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The decision of the Authority follows:
47 FLRA No. 22
FEDERAL LABOR RELATIONS AUTHORITY
NATIONAL TREASURY EMPLOYEES UNION
U.S. DEPARTMENT OF THE TREASURY
BUREAU OF PUBLIC DEBT
PARKERSBURG, WEST VIRGINIA
DECISION AND ORDER ON A NEGOTIABILITY ISSUE
March 31, 1993
Before Chairman McKee and Members Talkin and Armendariz.
I. Statement of the Case
This case is before the Authority on a negotiability appeal filed by the Union under section 7105(a)(2)(E) of the Federal Service Labor-Management Relations Statute (the Statute). The appeal involves the negotiability of one provision of a collective bargaining agreement that was disapproved by the Agency head under section 7114(c) of the Statute. For the following reasons, we conclude that the provision, which concerns contracting out, is negotiable.
The Employer agrees to comply with OMB Circular A-76 and other applicable laws and regulations concerning contractingout.
III. Positions of the Parties
The Union contends that, in addition to requiring the Agency to comply with Office of Management and Budget Circular A-76 (the Circular) before contracting out work previously performed by Agency employees, the provision "would also permit employees adversely affected by violations of the Circular to redress their injuries through the negotiated grievance arbitration procedure, instead of the procedure set forth in the Circular itself." Response at 6. The Union maintains that "well-established precedent" of the Authority establishes that the provision is negotiable. Id. at 3.
Relying on the legislative history of the Statute, the Union contends that Congress intended the phrase "applicable laws" in section 7106(a)(2) of the Statute to encompass statutes and regulations that are binding upon agency managers, including Government-wide directives and published agency rules and policies. The Union argues that the Circular and its accompanying Supplement are mandatory Government-wide standards that bind the Agency when evaluating whether services can be less expensively performed by in-house employees or by contractors, and that, therefore, the Circular and its Supplement are applicable laws within the meaning of section 7106(a)(2). The Union claims that, in view of the mandatory nature of the Circular, the fact that it may be a management tool, as argued by the Agency, is "of no consequence." Id. at 26.
The Union contends that, at a minimum, the Circular and its Supplement have the force and effect of law. In this regard, the Union argues that the Circular was issued by the Office of Management and Budget pursuant to statutory authority; that it was published in the Federal Register for notice and comment, as required by the Administrative Procedure Act; that it is mandatory and binding on the Agency; and that the Federal Acquisition Regulations, which are published in the Code of Federal Regulations, explicitly reference and generally restate the Circular's requirements. The Union maintains that "if the Union's proposal had merely referenced the [Federal] Acquisition Regulations, rather than the Circular itself, the proposal would be considered negotiable." Id. at 32.
Finally, the Union argues, in the alternative, that the provision is an appropriate arrangement within the meaning of section 7106(b)(3) of the Statute. In this regard, the Union contends that the provision is an arrangement for employees who are adversely affected by management's exercise of its right to contract out work that has been performed by bargaining unit employees, which can result in loss of employment or other displacement. The Union argues that the provision addresses this adverse effect by permitting employees to obtain appropriate relief for violations of the Circular's requirements through grievances and arbitration instead of the internal appeals procedure required by the Circular. The Union maintains that the provision would greatly benefit the adversely affected employees and would have only a modest effect on the Agency's right to contract out and that, therefore, it would not excessively interfere with that right.
The Agency contends that the provision interferes with its right to assign work and its authority to make determinations concerning contracting out. It argues that the Circular is not an applicable law within the meaning of section 7106 of the Statute. Relying on Defense Language Institute v. FLRA, 767 F.2d 1398 (9th Cir. 1985) and HHS v. FLRA, 844 F.2d 1087 (4th Cir. 1988), the Agency argues that "external oversight of agency determinations under Circular A-76 would inevitably lead to improper second-guessing of legitimate exercises of managerial discretion." Statement of Position at 3.
