[ v41 p1057 ]
The decision of the Authority follows:
41 FLRA No. 84
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 a single proposal that seeks to continue a productivity gainsharing program that had been run by the Agency as a six-month test. For the reasons that follow, we conclude that the proposal is negotiable.
II. The Proposal
Man[-]hours saved X Labor rate = Savings
Coverage - All Civilian Employees
Eligibility - 320 hours duty status quarterly (excludes overtime and leave) and a Depot employee at the end of the quarter
Sharing - 50/50 split employee and depot Reserve Pool - 5% Contingency Pool, from employee share, paid to employees at end of the year
Payouts - Equal for everyone, quarterly separate payroll checks, $25 minimum
Data - Audited, disciplined for fraud
Payouts depend on performance of three factors: Quality, Schedule, Cost
III. Positions of the Parties
A. The Agency
The Agency states that from October 1988 through March of 1989 it conducted a six-month test of a productivity gainsharing program and that, upon expiration of the six-month test, it chose to terminate the program. The Agency asserts that the Union's proposal to continue the gainsharing program is nonnegotiable based on several grounds.
First, the Agency contends that the proposal concerns a matter that is specifically provided for by Federal statute and, therefore, does not concern a condition of employment under section 7103(a)(14)(C) of the Statute. More specifically, the Agency asserts that by preventing the elimination of the program, the proposal negates authority that the Agency claims is vested in it by 5 U.S.C. § 4503 and, therefore, interferes with its discretion under that statute "to adjust, implement, or eliminate the incentive pay awards program." Agency statement of position at 2.
Second, the Agency argues that the proposal is inconsistent with section 7103(a)(14) of the Statute because Congress did not intend for that provision to encompass pay and money-related fringe benefits. In this regard, the Agency contends that the matter at issue is "incentive pay," which falls within a dictionary definition of pay. Id. at 3.
Third, the Agency contends that the proposal directly interferes with management's right to determine the methods and means of performing work under section 7106(b)(1) of the Statute by mandating the implementation of a "managerial tool" to be used by the Agency. Id. at 5. The Agency describes the purpose of the gainsharing program as motivation of employees to enhance their productivity and efficiency. According to the Agency, under the program gainsharing is realized by employees only when productivity increases occur. Thus, the Agency contends that gainsharing constitutes a tool, device or plan used to increase productivity and efficiency in Agency operations.
Fourth, the Agency asserts that the proposal directly interferes with its management right to determine its budget under section 7106(a)(1) of the Statute. The Agency argues that the proposal meets the first prong of the Authority's budget test "in that it establishes a specific program--a gain sharing [sic] program--for inclusion in the [Agency's] budget." Id. at 5. The Agency contends that this proposal is distinguishable from proposals related only to the "percentage of payout in an already established program" that were involved in previous decisions issued by the Authority, such as National Treasury Employees Union and Internal Revenue Service, 27 FLRA 132 (1987) (IRS). Agency statement of position at 5. The Agency argues that this proposal, in contrast, mandates the establishment of a program. Additionally, the Agency maintains that by requiring that 50 percent of any cost savings realized throughout the year be distributed to employees, the proposal prescribes a specific dollar amount of funds to be allocated in the budget for the gainsharing program. In this last regard, the Agency contends that this proposal is identical to one that was held to interfere with management's right to determine its budget in the court's decision in Navy Charleston Naval Shipyard v. FLRA, 885 F.2d 185 (4th Cir. 1989), reversing Federal Employees Metal Trades Union Council of Charleston and Department of the Navy, Charleston Naval Shipyard, Charleston, South Carolina, 32 FLRA 102 (1988) (Charleston Naval Shipyard).
B. The Union
The Union asserts that the Agency has presented arguments that have been rejected previously by the Authority in IRS, 27 FLRA 132. The Union describes that decision as having rejected assertions that a proposal concerning the rate of incentive pay directly interfered with management's rights under section 7106(a) to determine its budget, direct employees and assign work. The Union asserts that in IRS the Authority also determined that the rate of incentive pay is not a matter that is specifically provided for by Federal statute and, therefore, is a condition of employment within the meaning of section 7103(a)(14) of the Statute. The Union states that in IRS the Authority concluded that incentive pay did not constitute wages or salary. The Union urges that the Agency's arguments here should be rejected based on their similarity to those rejected in IRS. The Union further contends that the Agency's arguments are not consistent with its own regulation, AMC-R 5-26, which permits gainsharing between activities and employees in amounts up to a maximum of a 50/50 split.
