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The decision of the Authority follows:
45 FLRA No. 87
Before Chairman McKee and Members Talkin and Armendariz.
I. Statement of the Case
This case is before the Authority on a negotiability appeal filed under section 7105(a)(2)(E) of the Federal Service Labor-Management Relations Statute (the Statute) and concerns the negotiability of two provisions of an agreement that were disapproved by the Agency head under section 7114(c) of the Statute.
As discussed in greater detail below, the disputed portion of Provision 1, which establishes the productivity requirements for particular performance ratings, is nonnegotiable because it directly interferes with management's rights under section 7106(a)(2)(A) and (B) of the Statute to direct employees and assign work. Provision 2, which places the terms of the agreement into effect retroactively, is not inconsistent with section 7114(c) of the Statute and is negotiable.
II. Provision 1
a. The following ranges established by the employer will be used to determine the appropriate performance level for journeyman employees when OPCON standards are applied.
(1) Satisfactory Rating - 90-94 percent of standard
(2) Excellent Rating - 95-99 percent of standard
(3) Outstanding Rating - 100 percent or greater of standard
b. The following ranges established by the employer will be used to determine the appropriate performance level for Payroll Clerk Trainees when OPCON standards are applied.
TRAINEE LEVEL I
(1) Satisfactory Rating - 50-54 percent of standard
(2) Excellent Rating - 55-59 percent of standard
(3) Outstanding Rating - 60 percent or greater of standard
TRAINEE LEVEL II
(1) Satisfactory Rating - 75-79 percent of standard
(2) Excellent Rating - 80-84 percent of standard
(3) Outstanding Rating - 85 percent or greater of standard
c. The following percentages of base pay will be given as an incentive based upon the performance rating assigned. These increases will be effective the first complete pay period after approval by the approving authority, but will never be effective later than 30 calendar days following the end of the rating period.
(1) Satisfactory Rating - no pay increase
(2) Excellent Rating - 3 percent
(3) Outstanding Rating - 4 percent
d. The cash awards for performance as detailed in Article XX of existing contract will remain as is.
[Only sections a. and b. are in dispute.]
A. Positions of the Parties
According to the Agency, this provision applies to bargaining unit employees, who are mostly payroll clerks, located at the Central Nonappropriated Fund Payroll Office (CNPO). The CNPO is responsible for performing accounting, disbursing, examination and control, payroll processing, and quality assurance review operations for the Department of the Army nonappropriated fund system. The Agency states that the performance of these employees is measured, for the most part, by preestablished production goals known as "OPCON Standards." As an example of a typical "OPCON Standard," the Agency states that an employee might be required to file documents at a rate of 113.64 per hour in order to reach a 100 percent achievement level. According to the Agency, this dispute arose in the context of negotiations over the timing of future pay adjustments in the CNPO bargaining unit under the negotiated Pay Banding System.
The Agency asserts that, under Authority precedent, proposals that attempt to establish the level of performance required to achieve a particular rating interfere with management's rights to direct employees and assign work and are nonnegotiable. The Agency contends that the disputed portions of this provision establish "specific ranges of a standard that will match a specific performance rating." Statement of Position at 4. The Agency argues that the fact that the ranges set forth in the provision are currently established by the Agency does not render the provision negotiable. In this regard, the Agency contends that the provision would restrict it from altering those ranges during the life of the agreement and, consequently, interferes with its management rights to direct employees and assign work under section 7106(a)(2)(A) and (B) of the Statute.
The Union describes the Pay Banding System as an alternative method of pay that has no step increases based on length of service. The Union states that the intent of this provision is to provide a replacement for step increases. The Union asserts that under the provision the parties agree to link pay increases to performance based on performance level ranges established by the Agency. The Union contends that the parties are not attempting to establish the level of performance necessary to achieve a particular rating but are setting forth the levels of performance that will merit pay increases. The Union states that, under the provision, the Agency is free to change the levels of performance for rating purposes, but, if it does so, the result will be "one set of standards for performance evaluation and one set of standards for pay increases." Reply Brief at 3.
B. Analysis and Conclusions
Initially, we note that this provision applies to nonappropriated fund employees who are not covered by chapter 43 of title 5, which relates to performance appraisal. See, for example, American Federation of Government Employees, AFL-CIO, Local 987 and Headquarters, Warner Robins Air Force Logistics Command, Robins Air Force Base, Georgia, 8 FLRA 667, 676 (1982) enforcement denied as to other matters sub nom. United States Air Force, Headquarters, Warner Robins Air Force Logistics Command, Robins Air Force Base, Georgia v. FLRA, 727 F.2d 1502 (11th Cir. 1984). Thus, unlike the performance standards involved in much of Authority precedent, the performance levels involved in this provision are not governed by chapter 43. However, in our view the establishment of performance levels for nonappropriated fund employees has the same purpose as the establishment of performance standards for employees who are covered by chapter 43. That is: they "establish the level of output that is to be achieved." National Treasury Employees Union v. Federal Labor Relations Authority, 691 F.2d 553, 563 (1982).