The Agency contends that the Circular is merely a management tool that does not have the force and effect of law. The Agency claims that by its express terms the Circular states that it does not create any substantive or procedural basis for challenge regarding any agency action or inaction. Rather, the Agency argues, implementation of the Circular entails an unreviewable exercise of agency "judgment and discretion." Id. at 4, quoting HHS v. FLRA, 844 F.2d at 1092. Accordingly, the Agency contends, "government employees and their unions do not possess any legally cognizable interests under the Circular." Id. at 5-6, citing National Federation of Federal Employees v. Cheney, 883 F.2d 1038 (D.C. Cir. 1989), cert. denied, 110 S. Ct. 3214 (1990).
IV. Analysis and Conclusions
For the reasons fully set forth in National Treasury Employees Union and U.S. Department of the Treasury, Internal Revenue Service, 42 FLRA 377, 388-403 (1991), petition for review filed, No. 91-1573 (D.C. Cir. Nov. 25, 1991), we reiterate our conclusion that the term "applicable laws" in section 7106(a)(2) of the Statute encompasses rules and regulations having the force and effect of law; that the Circular has the force and effect of law; and that, therefore, the Circular is an applicable law within the meaning of section 7106(a)(2). Accordingly, insofar as the provision requires that the Agency comply with the Circular and other laws and regulations possessing the force and effect of law, the provision does not interfere with the Agency's management rights to contract out and assign work and is negotiable. See also National Treasury Employees Union and U.S. Department of the Treasury, Bureau of Public Debt, 42 FLRA 1333 (1991), petition for review filed, No. 91-1633 (D.C. Cir. Dec. 20, 1991) (Bureau of Public Debt).
In addition to requiring that the Agency comply with the Circular, the provision also requires compliance with "other applicable laws and regulations concerning contractingout." In Bureau of Public Debt we examined an identical provision. We concluded that to the extent that the provision required compliance with regulations that do not have the force and effect of law, the provision imposed substantive limitations on management's right to make determinations with respect to contracting out and directly interfered with that management right. A proposal that directly interferes with management's rights under section 7106(a) is negotiable if it constitutes an appropriate arrangement within the meaning of section 7106(b)(3) of the Statute. To determine whether a proposal constitutes an appropriate arrangement, we determine whether the proposal is: (1) intended as an arrangement for employees adversely affected by the exercise of a management right; and (2) appropriate because it does not excessively interfere with the exercise of management's rights. National Association of Government Employees, Local R14-87 and Kansas Army National Guard, 21 FLRA 24, 31 (1986). In Bureau of Public Debt we concluded that the portion of the provision that directly interfered with management's right to contract out constituted a negotiable appropriate arrangement under section 7106(b)(3) of the Statute.
In reaching the conclusion that a portion of the provision in Bureau of Public Debt was an appropriate arrangement, we relied in part on the reasoning set forth in American Federation of Government Employees, AFL-CIO, Department of Education Council of AFGE Locals and U.S. Department of Education, 42 FLRA 527 (1991) and American Federation of Government Employees, Department of Education Council of AFGE Locals and U.S. Department of Education, Washington, D.C., 38 FLRA 1068, 1076-77 (1990), decision on reconsideration, 39 FLRA 1241, 1242-46 (1991). After issuance of our decision in Bureau of Public Debt, the United States Court of Appeals for the District of Columbia Circuit denied enforcement to those cases. U.S. Department of the Interior, Minerals Management Service v. FLRA, 969 F.2d 1158 (D.C. Cir. 1992) (Minerals Management Service). The court concluded that the Authority had not identified the reasonably foreseeable adverse effects that would flow from the management actions involved in those cases and had not assessed whether the proposed arrangements were tailored to benefit or compensate those employees who would suffer those adverse effects.
We conclude that this case is readily distinguishable from Minerals Management Service and that the portion of the provision requiring compliance with regulations that may not have the force and effect of law is an appropriate arrangement.
