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44 FLRA No. 66

FEDERAL LABOR RELATIONS AUTHORITY

WASHINGTON, D.C.

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

SOCIAL SECURITY ADMINISTRATION

BALTIMORE, MARYLAND

(Agency)

and

AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES

(Union)

0-AR-2116

DECISION

April 14, 1992

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 Henry L. Segal filed by the Agency 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 Agency's exceptions. The Office of Personnel Management (OPM) filed a brief as amicus curiae. The Union filed a response to OPM's brief.

The Union filed grievances on behalf of Claims Examiners/Representatives, GS-105-9 and 10, and Claims Authorizers, GS-933-9 and 10, to protest the Agency's decision to exempt those employees from coverage under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq. The Arbitrator ruled that the Agency had illegally designated the grievants as exempt from coverage under the FLSA as bona fide administrative employees. The Arbitrator ordered the Agency to treat the grievants as nonexempt from coverage under the FLSA and to pay them backpay for overtime pay to which they were entitled.

The Agency, supported by OPM, contends that the Arbitrator's award is contrary to law and Government-wide regulation. For the following reasons, we find that the Agency has failed to demonstrate that the Arbitrator's award is deficient under the Statute. Accordingly, the Agency's exceptions will be denied.

II. Background

The FLSA provides, among other things, for overtime compensation of one and one-half times the regular rate of pay to employees for work performed in excess of 40 hours in a week. 29 U.S.C. § 207(a)(1). Since May 1, 1974, the FLSA has applied to most Federal employees. The Department of Labor (DOL) administers the FLSA for private sector employees, including state and local employees, and individuals employed in the Library of Congress, United States Postal Service, Postal Rate Commission, and the Tennessee Valley Authority. 29 U.S.C. § 204(f). As of May 4, 1991, Federal employees in general service (GS) positions who are covered by the FLSA are entitled to overtime compensation under the FLSA and not under the overtime provisions of 5 U.S.C. § 5542. See 56 Fed. Reg. 20339-20343 (1991).

Upon the enactment of 29 U.S.C. § 204(f) in 1974, the Civil Service Commission (CSC) was assigned responsibility for administering the provisions of the FLSA that are applicable to Federal employees, other than those employees covered under DOL regulations. As pertinent here, the CSC was assigned the responsibility for determining which Federal employees or categories of employees are exempt from coverage under the FLSA. 29 U.S.C. § 204(f) provided, in relevant part:

Notwithstanding any other provision of this [Act], or any other law, the Civil Service Commission is authorized to administer the provisions of [the FLSA] with respect to any individual employed by the United States[.]

Subsequently, OPM, as the successor agency to the CSC, assumed the responsibility for administering the FLSA with respect to Federal employees. OPM regulations implementing the FLSA are set forth in 5 C.F.R. Part 551, "Pay Administration under the Fair Labor Standards Act." These regulations provide that 5 C.F.R. Part 551 "supplements and implements the [FLSA], and must be read in conjunction with [the FLSA]." 5 C.F.R. § 551.101(c). The FLSA provides that certain specified employees or groups of employees, such as employees "in a bona fide executive, administrative or professional capacity[,]" are exempt from coverage under the FLSA under DOL regulations. 29 U.S.C. § 213(a). By regulation, Federal employees in grades GS-5 through GS-10 are exempt from coverage under the FLSA "only if the employee is an executive, administrative, or professional employee as defined in [5 C.F.R. § 551.205]." 5 C.F.R. § 551.203(b).^(*)

In 1974, when the FLSA became applicable to Federal employees, the workload of the Agency was increased substantially by the addition of the Supplemental Security Income (SSI) program to the Agency's responsibilities. The large number of claims filed under the SSI program required that Claims Examiners in the GS-105 occupational series and Claims Authorizers in the GS-933 occupational series perform significant amounts of overtime work. In June 1974, the Agency determined that Claims Examiners and Claims Authorizers at the GS-9 and 10 levels were covered by, and thus entitled to overtime pay under, the FLSA. However, this determination conflicted with interim guidance issued by the CSC in May 1974 in Federal Personnel Manual (FPM) Letter 551-1, which stated, among other things, that GS-105 occupational series positions at or above the GS-9 level typically meet the criteria of administrative positions that are exempt from coverage under the FLSA. In March 1975, to clarify the situation, the CSC advised the Agency that the Claims Examiner and Claims Authorizer positions at the GS-9 and 10 levels were administrative positions that were exempt from coverage under the FLSA. In April 1975, the Agency implemented the CSC directive and designated its Claims Examiner and Claims Authorizer positions at the GS-9 and 10 levels as exempt from the FLSA overtime pay provisions.

Subsequently, a number of affected Agency employees filed an appeal with the CSC protesting the change in status from nonexempt to exempt. By a decision letter dated April 20, 1976, the CSC denied the appeal of those employees and reaffirmed that GS-105-9 and GS-993-9 positions and higher were not covered by the FLSA because they were administrative positions under the CSC criteria. See Exceptions, Attachment H. The CSC based its denial of the employees' appeal on FPM Letter 551-7, dated July 1, 1975, which superseded FPM Letter 551-1 and remains in effect at the present time. FPM Letter 551-7 sets forth CSC's (now OPM's) definition of administrative employee for purposes of exemption from coverage under the FLSA.

Thereafter, a group of 54 Agency employees in GS-993-9, 10, and 11 positions filed an appeal of the CSC's decision in the Federal District Court for Eastern Pennsylvania. Applying the criteria set forth in 5 C.F.R. Part 551, the court ruled that "each of the employees at issue in each of the categories is employed in a bona fide administrative capacity, [and] hence is exempt from the overtime pay [provisions] of Section 207(a) of the Fair Labor Standards Act by virtue of 29 USC Section 213(a)(1)." Cervino v. Matthews, No. 76-1384, slip op. at 7 (E.D. Pa. July 13, 1978) (Cervino).

In 1987, the Union wrote letters to the Agency challenging the Agency's designation of the GS-9 and 10 Claims Examiner and Claims Authorizer positions as exempt from the FLSA. In particular, the Union charged that by complying with the CSC's "blanket" ruling "exempting thousands of employees," the Agency had failed to make "reasoned determinations of exemptions of employees in the bargaining unit in accord with the criteria of FPM [Letter] 551-7." Award at 4. The Union also claimed that the Agency had failed to construe the exemptions narrowly, as required by the FLSA, and had not met the burden of proof required to show that the Claims Examiners and Claims Authorizers were exempt from the FLSA. In December 1987, after its attempts to settle the issue of exemptions with the Agency were not successful, the Union filed a grievance on behalf of field office employees. In January 1988, the Union "filed a sweeping grievance covering the whole AFGE bargaining unit grieving 'a continuing practice by [the Agency] of improperly exempting some groups of unit employees from FLSA coverage.'" Id. at 4-5.

The Agency denied the grievances and the Union filed timely requests to submit the grievances to arbitration. According to the Agency, "[b]ecause of then existent legal questions concerning what forum could or should be used by any [F]ederal employee who was challenging his or her position's exemption from coverage by the [FLSA], the parties agreed to hold the two grievances in abeyance pending the outcome of those questions. After the en banc decision on March 30, 1990, of the [United States] Court of Appeals for the Federal Circuit in Carter v. Gibbs, 909 F.2d 1452,.[cert. denied sub nom. Carter v. Goldberg, 111 S. Ct. 46 (1990)], steps were taken which resulted in the" arbitration hearing in this case. Agency's Exceptions at 12. In Carter v. Gibbs, the court held that under the CSRA and section 7121(a)(1) of the Statute, claims of Federal employees to benefits under the FLSA must be resolved under the negotiated grievance procedure, including arbitration, for employees covered by collective bargaining agreements that do not specifically exclude such matters from the grievance procedure.