It is well established that management's rights to direct employees and assign work include the rights to determine the quantity, quality, and timeliness of employees' work products and to establish employees' work priorities. For example, Patent Office Professional Association and Patent and Trademark Office, Department of Commerce, 25 FLRA 384, 385-86 (1987), affirmed mem. sub nom. Patent Office Professional Association v. FLRA, No. 87-1135 (D.C. Cir. March 30, 1988) (per curiam). Those rights extend to the establishment of job requirements in the form of productivity or performance standards that serve as the basis for encouraging and rewarding successful performance and discouraging and remedying performance that is unacceptable. See, for example, American Federation of State, County and Municipal Employees, AFL-CIO, Council 26 and U.S. Department of Justice, 13 FLRA 578 (1984). In this regard, an essential aspect of management's assignment of work and direction of employees is the establishment of job requirements for various levels of performance in order to achieve the quality and amount of work needed from employees to effectively and efficiently fulfill the agency's mission and functions. Id. Thus, management's rights to direct employees and assign work include the establishment of the productivity requirements that employees must attain for their performance to meet acceptable or superior levels for purposes of avoiding punitive action or receiving a reward.
We emphasize that these rights do not extend to determining the rewards given for successful or superior performance. See National Treasury Employees Union and Internal Revenue Service, Indianapolis District, 30 FLRA 1170 (1988) (IRS, Indianapolis); National Treasury Employees Union and Internal Revenue Service, 27 FLRA 132 (1987). A proposal requiring that awards be granted for particular performance does not directly interfere with management's rights to direct employees and assign work if it leaves the establishment of the performance standards used to determine eligibility for awards to the agency's discretion. See IRS, Indianapolis, 30 FLRA at 1172. Unlike the establishment of productivity requirements, the determination of what rewards will be given for meeting or exceeding those requirements does not establish the level of output that is to be achieved and, consequently, is not directly related to the direction of and assignment of work to employees.
Sections a. and b. of Provision 1 set forth production standards that employees must meet in order for their performance to be considered satisfactory or better. Consequently, for the reasons set forth above, the disputed portion of Provision 1 directly interferes with management's rights to direct employees and assign work. The fact that sections a. and b. reflect the performance levels that have been established by the Agency does not, by itself, make the provision negotiable. To the extent that the Agency's policy constitutes, and results from, the exercise of management rights under section 7106 of the Statute, provisions incorporating that policy constitute an independent contractual limitation on management's rights and directly interfere with the relevant right or rights. For example, American Federation of Government Employees, National Border Patrol Council and National Immigration and Naturalization Service Council and U.S. Department of Justice, Immigration and Naturalization Service, 40 FLRA 521, 527 (1991), petition for review filed as to other matters sub nom. U.S. Department of Justice, Immigration and Naturalization Service v. FLRA, No. 91-4525 (5th Cir. June 25, 1991). In this case, the Union states that while, under the provision, the Agency could adopt different standards for purposes other than determining eligibility for pay increases, it would be bound by the standards contained in the contractual provision for purposes of determining eligibility for pay increases. As we discussed above, management's right to direct employees and assign work extends to establishing production requirements and standards for purposes of eligibility for rewards that are based on the performance of work. Consequently, by limiting the Agency's ability to alter the standards that apply for purposes of pay increases, the provision directly interferes with management's rights to direct employees and assign work under section 7106(a) of the Statute.
As there is no claim that sections a. and b. constitute an appropriate arrangement for employees who are adversely affected by the exercise of management's rights, we will not analyze this provision to determine whether it is negotiable under section 7106(b)(3) notwithstanding its direct interference with management's rights. Based on the foregoing, we conclude that the disputed portion of Provision 1 is nonnegotiable.
III. Provision 2
This agreement will be effective 10 Dec 91 and will remain in effect until superseded by renegotiation of formal contract.
A. The Positions of the Parties
The Agency states that the plain wording of this provision specifically makes the agreement effective on a date prior to the date of signature by the parties. The Agency asserts that this provision does not reflect the Union's stated intent that this provision merely seeks to give retroactive effect to the terms of the agreement upon approval by the Agency head. The Agency contends that this provision is inconsistent with section 7114(c) of the Statute because it establishes an effective date other than the date of approval by the Agency head or the 31st day after execution.
