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The decision of the Authority follows:
38 FLRA No. 98
FEDERAL LABOR RELATIONS AUTHORITY
NATIONAL ASSOCIATION OF GOVERNMENT EMPLOYEES
U.S. DEPARTMENT OF THE ARMY
ROCK ISLAND ARSENAL
ROCK ISLAND, ILLINOIS
DECISION AND ORDER ON NEGOTIABILITY ISSUE
December 31, 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)(D) and (E) of the Federal Service Labor-Management Relations Statute (the Statute). The case involves the negotiability of one proposal(1) that would increase the percentage of employee health insurance premiums paid by the Agency for a unit of Nonappropriated Fund (NAF) Employees.
For the reasons discussed below, we find that the proposal concerns a condition of employment and does not conflict with an Agency regulation for which there is a compelling need.
The Employer will pay seventy (70) percent of the employees [sic] health insurance premiums per year, for the duration of this agreement
III. Positions of the Parties
The Agency maintains that the proposal does not involve a condition of employment under the Statute. The Agency contends that Congress prohibited Federal employees from bargaining over money-related fringe benefits, and that in light of the D.C. Circuit's decision in Department of Defense Dependents Schools v. FLRA, 863 F.2d 988 (D.C. Cir. l988) (DODDS), the Authority should reevaluate its opinion that certain Federal sector pay and fringe benefits are negotiable. The Agency argues that the court held that "all Federal pay or fringe benefit proposals are nonnegotiable." Agency's Response at 5 (emphasis in original).
The Agency maintains that the legislative history of the Statute makes clear that Congress did not intend for any Federal workers to bargain over pay and fringe benefits. The Agency cites various statements made during Congressional debate to support its position. The Agency asserts that the decision of the U.S. Court of Appeals for the Third Circuit in Department of the Navy, Military Sealift Command v. FLRA, 836 F.2d 1409 (3d Cir. l988) (Military Sealift Command) supports this reading of the legislative history. The Agency argues that the decision of the U.S. Court of Appeals for the D.C. Circuit in DODDS also adopted this interpretation of the legislative history of the Statute.(2) Because the proposal involves a money-related fringe benefit, the Agency argues that based on the courts' decisions, the proposal does not concern a condition of employment.
The Agency also argues that the proposal is inconsistent with Army Regulation 215-3, for which there is a compelling need under section 7117 of the Statute. The Agency contends that the regulation establishes a uniform Army-wide NAF personnel program which ensures comparability of employment throughout the NAF system. The Agency asserts that uniformity of the personnel program complies with Congressional mandate and is essential for administering the Army's Morale, Welfare, and Recreation (MWR) system. The Agency contends that the regulation directs that the Agency and employees will each pay 50 percent of employee health insurance premiums. Because the proposal requires the Agency to pay 70 percent of the premium, the Agency maintains that it is inconsistent with the regulation.(3)
In support, the Agency first argues that there is a compelling need for the regulation because it is essential to the efficient and effective administration of the NAF system and its morale, welfare and recreational programs. The Agency contends that the mission of the MWR system is "to administer programs devoted to the mental and physical well-being of Army personnel and to support readiness and retention." Agency's Response at 6. The Agency contends that the services provided by the MWR system must be uniform for soldiers anywhere in the world. The Agency also asserts that Congressional overseers of the system have directed that MWR fees must be 20-25 percent less than the price for comparable goods off-post. The Agency asserts that if the MWR system fails to provide uniform services at comparable prices throughout the Army, it will have failed its mission. The Agency maintains that if the MWR system fails its mission, it will adversely affect the Army's personnel retention and readiness.
The Agency argues that by requiring it to negotiate over fringe benefits, it will no longer be able to guarantee that the MWR system will be uniform. The Agency asserts that commanders who are better negotiators will be able to offer better services, and less successful negotiators will have to curtail services or raise fees. The Agency asserts that the result will be different prices and different quality of services at different Army locations. The Agency argues that the military personnel expect uniform prices and services anywhere they go, and if it is required to negotiate, that expectation could no longer be fulfilled. In addition, the Agency asserts that if it must increase prices, the services and merchandise could not always be offered at prices 20-25 percent below the private sector as Congress directed. Consequently, the Agency maintains that it will not have fulfilled the mission of the MWR system.
Further, the Agency argues that its regulation is necessary to ensure fulfillment of Congressional mandates regarding the NAF system. The Agency argues that Congress directed that a uniform personnel system be established for NAFI employees and that the system include a career progression component. The Agency maintains that the mandates are non-discretionary within the meaning of section 2424.11(c) of the Authority's regulations.
The Agency maintains that its regulation meets the mandate for a uniform personnel system with career progression. The Agency argues that the uniform compensation package established by the regulation offers the incentives necessary to attract qualified workers. The Agency asserts that after reaching a specified grade level, the employees can apply for positions anywhere in the world. The Agency notes that if the employees are transferred they are assured of the same compensation package and progression as exists at their original location. The Agency contends that this employment progression and flexibility allows it to retain qualified employees at all levels and locations within the MWR. The Agency argues that the regulation establishes the system that Congress envisioned when it directed creation of a NAF workforce with career progression.
