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The decision of the Authority follows:
43 FLRA No. 48
FEDERAL LABOR RELATIONS AUTHORITY
U.S. DEPARTMENT OF HEALTH AND HUMAN
SOCIAL SECURITY ADMINISTRATION
AMERICAN FEDERATION OF GOVERNMENT
December 19, 1991
Before Chairman McKee and Members Talkin and Armendariz.
I. Statement of the Case
This matter is before the Authority on exceptions to an award of Arbitrator Ronald F. Talarico filed by the Union 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 Agency filed an opposition to the Union's exceptions.
The Arbitrator denied the grievance over the Agency's failure to give the grievant a performance award.
We conclude that the Union fails to establish that the award is deficient. Accordingly, we will deny the exceptions.
II. Background and Arbitrator's Award
The grievant is employed at the Agency's Johnstown, Pennsylvania District Office as a Title II Claims Representative. As part of its incentive awards program, the Agency grants cash performance awards which the Arbitrator defined as "performance-based lump-sum cash payment[s] made to employees based upon [the employees' performance] ratings of record." Award at 3. The grievant had received a performance award for the appraisal year ending September 30, 1988. For the October 1, 1988 - September 30, 1989, appraisal period the grievant received "a performance rating of 'Level 4--Excellent' with an overall score of 93.3" but did not receive a performance award. Id.
No employee at the Johnstown District Office who had a rating score lower than that of the grievant received a performance award for the 1988-1989 appraisal year. However, two employees at the Agency's Somerset Branch Office who had scores "slightly lower" than the grievant did receive awards. Id. The same District Manager is "responsible" for both the Johnstown and Somerset Offices and both offices are "under the same budget." Id. at 2.
A grievance was filed alleging that the Agency "failed to properly recognize and award the [g]rievant for his excellent performance" during the 1988-1989 appraisal period. Id. at 3. The grievance was not resolved and was submitted to arbitration.
The Arbitrator stated the issue to be resolved as:
Whether the [Agency] violated the Collective Bargaining Agreement by failing to grant the Grievant a Performance Award for fiscal year 1988-1989?"
Id. at 4.
Before the Arbitrator, the Union claimed that both Department of Health and Human Services (HHS) regulations and the Social Security Administration Personnel Manual for Supervisors (SSA Personnel Manual) provide that an employee with a Level 4 rating "should" receive a performance award. Id. Therefore, the Union argued, the Agency "abused [its] authority" in not giving the grievant an award. Id. The Union also asserted that the applicable Agency guidelines provide that "employees should not receive [p]erformance [a]wards if their ratings are lower than those of others in the same award budget" who do not receive an award. Id. The Union noted that the award "budget in question" encompassed both the Somerset and Johnstown offices and that two employees at the Somerset Office with lower ratings received awards. Id. Finally, the Union argued that applicable regulations required that the Agency official approving an award must be at a higher management level than the supervisor who recommended the award. The Union asserted that as the District Manager both recommended and approved the awards, his actions were "improper." Id.
The Agency argued before the Arbitrator that the decision to grant a performance award was "discretionary with management" and that neither the collective bargaining agreement nor applicable regulations required the granting of an award to the grievant. Id. at 5. The Agency observed that the word "should" appeared both in the contract and the applicable Agency regulations and argued that although "the word 'should' places an obligation on [the Agency] to show that its decision was a fair and objective one", the word "does not mean the same as 'will' or 'shall' which are words that imply a certainty." Id. The Agency asserted that the total award budget was allocated between the Johnstown and Somerset Offices and that "each case was reviewed individually and a decision made on the respective merits" with awards going to those "who helped . . . the most during the year by going that extra step . . . ." Id. at 6. The Agency argued that although the grievant was a good employee, "[h]e did his job but did not go consistently beyond as others did" and that "in comparing the [g]rievant to others who received [a]wards the [g]rievant could have done more." Id.
The Arbitrator noted that in Article 17 of the collective bargaining agreement, the parties agreed that an incentive awards program should result in a more effective and productive work force and that, in accordance with budgetary considerations and limitations, the Agency "'may' provide incentive awards to employees whose performance is substantially in excess of normal expectations."(1) Id. at 7 (emphasis in original). The Arbitrator determined that as Article 17 merely stated that the Agency "may" provide incentive awards, management was accorded discretion to do so and "under no circumstances are employees therefore contractually entitled to automatically receive incentive awards." Id. at 7-8.