The Union describes this provision as intended to "retroactively effect the Agreement upon approval or expiration of the review period." Petition at 1-2. The Union states that the purpose of the retroactive effective date was to ensure that employees would receive an upcoming cost of living increase and to discontinue a provision on gain sharing. The Union contends that both parties recognized that the agreement was subject to Agency head review pursuant to section 7114(c) of the Statute as was evidenced by the fact that the agreement was forwarded for review. The Union asserts that nothing in the Statute prevents parties from giving retroactive effect to an agreement upon review by the head of the agency or expiration of the 30-day review period.
B. Analysis and Conclusions
Initially, we note that the agreement to which this provision applies is of limited scope. In addition to this provision, the agreement consists of six sections, all of which relate to matters concerning the Agency's Pay Banding System. Four of these sections are set forth in conjunction with Provision 1 above. The Union contends that Provision 2 is intended to give retroactive effect to the provisions of the agreement and is not intended to circumvent the agency-head review process that is required by section 7114(c) of the Statute. The Agency argues that the wording of the provision does not reflect this intent. We find that the Union's statement of intent is consistent with the wording of the provision. In this regard, the provision, which is silent as to agency-head review, does not preclude that review from occurring or seek to circumvent it. We adopt the Union's interpretation of the provision for purposes of this decision. See, for example, U.S. Department of Health and Human Services, Social Security Administration, Baltimore, Maryland, 36 FLRA 655, 670-72 (1990).
Section 7114(c) of the Statute provides that an agreement between any agency and an exclusive representative "shall be subject" to approval by the head of the agency. See, for example, Patent Office Professional Association and U.S. Department of Commerce, Patent and Trademark Office, 41 FLRA 795, 802 (1991) (Patent and Trademark Office). The Authority has held that under section 7114(c) of the Statute, a collective bargaining agreement becomes effective and binding on both the agency and the exclusive representative upon approval by the agency head or, in the absence of either approval or disapproval within the statutory 30-day period for agency-head review, on the 31st day after execution of the agreement. See, for example, Federal Employees Metal Trades Council of Charleston and U.S. Department of the Navy, Charleston Naval Shipyard, Charleston, South Carolina, 35 FLRA 1091, 1093 (1990). However, nothing in section 7114(c) of the Statute precludes parties from agreeing to give retroactive effect to the provisions of any agreement reached that have been properly subjected to agency-head review. See Federal Deposit Insurance Corporation, 40 FLRA 775, 785 (1991), petition for enforcement filed sub nom. FLRA v. Federal Deposit Insurance Corporation, No. 91-1207 (D.C. Cir. May 5, 1991); American Federation of Government Employees, Local 32 and Office of Personnel Management, 26 FLRA 612, 619 (1897). Of course, such retroactivity may not be otherwise inconsistent with applicable law, rule, or regulation. See, for example, American Federation of Government Employees, National Veterans Administration Council and U.S. Department of Veterans Affairs, Washington, D.C., 41 FLRA 73, 79-80 (1991) (proposal requiring an agency to put employees on administrative leave retroactively for a period equal to the length of time that they were furloughed did not violate the Anti-Deficiency Act and was negotiable).
Based on the Union's statement of intent, which as stated above is consistent with the language of the provision, Provision 2 only requires that upon approval by the agency head or expiration of the 30-day period for agency-head review, the terms of the agreement will be applied retroactive to December 10, 1991. Provision 2 does not preclude or seek to circumvent agency-head review. The circumstances present here are distinguishable from those present in West Point Elementary School Teachers Association, NEA and United States Military Academy, West Point Elementary School, 34 FLRA 1008 (1990) (Provision 4) and National Federation of Federal Employees, Local 1263 and Defense Language Institute, Presidio of Monterey, California, 14 FLRA 761 (1984) (Provision 3). The provisions in those two cases provided that the agreements involved would become effective prior to the completion of the agency-head review process and explicitly relegated that process to the status of a "post audit review." The circumstances here are also distinguishable from those present with respect to Provision 17 in Patent and Trademark Office, 41 FLRA at 846-48. Provision 17 required that an agreement would become effective without permitting a 30-day period for agency-head review to occur as is required by section 7114(c) of the Statute. Based on the Union's statement of intent, which we have adopted, we find that in this case Provision 2 permits the 30-day period to occur. Therefore, we conclude that Provision 2 is consistent with section 7114(c) of the Statute. Moreover, the Agency does not cite any other basis for concluding that giving retroactive effect to the terms of the agreement is inconsistent with applicable law, rule or regulation and none is apparent to us. Thus, we conclude that Provision 2 is negotiable.
The petition for review is dismissed insofar as it concerns the disputed portion of Provision 1. The Agency shall rescind its disapproval of Provision 2.*/
(If blank, the decision does not have footnotes.)
*/ In finding that this provision is within the duty to bargain, we make no judgment as to its merits.