United States of America
BEFORE THE FEDERAL SERVICE IMPASSES PANEL
In the Matter of
FEDERAL DEPOSIT INSURANCE CORPORATION
NATIONAL TREASURY EMPLOYEES UNION
Case No. 05 FSIP 20
DECISION AND ORDER
The National Treasury Employees Union (Union or NTEU) filed a request for assistance with the Federal Service Impasses Panel (Panel) to consider a negotiation impasse under the Federal Service Labor-Management Relations Statute (Statute), 5 U.S.C. § 7119, between it and the Federal Deposit Insurance Corporation, Washington, D.C. (Employer or FDIC).
After investigation of the request for assistance, the Panel determined that the dispute, which concerns changes in the Employer's "weekend return travel policy," should be resolved through single written submissions. The parties also were advised that, after considering the entire record, the Panel would resolve the dispute by taking whatever action it deems appropriate, which could include the issuance of a binding decision. In accordance with the Panel's procedural determination, the parties submitted their final offers and written statements of position on April 4, 2005. The Panel has now considered the entire record.
The Employer's primary mission is to ensure the safety and soundness of state-chartered banks that are not members of the Federal Reserve System. The Union represents a consolidated bargaining unit consisting of approximately 3,700 professional and non-professional employees. The parties have two collective-bargaining agreements (CBA) in effect: (1) a master CBA, scheduled to expire in January 2008, which covers most terms and conditions of employment; and (2) a compensation agreement, in effect until December 2005, which addresses pay and other monetary benefits, including travel.
The issues in dispute mainly affect bank examiners and other employees who are away from their regular duty stations on assignments that typically involve travel of 60 days or more. Under a previous policy, employees on extended travel were permitted to return home every weekend at FDIC expense, except for the first weekend they are away. Travel reimbursement received by employees for weekend return trips home that were purely personal in nature were not reported by the FDIC to the Internal Revenue Service (IRS) as income to the employee. Last year, the IRS notified the Employer that this aspect of its weekend return travel policy was "out of compliance" with income reporting requirements and that FDIC must report the income to the IRS because it was taxable to the employee. Consequently, the Employer issued a notice to the Union that a change would be needed in the weekend return travel policy with respect to how income would be reported when trips home were personal in nature. To comply with the IRS requirements, the Employer would have to begin to report, as income to the employee (and noted on a Form W-2 Wage and Tax Statement), funds provided to the employee for travel expenses incurred for personal trips home made by the employee while he or she was on a temporary assignment away from the employee's official duty station. Along with this reporting plan, the FDIC agreed to cover the amount of the employee's additional tax liability by "grossing-up" the weekend travel reimbursement to include the amount that the employee would owe the IRS for this taxable income. The dispute herein arose during negotiations over those changes.
The parties reached agreement over all but two issues: (1) whether the agreement should include an example of what would constitute a business reason for weekend return travel home;1/ and (2) how to determine an employee's marginal tax rate on income (travel reimbursement) received by the employee for return travel home when the travel is deemed not to have been for valid business reasons and, therefore, must be reported as taxable income for the employee.
POSITIONS OF THE PARTIES
1. Business Reason for Return Trips
a. The Union's Position
The Union proposes that the following highlighted wording be added to a sentence the parties already have agreed to: Essentially, that employees' requests to return from a travel assignment to perform work at their regular duty stations are subject to supervisors' determinations that a business reason exists for the return trip, "e.g. that there is appropriate work to be performed at the regular duty station that will contribute to accomplishment of workload or mission objectives." The highlighted wording would provide a clarifying example of a business reason justifying return travel to the employee's regular duty station. In contrast to the Employer's view, the proposal does not limit, in any way, a supervisor's discretion to authorize travel to and from a temporary assignment and the employee's regular duty station for business reasons, nor does it limit a supervisor's authority to assign work.2/ Rather, it provides some balance to the other examples the parties have agreed to describing activities that would not meet the test of when there is a business reason to travel home.3/ Thus, including the proposed wording would ensure that supervisory determinations on this matter "are made as fairly and consistently as possible" by providing additional guidance regarding the circumstances under which an employee can travel home on a weekend so that the tax consequences for such travel are avoided.
b. The Employer's Position
The Panel should order the Union to withdraw its proposed wording; thus, the agreement would not include any examples/definitions/standards of what constitutes a "business reason" for weekend return trips to an employee's regular duty station. In this regard, the Union's proposal would impose a standard upon supervisors where, arguably, any work an employee performs would meet the "business reason" test, thereby permitting the employee to avoid any tax consequences of return trips home. The proposed standard sends mixed signals to supervisors and employees when read in the context of the agreed upon examples of activities that would not meet the business reason test. Finally, by subjecting management's determination of what constitutes a business reason to arbitral review, the Union's proposed wording interferes with management's right to assign work under section 7106(a)(2)(B) of the Statute.4/
Having carefully considered the evidence and arguments presented on this issue, we shall order the Union to withdraw its proposal. In our view, contrary to the Union's contention that the wording merely provides an "example" to guide supervisors, it appears to define the phrase "business reason." Moreover, it does so in a manner potentially at odds with the parties' previously agreed upon examples of activities that would not provide business reasons for the approval of return trips home. As a result, we believe that the wording is more likely to generate grievances over its meaning and interpretation than to ensure fairness and consistency.
