13 management analyst position, retroactive with backpay to July 1984, and to a GS-14 management analyst position, retroactive with backpay to August 1985. With respect to the promotions, the Agency agreed that these positions were currently established and properly classified and that the individual was qualified for all these positions. With respect to the individual's reinstatement, the Agency agreed to pay all costs and attorney fees related to the individual's removal and all retraining costs that he stated were incurred as a result of his removal.
The Agency agreed to reverse the previous suspension of another employee and pay her backpay and interest related to the suspension. The Agency agreed to purge existing leave restriction letters, a letter of admonishment, and all other Agency records related to the case of another employee and agreed to promote her to a GS-5 position, retroactive with backpay to April 1986, and to a GS-7 position in her current office location, retroactive with backpay to May 1988. With respect to the promotions, the Agency agreed that these positions were currently established and properly classified and that the employee was qualified for these positions. The Agency agreed to purge the February 19, 1988 letter of reprisal to one employee and to allow any bargaining unit employee to use Agency machines, telephones, and communication facilities on official time to communicate with any Union representative. Finally, the Agency agreed to purge another employee's 17 hours of AWOL and award him 17 hours of backpay. The Agency further agreed to reappraise his overall performance as "fully successful" and to raise the performance rating of "minimally successful" on two critical elements to at least one level higher.
The parties agreed that although Robert Wildberger, Jr. is a signatory to the settlement agreement, he was entitled to specific relief because of the "Agency's corrupt, indefensible and ludicrous actions in attempting to control the Union and because . . . of the Agency's vicious attacks against him because of his involvement in Union and protected activities." Id. at 8. As part of the settlement agreement, the Agency formally apologized for its "indefensible and ludicrous actions" in reprimanding Mr. Wildberger for his involvement in specified matters in 1985 and 1987, and the Agency agreed to remove the reprimands and all related files from Agency records. Id. at 9. The Agency agreed that from 1980 to 1988, Mr. Wildberger's position was covered by the Fair Labor Standards Act, and the Agency, therefore, agreed to pay him $162,030 for overtime pay properly due him. The Agency further agreed to promote Mr. Wildberger to a GS-14 management analyst position, retroactive with backpay to April 1986, and to a GS-15 program analyst (bargaining unit) position, retroactive with backpay to May 1987. With respect to the promotions, the Agency agreed that the positions were currently established, properly classified, bargaining unit positions and would be located in the Central Office and that Mr. Wildberger was qualified for these positions.
In conclusion, the Agency agreed to immediately pay any and all arbitration costs, unfair labor practice charge processing costs, court fees, all legal fees, and any other direct or indirect costs determined by the President of AFGE Council 228 and/or Local 2532 to be directly or indirectly related to the enforcement of the settlement agreement. The parties agreed that the discipline of any unit employee, supervisory official, or management official because that individual was connected with the settlement agreement would obviously have a chilling effect on unit employees. The parties, therefore, agreed that the Union and legal counsel retained by the Union could defend at the Agency's expense any unit employee, supervisory official, or management official who was discriminated against because that employee or official had entered into, or was associated with, a settlement agreement with AFGE Council 228 and/or Local 2532. The parties further agreed that Arbitrator Roger A. Mateer would have the authority to order the reinstatement of any Agency employee who is disciplined as a direct or indirect result of the settlement agreement, if the Union could demonstrate that such disciplinary action would or did have a chilling effect on unit employees.
On the page of the settlement agreement containing the signatures was a notary public statement. The statement provided that Stanton and Wildberger appeared before the notary and acknowledged that they fully understood the terms of the settlement agreement and had full authority to agree to those terms.
On June 16, 1988, the Agency's Acting Administrator informed both Stanton and Wildberger by memorandum that the Agency repudiated the settlement agreement because of Stanton's lack of authority. In addition, Stanton was ordered to cease all contact with Union. By letter dated June 21, the Agency's Chief Counsel for Administrative Law advised the Arbitrator that the Agency had repudiated the settlement agreement and that the Agency rejected the Arbitrator's appointment under the settlement agreement.
On June 27, the Union invoked arbitration on the issue of the repudiation of the settlement agreement and the Agency's failure to accept the disbandment of AFGE Local 3841. A hearing was set before the Arbitrator for July 18. By letter dated July 8, the Agency's Administrator informed the Arbitrator that Stanton had no authority to represent the Agency before the Arbitrator and designated Linda Martin as the Agency's representative. On July 11, the Agency filed four motions with the Arbitrator: motion for recusal; motion to dismiss; motion for continuance; and motion to bifurcate.