The Union contends that the circumstances involved in this case are distinguishable from those involved in Charleston Naval Shipyard. The Union asserts that in Charleston Naval Shipyard any "profits" generated were part of the agency's "bidding" for maintenance work in competition with private contractors and "were figured into the agency's overall budget." Union reply brief at 6. In this case, the Union contends that "the projected sum payable as an incentive to the employees [has] already been ascertained and figured into the budgeting scheme." Id. at 6-7. According to the Union, under the proposal in this case "[t]he budget would essentially remain a virtual constant while the added incentive to the employees would in theory result in substantial savings which would than [sic] be split 50/50 between the [A]gency and the employees." Id. at 7-8. The Union argues that this proposal is clearly negotiable under the budget test that the Authority set forth in American Federation of Government Employees, AFL-CIO and Air Force Logistics Command, Wright-Patterson Air Force Base, Ohio, 2 FLRA 604 (1980), aff'd as to other matters sub nom. Department of Defense v. FLRA, 659 F.2d 1140 (D.C. Cir. 1981), cert. denied, 455 U.S. 945 (1982) (Wright-Patterson).
IV. Analysis and Conclusions
A. 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). However, 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).
It is well established that where an agency has discretion under applicable law and regulation over a matter affecting conditions of employment, the agency is obligated under the Statute to exercise that discretion through bargaining unless the governing law or regulation specifically requires that only the agency may exercise that discretion. For example, National Federation of Federal Employees and U.S. Department of Agriculture, Forest Service, 35 FLRA 1008, 1014 (1990); National Treasury Employees Union and Department of the Treasury, U.S. Customs Service, 21 FLRA 6 (1986), aff'd sub nom. Department of the Treasury, U.S. Customs Service v. FLRA, 836 F.2d 1381 (D.C. Cir. 1988) (Customs Service); National Treasury Employees Union, Chapter 6 and Internal Revenue Service, New Orleans District, 3 FLRA 748, 759-60 (1980). Thus, it is only where law or applicable regulation vests an agency with exclusive authority or unfettered discretion over a matter that the agency's discretion is not subject to negotiation. See, for example, Illinois National Guard v. FLRA, 854 F.2d 1396 (D.C. Cir. 1988); (Illinois National Guard); Police Association of the District of Columbia and Department of the Interior, National Park Service, U.S. Park Police, 18 FLRA 348 (1985).
Additionally, the Authority has rejected any interpretation of section 7103(a)(14)(C) that would hold that reference to a particular matter in a statute is sufficient to except that matter from the definition of conditions of employment. For example National Association of Government Employees, Local R1-144, Federal Union of Scientists and Engineers and U.S. Department of the Navy, Naval Underwater Systems Center, Newport, Rhode Island, 38 FLRA 456, 487-88 (1990) petition for review as to other matters filed sub nom. United States Department of the Navy, Naval Underwater Systems Center, Newport, Rhode Island v. FLRA, No. 91-1045 (D.C. Cir. Jan. 24, 1991). Rather, where a statute specifically provides for, or establishes, a particular aspect of a matter, that aspect of the matter is not included within the conditions of employment about which an agency is obligated to bargain. Id. at 488.
1. The Proposal Does Not Concern a Matter That Is Specifically Provided for by Federal Statute
The Agency's assertion that the proposal concerns a matter that is specifically provided for by Federal statute centers on a claim that the proposal interferes with the discretion vested in it by chapter 45 of title 5 of the U.S. Code to establish incentive programs such as that proposed.
Based on the analytical structure that is set out above, we reject this assertion. Chapter 45 authorizes agencies to pay cash awards to employees; however, it does not prescribe the particulars of agency incentive awards programs. Thus, we conclude that the productivity gainsharing program that is proposed is not a matter that is specifically provided for by Federal statute. Rather, it is a matter that is within the Agency's discretion under chapter 45. The Agency makes no claim, nor is it otherwise apparent to us, that anything in chapter 45 forecloses the exercise of that discretion through negotiations. Compare Customs Service (agency's discretion under law and regulation to determine whether travel was sufficiently within the interest of the United States so as to be regarded as official business could be exercised through negotiations) with Illinois National Guard (section 709(e) of the National Guard Technician Act gave the Secretary of the Army unfettered discretion to prescribe the hours of duty for National Guard technicians and, therefore, hours of duty could not be subject to bargaining).
2. Pay and Money-Related Fringe Benefits
We reject the Agency's argument that the proposal is inconsistent with section 7103(a)(14) of the Statute because it concerns pay, a matter which the Agency claims does not come within the ambit of negotiable conditions of employment. As the Agency acknowledges, the Authority previously has rejected arguments that incentive pay constitutes wages or salary. IRS, 27 FLRA 132. However, even assuming that productivity gainsharing does concern pay, the Agency's argument is flawed in another respect.