III. Arbitrator's Award

The Arbitrator framed the issue as follows:

Are the exemptions from coverage under the [FLSA] of employees in the positions of Claims Examiner, GS-9 and GS-10, Occupational Series 105 and Claims Authorizers, GS-9 and GS-10, Occupational Series 993 as 'bona fide administrative' employees by the [Agency] proper exemptions?

If not, what should the remedy be?

Id. at 1-2.

The Arbitrator heard testimony describing the duties performed by Claims Examiners in Occupational Series 105, who are assigned to district and branch offices, and Claims Authorizers in Occupational Series 933, who are assigned to the Agency's six Program Service Centers. Witnesses for each group of employees testified that they worked according to Agency rules and guidelines and that "they have no input into Agency policy" and "they do not make [Agency] policy[.]" Id. at 6 and 9.

The Arbitrator noted that the DOL administers the FLSA for the private sector, including state and local governments, and that OPM is responsible for the administration of the FLSA for Federal employees. The Union contended before the Arbitrator that the DOL's FLSA regulations "are relevant to interpretation of the FLSA as it pertains to the [F]ederal sector" and must control in the event of inconsistencies between the two sets of regulations. Id. at 10. The Agency maintained that only the OPM regulations should apply in this case.

The Arbitrator noted the Union's reliance on the decision of the United States Court of Appeals for the District of Columbia Circuit in American Federation of Government Employees v. Office of Personnel Management, 821 F.2d 761 (D.C. Cir. 1987) (AFGE v. OPM). The Union cited AFGE v. OPM to support its contention that OPM's administration of the FLSA must be consistent with DOL's administration of the FLSA in the private sector. The Agency disagreed with the Union's interpretation of AFGE v. OPM. The Agency maintained that the court in AFGE v. OPM did not rule on OPM's regulations governing administrative exemptions from the FLSA but, rather, only addressed and set aside the OPM regulation that established a presumption of non-FLSA coverage for employees at grades GS-11 and above and another OPM regulation concerning the exemption of executive employees from FLSA coverage. The Agency maintained that the court's setting aside of those regulations "has no applicability to the administrative exemption." Id. at 12.

The Arbitrator rejected the Agency's arguments concerning AFGE v. OPM and found that the court's reasoning in that case was applicable to the case before him. He noted that the court vacated the regulations concerning the presumptive exemption of employees at grades GS-11 and above as administrative employees and vacated the regulation exempting executives "because [the latter regulation] was inconsistent with the DOL's definition of 'executive' . . . and when there is a conflict OPM must defer to the DOL." Id. The Arbitrator stated that he was bound by AFGE v. OPM and that he would decide the issue before him based on whether the grievants would have been considered exempt from FLSA coverage under "the DOL's definition of administrative employees." Id. at 13.

The Arbitrator referred to the DOL regulations governing exemption from FLSA coverage and found that "DOL provides a long definition and a short definition of what constitutes a bona fide employee for exemption from the FLSA." Id. at 14. He noted that the short definition of administrative employee is applicable to employees who earn more than $250 per week and is set out at 29 C.F.R. § 541.214 and that the long definition, which applies to employees who earn less than $250 per week, is set out at 29 C.F.R. § 541.2. The Arbitrator rejected the Union's claim that the short definition of administrative employee exempt from coverage under the FLSA should apply because the employees involved in this case earned more than $250 per week. He stated that "the discussion herein would be applicable to both definitions because the primary duty test [for describing an administrative employee] is the same in both DOL definitions and it is the application of this test which, in the Arbitrator's view, causes the differences between the Union and the Agency[.]" Id. at 16.

The Arbitrator stated that the "short definition [of administrative employee] sets forth three tests, all of which must be met, and all of which are included in the long test." Id. He ruled that the grievants met the third test--that is, they exercised discretion and independent judgment--and noted that the parties agreed that the grievants met that test. He ruled that the first test--compensation on a salary or fee basis at a rate of not less than $250.00 per week--is not applicable to Federal employees because, under the Federal pay system, "the employees involved herein would not meet the salary test of the DOL." Id.

The Arbitrator then considered the parties' contentions regarding the second test--the primary duty test--which in his view was the determining factor in deciding whether the grievants were administrative employees and, therefore, exempt from FLSA coverage. The Arbitrator noted that, under the DOL regulations relied on by the Union concerning the primary duty test, the requirement "'directly related to management policies' . . . describes those types of activities relating to the administrative operations of a business as distinguished from 'production[.]" Id. at 17 (quoting 29 C.F.R. § 541.205; emphasis supplied by the Arbitrator). The Arbitrator also noted the Union's argument that the employees did not meet the primary duty test under the DOL regulations because they did not perform duties "directly related to management policies or general business operations" of the Agency but "are production employees carrying out the ongoing mission and day-to-day functions of the Agency." Id. at 19. The Arbitrator also noted the Union's argument that, "even under OPM tests, the positions at issue are not bona fide administrative employees." Id. at 21.

The Arbitrator then set forth the Agency's position concerning the primary duty test under the OPM definition in 5 C.F.R. § 551.205. The Arbitrator noted the Agency's contention that, consistent with the testimony of its witnesses and the court's decision in Cervino, the employees are exempt under 5 C.F.R. § 551.205 because the employees' primary duties consist of work that: (1) significantly affects the execution of management policies or programs; or (2) involves general business functions of substantial importance to the organization serviced.

After taking into consideration the testimony from both parties' witnesses, "and more specifically the Agency's way of reading [5 C.F.R. §] 551.205(a)(1)," the Arbitrator concluded that "it is clear that the employees in the two positions do not make or participate in the development of management policies, or obtain compliance with such policies." Id. at 22. The Arbitrator rejected the Agency's contention that the Claims Examiner and Claims Authorizer positions "significantly affect the execution of management policies or programs (the first OPM test of primary duty)." Id. He pointed out that in FPM Letter 551-7, OPM directed that "FLSA exemptions must be narrowly construed and applied only to employees who are clearly within the terms and spirit of the exemptions" and that "[t]he burden of proof rests with the employer who asserts the exemption. Thus, if there is a reasonable doubt as to whether an employee meets the criteria for exemption, the employee should be ruled nonexempt." Id. at 23 (emphasis deleted). The Arbitrator also noted that, in Arnold v. Ben Kanowsky, Inc., 361 U.S. 388 (1960), the Supreme Court held that FLSA exemptions must be narrowly construed. The Arbitrator then stated that, "[a]ccordingly, as there is at least a reasonable doubt with respect to whether the employees meet the first criterion for primary duty, the exemption should not be applied based on the first criterion." Id.

The Arbitrator next noted that, as to the second criterion for primary duty in 5 C.F.R. § 551.205(a)(2), FPM Letter 551-7 provides that "[t]his element brings into the administrative category a wide variety of specialists who provide general management, business, or other supporting services as distinguished from production functions." Id. (emphasis supplied by the Arbitrator). The Arbitrator noted the Agency's claims that "the emphasis made on 'line' employees or 'production' employees as compared to 'staff' is of limited value or none in this case[,]" and that "the distinction between 'production' and 'staff' is irrelevant." Id. at 24.

