Department of Treasury, I.R.S. v. Federal Labor Relations Authority, 87-1439

• Decision Date: 28 February 1989
• Docket Number: No. 87-1439,87-1439
• Citation: 274 U.S.App.D.C. 135,862 F.2d 880
• Parties: 130 L.R.R.M. (BNA) 2024, 130 L.R.R.M. (BNA) 2760, 274 U.S.App.D.C. 135 DEPARTMENT OF THE TREASURY, INTERNAL REVENUE SERVICE, Petitioner, v. FEDERAL LABOR RELATIONS AUTHORITY, Respondent, and National Treasury Employees Union, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 880

862 F.2d 880

130 L.R.R.M. (BNA) 2024, 130 L.R.R.M. (BNA) 2760,

274 U.S.App.D.C. 135

DEPARTMENT OF THE TREASURY, INTERNAL REVENUE SERVICE, Petitioner, v. FEDERAL LABOR RELATIONS AUTHORITY, Respondent, and National Treasury Employees Union, Intervenor.

No. 87-1439.

United States Court of Appeals, District of Columbia Circuit.

Argued April 18, 1988.

Decided Dec. 2, 1988.

Order Denying Rehearing En Banc Feb. 28, 1989.

Thomas M. Bondy, Atty., Dept. of Justice, with whom, John R. Bolton, Asst. Atty. Gen., Richard K. Willard, Asst. Atty. Gen. ^* and William Kanter, Atty., Dept. of Justice, Washington, D.C., were on the brief for petitioner.

Robert J. Englehart, Atty., F.L.R.A., with whom, Ruth E. Peters, Sol., William E. Persina, Deputy Sol. and Arthur A. Horowitz, Associate Sol., Washington, D.C., F.L.R.A., were on the brief for respondent.

Clinton D. Wolcott, with whom, Lois G. Williams, Washington, D.C., was on the brief for intervenor, Nat. Treasury Employees Union.

Before MIKVA and D.H. GINSBURG, Circuit Judges and JACKSON, ^** District Judge.

Opinion for the Court filed by District Judge JACKSON.

Opinion concurring and dissenting in part filed by Circuit Judge D.H. GINSBURG.

JACKSON, District Judge:

We are again presented with a controversy between a federal agency and a union representing its employees as to whether they must bargain over the agency's power to contract for the goods and services it needs from the private sector. The Internal Revenue Service ("IRS"), petitioner, insists that "contracting-out" is an exclusive management prerogative and, thus, not a proper subject for negotiation in the course of collective bargaining. Intervenor National Treasury Employees Union ("NTEU" or "Union"), which represents IRS' non-management employees, precipitated this particular dispute with two proposals it demanded the parties address in supplemental negotiations under their master agreement in September, 1986. Respondent Federal Labor Relations Authority ("FLRA") sided with the Union when the issue reached it in June, 1987, and directed the IRS to bargain with NTEU over the proposals. IRS now petitions to set aside FLRA's decision. FLRA and the Union cross-petition to enforce it. We enforce the order of the FLRA as to the first of the proposals, and set it aside as to the second.

The case resumes an unresolved conflict between labor and management throughout the government generally as to the relationship between a document first promulgated by the Office of Management and Budget ("OMB") in 1966 (later revised), known as "Circular No. A-76" (the "Circular"), and various provisions of Title VII of the Civil Service Reform Act of 1978, 5 U.S.C. Sec. 7101 et seq. ("CSRA" or the "Act"). The Circular declares it to be the "general policy" of the government to rely on "commercial sources" to supply products and services necessary to its operation, id., para. 4.a., and, to that end, admonishes that agencies are not to "start or carry on any activity to provide a commercial product or service if the product or service can be procured more economically from a commercial source." Id. ¹ A "Supplement" to the Circular prescribes methods for calculating the differential between "in-house" and "contract-out" procurements, Supplement, Part IV, and directs each agency to establish an "administrative appeals procedure" to resolve questions from "directly affected parties" relating to "cost comparisons" expeditiously, and, in any event within 30 days. Id., Part I, Ch. 2, para. I. The Circular itself continues to state that in-house procurements are "authorized" only if a cost comparison demonstrates that the government can provide what is needed more cheaply than a "qualified commercial source" on an "ongoing basis." Circular, para. 8.d.

Government employees may of course, be "directly affected" by their agency's decisions to look elsewhere for products or services the employees themselves might conceivably furnish. Nevertheless, one provision of the CSRA, spoken of as the "management rights clause" expressly confirms the authority of the agency's "management officials" to, inter alia, "make determinations with respect to contracting out." 5 U.S.C. Sec. 7106(a)(2)(B). Elsewhere, however, the CSRA requires agencies to bargain collectively, and in good faith, with federal employee unions over "conditions of employment," including "policies, practices, and matters ... affecting working conditions." 5 U.S.C. Secs. 7103(a)(12), 7114(a)(4), 7117, 7106(b).