The Authority applies the basic analytical framework that is set forth above to negotiability questions that are presented to it, including those that concern pay and fringe benefits. Applying this framework, the Authority has rejected arguments that pay and fringe benefits, per se, do not concern "conditions of employment" within the meaning of section 7103(a)(14) of the Statute. For example, American Federation of Government Employees, Local 1857 and U.S. Department of the Air Force, Air Logistics Center, Sacramento, California, 36 FLRA 894, 899-901 (1990); American Federation of Government Employees, AFL-CIO, Local 1897 and Department of the Air Force, Eglin Air Force Base, Florida, 24 FLRA 377 (1986) (Chairman Calhoun dissenting) (Eglin).
While this case was pending, 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," which is contained in the Statute, does not encompass pay and (2) statements in the legislative history of the Statute warrant a conclusion that pay and fringe benefits are not "conditions of employment" under the Statute. Thus, under Fort Stewart, Eglin, and their progeny, matters concerning pay and fringe benefits that are not specifically provided for by statute, but are left to the discretion of the agency, are conditions of employment within the meaning of section 7103(a)(14) of the Statute.
B. Management's Right to Determine the Methods and Means of Performing Work
We reject the Agency's assertion that the proposal directly interferes with management's right to determine the methods and means of performing work. The reasoning offered by the Agency in support of its argument is essentially that because the purpose of the productivity gainsharing program is to motivate employees to work better, the program amounts to a methods and means of performing work within the meaning of section 7106(b)(1) of the Statute. This reasoning is analogous to reasoning that has been rejected in two circuits of the United States Court of Appeals.
In one case, the Ninth Circuit rejected a conclusion that the manner of distributing employee paychecks constituted a method or means of performing work. The premise for that conclusion had been that the agency involved needed a committed work force to accomplish its mission and that such was assured only if employees were paid. In rejecting the conclusion the court stated:
This line of reasoning proves too much. Because any benefit to employees is a means of retaining a stable and committed workforce, [this] reasoning would imply that all wages, hours, and working conditions are within the means and methods exception. To take the exception this far stretches the plain meaning of words to the breaking point. Nothing related to retaining the workforce would be subject to bargaining. Had Congress meant the exception to extend that far, it would not have adopted the [Statute].
Federal Employees Metal Trades Council v. FLRA, 778 F.2d 1429, 1431 (9th Cir. 1985).
In another case, the D. C. Circuit rejected a conclusion that levels of incentive pay constituted an exercise of management's rights to direct employees and assign work because such pay directly related to the potential success of the incentive in motivating the performance of particular job tasks. The court stated:
If the latter principle were applied consistently, it is difficult to imagine any agency prescriptions regarding terms and conditions of work for particular classes of employees that would remain bargainable, since (unless the agency is squandering its resources) they all have the same ultimate objective as assignment and direction, viz., increased production by those employees.
National Treasury Employees Union v. FLRA, 793 F.2d 371, 374-75 (D.C. Cir. 1986) (emphasis in original).
We agree with the courts that management's rights are not so all-encompassing as to include everything that contributes generally to employee motivation. In our view, in order for a matter properly to come within the ambit of methods and means under section 7106(b)(1) there must be a more specific relationship to the performance of work than the general motivation of employees. See, for example, Division of Military and Naval Affairs, State of New York, Albany, New York and New York Council, Association of Civilian Technicians, 15 FLRA 288 (1984), aff'd sub nom. New York Council, Association of Civilian Technicians v. FLRA, 757 F.2d 502 (2d Cir. 1985), cert. denied, 106 S. Ct. 137 (1985) (requirement that civilian technicians wear the military uniform constituted a methods and means of performing work within the meaning of section 7106(b)(1) of the Statute where the purpose of the requirement was to instill military characteristics in employees who performed military functions in a military organization).
Consequently, we reject the Agency's argument that the productivity gainsharing program is brought within the ambit of section 7106(b)(1) based simply on its role in motivating employees to work more productively. See American Federation of Government Employees, Local 3836 and Federal Emergency Management Agency, Washington, D.C., 31 FLRA 921, 929-30 (1988). To the extent that the analysis relied on in the Authority's decision in Charleston Naval Shipyard, 32 FLRA at 115 (1988), can be read to suggest that the establishment of a gainsharing program constitutes an exercise of management's right to determine the methods and means of performing work, it will no longer be followed.
C. Management's Right to Determine Its Budget
Now we turn to the Agency's assertion that this proposal, by requiring the continuation of the gainsharing program and specifying the distribution formula for gainsharing, is nonnegotiable under the first prong of the Authority's test for determining whether proposals directly interfere with management's right to determine its budget that was set forth in Wright-Patterson, 2 FLRA at 607-08.