However, the Arbitrator disagreed with the Agency and found that the distinction between production work and staff work was relevant. He noted that the large numbers of Claims Representatives and Claims Authorizers "illustrate the 'production' nature of" these positions. Id. Moreover, he found that emphasis must be given to the distinction between "production" functions and "staff" functions for two reasons. According to the Arbitrator, the first reason was that "OPM in its FPM Letter [551-7] makes the distinction . . . and the interpretations by the witnesses for the Agency ignore the distinction." Id. In this regard, the Arbitrator noted that "the Agency's broad interpretation of criterion 2 certainly is not clearly right, and to find the employees in the two positions involved to be bona fide administrative employees is contrary to the directives in 5 CFR §551.202 and in the attachment to FPM 551-7 that FLSA exemptions be narrowly construed and if there is any reasonable doubt whether an employee meets the criteria he should be nonexempt." Id. at 24-25 (emphasis in original).

The second, "and most important," reason given by the Arbitrator was his conclusion that "the Agency interpretation again ignores the DOL interpretation of applicable DOL regulations which under AFGE v. OPM,[] must be given credence." Id. at 25. The Arbitrator relied on the court's holding in AFGE v. OPM that DOL's interpretations of its FLSA exemption regulations must be given weight and that "if a [F]ederal employee would be nonexempt under the applicable DOL regulations, he cannot be found exempt under OPM regulations." Id. The Arbitrator rejected the Agency's reliance on Cervino. He found that Cervino conflicts with the requirement in AFGE v. OPM that DOL regulations be given weight. The Arbitrator concluded that, on the basis of DOL's interpretation of the primary duty test, he was convinced "that the Claims Representatives and Claims Authorizers, as 'line' or 'production' employees of the Agency, are not bona fide administrative employees under the DOL primary duty description." Id.

In conclusion, the Arbitrator ruled that the Claims Representatives, GS-105-9 and 10, and Claims Authorizers, GS-933-9 and 10, "were illegally designated as being exempt from coverage under the FLSA as bona fide administrative employees." Id. at 26. The Arbitrator's award was based on the Arbitrator's determination that:

[T]he employees involved do not clearly meet either criterion of the OPM primary duty requirement for exemption as bona fide administrative employees, considering OPM's explanations of the descriptions in its [FPM] Letter [551-7]. Moreover, even if it might be argued that they do, there would remain a reasonable doubt. Under the OPM's caveat that FLSA exemptions must be narrowly construed and if there is reasonable doubt the employee should be nonexempt, the employees involved herein should be nonexempt.

Id. As an alternative basis for his award the Arbitrator stated that, "regardless of the interpretation given to OPM regulations governing FLSA exemptions, the DOL primary duty standards as interpreted by the DOL would prevail over OPM's under the rationale of the Circuit Court in AFGE V. OPM," and "as application of the DOL regulations would give the [F]ederal employees herein nonexempt status, they must be found to be nonexempt." Id.

After discussing considerations relevant to the appropriate remedies in this proceeding, the Arbitrator made the following award:

(1) Having found that the Agency has been illegally exempting Claims Representatives, GS-9 and GS-10, Occupational Series 105 and Claims Authorizers, GS-9 and GS-10, Occupational Series 993, from coverage under the Fair Labor Standards Act (FLSA) as "bona fide administrative employees," the Arbitrator directs that upon receipt of this Award the Agency remove the FLSA exemption designation from employees in said positions and commence to accord them treatment under coverage of the FLSA as nonexempt employees.

(2) The said employees are to be reimbursed by the Agency with back pay for unpaid overtime work, which they would have been paid but for the Agency's illegal designation that they were exempt from coverage under the FLSA, for a back pay period and in a manner to be determined.

(3) Any other aspects of the remedies to be awarded to employees classified as Claims Representatives, GS-9 and GS-10, Occupational Series 105, and Claims Authorizers, GS-9 and GS-10, Occupational Series 993, because of their illegal exemption from coverage under the FLSA, are to be determined under the procedures set forth . . . above.

(4) The Arbitrator will retain jurisdiction until the additional remedies for said employees are ascertained.

Id. at 32.

IV. Positions of the Parties

A. The Agency

The Agency asserts that the Arbitrator's award is contrary to law and Government-wide regulation. Citing statements from the award in support of its position, the Agency asserts that the award is contrary to 29 U.S.C. § 204(f), which designates OPM "to administer the provisions of [the FLSA] with respect to any individual employed by the United States[,]" and to 5 C.F.R. Part 551, which sets forth OPM's regulations governing the application of the FLSA to Federal employees.

The Agency maintains that, inasmuch as OPM has been authorized to issue regulations implementing the FLSA for Federal employees, its regulations are entitled to deference. According to the Agency, the Arbitrator's award "ignores the express statutory language of 29 U.S.C. § 204(f) which states that it is OPM, not DOL, which administers the FLSA for the Federal sector." Exceptions at 14. The Agency cites Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (Chevron) in support of its argument that OPM is entitled to deference in the interpretation of its FLSA regulations. The Agency asserts that the Arbitrator failed to give the OPM regulations due deference and that the Arbitrator improperly disregarded the opinion of OPM and the testimony of the OPM expert witness at the hearing and independently applied the DOL regulations to find that the Claims Representatives and Claims Authorizers were exempt from FLSA coverage.

The Agency also maintains that the Arbitrator misinterpreted and misapplied AFGE v. OPM when he held that the DOL regulations governing exemptions from FLSA coverage must prevail over the regulations of OPM. The Agency contends that the issue in AFGE v. OPM concerned the validity of OPM regulations that a union had challenged as contrary to the FLSA and DOL regulations, and argues that the Arbitrator in the present case did not have the same authority that a court has to declare an OPM regulation invalid. The Agency maintains that "it is OPM's regulations that an arbitrator must apply when determining whether a Federal employee is exempt or nonexempt under the FLSA." Id. at 18.

The Agency asserts that the Arbitrator "incorrectly . . . determined that he was obligated to give controlling weight to rulings and interpretations of the Department of Labor and apply them to the [F]ederally classified positions at issue." Id. at 19. The Agency contends that "FPM Letter 551-7 is clearly a [G]overnment-wide regulation, and . . . [F]ederal agencies . . . are bound by the interpretations given to its published regulations by [OPM]." Id. at 21 (citation omitted). The Agency cites American Federation of Government Employees, AFL-CIO, Local 3232 and Department of Health and Human Services, Social Security Administration, Region II, 31 FLRA 355, 359 (1988), to support its contention that the Authority applies OPM Government-wide regulations in resolving negotiability disputes and argues that, in the same way that the Authority defers to OPM regulations, "a [F]ederal sector arbitrator cannot disregard the interpretation and application given such a regulation by OPM itself." Id. at 22.

The Agency maintains that the Arbitrator erroneously disregarded OPM's regulation and OPM's interpretation of its regulation presented by its representative who testified at the hearing. The Agency contends that, even if the Arbitrator disagreed with OPM's interpretation of its regulation, he was bound to follow OPM's interpretation. The Agency argues that AFGE v. OPM is not dispositive of this case because AFGE v. OPM concerned two other OPM regulations, not relevant to this case, which the court set aside. However, according to the Agency, the court in AFGE v. OPM did not rule that OPM lacks the authority to promulgate FLSA regulations that are applicable to Federal employees and the court did not set aside the "OPM regulation defining administrative exemption, [5 C.F.R. §] 551.205[.]" Id. at 26. The Agency asserts that it has complied with OPM's FLSA regulations and that the Arbitrator's award is deficient because it is contrary to those regulations and to 29 U.S.C. § 204(f).

The Agency also contends that, even if the award is not found deficient for the reasons set forth above, the award can be implemented only prospectively, not retroactively. The Agency maintains that it has acted in accordance with the appropriate regulations of OPM in classifying the Claims Representatives and Claims Authorizers GS-9 and 10 as exempt from FLSA coverage and denies that it has "committed 'an unjustified or unwarranted personnel action' which would subject it to liability under the Back Pay Act [5 U.S.C. § 5596]." Id. at 35.

