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The decision of the Authority follows:
48 FLRA No. 32
FEDERAL LABOR RELATIONS AUTHORITY
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
SOCIAL SECURITY ADMINISTRATION
NEW YORK REGION
AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES
August 23, 1993
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 Herbert L. Haber 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 Arbitrator sustained a grievance regarding the Agency's failure to give three grievants performance awards. We conclude that the Agency fails to establish that the award is deficient. Accordingly, we will deny the exceptions.
II. Background and Arbitrator's Award
Approximately two thousand employees in Region II of the Agency received summary appraisal ratings of outstanding in 1990. All but six of these employees were granted performance awards. A grievance was filed by the Union on behalf of the six employees. By letter of February 6, 1991, the Assistant Regional Commissioner advised the local union president that, commencing with the appraisal period ending September 30, 1988, "'the Social Security Administration orally communicated with the Regions that employees whose work performance during a given appraisal period was evaluated and resulted in a summary rating of Outstanding or Excellent would receive a performance based award.'" Award at 3, quoting Agency's letter. The Assistant Regional Commissioner further stated, however, that, commencing with the same appraisal period, "'in this Region it was determined that if an employee had been disciplined during an appraisal period, it would be improper to reward that employee with either a cash award or a Quality Step Increase'" and that this "policy," which had never been reduced to writing, was orally communicated to Area Directors and Managers. Id. at 3-4.
In response to the grievance, the Agency advised the Union that it had reviewed the above-stated policy and would individually review award determinations to ascertain whether an employee who had been subjected to disciplinary action would be granted an award. Thereafter, the Agency reversed its decision with regard to three grievants and provided them with performance awards. In addition, the Agency reaffirmed its decision as to the three remaining grievants because of the "nature and severity" of their "misconduct" during the appraisal period. Id. at 4. Subsequently, arbitration was invoked.
The Arbitrator set forth certain provisions of Article 17 of the parties' national collective bargaining agreement, which incorporates Health and Human Services (HHS) Instruction 430-5, and Article 21.(1) Article 17 and the HHS Instruction address awards while Article 21 pertains to performance appraisals. Before the Arbitrator, the Union contended that Article 17, Section 3 requires that performance awards be granted to employees who have received ratings of outstanding or excellent. The Union argued, in this connection, that neither the national agreement nor HHS Instruction 430-5 provides that disciplinary actions must be considered in the granting of performance awards and that the Region had no authority to modify the terms of the national agreement to consider disciplinary actions.
The Agency contended that the national agreement does not require performance awards to be granted solely on the basis of the employee's rating of record. In this connection, the Agency argued that Article 21, Section 5 "lists appraisal results as only one of the bases which are to be used for rewarding employees." Id. at 5. Furthermore, the Agency noted that the Authority has held nonnegotiable a proposal that provided that awards for performance "will be granted." Id. In this connection, the Agency cited U.S. Department of Health and Human Services, Social Security Administration and American Federation of Government Employees, Local 1923, 43 FLRA 538 (1991) (SSA), in which the Authority upheld an arbitrator's interpretation that Article 17 of an agreement covering the same parties as are involved in this case provided management discretion to grant incentive awards.(2) Consequently, the Agency asserted that it acted within its authority in establishing a policy of not granting performance awards to "employees whose egregious conduct warranted discipline" and that the Region "applied that policy in a reasonable and rational manner." Award at 6.
Based on the parties' arguments, the Arbitrator found that the issue before him was "whether the denial of performance awards to the grievants by Region II was properly based on considerations outside of their ratings of record." Id. In analyzing this question, the Arbitrator "[p]ut to one side the issue of whether . . . Article 17 mandates the granting of performance awards to employees who have received Outstanding and Excellent performance ratings[.]" Id. (footnote omitted). The Arbitrator found that the record "clearly establishes that the Agency ha[d] elected to do so." Id. In this connection, the Arbitrator looked to the Agency's February 6, 1991 letter to the Union in which the Agency stated that employees whose work performance was evaluated and rated as outstanding or excellent would receive a performance based award.
