U.S. Dep't of the Treasury Internal Revenue Serv. Office of Chief Counsel Wash. D.C. v. Fed. Labor Relations Auth.

• Citation: 739 F.3d 13
• Decision Date: 03 January 2014
• Docket Number: Nos. 12–1456,13–1066.,s. 12–1456
• Parties: UNITED STATES DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE OFFICE OF CHIEF COUNSEL WASHINGTON D.C., Petitioner v. FEDERAL LABOR RELATIONS AUTHORITY, Respondent National Treasury Employees Union, Intervenor.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

739 F.3d 13

UNITED STATES DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE OFFICE OF CHIEF COUNSEL WASHINGTON D.C., Petitioner

v. FEDERAL LABOR RELATIONS AUTHORITY, RespondentNational Treasury Employees Union, Intervenor.

Nos. 12–1456, 13–1066.

United States Court of Appeals, District of Columbia Circuit.

Argued Nov. 7, 2013.

Decided Jan. 3, 2014.

On Petition for Review and Cross–Application for Enforcement of a Final Decision of the Federal Labor Relations Authority.

Howard S. Scher, Attorney, U.S. Department of Justice, argued the cause for petitioner. With him on the briefs were Stuart F. Delery, Principal Assistant Deputy Attorney General, and Leonard Schaitman, Attorney.

Zachary R. Henige, Attorney, Federal Labor Relations Authority, argued the cause for respondent. On the brief was Rosa M. Koppel, Solicitor. David Shewchuk, Deputy Solicitor, Federal Labor Relations Authority, entered an appearance.

Peyton H.N. Lawrimore argued the cause for intervenor National Treasury Employees Union. With her on the brief were Gregory O'Duden and Larry J. Adkins.

Matthew W. Milledge, David A. Borer, and Andres M. Grajales were on the brief for amicus curiae American Federation of Government Employees, AFL–CIO in support of respondent.

Before: TATEL and KAVANAUGH, Circuit Judges, and WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge:

Section 7106(b)(3) of the Federal Service Labor Management Relations Statute (FSLMRS), 5 U.S.C. § 7101 et seq., provides that collective bargaining agreements reached between federal agencies and their employees' bargaining representatives may contain provisions that, although interfering with certain managerial prerogatives, constitute “appropriate arrangements for employees adversely affected by the exercise” of such management rights. 5 U.S.C. § 7106(b)(3). In determining whether a given “arrangement ]” is “appropriate,” the Federal Labor Relations Authority (“the Authority”)—which is charged with administering the FSLMRS—has, depending on how the issue comes before it, applied two different substantive tests that might yield different results for the very same arrangement. As explained in this opinion, by adopting two inconsistent interpretations of the same statutory language, the Authority has acted arbitrarily and capriciously.

I.

The FSLMRS establishes the framework governing labor-management relations in the federal government. The statute requires federal agencies and labor organizations representing their employees to “meet and negotiate in good faith for the purposes of arriving at a collective bargaining agreement,” 5 U.S.C. § 7114(a)(4), and sets forth various requirements for both the bargaining process and the content of any agreement.

At issue here is section 7106 of the Act. Section 7106(a) provides: “Subject to subsection (b) of this section, nothing in [the FSLMRS] shall affect the authority of any management official of any agency” to exercise certain management rights, which include the authority to “hire, assign, direct, layoff, and retain employees in the agency, or to suspend, remove, reduce in grade or pay, or take other disciplinary action against such employees,” id. § 7106(a)(2)(A), and “to assign work, to make determinations with respect to contracting out, and to determine the personnel by which agency operations shall be conducted,” id. § 7106(a)(2)(B). Section 7106(b), in turn, provides in relevant part that “[n]othing in this section shall preclude any agency and any labor organization from negotiating,” among other things, “appropriate arrangements for employees adversely affected by the exercise of any authority under this section by such management officials.” Id. § 7106(b), (b)(3).

We addressed the interaction between sections 7106(a) and 7106(b)(3) in American Federation of Government Employees, Local 2782 v. FLRA, 702 F.2d 1183 (D.C.Cir.1983) (“AFGE I”). There the Authority had held that any “arrangement” that interferes with the management rights set forth in section 7106(a) was necessarily not “appropriate” within the meaning of section 7106(b)(3). See id. at 1185–86. Rejecting this reading, we explained that section 7106(b)(3) establishes “an exception to the otherwise governing management prerogative requirements of subsection (a).” Id. at 1187. Thus, the provision contemplates that the management rights set forth in section 7106(a) will give way, to some extent, to “appropriate arrangements” for adversely affected employees. See id. Finding that an arrangement is inappropriate simply because it interferes with the enumerated management rights would, we concluded, render the section 7106(b)(3) exception entirely meaningless. See id. at 1188. We observed, however, that “some arrangements may be inappropriate because they impinge upon management prerogatives to an excessive degree,” and we declined to “speculate as to what the word ‘appropriate’ may lawfully be interpreted to exclude.” Id.