B. The Union

The Union contends that the Arbitrator correctly applied OPM regulations to find that the grievants are not administrative employees exempt from FLSA coverage. The Union points out that exemptions under the FLSA are "extremely limited" and "narrowly construed" and the FLSA places the burden of proof on the agency claiming an exemption. Opposition at 4. The Union asserts that the Arbitrator "carefully applied the Claims Representative and Claims Authorizer's job duties to the OPM regulations and found that using OPM regulations and guidance . . . the subject employees did not fit the narrow range of persons considered FLSA exempt under the 'administrative employee' exemption [set forth in 5 C.F.R. § 551.205(a)]." Id. at 11 (emphasis deleted).

The Union asserts that the testimony presented by Union witnesses proved that Claims Representatives and Claims Authorizers do not meet the requirement for an exemption as administrative employees and, in particular, that those employees "do not significantly affect the formulation or execution of management policies or programs pursuant to 5 C.F.R. § 551.205(a)(1)." Id. at 13 (emphasis deleted). The Union maintains that the testimony supports the Arbitrator's award and the Arbitrator correctly found that the affected employees were not exempt under the OPM's regulations. The Union asserts that the Agency is merely disagreeing with the Arbitrator's findings of fact when he applied the OPM regulations to the actual duties performed by the Claims Representatives and Claims Authorizers.

The Union maintains that the Arbitrator properly considered DOL regulations governing the exemption of administrative employees from FLSA. The Union asserts that the regulations governing exemption issued by OPM must be consistent with the regulations governing exemption issued by DOL. The Union states that the court's decision in AFGE v. OPM supports its position because the court "specifically restricted OPM's regulatory power over FLSA exemptions, ruling that OPM regulations that had the effect of expanding FLSA exemption[s] beyond the limits set by the Department of Labor were invalid." Opposition at 44-45 (emphasis deleted). The Union argues that "should OPM regulations and Department of Labor regulations or decisions be inconsistent, the Department of Labor's interpretation limiting a[n] FLSA exemption must be read as controlling." Id. at 46-47 (emphasis deleted).

The Union asserts that the Agency is mistaken in its reliance on Chevron to support the position that OPM's opinions as to the exemption of Federal employees from FLSA coverage are entitled to deference. The Union contends that Chevron concerned a review of rulemaking by a Federal agency, whereas the present case concerns a review of the Agency's decision that the grievants were exempt from FLSA. The Union argues that, under Chevron, deference to an agency regulation is required unless the regulation is one which Congress would not have sanctioned, and "[i]t is clear from AFGE v. OPM that Congress did not sanction OPM's broad interpretation of the FLSA exemptions." Id. at 49 (emphasis deleted). The Union states that "AFGE v. OPM makes it clear that the OPM regulations as the Agency sought to have them interpreted in this case are in plain violation of OPM's limited statutory authority to issue regulations[,]" and "the [A]rbitrator could not blindly follow OPM's assertions as to the scope of the FLSA [exemptions] which are in clear violation of law." Id. at 50.

The Union asserts that Carter v. Gibbs gives arbitrators great authority to apply applicable law to factual situations, as the Arbitrator did in the present case, and states further that "the [A]rbitrator did not declare any OPM regulation invalid." Id. at 53. The Union maintains that the Arbitrator applied the law to the facts and the Agency is only attempting to relitigate the merits of the case.

As to the Agency's exception that the award is contrary to the Back Pay Act, the Union states that "[t]his case is not a suit for Title 5 back pay under the Back Pay Act and the action was not brought under the auspices of the [Civil Service Reform Act]. Rather, the arbitration case's legal basis is §16(b) of the Fair Labor Standards Act, 29 U.S.C. §216(b), which provides original court jurisdiction for FLSA claims." Id. at 62. The Union states that the Back Pay Act "is simply irrelevant to claims under the FLSA." Id.

C. Amicus Curiae

OPM "endorses the arguments made by [the Agency] in its exceptions" in this case and supports the Agency's position that the award is contrary to law and Government-wide regulation. OPM Brief at 2. OPM asserts that it was granted the authority by Congress to administer the FLSA in the Federal sector pursuant to 29 U.S.C. § 204(f) and, although Congress intended that OPM's administration of the FLSA be consistent with the DOL's administration of the FLSA, Congress intended OPM to have "the same authority as [that] exercised by the Administrator of the Wage and Hour Division [of the DOL] in the private sector." Id. at 7. OPM maintains that its FLSA regulations, and not DOL's regulations, are controlling in this case and that the Arbitrator should have applied only the OPM regulations as interpreted by OPM.

OPM concedes that there are differences between its regulations governing exemption of administrative employees from the FLSA and the regulations issued by DOL for the private sector. However, OPM contends that its regulations are controlling for Federal employees and that its regulations were properly issued under the authority delegated to OPM by Congress in 29 U.S.C. § 204(f). OPM maintains that its authority to issue substantive FLSA regulations was confirmed in AFGE v. OPM, 821 F.2d at 769-70. OPM states that its FLSA regulations are reasonable and entitled to deference and argues that the Arbitrator's holding that the DOL regulations should control in this case is contrary to AFGE v. OPM.

OPM asserts that its FLSA regulations set forth in 5 C.F.R. Part 551 and FPM Letter 551-7 were correctly applied by the Agency and maintains that those regulations should have been applied in the same manner by the Arbitrator, who, instead, applied the DOL regulations. OPM states that the testimony of its expert witness, based on his years of experience in providing advice on the FLSA to Federal agencies, should not have been disregarded by the Arbitrator but should have been accepted as a basis for finding that the employees in question are exempt from FLSA coverage.

OPM further maintains that the Agency should not be held liable for any FLSA violation because the Agency relied in good faith on the advice of OPM and, therefore, is relieved of liability under 29 U.S.C. § 259, which protects from liability employers who rely in good faith on FLSA administrative regulations and rulings issued by the Administrator of the Wage and Hour Division of DOL. 29 U.S.C. § 259(b)(1). OPM asserts that the protections of that provision apply as well to Federal agencies that rely in good faith on the FLSA regulations and rulings of OPM. OPM argues that 29 U.S.C. § 259 should not be construed as applying only to rules and regulations issued by the Wage and Hour Administrator of DOL, but also as applying to the similar regulations issued by OPM in the exercise of its responsibilities under 29 U.S.C. § 204(f), so that agencies relying in good faith on OPM interpretations of its FLSA regulations will be protected from liability.

OPM asserts that Congress, in assigning the responsibility for administering the FLSA in the Federal sector to the CSC (later OPM) instead of DOL, did so because the CSC already administered the pay and classification system for Federal employees and "was in the best position to harmonize the overlapping overtime provisions of the two statutes [title 5 and FLSA] with a minimum of confusion." Id. at 28. OPM states that its "application of the FLSA is generally consistent with that of DOL[.]" Id. OPM maintains that the appropriate administrative exemption criteria to be applied in this case are those in OPM's regulation, 5 C.F.R. § 551.205, and not the criteria in the DOL regulation. OPM asserts that the employees in question, "under the proper application of OPM's regulations, clearly meet the administrative exemption criteria to exempt them from the FLSA[,]" and the Arbitrator's award finding otherwise is contrary to law and must be set aside. Id. at 29.