Based on the above arguments, the Agency asserts that it has demonstrated a compelling need for its regulation. The Agency argues that the proposal is outside the duty to bargain because it interferes with that regulation.
The Union maintains that the decision in Military Sealift Command is not dispositive of the issue in this case. The Union argues that Military Sealift Command is not applicable because the instant case does not involve a matter that is set by statute. The Union asserts that the Agency is incorrect in its view that fringe benefits are never negotiable conditions of employment.
The Union argues that the Agency regulation is not essential for administering the MWR system. The Union asserts that even if there is a Congressional mandate to provide comparable prices and services throughout the military, that fact does require that the employee benefits be uniform across the various activities. The Union contends that any increase in costs due to higher Agency contributions to employee health insurance premiums could be covered by adjusting other items in the budget. The Union also argues that the Agency provided no estimates on the cost of implementing the proposal, or how this cost would seriously affect its operating budget. The Union maintains that the Agency's argument is mere speculation.
The Union also maintains that the Agency itself noted that employees' salaries differ at the various activities. The Union contends that the disparity in wages would have a larger effect on the budget than a slight increase in the Agency's share of the cost of health insurance premiums. Therefore, the Union contends, the regulation is not essential in the promotion of the MWR system.
IV. Analysis and Conclusions
A. The Proposal Concerns a Condition of Employment
Under section 7117(a) of the Statute, parties are required to bargain over proposals concerning conditions of employment, provided the proposals are not inconsistent with law, Government-wide regulation, or an agency regulation for which a compelling need exists. With certain exclusions, conditions of employment are defined in section 7103(a)(14) as personnel policies, practices and matters affecting working conditions. Matters that are specifically provided for by Federal statute are excluded from the definition of conditions of employment by section 7103(a)(14)(C).
With respect to proposals that involve pay and fringe benefits and are otherwise negotiable, the Authority has consistently found that these matters concern conditions of employment in circumstances where they are not specifically provided for by statute. See, for example, Service Employees International Union, Local 556, AFL-CIO and Department of the Army, U.S. Army Support Command, Hawaii, Fort Schafter, Hawaii, 26 FLRA 380 (1987), affirmed sub nom. Department of the Army, United States Army Support Command, Hawaii, Fort Schafter, Hawaii v. FLRA, 914 F.2d 1291 (9th Cir. 1990) (Army Support Command v. FLRA); American Federation of Government Employees, Local 1897 and Department of the Air Force, Eglin Air Force Base, Florida, 24 FLRA 377 (1986) (Eglin). Subsequent to the parties' filings in this case, the Supreme Court affirmed the Authority's position regarding pay and fringe benefits. See Fort Stewart Schools v. FLRA, 110 S. Ct. 2043 (1990) (Fort Stewart Schools).
The proposal in this case involves insurance premiums for NAF employees working at the restaurant located on the Agency's premises. The Authority has recently addressed the issue of health insurance premiums for NAF employees in American Federation of Government Employees, Local 1857 and U.S. Department of the Air Force, Air Logistics Center, Sacramento, California, 36 FLRA 894 (1990) (Local 1857). The proposals in that case similarly involved an adjustment in the agency's portion of employee health insurance premiums. The Authority found that the health insurance premiums were fringe benefits that are not specifically provided for by statute and that, therefore, contributions to those premiums were within the discretion of the Agency. Based on the Supreme Court's decision in Fort Stewart Schools and its own precedent, the Authority concluded that the proposals concerned conditions of employment within the meaning of the Statute. Id. at 900-01. Similarly, the health insurance benefits of the NAF employees in this case are not provided for by Federal statute. See Eglin, 24 FLRA at 378. Therefore, for the reasons more fully discussed in Local 1857, we find that the current proposal involves a condition of employment.
B. The Proposal Does Not Conflict With an Agency Regulation for Which a Compelling Need Exists
The Agency argues that the proposal in this case interferes with Army Regulation 215-3 for which a compelling need exists. In order for a proposal to be found nonnegotiable based on an agency regulation, the agency must show that there is a conflict between the proposal and its regulation, and that there is a compelling need for the regulation under criteria established in section 2424.11 of the Authority's regulations. See Local 1857, 36 FLRA at 907.
Under section 2424.11, a compelling need exists for an agency regulation if it meets one or more of the following criteria:
(a) The rule or regulation is essential, as distinguished from helpful or desirable, to the accomplishment of the mission or the execution of functions of the agency or primary national subdivision in a manner which is consistent with the requirements of an effective and efficient government.
(b) The rule or regulation is necessary to insure the maintenance of basic merit principles.
(c) The rule or regulation implements a mandate to the agency or primary national subdivision under law or other outside authority, which implementation is essentially nondiscretionary in nature.
5 C.F.R. § 2424.11 (1990). It appears the Agency contends that the regulation meets the criteria established in sections 2424.11 (a) & (c). We find that the Agency has failed to establish that the regulation meets either criterion.
