[ v47 p980 ]
The decision of the Authority follows:
47 FLRA No. 95
FEDERAL LABOR RELATIONS AUTHORITY
NATIONAL TREASURY EMPLOYEES UNION
U.S. NUCLEAR REGULATORY COMMISSION
DECISION AND ORDER ON A NEGOTIABILITY ISSUE
June 29, 1993
Before Chairman McKee and Members Talkin and Armendariz.(1)
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). It concerns the negotiability of a single proposal, which concerns pay. For the reasons that follow, we conclude that the proposal is nonnegotiable because it directly interferes with management's right to determine its budget under section 7106(a)(1) of the Statute.
II. The Proposal
Employees' salary will be adjusted pursuant to the following formula:
A. With the beginning of the first (1st) pay period each calendar year, employee salaries will be adjusted upward by a percentage equal to the percentage increase in the nation-wide Consumer's Price Index over the four (4) previous calendar quarters or the Employment Cost Index, whichever is greater. Employees will be entitled to this increase retroactive to January 1, 1991. If there is no increase in either indices, employee salaries will remain the same or be increased by the percentage increase in the productivity increase the Commission claims, whichever is greater. In no case will the increase given unit employees be less than any increase given non-unit employees of the Commission. Moreover, in no case will the salaries of an occupation be less than that provided for under the federal special salary rate authorities or geographic salary schedule covering GS employees in that occupation, e.g., the Washington, D.C. special rate scale for clerical employees.
B. If any law or controlling regulation should operate to limit the Commission's authority to provide the above described increase, then the Commission will provide unit employees the maximum increase allowable by the law and/or regulation. Furthermore, it will negotiate with the Union at that time over all proposals relating to the adverse impact of the inability to provide the otherwise due increase.
C. Should the Commission ever assert an inability to pay the increases called for under Subsection A above, it will provide detailed written evidence in support of such an alleged inability to pay. The Commission will also negotiate with the Union as to the asserted reasons concerning the alleged inability to pay. In addition, the Commission will bargain as to: alternative ways to provide any otherwise due increase; adjustments to the otherwise due increase; and/or other relevant procedures and appropriate arrangements. It will not be obligated to provide the full annual increase provided that it can clearly demonstrate the alleged inability to pay.
D. Beginning in 1991, unit employees of the Commission will, at a minimum, receive the same geographic/locality pay adjustment that is provided under the federal GS schedule in their area. At that time, NRC employees in the Washington, D.C. metropolitan area will receive an extra 8% of salary each calendar year to compensate them for the high cost of living in that area. This increase will be provided until the General Schedule [in] the Washington area is adjusted in accordance with 5 U.S.C. 5304. At that time, the Union and the Commission will renegotiate this formula.
E. In addition to compensation provided above, in any "occupation" which experiences a turnover rate of 5% or more in a calendar year, the Commission will pay the occupants of that occupation a 5% retention bonus. This will be provided in quarterly installments until the turnover rate goes below 5% for one full calendar year.
F. The parties will establish a joint committee made up of five (5) appointees from each party. This committee will study the effect of the salary and compensation system on morale, turnover, motivation, and other vital goals of the employer. It will recommend changes in the compensation system that it believes are appropriate.
G. Bargaining unit employees in the NRC offices in Philadelphia, Chicago, Atlanta, Denver, and Dallas will receive the same benefits as outlined in subsection D above.
H. Within ninety (90) days of reaching agreement on the above stated issues, the Union will have the right to reopen negotiations on the salary of those employees performing collateral duties, e.g., union officials, EEO representatives/counsellors.
III. Positions of the Parties
A. The Agency
The Agency asserts that this proposal is nonnegotiable based on four grounds. First, the Agency contends that this proposal is inconsistent with section 161d of the Atomic Energy Act of 1954, as amended (42 U.S.C. § 2201(d)). Second, the Agency argues that the proposal is inconsistent with management's right to determine its mission under section 7106(a)(1) of the Statute. Third, the Agency contends that the proposal would require negotiations over matters about which it is prohibited by law from negotiating. Fourth, the Agency asserts that the proposal is inconsistent with management's right to determine its budget under section 7106(a)(1).
In support of the first ground, the Agency cites three limitations that it claims section 161d of the Atomic Energy Act imposes on the its discretion to set pay.(2) First, the Agency asserts that section 161d directs it to fix the compensation of employees in accordance with the Classification Act of 1949. The Agency argues that the proposal would require it to act inconsistently with that directive and negotiate salary increases that depart from those provided to other Federal employees under the Classification Act. The Agency contends that a second limitation that section 161d imposes on its discretion to set pay results from the specification that deviations from the Classification Act may occur only "to the extent that the Commission deems such action necessary to the discharge of its responsibilities . . . ." The Agency asserts that the proposal is inconsistent with this second limitation because it would require departure from the pay rates that are accorded to employees who are covered under the Classification Act without the Commission making the requisite determination of necessity. The Agency claims that a third limitation on its discretion to set pay rates results from the portion of section 161d that prohibits Agency employees from being paid "a salary at a rate in excess of the rate payable under [the Classification] Act for positions of equivalent difficulty or responsibility." Citing Nuclear Regulatory Commission v. FLRA, 879 F.2d 1225 (4th Cir. 1989) (en banc), vacated and remanded on other grounds, 110 S. Ct. 2579 (1990), vacated as moot, 924 F.2d 1052 (4th Cir. 1990), the Agency argues that section 161d constitutes a specific limitation on its discretion to set employee pay and that this proposal is inconsistent with that limitation.