D. Union's Response to OPM

The Union contends that OPM has made factual mistakes concerning the Arbitrator's award. The Union maintains that, contrary to OPM's view of the award, the Arbitrator did not hold that the FLSA regulations issued by OPM are invalid or outside the authority of OPM, and did not hold that OPM regulations must be identical to those of DOL. The Union states that "the Arbitrator sought to apply the exemption criteria for the 'administrative' exemption using the guidance of both OPM and [DOL] as directed by the Court of Appeals in AFGE v. OPM." Union's Response at 4. The Union also points out that OPM failed to address the impact of Carter v. Gibbs. The Union maintains that "Carter v. Gibbs establishes that FLSA backpay matters grant greater responsibilities and authority to a [F]ederal sector arbitrator than the normal 5 U.S.C. § 7121(a)(1) grievance arbitration." Id. at 7.

The Union disputes OPM's contention that the Agency is protected under 29 U.S.C. § 259 from liability because the Agency relied on OPM's FLSA regulations and interpretation of those regulations. The Union maintains that Palardy v. Horner, 711 F. Supp. 667, 672-73 (D. Mass. 1989) (Palardy), cited by OPM, is not dispositive of this issue and argues that the protection of 29 U.S.C. § 259 applies only to private sector cases involving advice given by the Administrator of the Wage and Hour Division of DOL. The Union "suggests that the analysis of [29 U.S.C. § 259] found in [Abundis v. U.S., 15 Cl. Ct. 506 (1988), petition for interlocutory review denied, 878 F.2d 1443 (Fed. Cir. 1989) (Abundis)] is the better reasoned decision." Id. at 10. The Union notes that, in Abundis, the court denied the protection of 29 U.S.C. § 259 to Federal agencies. The Union asserts that "[n]othing in the statutory language [of 29 U.S.C. § 259] suggests that OPM may be substituted for the Administrator of the Wage and Hour Division in the [F]ederal sector and empowered under § 259 to relieve the Government [as] employer from FLSA liability to its own employees." Id. at 12.

V. Analysis and Conclusions

For the reasons set forth below, we conclude that the Arbitrator's determination, based on his application of OPM regulations, that the Agency improperly designated the grievants as exempt from coverage under the FLSA as bona fide administrative employees is not deficient under the Statute. In view of this conclusion, we find it unnecessary to address the Agency's contention that the Arbitrator improperly relied on DOL regulations and AFGE v. OPM as a basis for sustaining the grievance. We also conclude that the aspect of the award that requires the Agency to pay the grievants backpay for overtime pay to which they would have been entitled if they had been properly designated as nonexempt from FLSA coverage is not deficient under the Statute.

A. The Applicable Statutory and Regulatory Framework and the Court's Decision in AFGE v. OPM

As relevant to this case, the FLSA provides that employees "in a bona fide executive, administrative or professional capacity" are exempt from coverage under the FLSA. 29 U.S.C. § 213(a). The FLSA also provides that OPM "is authorized to administer the provisions of [the FLSA] with respect to any individual employed by the United States[.]" 29 U.S.C. § 204(f).

OPM regulations implementing the FLSA are set forth in 5 C.F.R. Part 551, "Pay Administration under the Fair Labor Standards Act." Part 551 "supplements and implements the [FLSA], and must be read in conjunction with [the FLSA]." 5 C.F.R. § 551.101(c). Section 551.201 states:

The employing agency shall exempt from the overtime provisions of the [FLSA] any employee who meets the exemption criteria of this subpart and such supplemental interpretations or instructions as shall be issued by the [OPM].

Under 5 C.F.R. § 551.201:

OPM has delegated to the employing agencies the duty to exempt from the overtime provisions of the FLSA any employee who meets the exemption criteria. OPM simply issues supplemental interpretations or instructions to the employing agencies. OPM's role as administrator of the FLSA in the [F]ederal sector, 29 U.S.C. § 204(f), does not divest management of its authority and responsibility to make these determinations for each of its employees.

Ackerman v. U.S., 21 Cl. Ct. 484, 489 (1990) (citation omitted).

As pertinent to this case, the regulations provide that Federal employees in grades GS-5 through GS-10 are exempt from coverage under the FLSA "only if the employee is an . . . administrative . . . employee as defined in . . . [5 C.F.R. §] 551.205[.]" 5 C.F.R. § 551.203(b). Section 551.205 defines administrative employee as an employee who meets certain specified criteria. One criterion that must be met is that the employee's primary duty must consist of work that:

(1) Significantly affects the formulation or execution of management policies or programs; or

(2) Involves general management or business functions or supporting services of substantial importance to the organization serviced; or

(3) Involves substantial participation in the executive or administrative functions of a man[a]gement official.

5 C.F.R. § 551.205(a).

The OPM regulatory definition of the "primary duty" criterion for administrative employees differs from the DOL regulatory definition of that criterion for private sector and state and local employees. The DOL regulations setting forth the "primary duty" criterion for defining an administrative employee provide that "the employee must have as his primary duty office or nonmanual work directly related to management policies or general business operations of his employer[.]" 29 C.F.R. § 205. The DOL regulations further provide: "The phrase 'directly related to management policies or general business operations of his employer . . .' describes those types of activities relating to the administrative operations of a business as distinguished from 'production' . . . work." 29 C.F.R. § 206(a).

In AFGE v. OPM, the court addressed the relationship between OPM and DOL regulations. The court considered, among other matters, AFGE's claim in that case that OPM had no authority to issue substantive overtime regulations and that, even if OPM did have such authority, its regulations must conform to the DOL's regulations governing overtime payment to employees under the FLSA. The OPM regulations at issue in that case were 5 C.F.R. § 551.203 (1986), which made employees at grades GS-11 and above presumptively exempt from FLSA coverage, and 5 C.F.R. § 551.204 (1986), which defined executive employees for purposes of FLSA coverage.

The court found that OPM had been given the authority by Congress "to administer the provisions [of FLSA] with respect to any individual employed by the United States." 821 F.2d at 769 (citing 29 U.S.C. § 204(f)). The court noted that, in granting that authority, Congress intended that OPM would "administer the provisions of the [FLSA] in such a manner as to assure consistency with the meaning, scope, and application established by the rulings, regulations, interpretations, and opinions of the Secretary of Labor which are applicable in other sectors of the economy." Id. (citation omitted). Based on the legislative history of the Fair Labor Standards Amendments of 1974, Pub. L. No. 93-259, 88 Stat. 55, the court also found "that Congress intended OPM to have a great deal of authority to determine how the FLSA would be administered in the civil service." Id. However, the court cautioned:

In promulgating regulations, OPM is nevertheless obliged to exercise its administrative authority in a manner that is consistent with the Secretary of Labor's implementation of the FLSA . . . When the civil service and FLSA systems conflict, OPM must defer to the FLSA so that any employee entitled to overtime compensation under FLSA receives it under the civil service rules. FLSA, we reiterate, contains a presumptive rule that employees who work more than forty hours in a week must receive overtime compensation . . . . Although employees who are determined to be executive, administrative, or professional are exempt from overtime, 29 U.S.C. § 213(a)(1) (1982); 29 C.F.R. § 541 (1986), the burden is on the employer to demonstrate the employee is in fact exempt.

Id. at 770-71 (emphasis in original, some citations omitted).

The court concluded that the OPM regulation containing the rebuttable presumption that employees at grades GS-11 and above were exempt from FLSA coverage as executive, administrative, or professional employees conflicted with "the FLSA principle that employees are presumed eligible for overtime" and the requirement that agencies bear the burden of proof of showing that employees are exempt from overtime eligibility. Id. at 771. The court held that because the presumption in 5 C.F.R. § 551.203(c) that GS-11 employees are exempt from FLSA coverage "appears to guide or direct the agency to act inconsistently with the FLSA and places an unwarranted and, at minimum, confusing burden on the employee, section 551.203(c) is flawed and must be vacated as inconsistent with the 'meaning, scope, and application' of the FLSA." Id. The court also vacated 5 C.F.R. § 551.204, defining executive employees, because that provision was "inconsistent with the Labor Department's definition of 'executive' employees[.]" Id.