NTEU proffered two "proposals" (among others) to IRS as fit subjects for bargaining: the first would establish the "grievance and arbitration" provisions of the master labor agreement between them as the internal "administrative appeals procedure" mandated by the Supplement to the Circular for disputed "contracting-out" cases; the second would provide that no outside contract be awarded "until all grievance procedures, up to and including arbitration" had been exhausted. The IRS demurred. The proposals, it said, were non-negotiable, because they purported to place an exclusive management prerogative at hazard in the collective bargaining process. The Union appealed to the FLRA pursuant to 5 U.S.C. Sec. 7105(a)(2)(E) which found both proposals negotiable, and the IRS appealed to us.

A similar proposal by a federal employees' union to subject an agency's decisions to contract out in accordance with the Circular to the collective bargaining process has been before us in the past, and we find this case to be governed by that precedent. In EEOC v. Federal Labor Relations Authority, 744 F.2d 842 (D.C.Cir.1984) cert. dismissed, 476 U.S. 19, 106 S.Ct. 1678, 90 L.Ed.2d 19 (1986), the Equal Employment Opportunity Commission ("EEOC") had refused to bargain with the American Federation of Government Employees over its proposal that would have rendered the EEOC's decision to contract-out grievable. ² The FLRA rejected substantially the same management-prerogative position espoused by the IRS here, and required the EEOC to bargain over the proposal, and the agency appealed. We affirmed the FLRA, holding that the proposal would not impair management's statutorily reserved right to contract out; it merely rendered the grievance procedure the mechanism by which union members could make their displeasure with a decision to do so known and ask for relief. The court said:

A grievance alleging noncompliance with the Circular ... does not affect management's substantive authority, within the meaning of the statutory language, to contract-out. Rather, it provides a procedure for enforcing the Act's requirement that contracting-out decisions be made in accordance with applicable laws.... We therefore find that a grievance asserting that management failed to comply with its statutory or regulatory parameters in making a contracting-out decision is not precluded by the management rights clause.

Id. at 850-51.

The EEOC court was assuming, however, without considering or deciding, that the Circular was either an "applicable law," with which all contracting-out decisions must, by statute, accord, 5 U.S.C. Sec. 7106(a)(2)(B), or it was a "law, rule or regulation" a failure to comply with which would, again by statute, give rise to a grievance if it were to affect "conditions of employment." 5 U.S.C. Sec. 7103(a)(9)(C)(ii). The Supreme Court subsequently dismissed a writ of certiorari, issued upon EEOC's petition, as having been improvidently granted, 476 U.S. 19, 106 S.Ct. 1678, 90 L.Ed.2d 19 (1986), when the EEOC attempted to argue that the Circular was none of the foregoing, arguments it had never made before either the FLRA or this court. Those arguments have now been borrowed by the IRS, and are now before us (as they were this time also before the FLRA) as reason to conclude that EEOC v. FLRA is distinguishable, or was wrongly decided.

We do not, however, find an intellectually legitimate basis to distinguish EEOC from this case. The new arguments are merely that; they suggest alternative reasons why the "management rights" provisions of Section 7106 should be read to preclude employee grievances with respect to an agency's decision to contract-out. The holding of EEOC is, however, expressly to the contrary. Any distinction we might attempt to predicate on the difference in wording of the AFGE's proposal in EEOC and NTEU's first proposal here would be illusory. The essence of the controversy is the same, as to which EEOC has unequivocally held contracting-out decisions to be both grievable and, perforce, bargainable.

The new arguments have, however, persuaded the Ninth Circuit, see Defense Language Institute v. FLRA, 767 F.2d 1398 (9th Cir.1985), cert. dismissed, 476 U.S. 1110, 106 S.Ct. 2004, 90 L.Ed.2d 647 (1986), and more recently, the Fourth Circuit, U.S. Department of Health and Human Services v. FLRA, 844 F.2d 1087 (4th Cir.1988) (en banc) that EEOC was wrongly decided. That option, however, is not open to us. The doctrine of stare decisis "demands that we abide by a recent decision of one panel of this court unless the panel has withdrawn the opinion or the court en banc has overruled it." Brewster v. Comm'r of Internal Revenue, 607 F.2d 1369, 1373 (D.C.Cir.1979). Accordingly, we affirm the FLRA as to NTEU's first proposal, and enforce its order that the IRS and NTEU bargain over its inclusion in their master labor agreement.

We are not, however, so constrained with respect to NTEU's second proposal. No other court appears to have addressed its like. Perhaps no other union has been so bold as to suggest it. We conclude that it encroaches entirely too far upon management's authority to accomplish its agency's mission with dispatch, whether or not, as the Fourth Circuit concluded in HHS v. FLRA, binding arbitration of itself imports the substitution of arbitral judgment for that of management as to the circumstances in which the agency should contract-out.

The second...