Initially, we conclude that that portion of the provision is an arrangement for employees who would be adversely affected by management's right to contract out work. There is no question that the contracting out of bargaining unit work "will surely have adverse effects on some employees." U.S. Department of Treasury, Office of the Chief Counsel, Internal Revenue Service v. FLRA, 960 F.2d 1068, 1071 (D.C. Cir. 1992). Indeed, few actions taken by the Agency could have as devastating an effect on employees as the transfer of their work to outside contractors. It is also clear that the only employees who would have an interest in assuring that the Agency comply with regulations concerning contracting out are those who would be adversely affected by those actions. Thus, the provision in this case presents a quite different situation from the proposals at issue in Minerals Management, where, according to the court, "the Authority did not assess whether the rights conferred by the proposals, if adopted, would be limited to employees who suffered adverse effects as foreseen by the Authority." 969 F.2d at 1162. In contrast to the proposals concerning drug testing programs and the application of personnel regulations that were at issue in Minerals Management, the rights conferred by the Agency's compliance with regulations concerning contracting out would necessarily accrue only to those employees endangered by the contracting out actions. In our view, the ability to require compliance with regulations governing contracting out and the opportunity to challenge noncompliance with those regulations through arbitration unquestionably constitute an arrangement for those employees who might be adversely affected by the Agency's actions in contracting out their work.
Balancing the benefits conferred on the employees by the provision with the burdens it places on the Agency, we further conclude that the portion of the provision under discussion is an appropriate arrangement. If the Agency is required to comply with all governing contracting out regulations, and the employees have a mechanism to challenge noncompliance, contracts that otherwise would have been awarded to outside contractors could be terminated and performance converted to in-house execution. See generally National Federation of Federal Employees, Local 1263 and U.S. Department of Defense, Defense Language Institute, Monterey, California, 43 FLRA 791 (1991) (Defense Language Institute). Significantly, although the courts have denied employees and unions standing to bring an action alleging that an agency wrongfully converted to contract an activity previously performed in-house by agency personnel, the Authority has concluded that employees and unions affected by an agency's contracting out actions may challenge the agency's actions in arbitration. Id. at 804-05. Thus, this provision may provide the only avenue for relief for employees who have been affected by the Agency's improper transfer of work to outside contractors.(1)
In contrast, the provision burdens the Agency only by requiring that it comply with regulations that were specifically designed to guide the Agency's actions in contracting out work previously performed by its employees. In this regard, we note that under longstanding Authority precedent, a regulation concerning contracting out is enforceable in arbitration only if it is mandatory and nondiscretionary and contains sufficiently specific standards against which an arbitrator can objectively analyze and review the agency's actions. Headquarters, 97th Combat Support Group (SAC), Blytheville Air Force Base, Arkansas and American Federation of Government Employees, AFL-CIO, Local 2840, 22 FLRA 656, 661 (1986). Consequently, under the provision a regulation would be enforceable in arbitration only if it was mandatory and nondiscretionary and contained sufficiently specific standards.
In sum, we conclude that this portion of the provision provides benefits to the employees that outweigh the burdens placed on the Agency. Accordingly, we conclude that the provision does not excessively interfere with either the Agency's right to contract out or its right to assign work and that the provision is negotiable.
The Agency shall rescind its disapproval of the provision.(2)
(If blank, the decision does not have footnotes.)
1. In Defense Language Institute the Authority stated that an arbitrator may rely on a regulation to sustain a grievance disputing an agency's determination to contract out "only if that regulation constitutes an applicable law within the meaning of section 7106(a)(2) of the Statute." 43 FLRA at 800. As that case involved a grievance that directly challenged the agency's compliance with procurement regulations, our decision addressed the authority of arbitrators when confronted with such a grievance. Necessarily, such an analysis involves the determination of whether the arbitrator properly examined whether management acted "in accordance with applicable laws," as required by section 7106(a)(2). However, nothing in Defense Language Institute should be read to imply that the parties to a collective bargaining agreement may not negotiate an enforceable appropriate arrangement requiring adherence to agency regulations that may not be applicable laws within the meaning of section 7106(a)(2).
2. In finding the provision negotiable, we make no judgment as to its merits.