The Agency also asserts that the proposal is inconsistent with the purpose of section 161d. In this regard, the Agency describes the purpose of section 161d as being to grant the Agency "greater discretion in setting wages." Statement of Position at 7. The Agency claims that this proposal would provide it with less discretion in setting employee pay by tying pay to factors outside the Agency's control.
The Agency argues that the circumstances involved in this case are different from those involved in Fort Stewart Schools v. FLRA, 495 U.S. 641 (1990) (Fort Stewart). The Agency contends that while the proposal for pay that was at issue in Fort Stewart was compatible with 20 U.S.C. § 241, the legal provision involved in that case, the proposal at issue in this case cannot be reconciled with the restrictions and requirements of section 161d, which is involved here.
Additionally, the Agency contends that because section 161d contains no terms such as "practicability," "convenience," or "interest" of the Agency, it lacks the "stretch" that some regulatory provisions containing such terms have been found to possess. Statement of Position at 13 n.9. Consequently, the Agency argues that section 161d is distinguishable from such provisions and, unlike such provisions, lacks the breadth necessary to accommodate negotiations over its applicability. Specifically, the Agency asserts that the structure of section 161d is distinguishable from that of the Government-wide regulation involved in Department of Treasury, U.S. Customs Service v. FLRA, 836 F.2d 1381 (D.C. Cir. 1988) (Customs Service I), which the U.S. Court of Appeals for the District of Columbia Circuit found had "stretch" based on the presence of the terms "convenience" and "interest." Statement of Position at 13 n.9. Rather, the Agency contends that under section 161d a departure from Classification Act pay rates requires a determination that such action is necessary, including the extent to which it is necessary, to the discharge of the Agency's responsibilities.
The Agency argues that a purpose of section 161d is to enable it to attract individuals whose talents and expertise would assist it in the performance of its mission and that the proposal is inconsistent with this purpose. The Agency asserts that in order to fulfill this purpose, it must retain the flexibility to establish special salary schedules for specific positions where recruitment or retention difficulties exist. Because the proposal would require that all bargaining unit employees receive the "same increases that result from special salary schedules established for any group of employees" and that are provided to non-unit employees, the Agency contends that the proposal would negate the financial incentive created to staff specific positions where recruitment and retention difficulties exist. Id. at 17.
The Agency argues that the exercise of its discretion under section 161d to depart from the Classification Act of 1949 is a two-prong process. According to the Agency, under the first prong, a decision must be made that departure is necessary and under the second, the extent to which departure is necessary must be determined. The Agency argues that its action in 1975 exempting its positions from the Classification Act was taken under the first prong. However, it contends that the determination required by the second prong is "a separate, distinct and ongoing process[,]" which has been made on a case-by-case basis. Id. at 20.
With respect to the second ground, the Agency asserts that the exercise of the discretion to determine the extent of any departure from civil service pay rates is "inextricably intertwined with the definition and determination of the NRC's mission." Id. at 21. In this regard, the Agency contends that in order to determine whether departure from Classification Act pay rates is necessary to the discharge of the Agency's responsibilities, those responsibilities must first be defined. The Agency argues that, as a result, third party authorities, such as the Federal Service Impasses Panel (FSIP), will necessarily define the Agency's mission in the process of resolving disputes over pay rates that are being negotiated under section 161d. The Agency asserts that the proposal subjects decisions relating to the Agency's mission and "prioritizing mission-related work" to the "vicissitudes of the negotiations procedure" and, therefore, that the proposal infringes on its management right to determine its mission. Id. at 24.
The Agency's third ground is focused on paragraph B of the proposal, which requires negotiation over "proposals relating to the adverse impact of the inability to provide [an] otherwise due increase." The Agency asserts that because the authority to depart from Classification Act pay rates is granted "specifically and exclusively to the [Agency] by section 161d, [Agency] decisions to depart, or not depart, from such rates cannot be the subject of 'appropriate arrangements' negotiations." Id. at 25.
As its last ground, the Agency asserts that this proposal is inconsistent with its right to determine its budget and relies both on the "interpretative rules and tests issued by the Authority" and a claim that requiring the Agency to negotiate on whether to relinquish determination of its salary budget to factors and pay decisions beyond its control is inconsistent with the Statute. Id. at 26. The Agency contends that the proposal places the salary increases and, by extension, "a substantial slice of [the Agency's] budget" entirely beyond the control of the Agency by basing the increases on the Consumer Price Index (CPI), the Employment Cost Index (ECI), and increases granted to non-bargaining unit employees. Id. at 28. The Agency further argues that the portion of the proposal providing that the Agency may be relieved of its obligation to pay the required increases based on inability to pay would subject the determination of its budget priorities to outside third parties because of the requirement that the Agency negotiate with the Union concerning the inability to pay.
The Agency argues that this proposal is nonnegotiable under the first part of the Authority's budget test. In this regard, the Agency asserts that this proposal, although not directly prescribing an amount to be included in the Agency budget, effectively does the same thing. As an example, it contends that sections A, D, E, and G of the proposal require that, for 1991 alone, bargaining unit employees be provided pay increases that amount in the aggregate to $56 million, a figure that is equivalent to 12 percent of its entire appropriated budget for fiscal year 1991 and over 25 percent of its salary budget for the same year. The Agency contends that if the proposal went into effect, it necessarily would have to increase its salary budget by a corresponding amount.