On July 13, 1988, the Agency filed with the Authority a request for leave not to participate in the July 18 hearing. On July 14, the Agency expanded its arguments and filed with the Arbitrator an amended motion for recusal. On July 15, the Authority denied the Agency's request as interlocutory and declined to intervene. The Authority advised the Agency to present its arguments concerning the Arbitrator's authority to the Arbitrator. Small Business Administration and American Federation of Government Employees, Local 2532, Case No. 0-AR-1583 (Order July 15, 1988). By telephone conference with the parties on July 15, the Arbitrator informed them that he would rule on the Agency's motions at the hearing on July 18. Also on July 15, the Agency's Associate Deputy Administrator for Management and Administration informed Union officials that the Agency would not approve official time or travel expenses for the arbitration hearing.
On July 18, 1988, Martin, accompanied by the Agency's Chief for Labor Relations, appeared for the Agency, and Wildberger and Betty Adams appeared for the Union. A representative of a reporting company accompanied the Agency representatives to take notes for the Agency. After a dispute over the reporter's presence, the Arbitrator ordered the reporter to cease transcription of the hearing, and the reporter departed the hearing. Another dispute arose involving Stanton's attempt to appear before the Arbitrator and the denial of official time for Wildberger and Adams. The Arbitrator granted the Agency's motion and directed Stanton to leave the hearing. The Arbitrator also directed that the Agency grant Wildberger and Adams official time, but the Agency refused. As a result, Adams left the hearing and Wildberger participated while on annual leave.
The Agency representative then proceeded to argue the various pending motions. According to the Arbitrator, he denied the motions after extensive discussion for good and sufficient reasons. After the Arbitrator denied an additional Agency motion to keep the record open for 60 days, the Agency representative announced that the Agency was withdrawing from further participation.
After the Agency withdrew, the hearing proceeded on July 18 and continued on July 19 and 20. The Union presented its case involving the following issues: the settlement agreement, Agency corruption and union animus, official time, and AFGE Local 3841. According to the Arbitrator, the Union requested that a bench decision be issued in its favor on all the issues presented, but he decided to issue a bench decision only on the validity of the settlement agreement. In his subsequent Clarification of Bench Decision, the Arbitrator noted, as follows: "The undersigned issued a final bench decision on July 20, 1988, attesting to the legality and binding nature of the Settlement Agreement dated June 10, 1988." Clarification of Bench Decision and Supplemental Award at 131. The Arbitrator stated that "[t]he oral bench decision" indicated that Stanton and Wildberger had proper authority to bind their principals. Id. He explained that his decision was that the settlement agreement was legal, binding, and valid in all respects and that he had directed the Agency and the Union to comply fully with all its terms and conditions. Id. at 133.
As noted above, at the time Stanton executed the settlement agreement, he was under a notice of proposed removal for insubordination. On July 15, 1988, that notice was cancelled and Stanton was issued a new notice of proposed removal that incorporated his actions involving the settlement agreement.
The Agency charged Stanton with improper use of official authority. The Agency claimed that by entering into the settlement agreement that obligated large sums of Agency funds and abrogated provisions of the parties' collective bargaining agreement, Stanton far exceeded the bounds of his authority as a supervisor. The Agency alleged that as a GM-14 employee, Stanton knew or should have known that he had no authority to sign such an agreement without the concurrence of his supervisor, the Office of General Counsel, the Office of Personnel, or any agency official empowered to enter into such agreements and without consulting with the Office of Employee and Labor Relations, as required by Agency directives.
The Agency also charged Stanton with engaging in actions creating a conflict of interest or the appearance of a conflict of interest. The Agency alleged that the execution of an agreement so totally favorable to the Union and the attempt to waive express legal rights of the Agency constituted a clear conflict of interest. The Agency also alleged that Stanton's execution of an agreement that completely favored the Union outside of official channels created the impression of complicity between Stanton and the Union and consequently created the appearance of a conflict of interest. The Agency further alleged that Stanton's attempt to avoid the consequences of his actions by securing Union representation and payment of attorney fees also constituted a clear conflict of interest.
The Agency further charged Stanton with insubordination. The Agency noted that on June 3, 1988, the Agency had issued a notice to all managers and supervisors ordering them to contact and seek advice from the Office of Employee and Labor Relations prior to any labor relations involvement with the Union and prior to making any formal or informal commitments to the Union. The Agency claimed that Stanton's execution of the settlement agreement without first consulting with the Office of Employee and Labor Relations directly violated the Agency's order and constituted insubordination.
In proposing the penalty of removal, the Agency claimed that at the time Stanton entered into the agreement, he was in an adversarial position with the Agency because he had received a notice of proposed removal. The Agency alleged that Stanton knew that he was not acting in the Agency's interest and that the execution of the agreement could reasonably be construed as a deliberate, vindictive act. The Agency also alleged that Stanton's actions created the appearance of a lack of impartiality and suggested collusion with the Union.
On July 23, 1988, the Arbitrator wrote to the Agency's Deputy Administrator and requested that he hold in abeyance his decision on Stanton's removal. The Arbitrator stated that he would address Stanton's proposed removal in his award. On August 4, the Deputy Administrator informed the Arbitrator that the Agency did not recognize his authority to conduct an arbitration on the settlement agreement.