The Arbitrator then considered the HHS and SSA regulations and guidelines that were promulgated to implement the incentive awards program. He found it significant that like the collective bargaining agreement, the guidelines also provided that the grant of a performance award was discretionary. In this regard, the Arbitrator noted the Union's argument that because the SSA Personnel Manual provided, in pertinent part, that employees rated at Levels 4 and 5 "should" receive an award while employees rated at Level 3 "may" receive an award, the "word 'should' is tantamount to 'must' or 'will'" while "the word 'may' is used" to "connote discretion." Id. at 9. The Arbitrator rejected this argument and concluded that in the absence of a definition of "should" either in the contract or the regulations, he would apply the word's ordinary meaning of implying only a duty or obligation rather than a requirement. The Arbitrator reasoned that as Article 17 made the grant of awards discretionary, the Agency would not have unilaterally promulgated regulations that would "severely restrict those discretionary powers by making many of the [a]wards automatic." Id. The Arbitrator concluded that it was most significant that Chapter 451, Subchapter 1, Section V.C. of the SSA Personnel Manual provided that: "There is no right of entitlement to a monetary award. The decision to grant an award is at the discretion of management." Id. at 8 (quoting SSA Personnel Manual).
However, the Arbitrator concluded that under the contract and the implementing guidelines the Agency did have an obligation to consider the grant of an award to an employee who received a Level 4 rating, and that a burden was placed upon the Agency to explain its failure to grant an award to an employee who received such a performance rating. The Arbitrator noted that Appendix B to Chapter 451, Subchapter 1 of the SSA Personnel Manual authorized a supervisor to consider factors such as employee effort and the importance of employee accomplishments to the organization when determining whether to grant a performance award. The Arbitrator found that the Agency adequately explained its decision not to grant the grievant a performance award. In this regard, the Arbitrator concluded that the evidence demonstrated that while the grievant was a capable employee, he did not volunteer for additional assignments and that other employees who received awards did so volunteer.
The Arbitrator also rejected the Union's argument that HHS Instruction 430-5-70 F.9 of the HHS Personnel Manual required that the grievant receive an award.(2)
The Arbitrator reiterated his conclusion that all performance awards are discretionary with management provided they are made on a rational basis. Moreover, the Arbitrator concluded that the District Manager's decision to allocate award money on a proportionate basis to the Johnstown and Somerset Offices "even though they are part of the same budget" was "a very reasonable and prudent exercise of managerial discretion . . . ." Id. at 11. Therefore, the Arbitrator found that the "fact that two employees in the Somerset Office . . . had slightly lower ratings than the [g]rievant but still received [a]wards cannot be said to be an arbitrary or unreasonable decision." Id.
Finally, the Arbitrator concluded that the Union's assertions with respect to the District Manager improperly acting as both the recommending and approving official were without merit. The Arbitrator found that the District Manager had met with his subordinate supervisors who actually made the initial recommendations for the grant of awards and that the District Manager then made his decision based on their recommendations. The Arbitrator concluded that although the District Manager signed off on the awards as both the recommending and approving official, that "was really a matter of administrative expediency and does not reflect noncompliance with the appropriate regulations." Id. at 12.
The Arbitrator held that the Agency was not required to grant the grievant a performance award and that the Agency did not abuse its discretion because it had reasonably explained its decision for failing to grant the award. Accordingly, the Arbitrator denied the grievance.
III. Positions of the Parties
A. The Union's Exceptions
The Union contends that the award is deficient because it conflicts with 5 C.F.R. § 430 and HHS Instruction 430-5 and because it fails to draw its essence from the parties' collective bargaining agreement.
In its first exception the Union argues that the Arbitrator's award is deficient because in determining that performance awards "were not based solely on an employees [sic] appraisal[,]" the Arbitrator "made a decision contrary" to the requirements of 5 C.F.R. § 430.502. Exceptions at 2-3. 5 C.F.R. § 430.502 provides, in pertinent part, that a "'[p]erformance award' means a performance-based cash payment to an employee based on the employee's rating of record."