The Agency asserts that the proposal is nonnegotiable under the second part of the test because the proposal would result in substantially increased costs that cannot be presumed to be outweighed by compensating benefits. In support of this claim, the Agency reiterates that the proposal would cost $56 million for 1991. Based on 1990 figures, the Agency states that the proposal would have cost $20.5 million in that year. The Agency contends that although the cost of the proposal may vary from year to year, it nevertheless will result in substantial and unavoidable salary costs. The Agency contends that the "escape clause" provided in section C does not make the costs avoidable. Id. at 36 n.20. Specifically, the Agency contends that this clause does not apply to the increases required in section A and that under the clause any claim by the Agency that it is unable to pay must be negotiated with the Union and "clearly demonstrate[d]" to the satisfaction of the Union and/or any relevant third party. Id.
The Agency contends that the increased costs are not offset by compensating benefits. In support of this claim the Agency asserts that from 1987 through 1990 the percentage of employees receiving excellent/outstanding performance appraisals remained at about 92 percent and that it is difficult to discern how productivity or quality of performance could be significantly improved. According to the Agency, the number of grievances filed in the last five years has ranged between 14 and 28 per year and the number of grievances has shown no "consistent parallel reduction" to the increase in the mean salary of employees that has occurred. Id. at 37. Figures that the Agency submits show that between 1981 and 1991, attrition (based on separations for any reason) ran between 5 and 10 percent per year. The Agency contends that, generally, attrition rates show no correlation to the increase in the median salary of employees that occurred during that time period and suggests that a reduction in the attrition rate (to a low of 4.9 percent for the 10-year period) in 1991 is attributable to economic conditions. The Agency maintains that it lacks the data necessary to respond to any claim that salary increases bring about productivity increases because its workforce is almost entirely professional, and, consequently, quantifying increased productivity or morale is virtually impossible.
The Agency asserts that it is arbitrary, an abuse of discretion, and contrary to law for the Authority to require an agency to prove that increased costs are not offset by nonmonetary compensating benefits in order to satisfy the second part of the budget test. In support of this assertion, the Agency argues that the Supreme Court commented unfavorably on this aspect of the budget test in Fort Stewart. Moreover, the Agency asserts that the Authority lacks the competence to make determinations of whether and to what extent pay increases produce "improved morale, productivity and the like." Id. at 41. The Agency claims that, in fact, a survey of literature "reflects a popular view" that increased pay is of limited value as a motivator. Id.
B. The Union
The Union denies that its proposal is inconsistent with section 161d of the Atomic Energy Act. The Union states that the Agency has already exercised its discretion under section 161d to except itself from the Classification Act. The Union contends that having made the determination to except itself from the Classification Act, the Agency possesses unfettered discretion to set employee pay. The Union asserts that it is well-established under the Statute that where an agency possesses discretion over a condition of employment, the agency is required to negotiate about how to exercise that discretion.
Paraphrasing the court's decision in Customs Service I, the Union argues that section 161d has "some 'stretch' in it" and contends that "employees should . . . get the benefit of the 'stretch' as often as possible." Reply Brief at 11. In support of its position, the Union also cites Department of the Treasury, U.S. Customs Service v. FLRA, 873 F.2d 1473 (D.C. Cir. 1989) (Customs Service II), in which the U.S. Court of Appeals for the District of Columbia Circuit found that the case involved was largely indistinguishable from Customs Service I. According to the Union, the court ruled in Customs Service II that decisions made by the head of an agency under 5 U.S.C. § 5911(e) are "largely discretionary."(3) Reply Brief at 12.
The Union rejects the Agency's argument that the proposal would make pay determinations dependent on factors beyond the Agency's control and thereby divest the Agency of the discretion to set pay that Congress intended it to have. In this regard, the Union asserts that its proposal does not divest the Agency of discretion or control, but, rather, seeks to have the Agency exercise its discretion through bargaining. The Union denies the Agency's assertion that the proposal is inconsistent with specific limitations in section 161d. The Union points out that the proposal specifically states that where the Agency's authority to provide the prescribed increases is limited by law, the Agency will provide the maximum increase allowable and negotiate with the Union over how to address the adverse impact that the inability to provide the increases will have on employees. The Union states that "[e]ven absent th[e] explicit language . . . the proposal should not be interpreted to require the [A]gency to provide salaries specifically prohibited by law." Id. at 15.
The Union contends that the Agency's argument that the requirement of parity between unit and non-unit employees will undermine the Agency's efforts to attract and retain qualified employees is not properly raised in the context of a negotiability appeal. Rather, the Union argues that this argument relates to the merits of the proposal and should be addressed at the bargaining table.
As to the Agency's claim that the proposal interferes with its right to determine its mission, the Union responds that, under the proposal, the Agency's responsibilities and mission are determined by the Agency itself. The Union asserts that bargaining will merely concern the pay necessary to further the Agency's mission.
The Union contends that the Agency's argument that this proposal divests it of budget-making authority is without merit. The Union argues that this proposal no more divests the Agency of budget-making authority than did the proposal at issue in Fort Stewart, which required the agency involved to provide a pay increase of a specific percentage and which was found negotiable.
The Union argues that the Agency's assertion that this proposal is inconsistent with the first prong of the Authority's budget test "is squarely at odds with Fort Stewart[.]" Id. at 19. The Union states that its proposal does not address the budget per se and does not itself prescribe a particular amount for the Agency to allocate in its budget.
The Union urges the Authority to "jettison" the second prong of the budget test, asserting that weighing the costs and benefits of a proposal more properly relates to the merits of a proposal than to its negotiability. Id. at 23. The Union contends that, in any case, the Agency has failed to demonstrate that the proposal meets that portion of the test. In this regard, the Union argues that the proposal affords the Agency "a safety valve that permits it to assert that it is unable to pay certain increases for budgetary reasons" and that, consequently, the cost of the proposal is not "unavoidable." Id.