As to the portion of the letter referencing an oral policy of the Region to deny awards to employees who had been disciplined, the Arbitrator found "no authoritative basis for the establishment by the Region of a 'policy' which clearly modifies a policy directive of the Social Security Administration." Id. at 7. The Arbitrator determined that the denial of the grievants' performance awards was improperly based on considerations outside the ratings of record. The Arbitrator reasoned that under the Agency's policy the Region could consider disciplinary matters in determining the rating of record. However, the Arbitrator concluded that the "Region improperly went . . . beyond the policy set by its national Administration in denying the grievants their performance awards." Id.
Accordingly, the Arbitrator sustained the grievance and rendered the following award:
The Region's denial of performance awards to the named grievants who had received Summary Ratings of Outstanding or Excellent was improperly based on disciplinary actions not considered in those ratings.
The Region is directed to provide the grievants with those cash awards forthwith.
Award at 8.
III. First Exception
A. Positions of the Parties
1. The Agency
The Agency contends that the award violates the Statute "by putting aside the [p]arties' negotiated agreement . . . ." Exceptions at 6. Specifically, the Agency asserts that in U.S. Department of the Army, Fort Campbell District, Third Region, Fort Campbell, Kentucky and American Federation of Government Employees, Local 2022, 37 FLRA 186, 195 (1990) (Fort Campbell), the Authority found that collective bargaining agreements, rather than agency regulations, govern the disposition of matters to which they both apply when they are in conflict. The Agency argues that the "arbitrator improperly gave predominance to the Agency's internal unwritten policy guidance referenced in a letter from the Agency to the Union rather than the [p]arties' agreement in interpreting the scope of the Agency's discretion in this matter." Exceptions at 6 (emphasis in original). According to the Agency, the only rule or regulation regarding performance awards in the parties' agreement is HHS Instruction 430-5, which is contained in Article 17, Section 3, B. The Agency asserts that the policy guidance interpreted by the Arbitrator is not part of the HHS Instruction and that the latter does not mandate the granting of performance awards in all circumstances.
The Union maintains that the Arbitrator did not, in fact, "'put aside'" the national agreement in resolving the grievance. Opposition at 2. The Union argues that the Arbitrator's finding that the Agency's denial of performance awards to the grievants was improperly based on considerations outside the rating of record is consistent with Article 17 and HHS Instruction 430-5, which provides for the granting of performance awards on the basis of the ratings of record.
B. Analysis and Conclusions
We conclude that the Agency has failed to establish that the award is deficient. Accordingly, we will deny the Agency's exception.
The Agency takes the position that the award is deficient because the Arbitrator gave "predominance" to an "internal unwritten policy guidance" over the parties' agreement. Exceptions at 6 (emphasis omitted). We disagree. In determining whether the Agency's denial of performance awards for the grievants was improperly based on matters not contained in the grievants' ratings of record, the Arbitrator looked initially to the parties' agreement. In the Arbitrator's view, it was unnecessary for him to decide whether Article 17 mandates the granting of performance awards to the employees who received outstanding or excellent performance ratings because the Agency had "elected to do so." Award at 6. In this connection, the Arbitrator referenced an Agency policy directive that provided for performance awards for employees whose summary ratings were outstanding or excellent. The Arbitrator found that the Region could not modify the Agency's policy of granting performance awards by considering matters outside the employees' ratings of record. These findings of the Arbitrator clearly establish that he was relying on the Agency's own interpretation and application of Article 17. The Agency's contention that the Arbitrator gave predominance to an internal unwritten policy guidance does not provide a basis for finding that the award is deficient.
We further find inapposite the Agency's reliance on Fort Campbell. While the Agency correctly states that provisions contained in collective bargaining agreements govern over conflicting agency regulations when both apply to a matter in dispute, the Agency cites no agreement provision with which a regulation is alleged to be in conflict. Instead, the Agency states that HHS Instruction 430-5 is the only rule or regulation governing performance awards that is referenced in the parties' agreement and that the unwritten policy guidance interpreted by the Arbitrator is not part of the Instruction. The Arbitrator determined that the unwritten policy guidance constituted the Agency's interpretation of its obligations under Article 17 and, by incorporation, under the Instruction. In our view, the Agency is merely disagreeing with the Arbitrator's reliance on the Agency's application of Article 17. Such disagreement does not establish that the award is deficient.