B. Carter v. Gibbs and Subsequent Cases

Prior to the decision in Carter v. Gibbs, Federal courts entertained Federal employee suits concerning FLSA matters without regard to coverage of those employees under a negotiated grievance procedure. See, for example, Palardy. In Carter v. Gibbs, the court discussed the question of jurisdiction over FLSA claims and concluded that the negotiated grievance procedures mandated under section 7121 of the Statute are the appropriate mechanism for appealing FLSA matters unless those matters are specifically excluded by the parties. In that regard, the court stated: "Under the CSRA [Civil Service Reform Act], however, the rights of a unionized [F]ederal employee are consolidated within the four corners of the collective agreement: Congress defined a 'grievance' to include contractual disputes and 'any claimed violation . . . of any law.'" 909 F.2d at 1457 (citing 5 U.S.C. § 7103(a)(9)(C)). The Claims Court follows the rule of Carter v. Gibbs in deciding whether it has jurisdiction over FLSA claims by Federal employees. For example, Aamodt v. U.S., 22 Cl. Ct. 716 (1991); Beall v. U.S., 22 Cl. Ct. 59 (1990); Riggs v. U.S., 21 Cl. Ct. 664 (1990); Ackerman v. U.S., 21 Cl. Ct. at 487.

With respect to the role of arbitrators in deciding FLSA claims arising under negotiated grievance procedures, the court in Carter v. Gibbs rejected the plaintiffs' argument that arbitration is an inferior forum to court review and that arbitrators lack the necessary expertise to decide such issues. The court held that "it is manifest that Congress intended arbitrators to develop the expertise requisite to the construction and application of [F]ederal labor laws." 909 F.2d at 1457. The court also rejected the argument that arbitration is an incomplete remedy because there is no provision for attorney's fees or costs. The court stated:

To be sure, Congress has extended the rights and remedies of the FLSA to [F]ederal employees. But the CSRA requires that [F]ederal employees subject to a collective bargaining agreement negotiate with their employing department or agency whether to preserve the FLSA remedy, or instead to commend FLSA claims to the bargained grievance procedures. By accepting a position covered by the collective bargaining agreement, appellants effectively chose the procedures negotiated by the union.

Id. at 1458.

The Arbitrator's jurisdiction to resolve the Union's grievance is not challenged in the present case and it is not necessary to discuss further the aspect of Carter v. Gibbs that addresses the proper means by which Federal employees may pursue claims under the FLSA. However, it is relevant to our decision in this case to consider the court's statement concerning the authority of arbitrators chosen to resolve FLSA issues in grievance arbitration procedures. Following Carter v. Gibbs, it is clear that arbitrators have the authority to decide FLSA issues based on the application of pertinent law and regulations.

The Claims Court has similarly recognized the authority of arbitrators to apply pertinent law and regulations in deciding FLSA issues. For example, in Ackerman v. U.S., the Claims Court dismissed a suit by Federal employees who claimed that their agency improperly exempted them from FLSA coverage under OPM regulations. The court found that the matter was grievable under the parties' negotiated grievance procedure. As discussed above, the court found that OPM's role as administrator of the FLSA in the Federal sector "does not divest management of its authority and responsibility" to determine which employees are exempt from the overtime provisions of the FLSA. Ackerman v. U.S., 21 Cl. Ct. at 489. Noting that the employees were disputing the agency's application of law and regulations, the court emphasized that determinations as to whether the agency properly exempted employees from coverage under the FLSA "raise local, fact-specific issues that are best suited to the grievance procedures provided by the [collective bargaining agreement]." Id. See also Riggs v. U.S., 21 Cl. Ct. at 669 n.5 (recognizing the right of appeal to the Authority of arbitration awards involving the interpretation, application or violation of law in FLSA matters).

We find that the decision of the Federal Circuit in Carter v. Gibbs and the subsequent decisions of the Claims Court applying Carter v. Gibbs are relevant to the issues before us. In Carter v. Gibbs, the court removed any doubt as to the ability of arbitrators to make decisions as to whether OPM's FLSA regulations were properly applied by an agency when the court stated: "Congress intended arbitrators to develop the expertise requisite to the construction and application of [F]ederal labor laws." 909 F.2d at 1457. Further, it is clear from the decisions of the Claims Court that it is an agency's duty to make determinations on the "fact-specific issues" of whether employees are exempt from FLSA coverage under applicable OPM regulations. Ackerman v. U.S., 21 Cl. Ct. at 489.

C. The Award Is Not Deficient

We reject the Agency's contention that the Arbitrator's award is deficient on the basis that the Arbitrator "virtually ignore[d]" OPM's regulations regarding the exemption of administrative employees from FLSA coverage and failed to give proper deference to OPM's interpretation of those regulations. Exceptions at 13. To the contrary, it is clear that the Arbitrator specifically applied the OPM regulations in 5 C.F.R. § 551.205(a) and the guidelines for application of the regulations contained in FPM Letter 551-7. See Award at 20-25. Applying those regulations and guidelines, he concluded that the grievants were not properly exempted from FLSA coverage under the OPM regulations. The Arbitrator did not modify or invalidate the regulations but, rather, applied them by comparing the definition of administrative employee established by OPM in its regulations to the actual work performed by the grievants in their positions.

With respect to the Agency's arguments concerning the regulations of OPM, the Arbitrator quoted and applied the exemption criteria of 5 C.F.R. § 551.205. See Award at 15, 20. He also quoted and considered the relevant provisions of FPM Letter 551-7 describing the primary duty tests for determining when employees are administrative employees under the FLSA. See id. at 22-24. The Arbitrator rejected the Agency's arguments that the grievants were properly exempted from FLSA coverage under OPM regulations. Instead, he found that OPM's expert witness did not establish that the grievants make "significant determinations in furtherance of the operation of programs and accomplishment of program objectives" and, consequently, failed to show that the grievants "significantly affect the execution of management policies or programs (the first OPM test of primary duty)." Id. at 22 (emphasis deleted).

The Arbitrator also found that the grievants were not properly classified as exempt from FLSA coverage under the general requirements of FPM Letter 551-7. He noted that: (1) the FPM letter specifically requires that "FLSA exemptions must be narrowly construed and applied only to employees who are clearly within the terms and spirit of the exemptions[;]" (2) the employer bears the burden of proof; and (3) "if there is at least a reasonable doubt with respect to whether the employees meet the first criterion for primary duty, the exemption should not be applied based on the first criterion." Award at 23 (emphasis deleted). The Arbitrator rejected the Agency's argument that the distinction between production work and staff work contained in FPM Letter 551-7 is not relevant. FPM Letter 551-7, Attachment B.1.h. includes, among other descriptions of administrative work, "supporting services as distinguished from production functions." Id. (emphasis deleted). The Arbitrator ruled that there is a relevant distinction between production work and staff work because "OPM in its FPM Letter makes the distinction and speaks of the administrative category as being specialists providing non-production services, and the interpretations by the witnesses for the Agency ignore the distinction." Id. at 24. The Arbitrator stated that the Agency was not "clearly right" in its interpretation of the OPM regulations and that classifying the grievants as exempt from FLSA coverage was "contrary to the directives in 5 CFR § 551.202 and in the attachment to FPM 551-7 that FLSA exemptions be narrowly construed and if there is any reasonable doubt whether an employee meets the criteria he should be nonexempt." Id. at 25.