In its second exception the Union contends that the award conflicts with HHS Instruction 430-5-70 F.9 and 430-5-70 F.4.(3)
The Union asserts that these regulations require that employees rated at a Level 3 may only be granted performance awards if all those employees rated at Level 4 who are covered under the same award budget have received awards. The Union argues that this "concept of the rules" was violated when the grievant did not receive an award based upon his performance rating while two employees in the same "complex" who were rated at Level 3 did receive awards. Exceptions at 3. The Union maintains that the District Manager was not "authorized to divide" the award budget that had been "allocated to the entire Johnstown, Pa. District Complex . . . ." Id. at 4. Finally, the Union argues that as Article 1 of the parties' collective bargaining agreement provides that "[i]n the administration of all matters covered by [the] agreement, officials and employees shall be governed by . . . existing government-wide rules and regulations, as defined in 5 U[.]S[.]C[.] [chapter] 71, and by subsequently enacted government-wide rules and regulations implementing" 5 U.S.C. § 2302, "the Arbitrator and [the Agency] are bound to comply" with regulations and "neither can abuse their authority in granting an award." Id. The Union asserts that the Agency abused its discretion by failing to grant a performance award to the grievant while granting awards to two "lesser[-]rated employees." Id.
B. The Agency's Opposition
The Agency asserts that the Arbitrator considered and properly applied Government-wide regulations and HHS Instructions in making his award. The Agency argues that the Union's exceptions merely constitute an attempt to relitigate the issues already considered and properly decided by the Arbitrator.
With respect to the Union's first exception the Agency states that, in fact, the Arbitrator "takes his definition of 'performance award' from" 5 C.F.R. § 430.502 and HHS Instruction 430-5. Opposition at 2. The Agency argues that the Arbitrator correctly determined those regulations do not preclude the Agency from exercising discretion when granting performance awards. The Agency notes that 5 C.F.R. § 430.503(b) states that a performance award "shall be based on the employee's rating of record" and argues that the Agency is not required to use the rating of the record as the "sole basis in granting a performance award[.]" Id. at 3 (emphasis supplied by Agency). Rather, the Agency contends that "the rating is the basis or starting point in determining whether a performance award should be granted." Id. Finally, the Agency claims that 5 C.F.R. § 430.503(f) gives the Agency great latitude in structuring its performance award program.(4)
With respect to the Union's second exception, the Agency asserts that the Arbitrator correctly interpreted and applied the contract and HHS Instructions. The Agency argues that the grant of performance awards is discretionary and that neither HHS Instructions 430.5-70 F.4 and 430-5-70 F.9 nor the collective bargaining agreement required the Agency to grant a performance award to the grievant. Although acknowledging that the Johnstown District Office and the Somerset Branch Office "make up the whole of the Johnstown District complex [award] budget," the Agency further contends that "[a]llocating the awards budget between the two offices . . . did not violate any rule or regulation." Id. at 4.
IV. Analysis and Conclusions
We conclude that the Union fails to establish that the Arbitrator's award is contrary to law, rule or regulation, or that the award fails to draw its essence from the collective bargaining agreement. Accordingly, we will deny the exceptions.
The Union fails to establish that the award is contrary to 5 C.F.R. § 430.502. The Union specifically argues that the award is deficient because the Arbitrator made a decision contrary to the requirements of 5 C.F.R. § 430.502, which provides, in pertinent part, that a "'[p]erformance award' means a performance-based cash payment to an employee based on the employee's rating of record." The Arbitrator recognized the foregoing definition of "performance award" and concluded that the Agency had based its initial consideration of the grant of performance awards on employees' rating of record. The Union has not shown that 5 C.F.R. § 430.502 requires that performance awards must be based solely on an employee's rating or that an employee receiving a specific rating is entitled to a monetary award. In particular, the Union has not shown that the Arbitrator's conclusion, that the granting of performance awards is discretionary with management provided that the awards are made on a rational basis, is contrary to 5 C.F.R. § 430.502. Rather, we find that the Union's exception constitutes nothing more than disagreement with the Arbitrator's findings, reasoning and conclusions and provides no basis for finding the award deficient. See, for example, U.S. Department of the Army, Headquarters, XVIII Airborne Corps and Fort Bragg, Fort Bragg, North Carolina and American Federation of Government Employees, Local 1770, 42 FLRA 1186, 1193 (1991).
Section 7122(a) of the Statute provides that an arbitration award is deficient if it conflicts with a governing rule or regulation. U.S. Department of the Army, Fort Campbell District, Third Region, Fort Campbell, Kentucky and American Federation of Government Employees, Local 2022, 37 FLRA 186, 195 (1990) (Fort Campbell). To the extent that the Union claims that the Arbitrator's finding is contrary to HHS Instruction 430-5, we find that the Union has not supported such a claim. The Union asserts that the Arbitrator's award is deficient because the grievant is entitled to a performance award under HHS Instruction 430-5-70 F.9 and HHS Instruction 430-5-70 F.4. It argues that the Agency abused its discretion by failing to grant a performance award to the grievant while granting awards to two employees in another office who received lower performance ratings.