At the outset, we note that we have not adopted the court's decision in Charleston Naval Shipyard on which the Agency relies. In fact, we have specifically rejected the court's conclusion that an agency's "discretion and control over an agency's funding decisions" equates to management's right to determine its budget pursuant to section 7106(a)(1) of the Statute. U.S. Department of Health and Human Services, Social Security Administration, Baltimore, Maryland and American Federation of Government Employees, Council 220, 41 FLRA 224 (1991) (Social Security Administration). In Social Security Administration we stated:
In Wright-Patterson, the Authority noted that whether a proposal directly affects an agency's determination of its budget depends upon the definition of "budget" as used in the Statute. The Authority stated that, in the absence of a definition in the Statute or its legislative history, it was appropriate to give the term its common or dictionary definition. Accordingly, the Authority adopted the dictionary's definition of "budget" as "a statement of the financial position of a body for a definite period of time based on detailed estimates of planned or expected expenditures during the period and proposals for financing them." 2 FLRA at 608. From this definition, the Authority developed its two-prong test for determining whether a proposal directly interferes with management's right to determine its budget.
Under the first prong of this test, in order for an agency to demonstrate that a proposal directly interferes with management's right to determine its budget, the agency must show either that the proposal prescribes the programs and operations to be included in the agency's budget or prescribes the amount to be allocated for them. We adhere to the interpretation and application of the first prong of the budget test and the established meaning of the term "budget," as interpreted and applied by the Authority in Charleston Naval Shipyard.
41 FLRA at 231-32.
The Agency's contentions that the proposal prescribes a program, i.e., gainsharing, for inclusion in the Agency's budget and mandates a specific dollar amount to be allocated in the budget for that program do not accord with other information and statements in the record. The Agency itself describes gainsharing as dependent on the existence of cost savings generated by productivity increases. For example, in describing the gainsharing program that the Union proposes to continue, the Agency states, "The gain sharing [sic] program provided . . . that cost savings generated . . . would be split between management and the employees on a 50/50 basis." Agency statement of position at 1. Additionally, the Agency states, "It is only through increases in productivity that gain sharing [sic] can be realized." Id. at 5.
The Union describes the proposal as having no impact on the budget or the budget-making process. Union reply brief at 7. Rather, according to the Union, the gainsharing program operates based on a budget that already has been established and simply entails the distribution of the savings that accrue from productivity increases.
Additionally, we note that in issuing guidance to agencies concerning such programs, the Office of Personnel Management (OPM) has defined "productivity gainsharing program" as "an agency's program to share monetary savings with employees when their achievements above agency established levels of productivity result in measurable savings to the government." Federal Personnel Manual Letter 451-6 (April 10, 1989).
Given the concept underlying productivity gainsharing, i.e., the distribution of savings resulting from gains in productivity, it is unclear to us how a proposal requiring that a gainsharing program be established and specifying the distribution formula to be used prescribes the programs and operations to be included in the agency's budget or prescribes the amount to be allocated for them, as the Agency claims. Rather, it appears that the proposal is limited to a matter that occurs within the context of, and reflects, a budget that already has been formulated.
The Agency has provided no support for its claim that the proposal prescribes a program to be included in its budget and an amount to be allocated for it. It is well established that parties bear the burden of creating a record upon which the Authority can make a negotiability determination. For example, National Federation of Federal Employees, Local 2050 and U.S. Environmental Protection Agency, 35 FLRA 706, 711-12 (1990); National Federation of Federal Employees, Local 1167 v. FLRA, 681 F.2d 886 (D.C. Cir. 1982), aff'g National Federation of Federal Employees, Local 1167 and Department of the Air Force, Headquarters, 31st Combat Support Group (TAC), Homestead Air Force Base, Florida, 6 FLRA 574 (1981). A party failing to meet this burden acts at its peril. For example, National Association of Government Employees, Local R1-134 and U.S. Department of the Navy, Naval Underwater Systems Center, Newport, Rhode Island, 38 FLRA 589, 596 (1990).
Because the record does not support a conclusion that the Union proposal is nonnegotiable under the first prong of the Authority's budget test, we reject the Agency's argument that the proposal directly interferes with management's right to determine its budget.(1)
Based on the foregoing we conclude that the proposal concerns a condition of employment within the meaning of section 7103(a)(14) of the Statute. The proposal does not directly interfere with management's rights to determine the methods and means of performing work or to determine the budget of the agency. Consequently, we conclude that the proposal is negotiable.
The Agency shall upon request, or as otherwise agreed to by the parties, bargain over the proposal.(2)
(If blank, the decision does not have footnotes.)
1. The Agency's arguments are limited to the first prong of the budget test; therefore, we limit our consideration to that portion of the test.
2. In finding the proposal to be negotiable, we make no judgment as to its merits.