IV. Second Exception
A. Positions of the Parties
The Agency contends that the award is deficient because it conflicts with 5 C.F.R. Part 430. Specifically, the Agency asserts that the award is contrary to 5 C.F.R. §§ 430.502 and 430.503(b), which are claimed to be Government-wide regulations. The Agency notes that 5 C.F.R. § 502 defines the term performance award and 5 C.F.R. § 430.503(b) states that performance awards shall be based on an employee's rating of record. The Agency argues that it is not required to use the rating of record as the "sole basis in granting a performance award[.]" Exceptions at 9. Rather, the Agency contends that "the rating is the basis or starting point in determining whether a performance award should be granted." Id. Finally, the Agency claims that 5 C.F.R. § 430.503(e) gives the Agency great latitude in structuring its performance award programs.(3) In this latter connection, the Agency maintains that Article 17 of the parties' agreement makes the granting of awards discretionary on the part of management. The Agency further notes that Article 21, Section 5 of the agreement establishes that appraisals are simply one of the bases on which award determinations are made.
The agency also asserts that the award is contrary to 5 C.F.R. § 430.504(d) because it deprives the Agency of the right to review and approve, and possibly disapprove, the performance awards at a higher level of review than the officials proposing the awards.(4) The Agency maintains that Authority decisions have consistently held nonnegotiable bargaining proposals that mandate the granting of performance awards on the ground that such proposals conflict with 5 C.F.R. § 430.504(d).
The Union contends that the award is not inconsistent with 5 C.F.R. § 430.504(d) because the Agency is not precluded from reviewing performance awards. In addition, the Union maintains that the Agency has not demonstrated that the award is inconsistent with 5 C.F.R. §§ 430.502 and 430.503(b).
B. Analysis and Conclusions
We conclude that the Agency has failed to establish that the Arbitrator's award is contrary to 5 C.F.R. Part 430. Accordingly, we will deny the Agency's exception.
The Agency essentially argues that under 5 C.F.R. §§ 430.502, 430.503(b), and 430.503(e), the granting of performance awards is discretionary with management and is not based solely on the rating of record. However, the Agency has not shown that those regulatory provisions preclude management from establishing a policy to grant performance awards based on an employee's rating of record, as the Arbitrator found the Agency had done, without regard to any disciplinary actions that may have been taken against the employee.
Similarly, we find no merit to the Agency's contention that the award is contrary to 5 C.F.R. § 430.504(d) on the basis that it deprives the Agency of the right to approve or disapprove performance awards at a higher level of review. In this case, the Agency had already determined that the grievants were entitled to performance ratings of outstanding or excellent. The existence of an Agency policy granting awards to employees who attain outstanding or excellent ratings constitutes an exercise of the Agency's right to engage in the requisite review and approval of awards. The Arbitrator did not interfere with the Agency's rights in this regard. Accordingly, we find that this exception provides no basis for finding the award deficient. See, for example, U.S. Department of Health and Human Services, Social Security Administration and American Federation of Government Employees, Local 1923, 46 FLRA 1126, 1132 (1993) (the Authority upheld an award in which the arbitrator interpreted a collective bargaining agreement and agency regulations in sustaining a grievance and granting a full performance award to a grievant who had been rated outstanding but who had received a diminished award).
Finally, we note the Agency's reference to cases concerning the negotiability of bargaining proposals relating to performance awards. Those cases are not applicable here because by maintaining a policy that awards would be based on ratings of record without regard to matters outside the rating, the Agency exercised its right to approve and disapprove awards.
V. Third Exception
A. Positions of the Paries
The Agency contends that the award is contrary to the Back Pay Act, 5 U.S.C. § 5596(b), insofar as the Arbitrator failed to make the requisite findings to support the granting of performance awards to the grievants. The Arbitrator maintains that the Arbitrator did not find that an unjustified or unwarranted personnel action had occurred because he did not address whether the Region had violated the parties' collective bargaining agreement. Instead, according to the Agency, the Arbitrator relied solely on the Agency's February 6, 1991, letter to the Union to find the existence and violation of a mandatory award policy. Consequently, the Agency asserts that "there is no but for test and back pay is not appropriate." Exceptions at 19.
The Union contends that the award is not contrary to the Back Pay Act. The Union maintains that the Arbitrator found a violation of Article 17 by concluding that the Region could not modify a policy directive referenced in the agreement and by improperly considering matters outside the rating of record. The Union also points to the Agency's testimony at the hearing that the "only reason" the grievants did not receive performance awards was because of the disciplinary action that was taken against them. Opposition at 7.