As to the significance of the costs that would flow from the proposal, the Union argues that the Agency's use of 1991 as a sample year to illustrate the cost of the proposal is "misleading." Id. at 24. The Union states that the figure for that year is extraordinary because under the proposal the unit employees would receive, among other things, a 25 percent pay increase based on one given to the Senior Executive Service, which is not likely to recur. According to the Union, if 1990 were used as a representative year, the proposal would amount only to about 4.7 percent of the Agency's budget.
The Union contends that in addition to failing to demonstrate that the proposal would result in costs that are significant and unavoidable, the Agency has failed to demonstrate that the costs are not offset by compensating benefits. Specifically, the Union argues that the Agency has not introduced any evidence, such as expert testimony, to show that the proposal would not result in benefits such as improved productivity, reduced turnover, and fewer grievances. Additionally, the Union contends that the Agency's claim that previous pay increases have failed to produce any meaningful change in levels of grievances, performance ratings or turnover does not take into account either the significantly higher pay increase that the proposal would afford employees or the fact that the locality pay afforded by the proposal is "highly likely" to reduce turnover. Id. at 26.
The Union asserts that the Agency has not provided "meaningful statistics" by which to measure the impact of pay increases on employee turnover, productivity or grievances. Id. That is, the Union contends that the Agency's statistics do not allow a comparative analysis of the amount of the pay increases provided each year by occupation and the extent of turnover, productivity, and grievances experienced in those occupations. The Union argues that the statistics submitted by the Agency "prove nothing." Id. The Union contests the Agency's challenge to the appropriateness of the compensating benefits portion of the Authority's budget test. The Union asserts that while the Court's decision in Fort Stewart questioned whether it was appropriate for the "compensating benefits" portion of the test to include "non-monetary 'intangible' benefits such as improved employee morale[,]" that decision "implicitly ratifies the requirement that the [A]gency demonstrate no compensating tangible benefit." Id. at 27 (emphasis in original).
IV. Analysis and Conclusions
The Authority addressed the question of the negotiability of pay under section 161d of the Atomic Energy Act in National Treasury Employees Union and Nuclear Regulatory Commission, 29 FLRA 217 (1987) (NRC I), which concerned a proposal to adjust the pay rates of bargaining unit employees in accordance with the adjustment recommended to the President by the Advisory Committee on Federal Pay. In that decision, the Authority applied its consistent holding that where an agency has discretion over a matter affecting conditions of employment, the agency is obliged under the Statute to exercise that discretion by means of bargaining, unless the discretion is specifically limited by law or regulation. 29 FLRA at 220. This principle applies to proposals concerning employee compensation. Thus, proposals concerning employee compensation are negotiable where (1) the matters proposed are not specifically provided for by law and are within the discretion of the agency and (2) the proposals are not otherwise inconsistent with law, Government-wide rule or regulation or an agency regulation for which a compelling need exists. Id.
In NRC I, the Authority stated that it did not view section 161d of the Atomic Energy Act, which allows the Agency to deviate from pay schedules that apply to positions covered under the Classification Act to the extent such action is "necessary to the discharge of its responsibilities," as placing a specific limitation on the Agency's discretion to bargain over the proposal in that case. The Authority noted that in 1975 the Agency exempted its positions from coverage under the Classification Act. The Authority found that the proposal was not otherwise inconsistent with section 161d.
On a petition for review filed by the Agency, a panel of the U.S. Court of Appeals for the Fourth Circuit affirmed the Authority's decision on this and other grounds. Nuclear Regulatory Commission v. FLRA, 859 F.2d 302 (4th Cir. 1988). Subsequently, the Fourth Circuit, sitting en banc, vacated the panel's decision and denied enforcement of the Authority's bargaining order. Nuclear Regulatory Commission v. FLRA, 879 F.2d 1225 (4th Cir. 1989). On petitions for certiorari filed by the Authority and the Union, the U.S. Supreme Court vacated the Court of Appeals' en banc decision and remanded the case to the Fourth Circuit. FLRA v. National Treasury Employees Union, 110 S. Ct. 2580 (1990); National Treasury Employees Union v. Nuclear Regulatory Commission, 110 S. Ct. 2579 (1990). On remand from the Supreme Court, the Fourth Circuit vacated the Authority's decision and remanded the case to the Authority with instructions to dismiss the case as moot.(4) Subsequently, the Authority did so. National Treasury Employees Union and Nuclear Regulatory Commission, 39 FLRA 182 (1991).
The proposal now before us establishes the method by which the salary of bargaining unit employees will be adjusted annually. The portion of section 161d of the Atomic Energy Act that is relevant to this dispute is the second sentence, which provides:
Such officers and employees shall be appointed in accordance with the civil service laws and their compensation fixed in accordance with chapter 51 and subchapter III of chapter 53 of Title 5, except that, to the extent the Commission deems such action necessary to the discharge of its responsibilities, personnel may be employed and their compensation fixed without regard to such laws: Provided, however, That no officer or employee (except such officers and employees whose compensation is fixed by law, and scientific and technical personnel up to a limit of the highest rate of grade 18 of the General Schedule) whose position would be subject to chapter 51 and subchapter III of chapter 53 of Title 5, if such provisions were applicable to such position, shall be paid a salary at a rate in excess of the rate payable under such provisions for positions of equivalent difficulty or responsibility.