On October 7, 1988, the Deputy Administrator issued his decision removing Stanton from employment. The Deputy Administrator rejected Stanton's claim that the parties' collective bargaining agreement gave him authority to execute the settlement agreement. The Deputy Administrator concluded that the authority extending to the resolution of grievances of subordinates in no way authorized the settlement agreement which covered not a single employee under Stanton's supervision. The Deputy Administrator also concluded that the limited authority granted supervisors to settle grievances of their subordinates could not remotely be viewed as authorizing an attempt to commit the Agency to pay the Union $6.7 million. The Deputy Administrator also stated that it strained credulity for Stanton to argue that the $6.7 million liability was in the Agency's best interest.
By letter dated January 4, 1989, to the Agency's Administrator, the Arbitrator noted that he had issued a final bench decision on July 20, 1988, attesting to the legality and binding nature of the settlement agreement. He stated that he was now in a position to issue a Supplemental Award dealing with the interpretation and application of the settlement agreement and with the other issues raised in the hearing held in July 1988.
On January 27, 1989, the Agency filed exceptions to the bench decision. The Agency claimed that it was unaware of any purported bench decision; that the purported bench decision had never been reduced to writing; and that the purported bench decision had never been served on the Agency. The Agency maintained that, nevertheless, it was filing exceptions to preserve its rights.
By memorandum dated March 24, 1989, John Sturdivant, National President of the American Federation of Government Employees, notified members of AFGE Council 228 that he had imposed trusteeship on the Council. By letter dated April 14, 1989, the Arbitrator informed Sturdivant that the trusteeship issue was before the Arbitrator and that the issue would be clarified by a forthcoming supplemental award. Accordingly, the Arbitrator ordered: (1) all officers and agents of the National Office of AFGE to cease and desist in attempts to establish a trusteeship on Council 228; (2) current officers and agents of Council 228, including Wildberger, to continue serving as officers and agents of Council 228; and (3) all officers and agents of the Agency to disregard any further attempts by the National Office of AFGE to place Council 228 in trusteeship and to continue to recognize and grant official time to officers of Council 228 elected in August 1988. By letter dated May 5, 1989, the General Counsel of AFGE advised the Arbitrator that he had no authority to adjudicate with respect to the trusteeship imposed on Council 228.
On July 26, 1989, the Arbitrator issued a Clarification of Bench Decision and Supplemental Award. Pursuant to the settlement agreement, the Arbitrator billed the following fees and expenses entirely to the Agency:
|Hearing||3 days||$ 1,500.00|
|Study & Preparation||55 days||$27,500.00|
|Total Agency Cost||$31,690.84|
In clarifying the bench decision of July 20, 1988, the Arbitrator listed reasons to uphold the settlement agreement, his selection as Arbitrator, and the agreement that the Agency pay all the costs of arbitration. Among the reasons the Arbitrator listed for upholding the settlement agreement were the following: Stanton had actual or apparent authority to sign the agreement and this was attested to in the notary's statement which was a part of the settlement agreement; all payments required of the Agency by the settlement agreement serve the convenience of the Agency, are in the primary interest of the Government, and are in the public interest; there was detrimental reliance by the Union on Stanton's actual and apparent authority to bind the Agency to the settlement agreement; and it was reasonable for Wildberger to conclude that a manager at Stanton's responsibility level would possess the authority to bind the Agency. Clarification of Bench Decision and Supplemental Award at 134-41. The Arbitrator determined that the objections to his selection as Arbitrator were "de minimus [sic]." Id. at 141. The Arbitrator also determined that the parties' collective bargaining agreement permitted the provision of the settlement agreement providing that the Agency would pay all arbitration costs and related expenses.
The Supplemental Award dealt with other issues raised by the parties at the hearing held in July 1988. The Arbitrator stated that the Agency's removal of Stanton was raised as an issue. The Arbitrator found that Stanton was removed because of his execution of the settlement agreement and that the removal had and may continue to have a chilling effect on unit employees. Consequently, the Arbitrator directed that the Agency reinstate Stanton with backpay and accrued interest and refrain from further attempts to discipline Stanton.
The Arbitrator stated that the removal of Marie Palmieri was another issue raised in the arbitration proceeding. The Arbitrator found that the removal violated the settlement agreement and the collective bargaining agreement because her removal was a direct result of her testifying at the arbitration hearing and being named in the settlement agreement. Consequently, the Arbitrator directed that the Agency reinstate Palmieri with backpay and accrued interest and refrain from further reprisal against her because of her association with the settlement agreement.