1. The Agency Has Failed to Establish That Its Regulation Is "Essential" Within the Meaning of Section 2424.11(a) of the Authority's Regulations
To establish a compelling need under section 2424.11(a), the Agency must demonstrate that the regulation is essential, as distinguished from helpful or desirable, to the accomplishment of its mission or the execution of its functions in an effective and efficient manner. Pearl Harbor, 37 FLRA at 334. We find that the Agency has failed to establish that the uniform benefits package established under its regulation, which includes a 50/50 split in health insurance premiums, is essential to the accomplishment of its mission of providing for the morale, welfare and recreation of active duty military, their families, and retirees.
The Agency raises two basic arguments to support its contention that the regulation is essential to the Agency mission. First, the Agency contends that if it is required to bargain over benefits packages, operating costs would increase and the result at some installations would be either a decline in services or an increase in prices. We recognize that bargaining over benefits could result in increased operating costs at some locations. However, although financial considerations are a factor to consider in evaluating compelling need, cost factors alone are not conclusive. See Lexington-Blue Grass Army Depot, Lexington, Kentucky and American Federation of Government Employees, AFL-CIO, Local 894, 24 FLRA 50, 53 (1986).
In addition, the Agency has produced no data to support its claim. The Agency argues that the increase in operating expenses caused by bargaining over benefits would result in either a decline in services or an increase in prices. This conclusion is speculative. There is no indication in the record that the financial status of this or any other Army installation is such that an increase of any amount in operating costs would result in a decline in services or an increase in prices. An increase in costs resulting from higher employer contribution to health insurance premiums or other benefits could be offset by adjusting other operating expenses. Further, even if the Agency would have to raise the prices of goods and services at a particular exchange, the increase would likely be small and, therefore, would not prevent the Agency from fulfilling its mission of providing for the welfare of the armed forces, in part by providing quality services at prices below the private sector. See Army Support Command v. FLRA, 914 F.2d at 1293-94. Absent data to the contrary, we find that the Agency has failed to establish that the financial considerations resulting from an increase in the Agency's contribution to the health insurance premiums in this case justify a finding of compelling need.
Second, the Agency contends that military personnel expect services and prices to be the same at the various army installations. Therefore, the Agency argues that it is essential to have a uniform benefits package to assure uniform prices and services. As discussed above, there is no indication in the record that the Agency cannot maintain uniform services and prices despite a possible increase in operating costs. Further, the expectation that the services and prices at the various installations will be identical is not essential to the mission of the Agency. With respect to MWR, the mission of the Agency is to provide for the welfare of the armed forces and to "support readiness and retention." Agency's Response at 6. The services and prices at the various installations do not have to be identical in order for the Agency to fulfill this mission. Consequently, we find that the Agency has failed to show that its regulation requiring uniform benefits is essential to the accomplishment of its mission.
2. The Agency Has Failed to Establish That a Compelling Need Exists Under the Criterion Established in Section 2424.11(c)
Under section 2424.11(c) of the Authority's Regulations, a compelling need exists for an agency regulation if it implements an essentially nondiscretionary mandate under law or other outside authority. Pearl Harbor, 37 FLRA at 341. We find that the Agency has failed to establish that its regulation meets this criterion.
The Agency maintains that the uniform benefits package, established under AR-215-3, implements a nondiscretionary mandate from Congress. This issue was addressed by the Authority in Pearl Harbor. In that case, the Authority found that the agency failed to establish that the Congressional mandate to create an all-NAF, business-oriented, personnel system with coherent career progression was intended to create a particular personnel system with specific compensation and benefits packages. Id. at 341. Consequently, the Authority found that there was no compelling need under section 2424.11(c) for the Army regulation. Similarly, for the reasons more fully discussed in Pearl Harbor, we find that there is no compelling need under section 2424.11(c) for the Army regulation requiring a 50/50 split in health insurance premiums.
Based on the above analysis, we find that the Agency has failed to establish a compelling need for its regulation under sections 2424.11 (a) & (c) of our Rules and Regulations.
We find that the proposal concerns a condition of employment under the Statute. In addition, the Agency has failed to establish that a compelling need exists for its regulation establishing a uniform benefits package requiring that the Agency and employees each pay 50 percent of employee health insurance premiums. Consequently, the Union's proposal concerning the percentage of employees' health insurance premiums to be paid by the Agency is negotiable.
The Agency shall, upon request, or as otherwise agreed to by the parties, bargain over the Union's proposal.(4)
(If blank, the decision does not have footnotes.)
1. The Union originally filed a petition for review of the Agency's allegation of nonnegotiablity of four Union proposals. The Union subsequently withdrew its petition for review of three of the four proposals. Union Response
at 2. Therefore, those proposals are not before us.
2. These arguments were submitted by reference to the brief submitted in Case No. 0-NG-1589 by the Department of Defense and the Department of the Air Force. Agency Response, Appendix B. Case No. 0-NG-1589 is pending before the Authority.
3. The remaining arguments noted below were incorporated by reference to the brief submitted by the Department of the Army in Service Employees International Union Local 556 and U.S. Department of the Navy, Navy Exchange, Pearl Harbor, Hawaii, 37 FLRA 320 (1990) (Pearl Harbor).
4. In finding that this proposal is negotiable, we make no judgment as to its merits.