In our view, this provision gives the Agency the discretion to except itself from various civil service laws governing the appointment and compensation of employees. However, other than the ceiling on rates of pay that is imposed by the proviso, this sentence places no limits on the Agency's discretion to determine what pay rates may be substituted for those which would otherwise obtain under title 5.
We adhere to the Authority's previous conclusions that because the Agency exempted itself from the pay system that is provided in title 5, the determination of employee pay rates is a matter within the administrative discretion of the Agency and that nothing in section 161d limits the Agency from exercising that discretion by means of bargaining.(5)
As to the Agency's claim that this proposal would require it to exceed the ceiling placed on payments in section 161d, we note that section B of the proposal specifically acknowledges any limitations that result from the operation of "any law or controlling regulation." Additionally, the Union denies any intention of requiring the Agency to provide salaries that are prohibited by law. Consequently, we reject the Agency's claim.
Accordingly, we reject the Agency's contention that this proposal is inconsistent with section 161d of the Atomic Energy Act. Insofar as the Agency contends that this proposal would undermine its efforts to use the flexibility afforded by section 161d to recruit and retain highly qualified employees, we find that such arguments address the merits of the proposal. As we have previously stated, a finding of negotiability means only that a proposal is within the duty to bargain and could legally be implemented, not that the proposal must, or ought to, be implemented. See, for example, National Treasury Employees Union, Chapter 83 and Department of the Treasury, Internal Revenue Service, 35 FLRA 398, 414-16 (1990). A proposal is exactly what the word implies: it is a plan or offering presented by one party to another for consideration. In collective bargaining, one party is not bound to accept the proposal of another party but is free to reject it or seek to modify it during the bargaining process. Thus, an agency has no obligation to abandon what it conceives are its best interests merely because it must negotiate over a proposal. American Federation of Government Employees v. FLRA, 798 F.2d 1525, 1530 (D.C. Cir. 1986). Should matters of concern to the parties prevent them from reaching agreement, such concerns can be presented to the FSIP in a proceeding pursuant to section 7119 of the Statute.
Next, we turn to the Agency's claim that this proposal could result in decisions concerning the Agency's mission being subject to negotiations and binding determinations by the FSIP. The Agency does not assert that this particular proposal contains any provision that interferes with its right to determine its mission. Rather, the Agency's claim is focused on negotiations that may occur in the future as a consequence of this proposal. If, in the context of such negotiations, proposals are advanced that the Agency believes are inconsistent with its management right to determine its mission, it retains the right to object to such proposals when they are submitted. At this time, however, the Agency's objection concerning management's right to determine the mission of the Agency is premature and speculative and does not provide a basis for finding that this proposal is nonnegotiable. See for example, National Association of Government Employees, Local R1-109 and U.S. Department of Veterans Affairs, Veterans Administration Medical Center, Newington, Connecticut, 35 FLRA 513, 520 (1990).
As to the Agency's concerns that the FSIP may issue decisions that infringe on its management right to determine its mission, we note that if, as a consequence of future negotiations, the FSIP issues a decision that imposes a provision that the Agency believes is inconsistent with its management right to determine its mission, there are avenues available for challenging such action. For example, a decision of the FSIP that is issued pursuant to section 7119(b)(1) of the Statute is subject to agency head review under section 7114(c) of the Statute. See Patent Office Professional Association and U.S. Department of Commerce, Patent and Trademark Office, 41 FLRA 795, 797-800 (1991); Interpretation and Guidance, 15 FLRA 564 (1984), aff'd sub nom. American Federation of Government Employees, AFL-CIO v. FLRA, 778 F.2d 850 (D.C. Cir. 1985) (an agency head is authorized to review for legal sufficiency provisions of a collective bargaining agreement imposed by a decision and order of the FSIP). An agency head's disapproval of a provision in a negotiated agreement is a declaration of nonnegotiability for purposes of an appeal to the Authority. Interpretation and Guidance, 15 FLRA at 567. Additionally, FSIP decisions are subject to indirect, limited judicial review for legal sufficiency through the Statute's unfair labor practice procedures. Council of Prison Locals v. Brewer, 735 F.2d 1497, 1500 (D.C. Cir. 1984).
We reject the Agency's claim that section B of this proposal is nonnegotiable because it would require the Agency to negotiate over proposed "appropriate arrangements" with respect to actions taken under laws other than section 7106 of the Statute. Section B requires the Agency to negotiate over proposals relating to the "adverse impact" of the inability to provide an increase that is otherwise due because of limitations imposed by law or controlling regulation. In our view, this language does not require the Agency to negotiate over proposals notwithstanding the fact that they are inconsistent with section 7106 or laws other than that section. Additionally, we find that nothing in the Statute prohibits parties from negotiating over an "adverse impact" on employees that has resulted from some action other than the exercise of a management right. Such negotiations would flow from the parties' general obligation under the Statute to negotiate collective bargaining agreements covering employees in the bargaining unit. Of course, proposals presented in such a context would have to meet the legal requirements of the Statute to come within the scope of the duty to bargain. That is, the matters proposed must concern conditions of employment and not be inconsistent with law, Government-wide rule or regulation or an agency regulation for which a compelling need exists.
We reiterate that if proposals were submitted in the future as a consequence of this proposal that the Agency believed to be inconsistent with law or applicable regulation, the Agency would have the right to object to them at that point.