B. Analysis and Conclusions
We conclude that the Agency fails to establish that the award is contrary to the Back Pay Act. Accordingly, we will deny the Agency's exception.
For an award of backpay to be authorized under the Back Pay Act, an arbitrator must determine: (1) that the aggrieved employee was affected by an unjustified or unwarranted personnel action; (2) that the personnel action directly resulted in the withdrawal or reduction of the grievant's pay, allowances or differentials; and (3) that but for such action, the grievant otherwise would not have suffered the withdrawal or reduction. See Federal Employees Metal Trades Council and U.S. Department of the Navy Portsmouth Naval Shipyard, Portsmouth, New Hampshire, 39 FLRA 3, 7 (1991) (Portsmouth Naval Shipyard).
The Back Pay Act defines "personnel action" as including "the omission or failure to take an action or confer a benefit." 5 U.S.C. § 5596(b)(3). The regulations implementing the Back Pay Act state:
"Unjustified or unwarranted personnel action" means an act of commission or an act of omission (i.e., failure to take an action or confer a benefit) that an appropriate authority subsequently determines, on the basis of substantive or procedural defects, to have been unjustified or unwarranted under applicable law, Executive order, rule, regulation, or mandatory personnel policy established by an agency or through a collective bargaining agreement.
5 C.F.R. § 550.803. The Authority has held that 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. Veterans Administration Medical Center, Palo Alto, California and American Federation of Government Employees, Local 2110, 36 FLRA 98, 108 (1990).
In this case, the Arbitrator found that the Agency's consideration of disciplinary actions was improper, as it did not comport with the Agency's policy implementing the parties' agreement and the HHS Instruction incorporated therein, and resulted in the Agency's failure to grant the grievants their cash awards. We find that the Agency's failure to pay the grievants the monies to which they were entitled constitutes an unwarranted and unjustified personnel action and satisfies the first requirement under the Back Pay Act. See also Portsmouth Naval Shipyard, 39 FLRA at 7.
We also find that the granting of awards to the grievants satisfies the second and third requirements for an award of backpay. In this connection, we reject the Agency's assertion that the Arbitrator did not find that but for the unjustified or unwarranted personnel action, the grievants would have been granted performance awards. The Authority has held that the "but for" test does not require "a specific recitation of certain words and phrases, such as 'but for[,]'" but rather a finding of a direct connection between an unwarranted or unjustified personnel action and an employee's loss of pay, allowances, or differentials. See American Federation of Government Employees, Local 31 and U.S. Department of Veterans Affairs, Medical Center, Cleveland, Ohio, 41 FLRA 514, 518 (1991) (VA Cleveland). Moreover, the finding of a direct and causal connection may be "implicit from the record and the award." Id. at 519.
In this case, it is implicit from the Arbitrator's findings that there was a direct, causal connection between the Agency's conduct and the grievants' loss of pay. Thus, the Arbitrator found that the Agency improperly considered matters outside the grievants' ratings of record and that the grievants thereby failed to receive the cash performance awards to which they were entitled under the parties' agreement and the HHS Instruction incorporated therein, and which they otherwise would have received. Therefore, we find that the Arbitrator made all the necessary findings for a backpay award.
VI. Fourth Exception
A. Positions of the Parties
The Agency contends that the award does not draw its essence from the agreement because neither Article 17 nor HHS Instruction 430-5 mandates the issuance of performance awards for employees at specified levels of achievement. The Agency points to the history of negotiations that led to Article 17 and states that the Union unsuccessfully sought to negotiate mandatory performance awards. The Agency also states that by agreeing to incorporate HHS Instruction 430-5 into Article 17, the Agency did not cede its discretionary authority to grant or deny performance awards.
The Union disagrees with the Agency's exception. The Union maintains that testimony at the arbitration hearing establishes that the parties agreed that the only restriction on management's discretion to grant performance awards would be financial.