Specifically, the Arbitrator ruled that the Claims Representatives, GS-105-9 and 10, and Claims Authorizers, GS-933-9 and 10, "were illegally designated as being exempt from coverage under the FLSA as bona fide administrative employees." Id. at 26. The Arbitrator stated unequivocally his opinion that:

[T]he employees involved do not clearly meet either criterion of the OPM primary duty requirement for exemption as bona fide administrative employees, considering OPM's explanations of the descriptions in [FPM] Letter [551-7]. Moreover, even if it might be argued that they do, there would remain a reasonable doubt. Under the OPM's caveat that FLSA exemptions must be narrowly construed and if there is reasonable doubt the employee should be nonexempt, the employees involved herein should be nonexempt.

Id.

We conclude that the Arbitrator, exercising the authority conferred on arbitrators under Carter v. Gibbs, properly applied OPM's FLSA regulations governing the exemption of administrative employees. Further, we conclude that the Arbitrator properly declined to accept the opinions of Agency witnesses in reaching his decision that the grievants are not exempt from FLSA coverage because they are administrative employees under the OPM regulations.

Contrary to the Agency's contention, the case before us does not concern a matter that is governed by the Supreme Court's decision in Chevron. In Chevron, the Court addressed a challenge to certain regulations issued by the Environmental Protection Agency implementing the Clean Air Act Amendments of 1977. The Court held that, in deciding cases involving the interpretation of an unclear statutory term, a court must decide whether the responsible agency's regulation "is based on a permissible construction of the statute." 467 U.S. at 843. The Court further held that "[s]uch legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute." Id. at 844 (footnote omitted). However, unlike Chevron, this case does not concern the validity or the interpretation of OPM's regulations governing exemptions from the FLSA. Rather, the case concerns the Arbitrator's resolution of the Union's grievance claiming that the Agency applied those regulations incorrectly. As the Claims Court held in Ackerman v. U.S., a broad exclusion from a grievance procedure that

addresses interpretation of [F]ederal law and regulations, and plaintiffs' claim does not dispute interpretation of [F]ederal law or regulations, but rather their application. The statutory definition of "grievance" recognizes the distinction between misinterpretation and misapplication. 5 U.S.C. § 7103(a)(9)(C)(ii). OPM regulations confer on the agency the duty of applying the FLSA exemptions to its employees. 5 C.F.R. § 551.201.

21 Cl. Ct. at 490 (emphasis in original).

The Arbitrator did not modify or invalidate OPM's FLSA regulations, nor did he fail to give the regulations due deference. The Agency has not demonstrated that the Arbitrator was required to follow OPM's decision letter of 1976 or the testimony of the OPM employee at the arbitration hearing in resolving the fact-specific issue before him. OPM's regulations set the criteria for determining whether Federal employees are exempt from FLSA coverage, but the regulations do not make the fact-specific determinations with regard to the exemptions of specific employees. Moreover, as the court noted in Ackerman v. U.S., "OPM regulations confer on the agency the duty of applying the FLSA exemptions to its employees." Id. at 490. In addition, the court held that "local, fact-specific issues . . . are best suited to the grievance procedures provided by the [collective bargaining agreement]." Id. at 489. Therefore, we conclude that the Agency's argument that the Arbitrator failed to give OPM's regulations proper deference provides no basis for finding the award deficient. In our view, this argument is mere disagreement with the Arbitrator's evaluation of the evidence in deciding the issue before him. Such disagreement provides no basis for finding the award deficient. See U.S. Department of the Treasury, Customs Service, South Central Region, New Orleans, Louisiana and National Treasury Employees Union, Chapter 168, 43 FLRA 337, 341 (1991).

We recognize that the Union argued before the Arbitrator that the FLSA regulations issued by DOL should be applied in resolving the grievance while the Agency argued that OPM regulations alone and OPM's interpretation of its regulations should be applied. Further, both parties made extensive arguments based on AFGE v. OPM. The Arbitrator considered the arguments of both parties and, as an alternative basis for his award, applied the DOL regulations and AFGE v. OPM, in addition to the OPM regulations. In view of our determination that the award is not deficient insofar as the award is based on the OPM regulations, we find it unnecessary to address the Arbitrator's alternative basis for his award.

D. The Award Is Not Contrary to the Back Pay Act

Under the Back Pay Act, an employee found to have been affected by an unjustified or unwarranted personnel action that resulted in the loss of pay or differentials "is entitled, on correction of the personnel action, to receive for the period for which the personnel action was in effect" the pay or differentials that the employee would otherwise have received if the personnel action had not occurred. 5 U.S.C. § 5596(b)(1)(A). The Agency maintains that the Arbitrator could not order an award of backpay because there was no unjustified or unwarranted personnel action taken against the grievants. We disagree.

The Back Pay Act requires backpay for the amount of pay or differentials lost by an employee due to an agency's unwarranted or unjustified personnel action. 5 U.S.C. § 5596(b)(1)(A). The failure of an agency to pay employees monies to which they are entitled constitutes an unwarranted personnel action within the meaning of the Back Pay Act. See Federal Employees Metal Trades Council and U.S. Department of the Navy, Portsmouth Naval Shipyard, Portsmouth, New Hampshire, 39 FLRA 3, 7 (1991). An arbitrator can properly award backpay to remedy an unjustified or unwarranted personnel action that resulted in the loss of a differential, such as overtime pay, that employees otherwise would have received. See generally U.S. Department of the Navy, Charleston Naval Shipyard, Charleston, South Carolina and Federal Employees Metal Trades Council, 39 FLRA 987, 993 (1991). Backpay is authorized for violations of the overtime provisions of the FLSA. See International Association of Firefighters, Local 13 and Panama Canal Commission, General Services Bureau, Balboa, Republic of Panama, 43 FLRA 1012, 1026 (1992). See also 29 U.S.C. § 216(b).

In this case, the Arbitrator found that the grievants had been affected by the Agency's unjustified personnel action that improperly classified them as exempt from coverage under the FLSA. He ruled that the grievants were entitled to backpay for the amount of overtime pay that they would have received "but for the Agency's illegal designation that they were exempt from coverage under the FLSA, for a back pay period and in a manner to be determined." Award at 32. Therefore, we conclude that the Arbitrator made the proper findings for an award of backpay and there is no basis on which to find the award deficient under the Back Pay Act.

In holding that the Arbitrator's award of backpay is not contrary to the Back Pay Act, we reject OPM's argument that under 29 U.S.C. § 259 the Agency should not be held liable for an FLSA violation because the Agency relied on the regulations and rulings of OPM. That provision protects from liability employers who rely in good faith on FLSA administrative rulings and regulations issued by the Administrator of the Wage and Hour Division of the DOL. 29 U.S.C. § 259(b)(1). OPM cites Palardy in support of its argument that 29 U.S.C. § 259 applies to the FLSA regulations issued by OPM and maintains that agencies relying in good faith on OPM interpretations of its FLSA regulations should be protected from liability. The Union contends that the decision of the Claims Court in Abundis is controlling in this case and that the plain language of 29 U.S.C. § 259 refers only to the Administrator of the Wage and Hour Division.

The holdings of Abundis and Palardy "are in opposition." Campbell v. U.S. Air Force, 755 F. Supp. 897, 901 (E.D. Cal. 1990). We agree with the court's reasoning in Abundis that 29 U.S.C. § 259 "is explicit in requiring that the regulation relied upon be one issued by the 'Administrator of the Wage and Hour Division of the Department of Labor.'" 15 Cl. Ct. at 510. Although recognizing the authority of OPM to issue regulations to administer the FLSA for Federal employees, the court did not accept the contention that section 259 applies to Federal agencies. The court stated:

[N]otwithstanding OPM's authority to "administer" the FLSA with respect to federal agencies, it is still not "the Administrator of the Wage and Hour Division of the Department of Labor." The exception created by section 259 is very precise. It is limited to circumstances in which regulations are adopted by the "Administrator," the office created in 29 U.S.C. § 204(a). To apply the statute to a regulation issued by OPM, an agency not referred to, would be to extend the exception beyond its scope.