We now turn to the Agency's argument that this proposal is inconsistent with management's right to determine its budget. In American Federation of Government Employees, AFL-CIO and Air Force Logistics Command, Wright-Patterson Air Force Base, Ohio, 2 FLRA 604, 607-08 (1980) (Wright-Patterson), aff'd as to other matters sub nom. Department of Defense, Army Air Force Exchange Service v. FLRA, 659 F.2d 1140 (D.C. Cir. 1981), cert. denied, 455 U.S. 945 (1982), the Authority established two separate tests for determining whether a proposal conflicts with an agency's right to determine its budget. The Authority held that, in order to establish that a proposal directly interferes with management's right to determine its budget, an agency must demonstrate that the proposal either: (1) provides the particular programs to be included in the budget or the amount to be allocated in the budget for those programs; or (2) entails an increase in costs that is significant and unavoidable and is not offset by compensating benefits. See Fort Stewart.
The first budget test in Wright-Patterson makes nonnegotiable only those proposals that are addressed to the budget per se. A proposal will be found to violate an agency's right to determine its budget under the first test if the proposal prescribes the particular programs or operations an agency will include in its budget or prescribes the amount to be allocated in the budget for those programs or operations. Under the second test, a proposal will be found to violate an agency's right to determine its budget if the proposal does not, by its terms, prescribe the particular programs or amounts to be included in an agency's budget but, nevertheless, would result in an increase in costs that is significant and unavoidable and not offset by compensating benefits. Wright-Patterson, 2 FLRA at 608.
The proposal in this case is not addressed to the budget per se. It does not by its terms prescribe the particular programs or amounts to be included in the Agency's budget. Its relationship to, and potential effect on, the budget results from the fact that it entails increased costs to the Agency. Thus, it does not satisfy the first test and is appropriately analyzed under the second test.
In this case, both parties have requested that we reconsider the second budget test. The Agency questions whether that test lawfully may include nonmonetary compensating benefits. The Union questions the propriety of using a cost-benefit test to analyze whether a proposal interferes with management's right to determine its budget and urges the Authority to "jettison" the second budget test. Reply Brief at 23.
In articulating the tests for determining whether a proposal interferes with an agency's right to determine its budget, the Authority rejected a construction of management's right to determine its budget that would foreclose the negotiation of any proposal that imposes a cost on an agency that requires an expenditure of agency funds. Wright-Patterson, 2 FLRA at 607. The Authority noted that such a construction of the Statute could preclude negotiation of virtually all otherwise negotiable proposals because, to one extent or another, most proposals would have the effect of imposing costs upon the agency that would require the expenditure of agency funds. Id. The Authority stated that "[n]othing in the relevant legislative history indicates that Congress intended the right of management to determine its budget to be so inclusive as to negate in this manner the obligation to bargain." Id. Thus, the Authority has declined to define "budget" in a manner that is so expansive that all proposals with cost ramifications are rendered nonnegotiable. However, the Authority recognized that proposals may entail costs of such significance that they, in effect, determine the agency's budget. In an effort to strike a balance between rendering all proposals that have any budget impact nonnegotiable and requiring an agency to negotiate over proposals notwithstanding a significant cost, the Authority developed the two Wright-Patterson budget tests.
Our dissenting colleague would discard the second test in its entirety. We acknowledge that application of this test involves an examination of the merits of proposals, an approach we have generally avoided when assessing whether proposals directly interfere with other management rights set forth in section 7106. Accordingly, adoption of a test focused solely on whether a proposal addresses an agency's budget per se has considerable appeal. Nonetheless, the longevity of the Wright-Patterson tests and the considerable body of case law that relies on the Wright-Patterson approach to the budget right provide a compelling counterweight to that appeal. We conclude that the balance struck by the Wright-Patterson budget tests continues to offer a reasonable solution to the tension that exists between the management rights provisions of the Statute and the promotion of genuine collective bargaining over meaningful issues. See, for example, American Federation of Government Employees, Local 1857 and U.S. Department of the Air Force, Air Logistics Center, Sacramento, California, 36 FLRA 894, 903 (1990) (AFGE, Local 1857). We find that retention of this balance is warranted. Thus, we will continue to adhere to the two tests that were set forth in Wright-Patterson and we reject the Union's suggestion that we discard the second test.
However, in applying the second test, we will heed the admonition of the Court in Fort Stewart and we will not consider "nonmonetary 'intangible' benefits such as the positive effects . . . on employee morale." Fort Stewart, 495 U.S. at 652. As the Court stated, "it is difficult to see how the Authority could possibly derive a test measured by nonmonetary benefits from a provision that speaks only to the agency's 'authority . . . to determine . . . [its] budget,' a phrase that can only be understood to refer to the allocation of funds within the agency." Id. at 653. On reflection, we agree that it is extremely difficult, at best, to place an objective and reliable monetary value on intangibles such as employee morale. In view of this difficulty, we will no longer require that parties submit information concerning such benefits in order to meet the second budget test.
The question before us is whether the Agency has made a substantial demonstration that this proposal entails an increase in costs that is significant and unavoidable and is not offset by compensating benefits that are of a tangible, monetary nature. We conclude that, in this case, the Agency has made such a demonstration.
Initially, we note that section A of the proposal, by its terms, requires that the salary increases sought by that section be retroactive to January 1, 1991, and that other sections of the proposal, by their terms, apply beginning in 1991. Consequently, the proposal is not limited to a prospective effect. Therefore, we reject the Union's assertion that the cost figures that the Agency has supplied for 1991 should be dismissed as "highly misleading" insofar as assessing the likely cost of the proposal. Statement of Position at 24.