The Arbitrator stated that alleged union animus and violations of the settlement agreement and the collective bargaining agreement related to official time were other issues raised in the arbitration hearing. The Arbitrator found that the Agency's conduct represented a "massive . . . display" of union animus. Id. at 156. The Arbitrator directed the Agency to cease and desist in any activity that reflects illegal union animus. The Arbitrator further found that the Agency violated provisions of the settlement agreement and collective bargaining agreement related to official time. Consequently, the Arbitrator directed the Agency to: (1) comply with the Union's letter relating to placement of certain individuals on 100 percent official time; (2) cease and desist in further attempts to deny Union officials and unit employee arbitration witnesses official time and travel and per diem expenses necessary to participate on arbitration proceedings; (3) comply with the settlement agreement relating to official time; (4) restore 24 hours of annual leave to Robert Wildberger representing annual leave taken during the arbitration proceeding that should have been official time; (5) restore the pay with accrued interest due Betty Adams for the period in the arbitration during which she may have been placed in an AWOL status; and (6) refer managers and supervisors for outside counseling and sensitivity training to encourage more constructive employee relations.
The Arbitrator also stated that the pervasive corruption in the Agency was another issue raised in the arbitration proceeding. The Arbitrator found that the Agency insisted "on nourishing a hostile and corrupt work environment." Id. at 165. Accordingly, the Arbitrator directed that the Agency comply with the settlement agreement and refrain from encouraging and nurturing a corrupt work environment for unit employees and from engaging in prohibited personnel practices and unfair labor practices.
The Arbitrator further stated that issues related to the representational structure of AFGE Council 228 were also raised in the arbitration preceding. The Arbitrator found that under the collective bargaining agreement, the Agency and the National Office of AFGE must accept any representative and representational structure designated by the Council 228 president. Consequently, the Arbitrator directed that the Agency comply with representative designations and representational structures adopted by Council 228 and continue to recognize Wildberger as President of Council 228 without regard to contrary instructions or designations from the National Office of AFGE.
Although the Arbitrator addressed the issue of Stanton's removal, the Arbitrator did not address Stanton's appeal of his removal to the Merit Systems Protection Board (MSPB). On February 27, 1989, an MSPB administrative judge sustained the removal.
The administrative judge found that the Agency had established by a preponderance of the evidence that Stanton did not have the authority to enter into the settlement agreement. Consequently, the judge sustained the charge of improper use of official authority. The judge noted that Stanton contended, with support by the testimony of Wildberger, that he was authorized to enter into the settlement agreement because he was a supervisor and because the collective bargaining agreement and the Supervisor's Guide advise that every effort should be made to settle grievances at the lowest possible level. However, the judge stated that the unrebutted testimony established that Stanton did not supervise any of the 17 employees named in the settlement agreement and that Stanton signed the agreement while he was on a detail with no supervisory responsibilities. The judge also noted that although there had been instances in which supervisors had executed settlement agreements for employees they did not supervise, the testimony of the Agency's Chief of Labor Relations was that in each instance, a prior delegation had been received from the employee's supervisor or other appropriate agency official and that Stanton never received such a delegation and never even conferred with the labor relations office. Accordingly, the judge concluded that the collective bargaining agreement did not authorize Stanton to execute the settlement agreement with the Union.
The judge also stated that the unchallenged testimony was that Stanton did not have the authority to obligate the Agency's Office of Small Business and Capital Ownership Development funds and such authority was not delegated to him. The Judge noted that Stanton did not identify any source that explicitly or implicitly authorized him to obligate Agency funds. In view of this evidence and the amount of the financial obligation, the judge found, for this additional reason, that Stanton was not authorized to execute the settlement agreement.
The judge further found that Stanton signed the settlement agreement without contacting the Agency's Office of Employee and Labor Relations as required by the Agency notice, dated June 3, 1988. Because such contact was required prior to participation in any formal or informal labor management activity, the judge ruled that Stanton exceeded his authority when he signed the settlement agreement. Moreover, the judge ruled that because intent was not an element of the charge, Stanton's claim that he did not have knowledge of the Agency notice had no bearing on whether he had the authority to enter into the settlement agreement.
The judge also sustained the charge of a conflict of interest. The judge stated that under the Agency's standards of conduct, employees are not to engage in any action which might result in, or create the appearance of, losing independence or impartiality or making a government decision outside official channels. The judge noted that the settlement agreement would hold Stanton harmless for his involvement in the agreement; would pay for his litigation costs, expenses, and attorney fees at the Agency's expense; would provide for his representation by the Union; and would provide his reinstatement by the Arbitrator under the settlement agreement. The judge further noted that in addition to the personal benefits provided to Stanton, the settlement agreement also required the Agency to waive various management rights. Taking into account the nature of these terms of the settlement agreement, the disparaging language in the agreement identifying the Agency as a racketeer-influenced and corrupt organization in desperate need of rehabilitation, and the fact that Stanton entered into the agreement without consulting any management official, the judge found that Stanton acted outside official channels and that his conduct demonstrated a lack of impartiality and independence. In the judge's view, it was the Agency's interests and not Stanton's personal agenda that Stanton was to pursue and the terms of the settlement agreement and the process followed by Stanton showed that these interests were not considered.