Id. at 511. The court also stated that another reason for limiting the application of section 259 to the private sector was that "in the public sector there is no legal dichotomy between the regulator and the employer . . . . When the Government is the employer, the regulations both emanate from and apply to the same entity . . . . Application of section 259 to public sector employers would effectively insulate the Government from all liability arising from faulty OPM regulations." Id. at 512.

We agree with the Claims Court that "the exception created by [29 U.S.C. §] 259 is very precise" and "is limited to circumstances in which regulations are adopted by the 'Administrator [of the Wage and Hour Division].'" 15 Cl. Ct. at 511. As the regulations applied by the Agency in this case were issued by OPM and not the Administrator of the Wage and Hour Division, the Agency cannot use the defense in 29 U.S.C. § 259.

Consequently, in view of the Arbitrator's finding that the Agency misapplied the OPM regulations to deny the grievants coverage under the FLSA and that, but for the Agency's improper action, the grievants would have received FLSA overtime compensation, there is no basis for finding the award of backpay contrary to the Back Pay Act.

We note that, although he held that the grievants were entitled to backpay, the Arbitrator did not make a specific finding as to the amount of backpay or the backpay period but retained jurisdiction for the purpose of allowing the parties to reach a settlement of the matter. Therefore, those issues are not before us. Accordingly, we conclude that the Arbitrator made the required findings for an award of backpay under the Back Pay Act and the Agency has failed to establish that the award is contrary to the Act. The grievants were entitled to the award of backpay as a remedy for the Agency's violation of the OPM regulation that resulted in a loss of pay, allowances, or differentials. The Agency's exceptions will be denied.

VI. Decision

The Agency's exceptions are denied.

APPENDIX

29 U.S.C. § 204(f) provides, in relevant part:

Notwithstanding any other provision of this Chapter, or any other law, the Director of the Office of Personnel Management is authorized to administer the provisions of this Chapter with respect to any individual employed by the United States . . . .

29 U.S.C. § 259 provides, in relevant part:

(a) In any action or proceeding based on any act or omission on or after May 14, 1947, no employer shall be subject to any liability or punishment for or on account of the failure of the employer to pay minimum wages or overtime compensation under the Fair Labor Standards Act of 1938, as amended . . . if he pleads and proves that the act or omission complained of was in good faith in conformity with and in reliance on any written administrative regulation, order, ruling, approval, or interpretation, of the agency of the United States specified in subsection (b) of this section, or any administrative practice or enforcement policy of such agency with respect to the class of employers to which he belonged. Such a defense, if established, shall be a bar to the action or proceeding, notwithstanding that after such act or omission, such administrative regulation, order, ruling, approval, interpretation, practice, or enforcement policy is modified or rescinded or is determined by judicial authority to be invalid or of no legal effect.

(b) The agency referred to in subsection (a) of this section shall be--

(1) in the case of the Fair Labor Standards Act of 1938, as amended [29 U.S.C. § 201 et seq.]--the Administrator of the Wage and Hour Division of the Department of Labor[.]

5 C.F.R. § 551.205 provides:

§ 551.205 Administrative exemption criteria.

An administrative employee is an advisor, assistance, or representative of management, or a specialist in a management or general business function or supporting service who meets all of the following criteria:

(a) The employee's primary duty consists of work that--

(1) Significantly affects the formulation or execution of management policies or programs; or

(2) Involves general management or business functions or supporting services of substantial importance to the organization serviced; or

(3) Involves substantial participation in the executive or administrative functions of a management official.

(b) The employee performs office or other predominantly nonmanual work which is--

(1) Intellectual and varied in nature: or

(2) Of a specialized or technical nature that requires considerable special training, experience, and knowledge.

(c) The employee must frequently exercise discretion and independent judgment, under only general supervision, in performing the normal day-to-day work.

(d) In addition to the primary duty criterion that applies to all employees, General Schedule employees classified at GS-5 or GS-6 (or the equivalent in other white collar systems) must spend 80 percent or more of the worktime in a representative workweek on administrative functions and work that is an essential part of those functions.

29 C.F.R. § 541.205(a) provides:

§ 541.205 Directly related to management policies or general business operations.

(a) The phrase "directly related to management policies or general business operations of his employer or his employer's customers" describes those types of activities relating to the administrative operations of a business as distinguished from "production" or, in a retail or service establishment, "sales" work. In addition to describing the types of activities, the phrase limits the exemption to persons who perform work of substantial importance to the management or operation of the business of his employer or his employer's customers.

29 C.F.R. § 541.206(a) provides, in relevant part:

§ 541.206 Primary duty.

(a) The definition of "administrative" exempts only employees who are primarily engaged in the responsible work which is characteristic of employment in a bona fide administrative capacity. Thus, the employee must have as his primary duty office or nonmanual work directly related to management policies or general business operations of his employer or his employer's customers[.]

Attachment to FPM Letter 551-7, provides, in relevant part:

A. Definitions of Executive, Administrative and Professional Employees

. . . .

2. Administrative Employees: An administrative employee is an advisor, assistant or representative of management, or a specialist in a management or general business function or supporting service whose position meets the criteria in subsections a. through e., below:

a. The employee's primary duty consists of work that:

(1) Significantly affects the formulation or execution of management policies or programs; or

(2) Involves general management or business functions or supporting services of substantial importance to the organization serviced; or

(3) Involves substantial participation in the executive or administrative functions of a management official.

. . . .

B. General Guidance to Application of Executive, Administrative and Professional Exemption Definitions

1. Meaning of Terms:

. . . .

g. Formulation or execution of management policies or programs: Management policies and programs range from broad national goals that are expressed in statutes or Executive Orders to specific objectives of a small field office. Employees may actually make policy decisions or participate indirectly, through developing proposals that are acted on by others. Employees who significantly affect the execution of management policies or programs typically are those whose work involves obtaining compliance with such policies by other individuals or organizations, within or outside of the Federal Government, or making significant determinations in furtherance of the operation of programs and accomplishment of program objectives.

Administrative employees engaged in formulation or execution of management policies or programs typically perform one or more phases of program management (i.e., planning, developing, promoting, coordinating, controlling, or evaluating operating programs of the employing organization or of other organizations subject to regulation or other controls). Some of these employees are classified in occupations that reflect these functions (e.g., program analyst) but many are classified in subject matter occupations.

h. General management, business, or supporting services: This element brings into the general administrative category a wide variety of specialists who provide general management, business, or other supporting services as distinguished from production functions. The administrative employees in this category provide support to line managers by:

(1) Providing expert advice in specialized subject matter fields, such as that provided by management consultants or systems analysts;

(2) Assuming facets of the overall management function, such as safety management, personnel management, or budgeting and financial management;

(3) Representing management in such business functions as negotiating and administering contracts, determining acceptability of goods or services, or authorizing payments; or

(4) Providing supporting services, such as automated data processing, communications, or procurement and distribution of supplies.

Neither the organizational location nor the number of employees performing identical or similar work changes general management, business or servicing function into production functions. However to warrant exemption, each employee's work must involve substantial discretion on matters of enough importance that the employee's actions and decisions have a noticeable impact on the effectiveness of the organization advised, represented, or serviced.

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FOOTNOTES:
(If blank, the decision does not have footnotes.)
 

*/ The relevant portions of applicable statutory and regulatory provisions are set forth in the Appendix to this decision.

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