The Agency asserts, and the Union does not dispute, that this proposal would cost $56 million for 1991. We are not free of doubt as to the accuracy of this figure. For example, this figure appears to include a full 25 percent increase based on the increase provided the Senior Executive Service (SES) employees in 1991, which section A would afford to bargaining unit employees. It is not clear to us whether section A contemplates that the full 25 percent be given or whether it might be offset by any pay increase that was given employees in 1991. The Union, however, does not dispute the Agency's use of the full 25 percent in computing the cost of the proposal. Second, it is not clear to us whether and to what extent the ceiling that section 161d places on the compensation of Agency employees would operate to reduce the cost of the proposal. Again, the Union raises no question in this regard. Last, it is not clear to us whether the cost figures submitted by the Agency are based on the application of the proposal to all non-SES employees in the Agency or only to non-SES employees who are in the bargaining unit. As the Union undoubtedly has knowledge of the size of its bargaining unit vis-a-vis the Agency's total non-SES employee complement, it is in a better position than we are to gauge whether the Agency's cost figures reflect an application of the proposal that is limited to the bargaining unit or a more expansive application.(6) However, the Union has raised no questions as to the accuracy of the Agency's cost figures. It asserts only that 1991 is not a representative year.
In the absence of any question raised by the Union and any firm basis for questioning the accuracy of the Agency's cost figure on our own, we accept the Agency's assertion that this proposal would cost $56 million for 1991 for purposes of this decision. The Agency asserts that $56 million represents approximately 25 percent of its salary budget for fiscal year 1991 and approximately 12 percent of its entire appropriated budget for that fiscal year.(7) This represents a substantially larger percentage of the Agency's budget than has been established in cases in which the Authority previously has held that costs were not significant for purposes of the budget test. See, for example, National Association of Government Employees, Local R4-26 and Department of the Air Force, Langley Air Force Base, Virginia, 40 FLRA 118, 133-34 (1991) (the Authority found that an increase of either 2.34 percent or 5.75 percent in a $7,100,000 budget was not significant); American Federation of Government Employees, AFL-CIO, Local 3106 and U.S. Department of Agriculture, 21 FLRA 711, 713 (1986) (the Authority found that a claimed increase of 1.7 percent of "the total budget for the T[ick] E[radication] P[rogram]" was not significant); National Treasury Employees Union, Chapter 6 and Internal Revenue Service, New Orleans District, 3 FLRA 748, 766 (1980) (the Authority found that a cost representing 1/6 of 1 percent to 1/7 of 1 percent of the total budget for the New Orleans Regional Office was not significant). Based on our previous experience in applying the budget test under the Statute, we conclude that this proposal entails an increase in costs that is significant.(8)
Because this proposal expressly provides that the required salary increases were to become effective in 1991, there is little, if anything, that the Agency can do to avoid the cost of the proposal for that year. For example, the Agency cannot at this point take actions to reduce the number of employees on its payroll for that year. Additionally, we reject the Union's argument that section C of this proposal renders the cost of the proposal avoidable. While that section allows the Agency to "assert an inability to pay," it still requires the Agency to negotiate with the Union "as to the asserted reasons concerning the alleged inability to pay." There is no assurance that the outcome of these negotiations would permit the Agency to avoid the cost of the proposal.
Section C is limited to authorizing the Agency to seek renegotiation of the pay requirements that are set forth by section A of the proposal when it determines that is has an "inability to pay." Section C does not afford the Agency with a means of accomplishing cost savings while operating within the confines of the pay system that is established by the proposal but, rather, requires that the Agency attempt to obtain an alteration in that established system through subsequent negotiations. In our view, the concept of avoidability relates to the existence of potential measures that an agency can take to minimize or offset cost increases that would otherwise flow from a proposal while operating within the established terms of the proposal. We do not view costs as avoidable simply because an agency may reopen negotiations over the proposal in an attempt to alter the requirements established by the proposal itself. Compare AFGE, Local 1857, 36 FLRA at 905 (agency failed to demonstrate that the projected increases in costs resulting from a proposal that it pay a larger share of health benefits premiums could not be offset by modifying the health benefits program or increasing efficiency in its administrative processes). The Union's argument that the presence of a section within a proposal that effectively authorizes the Agency to seek renegotiation of the terms of the proposal renders the costs of the proposal avoidable is unpersuasive. We find that, under the circumstances of this case, the cost of the proposal for 1991 is unavoidable.
Now, we turn to the question of whether the significance of the cost of the proposal is offset by compensating benefits. The Agency has submitted information to show that the attrition rate (based on separations for any reason) that it experienced from fiscal years 1981 through 1991 ranged between 4.9 percent and 9.82 percent. According to undisputed information submitted by the Agency, the number of grievances filed by Agency employees from fiscal years 1987 through 1991 ranged from 14 to 28 per year. The Agency also states that the percentage of employees rated "outstanding" or "excellent" ran between 61.9 percent to 93.6 percent for fiscal years 1983 through 1990. For fiscal years 1987 through 1990, this percentage ranged from 9l.8 percent to 93.6 percent. Based on the information submitted by the Agency, it appears that the potential for tangible, monetary benefits flowing from a reduction in turnover, a lower number of grievances, and improved employee performance and consequent increases in productivity is limited.(9)
We find that the Agency has made a substantial demonstration that this proposal entails an increase in costs that is significant and unavoidable and not offset by compensating benefits. Therefore, we conclude that this proposal directly interferes with the Agency's right under section 7106(a)(1) of the Statute to determine its budget and that it is nonnegotiable.
The Union's petition for review is dismissed.