The judge further found that Stanton knew of the requirement under the June 3, 1988 notice to contact the Office of Employee and Labor Relations. The judge found Stanton's testimony that he was unaware of the notice inherently unbelievable. Accordingly, the judge ruled that Stanton was insubordinate by signing the settlement agreement.
In determining the reasonableness of the penalty, the judge noted that Stanton's misconduct was extremely serious and had a continuing adverse effect on the Agency's labor relations program. Accordingly, the judge concluded that removal was an appropriate and reasonable penalty.
On June 20, 1989, the MSPB denied Stanton's petition for review of the administrative judge's decision. Dean Stanton v. Small Business Administration, Case No. DC 07528910060. On July 19, 1989, Stanton appealed the MSPB's decision to the U.S. Court of Appeals for the Federal Circuit and the case is currently pending. Stanton v. Small Business Administration, Case No. 89-3380.
On September 1, 1989, the Agency filed exceptions to the Arbitrator's Clarification of Bench Decision and Supplemental Award which the Arbitrator served on the Agency on August 1, 1989.
III. Positions of the Parties
A. Agency's Exceptions
The Agency first contends that its exceptions were timely filed. The Agency argues that the time period for filing exceptions in this case began on August 1, 1989, the date of service on the Agency of the Clarification of Bench Decision and Supplemental Award, because that was the first date on which a written decision was served on the Agency. The Agency claims that the time period for filing exceptions did not begin on July 20, 1988, the date of the Arbitrator's purported oral bench decision, because the Authority's Rules and Regulations clearly contemplate a written document.
The Agency maintains that under the Authority's Rules, an exception to an Arbitrator's award must be filed within 30 days beginning on the date the award is served on the filing party, and the filing party must enclose with the exception a legible copy of the award. The Agency claims that because date of service under the Authority's Rules is defined as the day a document is either mailed or delivered in person and because of the requirement of a legible copy of the award, the Authority Rules clearly contemplate a written award in order to file exceptions. The Agency asserts that the purported bench decision of July 20, 1988, has never been reduced to writing or served on it.
The Agency argues that the facts of this case are distinguishable from the limited situations in which the Authority has ruled that a bench decision was final when issued and has not required a written decision. The Agency maintains that in those cases, the parties had previously expressly agreed to the issuance of bench decisions and there was an established pattern and practice of reliance on bench decisions.
The Agency also argues that its exceptions should be timely because the Arbitrator deliberately misled the Agency and prevented it from timely filing exceptions to the July 20 bench decision.
The Agency contends that the award is deficient for the following reasons: (1) the settlement agreement was void; (2) the Arbitrator lacked authority and displayed evident partiality amounting to manifest disregard of the law; (3) the award was the product of misconduct by the Arbitrator; (4) the award does not draw its essence from the collective bargaining agreement; (5) the award is contrary to law, rule, regulation, and public policy and is not supported by the facts; and (6) the award is procedurally defective.
The Agency primarily argues that the settlement agreement was void ab initio because Stanton had no authority to sign it. The Agency, therefore, claims that the Arbitrator, who was appointed as part of the settlement agreement, had no authority to render an award. The Agency argues that Stanton lacked both actual and apparent authority to execute the settlement agreement or commit the Agency to the July 18 proceeding. The Agency asserts that Stanton acted outside his normal scope of responsibility because he purported to settle claims or disputes of a long list of employees, none of whom he supervised, and because he executed the agreement without consulting the Office of Employee and Labor Relations or his supervisor. The Agency also contends that the settlement agreement was void: because Stanton was in a position highly adverse to the Agency at the time of the signing of the agreement as a result of his proposed removal; because of Stanton's conflict of interest between his responsibilities as a management official and his allegiance to the Union, which became his protector under the settlement agreement; and because Stanton would profit personally and materially from the agreement's provisions to hold him harmless for his actions.
The Agency maintains that the Arbitrator's findings and conclusions on Stanton's authority should be rejected. The Agency concedes that Stanton had the authority, like any other Agency manager, to settle certain types of grievances by employees under his supervision in consultation with his supervisor and the Agency's Office of Employee and Labor Relations. However, the Agency argues that such authority was extremely limited and could not by any reasonable standard be viewed as authorizing the provisions of the settlement agreement. The Agency also argues that the Arbitrator's reliance on the notary's statement in the settlement agreement was ludicrous because the statement only certifies to the authenticity of the signature and not to the authority of the signer. The Agency further argues that the Arbitrator's finding that the Agency should be estopped from denying Stanton's authority because of detrimental reliance by the Union is not supported by either the facts or the law.