2. Alternative Method For Determining An Employee's Federal Taxable Income Amount and Appropriate Marginal Tax Rate5/
a. The Union's Position
The Union proposes that employees be permitted the option of certifying to the Employer in writing each year by January 15, under penalties of perjury found in 18 U.S.C. §1001: (1) the amount of his/her adjusted gross income as reported to the IRS for the prior filing year; and (2) that his/her adjusted gross income for the just completed year is expected to be the same or higher. The proposal would correct the Employer's current methodology for making "gross-up" calculations, which is fundamentally flawed because it fails to accurately identify an employee's actual taxable income and associated marginal tax rate. This is because its calculations are based solely on an employee's wages and do not take into consideration other family income such as a spouse's wages. Its proposal would allow the employee to certify, under penalty of perjury, that other family income exists. It is important to consider total family income because doing so may push an employee into a higher tax bracket, which equates to a higher tax liability for the employee, not otherwise reimbursed by the Employer. Ultimately, the adoption of its proposal would ensure that the gross-up amount the Employer provides the employee fully covers the tax liability associated with weekend return trips that are for personal rather than business reasons.
An employee's certification of additional family income is likely to be reliable because the employee would be subject to criminal sanctions if proven false. Certification would be a substitute for the employee divulging his/her SF-1040 tax returns to the Employer; thus, the employee's financial privacy would be preserved. The proposal is merely an alternative approach to the Employer's way of calculating the gross-up amount; essentially, it would place the onus on employees with minimal administrative burden on the Employer; if the employee does not offer any certification, then the Employer's method would be used. Finally, reimbursement for weekend return travel is based on an actual expense incurred by the employee and is different from payments made to employees for miscellaneous expenses in connection with relocations, which are "based on a reasonable estimate of expenses that may be incurred by the employee when relocating." This difference explains why the Union is proposing an alternative methodology for making gross-up calculations than the one it has agreed to in the past and is preferred by FDIC.
b. The Employer's Position
In essence, the Panel should order the Union to withdraw its proposed wording. Thus, employees would not have the option of submitting additional evidence of income to determine the grossed-up travel reimbursement amount to be issued by the Employer for weekend return travel that is personal in nature, and the gross-up amount would continue to be based solely on the employee's FDIC wages. The Employer's preferred procedure for determining the gross-up amount is identical to the process the parties recently agreed to use in three other travel reimbursement policies involving (1) Guest/Spousal Travel, (2) Multiple, Regular Places of Business, and (3) Relocation Travel. Not only does FDIC "gross up" the amounts involved in these trips, a very generous practice that the Union has failed to demonstrate is offered by any other Federal agencies, but it also conducts a "true up" review at the end of the tax year to minimize the possibility of underpayment and ensure that the employee is adequately reimbursed. The policy has a safeguard that permits any employee who disagrees with the results of the "true up" review performed at the end of the year to seek yet another review, this one by an independent third party, to ensure the computation is as accurate as possible.
Having carefully evaluated the parties' positions on this issue, we are not persuaded that the Union has justified a different method for determining taxable income in this circumstance from what the parties already have agreed to regarding other FDIC travel reimbursement policies. In our view, the adverse financial impact on employees, particularly after reducing the taxable portions of reimbursements by what remaining at the temporary worksite would have cost the Employer, appear to be minimal. On balance, any shortfall is more than adequately addressed by the Employer's agreement to continue to reimburse employees for return trips home regardless of the reason, and to gross-up the amount that would be reported as taxable income. Accordingly, we shall order the Union to withdraw its proposal.
Pursuant to the authority vested in it by the Federal Service Labor Management Relations Statute, 5 U.S.C. § 7119, and because of the failure of the parties to resolve their dispute during the course of proceedings instituted under the Panel's regulations, 5 C.F.R. § 2471.6(a)(2), the Federal Service Impasses Panel, under 5 C.F.R. § 2471.11(a) of its regulations, hereby orders the following:
1. Business Reason for Return Trips
The Union shall withdraw its proposal.
2. Alternative Method For Determining An Employee's Federal Taxable Income Amount and Appropriate Marginal Tax Rate
Union shall withdraw its proposal.
By direction of the Panel.
H. Joseph Schimansky
July 1, 2005
A return trip home on a weekend that is authorized by a supervisor as having a business purpose would not present a taxable event for the employee since travel reimbursement for a business-related trip would not have to be reported to the IRS as income to the employee. Among other things, the parties already have agreed that supervisors must authorize return travel that is associated with a legitimate business reason.
In the Union’s pre-jurisdictional response to the Employer’s allegation that its proposal violates management’s right to assign work, the Union cites the Federal Labor Relations Authority’s (FLRA) decision in National Treasury Employees Union and Department of the Treasury, Customs Service, 40 FLRA 570, 579 (1991) to support its negotiability
Specifically, the parties have agreed that: “Simply making a brief stop by the office on your return trip to your residence to submit an ETV [travel voucher] claim, to perform administrative duties, or to spend only an hour or two to catch up on some work generally does not provide a business reason for the trip.”
Among other FLRA cases, the Employer cites AFGE, Local 1815 and Army Aviation Center, Fort Rucker, Alabama, 28 FLRA 1172, 1190 (1987) to support its position that the Union's proposal is nonnegotiable.
The Union's proposal represents an alternative that would be available to employees in addition to the procedure the parties already have agreed upon. Under the agreed-upon process, in order to help offset the tax impact of a financial reimbursement for weekend travel that is purely personal in nature, the FDIC would provide an income tax allowance to cover the employee's additional tax expense. This income tax allowance would be made during the FDIC's year-end tax reporting process, and both the reimbursement and the income tax allowance would be included in the Supplemental W-2 issued to the employee by the FDIC. If employees do not agree with the amount of the tax allowance, they may appeal the calculation within 6 months of the end of the tax year.