Chairman McKee: Dissenting in part
I dissent from the portion of my colleagues' decision finding that the disputed proposal directly interferes with the Agency's right under section 7106(a)(1) of the Statute to determine its budget because the proposal would entail a significant and unavoidable increase in costs. In my view, determining the magnitude or significance of cost increases resulting from proposed salary adjustments is a matter involving the merits of the proposal and, as such, should be addressed by the parties jointly in negotiations. Accordingly, I would discard the second budget test established in Wright-Patterson and would find a proposal inconsistent with the Agency's right to determine its budget only if the proposal addressed the budget per se. See Fort Stewart, 495 U.S. at 657-59 (Marshall J., concurring). As the proposal in this case does not address the Agency's budget per se, I would find it negotiable.
(If blank, the decision does not have footnotes.)
1. The separate opinion of Chairman McKee, dissenting in part, appears at the end of this decision.
2. Section 161d of the Atomic Energy Act is codified at 42 U.S.C. § 2201(d) and provides:
§ 2201. General duties of Commission
In the performance of its functions the Commission is authorized to--
. . . .
Employment of personnel
(d) appoint and fix the compensation of such officers and employees as may be necessary to carry out the functions of the Commission. Such officers and employees shall be appointed in accordance with the civil-service laws and their compensation fixed in accordance with chapter 51 and subchapter III of chapter 53 of Title 5, except that, to the extent the Commission deems such action necessary to the discharge of its responsibilities, personnel may be employed and their compensation fixed without regard to such laws: Provided, however, That no officer or employee (except such officers and employees whose compensation is fixed by law, and scientific and technical personnel up to a limit of the highest rate of grade 18 of the General Schedule) whose position would be subject to chapter 51 and subchapter III of chapter 53 of Title 5, if such provisions were applicable to such position, shall be paid a salary at a rate in excess of the rate payable under such provisions for positions of equivalent difficulty or responsibility. Such rates of compensation may be adopted by the Commission as may be authorized by chapter 51 and subchapter III of chapter 53 of Title 5, as of the same date such rates are authorized for positions subject to such provisions. The Commission shall make adequate provision for administrative review of any determination to dismiss any employee[.]
3. 5 U.S.C. § 5911(e) provides:
(e) The head of an agency may not require an employee . . . to occupy quarters on a rental basis, unless the agency head determines that necessary service cannot be rendered or that property of the Government cannot adequately be protected, otherwise.
4. The proposal at issue in that case tied the pay increase given Agency employees to the recommendation of the Advisory Committee on Federal Pay. That entity was abolished by the Federal Employees Pay Comparability Act of 1990, Pub. L. No. 101-509, sec. 529 (1990), which was signed into law on November 5, 1990.
5. In a recent decision, American Federation of Government Employees, Local 3295 and U.S. Department of the Treasury, Office of Thrift Supervision, 47 FLRA No. 84 (1993) (Member Talkin dissenting in part), the Authority concluded that under 12 U.S.C. § 1462a(g), the Director of the Office of Thrift Supervision (OTS) was granted sole and exclusive authority to set pay and benefits for OTS employees. Critical to this conclusion was the presence of a provision in section 1462a(g)(1) that stated, "compensation shall be paid without regard to the provisions of other laws applicable to officers or employees of the United States." It was this provision and the legislative history underlying section 1462a(g) that provided the basis for the Authority's conclusion that the Director was granted exclusive authority over pay and benefits. Section 161d is distinguishable from section 1462a(g)(1) in that it does not contain any provision comparable to "without regard to the provisions of other laws applicable to officers or employees of the United States" that would indicate that the discretion granted to the Nuclear Regulatory Commission is sole and exclusive. Rather, it affords the Nuclear Regulatory Commission discretion to fix compensation without regard to chapter 51 and subchapter III of Chapter 53 of title 5 and contains no wording that establishes that this discretion to fix compensation cannot be exercised in accordance with the collective bargaining obligations imposed by the Statute.
6. It is well established that parties bear the burden of creating a record upon which the Authority can make a negotiability determination. For example, National Federation of Federal Employees, Local 2050 and U.S. Environmental Protection Agency, 35 FLRA 706, 711-12 (1990); National Federation of Government Employees, Local 1167 v. FLRA, 681 F.2d 886 (D.C. Cir. 1982), aff'g National Federation of Federal Employees, Local 1167 and Department of the Air Force, Headquarters, 31st Combat Support Group (TAC), Homestead Air Force Base, Florida, 6 FLRA 574 (1981). A party failing to meet this burden acts at its peril. For example, National Association of Government Employees, Local R1-134 and U.S. Department of the Navy, Naval Underwater Systems Center, Newport, Rhode Island, 38 FLRA 589, 596 (1990).
7. On the likelihood that the figure of $56 million applies to calendar year 1991, we have calculated what percentage of the Agency's calendar year budget this figure represents using three-fourths of the Agency's overall budget figure for fiscal year 1991 and one-fourth of the Agency's overall budget figure for fiscal year 1992. The result was approximately 11.7 percent, not significantly less than the 12 percent figure proffered by the Agency.
8. Even if this cost were assessed against the budget of a fiscal year subsequent to 1991, it is reasonable to conclude that the cumulative costs of the year or years for which retroactive payment is due plus the year in which the payment is being made would amount to a significant cost relative to the budget for that particular year.
9. In response to an Agency argument that previous salary increases had little impact on turnover, grievances, and performance, the Union contends that the statistics and information submitted by the Agency do not permit such a conclusion. While the information submitted by the Agency may not support conclusions as to the likelihood that the pay increases proposed by the Union will produce positive results in terms of turnover, grievances, and performance, it does show that there is limited potential for improvement in those areas.