B. Union's Opposition
In its opposition,(1) the Union first contends that exceptions to the Arbitrator's bench decision of July 20, 1988, pertaining to his authority and the validity of the settlement agreement, must have been filed no later than August 19, 1988, in order to have been timely. Therefore, the Union argues that the Agency's exceptions to the bench decision are untimely filed and should be dismissed. The Union maintains that under settled Authority precedent, an Arbitrator's bench decision is final when rendered and ripe for filing exceptions with the Authority at that time. The Union further argues that the Agency's contentions for avoiding this precedent are totally without merit. The Union asserts that, contrary to the Agency's contention, the Authority's Rules do not contemplate or require that an award be in writing.
On the merits of the Agency's exceptions, the Union contends that the arguments raised by the Agency are presented for the first time and cannot be considered by the Authority under section 2429.5 of the Authority's Rules. Section 2429.5 pertinently provides that evidence or issues not presented to the Arbitrator will not be considered by the Authority. The Union maintains that the Agency abandoned the hearing without presenting any evidence on the merits of the settlement agreement and, consequently, is precluded from presenting arguments and evidence to the Authority that it refused to present to the Arbitrator.
The Union contends that even if the Authority decides to consider the Agency's arguments that the settlement agreement was invalid, the Agency's arguments are inconsistent with the enormously detailed decision of the Arbitrator. The Union contends that contrary to the Agency's contention that Stanton lacked authority to execute the settlement agreement, the parties' collective bargaining agreement provides that every effort will be made to settle grievances at the lowest possible level. With respect to the Agency notice dated June 3, 1988, requiring consultation with the Office of Employee and Labor Relations, the Union argues that the Arbitrator was within his authority to reject the notice based on evidence that the notice was back-dated solely for the purpose of discrediting the settlement agreement.
The Union also maintains that the Agency's contention that the settlement agreement was void because Stanton was in a position adverse to the Agency at the time of the signing as a result of his proposed removal is precisely the kind of argument the Agency should have made to the Arbitrator, but did not. The Union asserts that the Arbitrator never had a chance to consider the contention and that the Authority should not make itself available as the initial forum in which to raise the issue. The Union further asserts that, in any event, the proposed removal did not automatically deprive Stanton of the authority he had.
The Union also argues that the Agency's contention that the agreement was invalid because of a conflict of interest should be rejected. The Union maintains that the Agency cited no authority for its contention that an offer to represent an individual precludes that individual from signing a binding document.
The Union further asserts that the Agency has failed to demonstrate why the financial amount of the settlement agreement is illegal. The Union similarly asserts that contrary to the Agency's contention, the Agency has materially benefited from the settlement agreement.
IV. Union's Motion to Strike
In conjunction with its opposition to the Agency's exceptions, the Union moves to strike all but four of the Agency's exhibits submitted with its exceptions. The Union argues that under section 2429.5 of the Authority's Rules, these exhibits cannot be considered by the Authority because they were never presented to the Arbitrator for review.
In reply to the Union's motion, the Agency contends that Agency motions filed with the Arbitrator included specific arguments on Stanton's and the Arbitrator's lack of authority. The Agency further contends that the Authority should take official notice of evidence, as appropriate, under section 2429.5 of the Authority's Rules.
V. Analysis and Conclusions
A. Timeliness of Agency's Exceptions
As the Union noted, the Authority has expressly held that oral bench rulings are final when rendered and ripe for filing exceptions with the Authority at that time. For example, Department of Health and Human Services, Social Security Administration and American Federation of Government Employees, AFL-CIO, 24 FLRA 6, 7 (1986) (SSA) and cases cited in the decision. On reexamination, we conclude that oral bench decisions by arbitrators are not ripe for filing exceptions when rendered. We reach this conclusion on the basis of the statutory and regulatory provisions for the filing of exceptions to arbitration awards with the Authority.
Section 7122(b) of the Statute provides in pertinent part as follows: "[i]f no exception to an arbitrator's award is filed . . . during the 30-day period beginning on the date the award is served on the party, the award shall be final and binding." See also 5 C.F.R. § 2425.1(b). Under section 2429.27(d) of our Rules, the date of service of an arbitration award is the date the award is deposited in the mail or is delivered in person. 5 C.F.R. § 2429.27(d); U.S. Department of the Navy, Norfolk Naval Shipyard, Portsmouth, Virginia and National Association of Government Employees, Local R4-19, 36 FLRA 304, 308 (1990). Under section 2425.2(d) of our Rules, the exception must include a legible copy of the award. Examining these provisions, we conclude that the Statute and our Rules contemplate a written award. We also believe that the Civil Service Miscellaneous Amendments Act of 1983 (Pub. L. No. 98-224, § 4, 98 Stat. 47, 48 (1984)) supports our conclusion.
The Act amended section 7122(b) of the Statute to provide that the 30-day period for filing exceptions begins on the date the award is served rather than the date of the award. Congress was concerned with the certainty and the fairness of the action by the arbitrator that commenced the 30-day filing period. See 129 Cong. Rec. 33080 (1983).