Significantly for the issue before us, questions regarding section 7106's application may come before the Authority in at least three ways. First, an agency may assert during collective bargaining that a particular union proposal falls outside the agency's duty to bargain because it would contravene section 7106. Agencies are not required to bargain over all issues relating to conditions of employment, but may instead declare a particular union proposal to be “nonnegotiable” if, for example, the proposal would be “inconsistent with any ‘Federal law or any government-wide rule or regulation.’ ” American Federation of Government Employees v. FLRA, 778 F.2d 850, 852 (D.C.Cir.1985) (“AFGE II ”) (quoting 5 U.S.C. § 7117(a)(1)). The union may seek expedited review of such nonnegotiability determinations before the Authority. See5 U.S.C. § 7117(c). Second, any agreement ultimately reached between the agency's bargaining representatives and the union is “subject to approval by the head of the agency,” id. § 7114(c)(1), with such approval required “if the agreement is in accordance with the provisions of [the FSLMRS] and any other applicable law, rule, or regulation,” id. § 7114(c)(2). An agency head may reject a provision on the ground that it contravenes section 7106, a decision the union may then appeal to the Authority. See id. § 7105(a)(2) (E). Third, an agency might take exception to a provision imposed in arbitration, asserting before the Authority that the arbiter's award violates section 7106. See id. § 7122(a)(1).

In a series of decisions, the Authority has delineated the substantive tests it will use in each of these three sorts of appeals to determine what constitutes a section 7106(b)(3) “appropriate arrangement[ ].” Following our decision in AFGE I, the Authority first addressed the issue in National Ass'n of Government Employees, Local R14–87, 21 F.L.R.A. 24 (1986) ( “KANG”), a case that arose in the context of an agency head's determination under section 7114(c) that a collective bargaining provision was impermissible. See id. at 24. The Authority adopted what it characterized as the “excessive interference test enunciated” in AFGE I, holding:

In this and future cases where the Authority addresses a management allegation that a union proposal of appropriate arrangements is nonnegotiable because it conflicts with management rights ..., the Authority will consider whether such an arrangement is appropriate for negotiation within the meaning of section 7106(b)(3) or[ ] whether it is inappropriate because it excessively interferes with the exercise of management's rights.

Id. at 30–31. The Authority went on to describe the factors it would consider in evaluating whether a given arrangement “excessively interferes,” among them whether the “negative impact on management's rights [is] disproportionate to the benefits to be derived from the proposed arrangement.” Id. at 31–33.

Soon thereafter, the Authority applied the same “excessive interference” test in a case that arose in the context of a union's appeal from an agency declaration during collective bargaining that a particular proposal was nonnegotiable. See American Federation of Government Employees, Local 1923, 21 F.L.R.A. 178, 186 & n. 2 (1986) (“Local 1923 ”).

But the Authority has treated somewhat differently agency claims that a provision in an arbitrator's award impermissibly interferes with management rights and should be set aside as “contrary to ... law” pursuant to section 7122(a)(1). Although initially applying the “excessive interference” test in such cases, see Washington Plate Printers Union Local No. 2, 31 F.L.R.A. 1250, 1256 (1988), the Authority later changed course, holding that only when an award “abrogates” a management right—which occurs when the award “precludes an agency from exercising” the right—would the Authority grant the agency relief, Department of the Treasury, U.S. Customs Service, 37 F.L.R.A. 309, 314 (1990). After some further oscillation, see Department of Justice, Federal Bureau of Prisons, 58 F.L.R.A. 109, 110 (2002) (returning to the “excessive interference test), the Authority eventually settled on this “abrogation” standard, see U.S. EPA, 65 F.L.R.A. 113, 116–17 (2010) ( “EPA ”).

Then, overruling its prior decision in KANG, the Authority extended this “abrogation” test to appeals brought when an agency head disapproves a provision under section 7114(c). See National Treasury Employees Union, 65 F.L.R.A. 509, 512 (2011) (“NTEU I ”). The Authority made clear, however, that it would continue to apply the “excessive interference” standard when, during bargaining, an agency asserts that a proposal is nonnegotiable. Id. at 512 n. 4. Member Beck dissented, contending, among other things, that the Authority had no basis for holding that “the same proposal that is legally invalid if it ‘excessively interferes' with management rights at the bargaining table magically becomes valid and binding when it lands...