B. Analysis and Conclusions
To demonstrate that an award fails to draw its essence from a collective bargaining agreement, a party must show that the award: (1) cannot in any rational way be derived from the agreement; (2) is so unfounded in reason and fact, and so unconnected with the wording and the purpose of the agreement as to manifest an infidelity to the obligation of the arbitrator; (3) evidences a manifest disregard for the agreement; or (4) does not represent a plausible interpretation of the agreement. See U.S. Department of the Army, Headquarters, XVIII Airborne Corps and Fort Bragg, Fort Bragg, North Carolina and American Federation of Government Employees, Local 1770, 42 FLRA 1186, 1193 (1991). We conclude that the Agency has failed to demonstrate that the award does not draw its essence from the agreement under any of the tests described above.
As we started earlier, the Arbitrator found that the Agency had interpreted and applied Article 17 in establishing a policy of granting performance awards to employees based on their ratings of record. In our view, the Agency's exception constitutes mere disagreement with the Arbitrator's findings and is an attempt to relitigate this case before the Authority. Such an exception does not provide a basis for finding the award deficient. See, for example, Ogden Air Logistics Center, Hill Air Force Base, Utah and American Federation of Government Employees, AFL-CIO, Local 1592, 39 FLRA 1282, 1286 (1991).
VII. Fifth Exception
A. Positions of the Parties
The Agency argues that the award interferes with management's rights to direct employees under section 7106(a)(2)(A) of the Statute and to assign work under section 7106(a)(2)(B) of the Statute.
The Agency asserts that by directing the Agency to grant performance awards to the grievants, the Arbitrator substituted his judgment for that of the Agency. In support of its position, the Agency cites Louis A. Johnson Veterans Administration Medical Center, Clarksburg, West Virginia and American Federation of Government Employees, Local 2384, 15 FLRA 347, 351 (1984), in which the Authority held that an integral aspect of management's rights to direct employees and assign work is the ability to prescribe the standards which an employee must attain in order to be eligible for a reward for superior performance. In addition, the Agency notes that there is no issue of abrogation of management's rights inasmuch as the Arbitrator did not enforce a contractual provision.
The Union maintains that the award does not interfere with the exercise of management's rights. In addition, the Union asserts that the Arbitrator did not substitute his judgement for that of management because the Agency had determined to rate the grievants outstanding or excellent.
B. Analysis and Conclusions
We find no merit to the Agency's contention. Nothing contained in the award prescribes the standards that an employee must attain in order to be eligible for a performance award. Similarly, nothing in the award affects the Agency's determination to rate the grievants outstanding or excellent. Rather, the award simply finds that the Agency improperly considered matters outside the grievants' ratings of records. In sum, we conclude that this exception provides no basis for finding the award deficient.
The Agency's exceptions are denied.
Section 2--Types of Awards
B. A Performance Award is a performance-based cash payment to an employee based on the employee's rating of record. A performance award does not increase base pay.
B. The Administration will follow the procedures and criteria set forth in HHS Instruction 430-5.
Section 5--Applications of the Appraisal
Appraisal results will be used by the administration as one of the bases for training, rewarding, reassigning, promoting, reducing-in-grade, retaining, removing employees, granting and withholding within-grade increases and other decisions affecting the employee for which performance is a factor.
HHS Instruction 430-5, Performance Award Requirements, provides in relevant part:
F. In reviewing and approving award determinations, the following apply:
2. An employee with a rating of Level 5 (Outstanding) should receive a performance award . . . .
3. An employee with a rating of Level 4 (Excellent) should receive a performance award. . . .
4. An employee with a rating of Level 3 (Fully Successful) may receive a performance award. . . .
(If blank, the decision does not have footnotes.)
1. The relevant provisions of Articles 17 and 21 and the HHS Instruction are set forth in an Appendix to this decision.
2. The Arbitrator noted that the language of Article 17 at issue in SSA "appears not to be the same language" as presently contained in Article 17. Award at 6, n.*.
3. 5 C.F.R. § 430.503(e) provides:
(e) OPM encourages agencies to make maximum use of their authorities under chapters 43 and 45 of title 5, United States Code, within existing appropriated funds to establish and administer performance awards programs that best support and enhance agency and national goals and meet employee recognition needs.
4. 5 C.F.R. § 430.504(d) provides:
(d) The decision to grant a performance award, including the amount of such award, shall be reviewed and approved by an official of the agency who is at a higher level than the official who made the initial decision, unless there is no official at a higher level in the agency.