In our view, certainty and fairness are best served by requiring the award to be reduced to writing. We believe that to be consistent with the statutory and regulatory provisions pertaining to the filing of exceptions, an oral bench decision must be reduced to writing and served on the parties. When exceptions are filed, a legible copy of the written transcription can then be included to facilitate our review. Accordingly, we now hold that the period for filing exceptions under section 7122(b) of the Statute and section 2425.1 of our Rules commences on the date a written award is served on the party and that in order to be final and binding, an award must have been reduced to writing and served. In so holding, we emphasize that the transcription can be minimal. For example, a transcription only of the award would be sufficient because we are not holding that arbitrators must write opinions to accompany their awards, and the transcription can be handwritten. Authority decisions to the contrary will no longer be followed. For example, SSA and cases cited in the decision.
Applying this approach in this case, we find that the Agency's exceptions were timely filed. The Clarification of Bench Decision and Supplemental Award was the only award reduced to writing and served on the Agency in order to commence the period for filing exceptions. The award was served on the Agency by mail on August 1, 1989, and, consequently, the exceptions filed on September 1, 1989, were timely. Because the July 20, 1988 oral bench decision was never reduced to writing and served on the Agency, the rendering of the bench decision did not commence the 30-day period for filing exceptions, and the bench decision never became final and binding under section 7122(b) of the Statute.
B. Union's Motion to Strike Exhibits and Argument to Preclude Evidence and Issues Not Raised Before the Arbitrator
Section 2429.5 of our Rules provides as follows:
The Authority will not consider evidence offered by a party, or any issue, which was not presented in the proceedings before the Regional Director, Hearing Officer, Administrative Law Judge, or arbitrator. The Authority may, however, take official notice of such matters as would be proper.
On this basis, the Union has argued that all of the Agency arguments on the validity of settlement agreement cannot be considered by the Authority because they were never presented to the Arbitrator. On the same basis, the Union has moved to strike most of the exhibits presented by the Agency with its exceptions.
We will grant the Union's motion to strike the Agency's exhibits to the extent that the exhibits are not addressed or referenced by the Arbitrator's award. To this extent, the evidence was not presented to the Arbitrator and we view our consideration of the evidence to be precluded by section 2429.5. See Michigan Air National Guard, Selfridge ANG Base Michigan and The Association of Civilian Technicians, Michigan State Council, 33 FLRA 385 (1988) (affidavits not considered). Accordingly, we have not considered such exhibits. However, to the extent that the Arbitrator addressed or referenced in his award a document or matter that is included as an Agency exhibit, we believe that proper review of the award under section 7122 permits us to consider such a matter and that such consideration is not precluded by section 2429.5. See Association of Civilian Technicians, Michigan State Council and Michigan Air National Guard, 32 FLRA 1207 (1988) (evidence not presented to arbitrator was considered because the evidence related to central issue in dispute as recognized by the arbitrator). Furthermore, pursuant to section 2429.5, we will take official notice of Stanton's removal, the MSPB decisions sustaining Stanton's removal, and Stanton's appeal to the U.S. Court of Appeals for the Federal Circuit.
We reject the Union's claim that the Agency's arguments on the validity of the settlement agreement cannot be considered by the Authority because they were never presented to the Arbitrator. The Union has misconstrued the meaning of the term "issue" in section 2429.5, as it applies to exceptions to arbitration awards under section 7122(a) of the Statute. In our view, the issue presented by the Agency in its exceptions is whether the arbitration award is deficient on any of the grounds set forth in section 7122(a) of the Statute. This issue cannot be precluded under section 2429.5 because it is not an issue that could have been presented to the Arbitrator. Instead, it is an issue that arose only after the Arbitrator issued his award. See Department of the Air Force, Kirtland Air Force Base and American Federation of Government Employees, Local 2263, AFL-CIO, 19 FLRA 260, 260 n.1 (1985) (the Authority rejected the union's contention that the Agency's exceptions should be dismissed because they raise new issues not raised before the Arbitrator; the Authority concluded that the Agency appropriately raised for resolution by the Authority the issue of whether the award is deficient under section 7122(a) of the Statute). Accordingly, we will consider the Agency's arguments that the award is deficient because the settlement agreement was void.
C. Whether the Award is Deficient
We conclude that the award is deficient. We find that the settlement agreement was void and unenforceable because Stanton lacked actual authority to bind the Agency. Consequently, the provision for direct submission of disputes under the settlement agreement to the Arbitrator was void and the Arbitrator lacked authority to issue an award.
It is well settled that a question of whether a settlement agreement is enforceable is a question of law. See, for example, McCall v. U.S. Postal Service, 839 F.2d 664 (Fed. Cir. 1988). Accordingly, the findings and conclusions of the Arbitrator are entitled to no deference. We must resolve the question of law as to whether Stanton had the authority to bind the Agency to the terms and conditions of the settlement agreement.