The Union has failed to establish that the Arbitrator's interpretation of HHS Instruction 430-5 was erroneous. It is clear that the Union's interpretation of the regulations differs from the Arbitrator's. The Union has not shown, however, that the Arbitrator's interpretation of those regulations conflicts with the plain wording of the regulations or is otherwise impermissible. In particular, the Union has not shown that the award conflicts with the regulations based on the Arbitrator's conclusion that the language of the regulations permitted the Agency to exercise discretion as to whether to grant a performance award to an employee with a Level 4 rating and to allocate award money on a proportionate basis among its offices. In this regard, we note the Arbitrator's finding that the parties' collective bargaining agreement "clearly makes it discretionary for management to provide incentive awards." Award at 9.
As we stated in Fort Campbell, "under the statutory framework, collective bargaining agreements, and not agency rules and regulations, govern the disposition of matters to which they both apply when there is a conflict between the agreement and the rule or regulation." 37 FLRA at 194. As the Arbitrator properly looked to the parties' agreement in interpreting the scope of the Agency's discretion in this matter, the Union cannot prevail by arguing that the Agency's regulations require a more restrictive interpretation. Rather, the Union's contention constitutes nothing more than disagreement with the Arbitrator's findings, reasoning and conclusions and as such provides no basis for finding the award deficient. See, for example, U.S. Department of the Treasury, Internal Revenue Service, Ogden Service Center, Ogden, Utah and National Treasury Employees Union, Chapter 67, 42 FLRA 1034, 1056-57 (1991). We have, therefore, no basis on which to find that the Arbitrator's award conflicts with HHS Instruction 430-5.
The Union also contends that the Arbitrator's award fails to draw its essence from the parties' agreement. Specifically, the Union alleges that the award is contrary to Article 1 of the parties' agreement, which requires, in relevant part, that in the administration of all matters covered by the agreement, officials and employees shall be governed by existing Government-wide rules and regulations. Based on our finding that the Union has not established that the award is contrary to any law, rule, or regulation, we conclude that there is no basis upon which to find that the award is irrational, unfounded or implausible and, therefore, that it fails to draw its essence from the agreement. See U.S. Department of the Army, Headquarters, XVIII Airborne Corps and Fort Bragg, Fort Bragg, North Carolina and American Federation of Government Employees, Local 1770, 42 FLRA 1186, 1193-94 (1991) (where Authority found that arbitrator's award was not inconsistent with law, rule or regulation, union failed to establish that the award did not draw its essence from provisions of the parties' agreement that restated certain requirements of law and regulation).
Therefore, we find that the Union has not shown that the award is deficient under section 7122(a) of the Statute. Accordingly, we will deny the exceptions.
The Union's exceptions are denied.
Section 1 - Purpose and Policy
The parties agree that an effective incentive awards program should result in a more effective work force, higher productivity, and improved working environment. Therefore, within the context of budgetary considerations and limitations, the Administration may provide incentive awards to employees whose performance is substantially in excess of normal expectation and to employees who submit suggestions which result in measurable improvements in efficiency.
Section 2 - Type of Awards
A. High quality increases and cash awards will be used to recognize and reward employees whose performance so warrants.
1. To be considered for a high quality increase, an employee must perform the duties and responsibilities of his/her assigned position at a level that substantially exceeds an acceptable level of competence so that, when viewed as a whole, the employee's performance is at a high level of quality and is expected to continue. An employee will be considered for a high quality increase when the employee's work is determined to be outstanding on a summary basis. This does not preclude awarding high quality increases between rating periods. . . .
(If blank, the decision does not have footnotes.)
1. The relevant portions of Article 17 are set forth in the Appendix to this decision.
2. Instruction 430-5-70 F.9 states as follows:
Employees should not receive Performance Awards if their ratings are lower than those of others under the same award budget who are not being given a Performance Award or a Q[uality] S[tep] I[ncrease].
3. HHS Instruction 430-5-70 F.4 states:
An employee with a rating of Level 3 (Fully Successful) may receive a performance award. Among the employees included under the same performance award budget, any award granted to an employee rated at Level 3 must be less than any award received by an employee rated at Level 4.
4. 5 C.F.R. § 430.503(f) states:
[Office of Personnel Management] encourages agencies to make maximum use of their authorities under chapters 43 and 45 of title 5, United States Code, within existing appropriated funds to establish and administer performance awards programs that best support and enhance agency and national goals and meet employee recognition needs.