It is also well settled that the United States is not bound by the unauthorized acts or representations of its agents. For example, Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 384-85 (1947) (Merrill). See generally Office of Personnel Management v. Richmond, 110 S. Ct. 2465, 2469-71 (1990). When the terms and conditions of an agreement with the Federal Government are disputed by the Government, those terms and conditions are not valid in the absence of proof that the agent had the actual authority to agree to such terms and conditions. See Jackson v. United States, 573 F.2d 1189, 1197 (Ct. Cl. 1978) (Jackson). Individuals who purport to contract with the Government assume the risk that the official with whom they are dealing is not clothed with the actual authority to enter into the alleged agreement. Merrill, 332 U.S. at 384. Moreover, the Government is not estopped to deny the authority of its agents. Jackson, 573 F.2d at 1197. Consequently, there can be no relief from any negative consequences flowing from assurances that an agent was not authorized to make. For example, Bollow v. Federal Reserve Bank of San Francisco, 650 F.2d 1093, 1100 (9th Cir. 1981). Furthermore, the doctrine that principals may be bound by the acts of their agents acting in violation of specific instructions is not applicable to the acts of an officer of the Federal Government. United States v. 45.28 Acres of Land, etc., 483 F. Supp. 1099, 1102 (D. Mass. 1979) (Acres of Land). The courts have explained the reasoning for this approach to be that it is better for an individual to suffer from mistakes of such officers than to adopt a rule which by collusion or otherwise might result in detriment to the public. Acres of Land, 483 F. Supp. at 1102. In sum, the U.S. Supreme Court has stated that the often quoted observation in Rock Island, Arkansas & Louisiana L. R. Co. v. U.S., 254 U.S. 141, 143 (1920) that "[m]en must turn square corners when they deal with the Government," does not reflect a callous outlook, but merely expresses the duty of all courts to observe the conditions defined by Congress for charging the public treasury. Merrill, 332 U.S. at 385.
Applying these principles in this case, we find an absence of proof that Stanton, as a GM-14 supervisor, had the actual authority to agree to the extensive terms and conditions of the settlement agreement. We are persuaded by the findings of the MSPB administrative judge who, unlike the Arbitrator, heard testimony from Stanton, Wildberger, and Agency officials. We conclude, as did the judge, that Stanton did not have authority to enter into the settlement agreement, and we reject, as did the judge, the contention that Stanton had authority to execute the settlement agreement because he was a supervisor or because the parties' collective bargaining agreement provides for every effort to settle grievances at the lowest possible level.
We note the unrebutted testimony before the judge that Stanton did not supervise any of the 17 employees named in the settlement agreement and that in every instance where supervisors executed a settlement agreement for employees, they had received a prior delegation from the employee's supervisor or other appropriate agency official, while Stanton never received such delegation and never conferred with the labor relations office. We also note the unchallenged testimony before the judge that Stanton did not have the authority to obligate Agency funds and that such authority was never delegated to him. In view of the Agency's multi-million dollar obligations under the settlement agreement and the absence of an identification of any source that explicitedly or impliedly authorized Stanton to obligate Agency funds, we find that the Agency has established that Stanton had no authority to execute the settlement agreement.
We are further persuaded that Stanton lacked authority to execute the settlement agreement because he disregarded the Agency notice that required contact with the Agency's Office of Employee and Labor Relations and because of his conflict of interest. We reject as unsubstantiated, as did the judge, the contention that the Agency notice was issued after the execution of the settlement agreement and back-dated solely for the purpose of discrediting the settlement agreement. We agree with the judge, who found that Stanton had acted outside of official channels in signing the settlement agreement. The settlement agreement provided substantial personal benefits to Stanton and its terms completely favored the Union. The settlement agreement held Stanton harmless for his involvement in the settlement agreement; required the Agency to pay for Stanton's litigation costs, expenses, and attorney fees; provided for his representation by the Union notwithstanding that he was a supervisor; and provided for his reinstatement by the Arbitrator. In addition, the settlement agreement waived or abrogated provisions of the parties' collective bargaining agreement; required the Agency to waive management rights under section 7106(a) of the Statute, and identified the Agency in disparaging language. We agree with the judge's explanation that, as a supervisor, Stanton was obligated to pursue the Agency's interests and not his own personal agenda. In our view, and in agreement with the judge, the terms of the settlement agreement and the process followed by Stanton evidenced that the Agency's interests were not considered.
For all these reasons, we find that the settlement agreement was void and unenforceable and that, consequently, the Arbitrator was not empowered to issue the Clarification of Bench Decision and Supplemental Award. Accordingly, we set the award aside.(2)
The award is set aside.
(If blank, the decision does not have footnotes.)
1. The Agency filed a response to the Union's opposition and the Union moved to strike the response because leave had not been granted to file such a document. Because the record before us is adequate to resolve the exceptions, we grant the Union's motion and will not consider the Agency's response.
2. In view of this decision, it is unnecessary for us to address the Agency's other exceptions to the award.