U.S. Dept. of Health and Human Services v. Federal Labor Relations Authority

• Decision Date: 19 April 1988
• Docket Number: L,AFL-CI,No. 86-2619,86-2619
• Citation: 844 F.2d 1087
• Parties: 128 L.R.R.M. (BNA) 2150, 56 USLW 2628 U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, Petitioner, v. FEDERAL LABOR RELATIONS AUTHORITY, Respondent, American Federation of Government Employees,ocal 1923, Intervenor.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1087

844 F.2d 1087

128 L.R.R.M. (BNA) 2150, 56 USLW 2628

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, Petitioner, v. FEDERAL LABOR RELATIONS AUTHORITY, Respondent American Federation of Government Employees, AFL-CIO, Local 1923, Intervenor.

No. 86-2619.

United States Court of Appeals Fourth Circuit.

Argued Dec. 1, 1987.

Decided April 19, 1988.

Harold Jonathan Krent, Civil Div., Dept. of Justice (Richard K. Willard, Asst. Atty. Gen., William Kanter, Civil Div., Dept. of Justice, Washington, D.C., on brief), for petitioner.

Ruth Peters, Sol., Federal Labor Relations Authority (William E. Persina, Deputy Sol., Arthur A. Horowitz, Associate Sol., Robert J. Englehart, Washington, D.C., on brief), for respondent.

Stuart Alan Kirsch, American Federation of Government Employees, AFL-CIO (Mark Roth, Gen. Counsel, Washington, D.C., on brief), for intervenor.

Before WINTER, Chief Judge, RUSSELL, WIDENER, HALL, PHILLIPS, MURNAGHAN, SPROUSE, ERVIN, CHAPMAN, WILKINSON, and WILKINS, Circuit Judges, sitting in banc.

WILKINSON, Circuit Judge:

In 1983, the Office of Management and Budget issued the current version of its Circular A-76. The Circular establishes executive branch policy for the performance of commercial activities. It guides agency managers in deciding whether a given activity should be performed "in-house" by government workers or should be "contracted out" to the private sector.

In collective bargaining negotiations between the United States Department of Health and Human Services and the American Federation of Government Employees, the union proposed a contract provision that would require HHS to make contracting out decisions in accordance with the provisions of Circular A-76. HHS argued that the proposal would usurp authority reserved by law to agency managers and refused to bargain over the proposal. The Federal Labor Relations Authority, however, ordered HHS to bargain over the proposal. HHS sought review of the Authority's decision. Because the proposal would encroach on prerogatives reserved by law to agency management, 5 U.S.C. Sec. 7106(a), and because it would create an inconsistency with a government-wide directive in violation of 5 U.S.C. Sec. 7117, we set aside the order of the Federal Labor Relations Authority and deny its cross-application for enforcement.

I.

A.

Title VII of the Civil Service Reform Act of 1978, 5 U.S.C. Secs. 7101-7135 (1982), establishes a collective bargaining system for federal employers and employees. In establishing that system, Congress sought to safeguard the rights of employees to "organize, bargain collectively, and participate through labor organizations of their own choosing in decisions which affect them." 5 U.S.C. Sec. 7101(a)(1).

Title VII is not simply an "employees' rights" statute, however. In it, Congress sought to balance the public interest served by the protection of employees' rights against the public interest served by granting agency managers the powers needed to govern effectively. Congress recognized in Title VII "the special requirements and needs of the Government," and carefully directed that its provisions be interpreted "in a manner consistent with the requirement of an effective and efficient Government." 5 U.S.C. Sec. 7101(b).

Title VII subjects both federal employers and employee unions to a duty to bargain in good faith over "conditions of employment." 5 U.S.C. Secs. 7114(a)(4), 7103(a)(12). The Act defines "conditions of employment" broadly, to include "personnel policies, practices, and matters ... affecting working conditions." 5 U.S.C. Sec. 7103(a)(14). Agencies must make "good faith" efforts to reach agreement with employee representatives on subjects committed to bargaining, 5 U.S.C. Sec. 7114(a)(4), and where bargaining fails to produce an agreement, the statute provides for binding resolution of the dispute. 5 U.S.C. Sec. 7119(b), (c)(5)(B) & (C). A duty to bargain over a proposal, therefore, does more than simply require an agency to negotiate; it subjects the agency to the possibility that the proposal will become binding.

Recognizing the need to promote the effectiveness and efficiency of government, the Act limits the duty to bargain. The "management rights clause" of the Act reserves certain prerogatives to management, and exempts those subjects from bargaining. 5 U.S.C. Sec. 7106. That provision reads, in pertinent part:

[N]othing in this chapter shall affect the authority of any management official of any agency--

* * *

(2) in accordance with applicable laws--

* * *

(B) ... to make determinations with respect to contracting out.

5 U.S.C. Sec. 7106(a)(2)(B). Section 7117 of the Act further limits the duty to bargain, precluding negotiation over contract proposals that are "inconsisten[t] with any Federal law or Government-wide rule or regulation." 5 U.S.C. Sec. 7117(a)(1).

B.

Circular No. A-76, published by the Office of Management and Budget, establishes "the policies and procedures used [by executive branch departments and agencies] to determine whether needed commercial or industrial type work should be done by contract with private sources or in-house using Government facilities and personnel." 44 Fed.Reg. 20557 (1979). A Supplement to the Circular "sets forth procedures for determining" whether a given activity should be performed by government employees or contracted out. Office of Management and Budget, Circular No. A-76 (Revised) 1 (1983) [hereinafter, OMB Circular A-76].

During negotiations between HHS and the union, the union proposed a contract provision that would require HHS to make contracting-out decisions in accordance with the Circular. Title VII requires all collective bargaining agreements to include grievance procedures, 5 U.S.C. Sec. 7121(a)(1), and provides that grievances that cannot be resolved satisfactorily through such procedures must be submitted to binding arbitration. 5 U.S.C. Sec. 7121(b)(3)(C). Because Title VII defines grievance to include claims of breaches of collective bargaining agreements, 5 U.S.C. Sec. 7103(a)(9)(C)(i), incorporation of the Circular's requirements in the collective bargaining agreement would subject disputes over the Circular's application to this grievance and arbitration procedure. 5 U.S.C. Sec. 7103(a)(9)(C)(i).

HHS determined the proposal to be nonnegotiable. The agency found that the proposal would violate the management rights clause by affecting management decisions to contract out. According to the agency, the proposal would at least delay the exercise of management's right to contract out. In some cases, it would result in arbitrators, rather than agency management, making substantive contracting out decisions. HHS also found that the proposal would violate Sec. 7117. It contended that incorporating the Circular's requirements into the collective bargaining agreement would subject disputes over its application to the Act's protracted grievance and arbitration procedures. HHS argued that this would create an inconsistency with a government-wide regulation, in this case the Circular itself, because the Circular provides for an exclusive, expedited appeals procedure.

The union petitioned the Federal Labor Relations Authority (FLRA) for review of HHS's finding of nonnegotiability, and the FLRA ruled that the proposal was subject to the duty to bargain. American Federation of Government Employees, AFL-CIO, Local 1923 and Department of Health and Human Services, 22 F.L.R.A. 1071 (1986). The FLRA held that the proposal was not inconsistent with the management rights clause of Sec. 7106 because it would not in itself impose any substantive limits on management's right to make decisions on contracting out, but would merely recognize existing constraints on that right. The Authority also held that the proposal did not violate Sec. 7117 because alleged violations of the Circular were already subject to the Act's grievance procedures, and the proposal therefore did not create any new right of appeal that was inconsistent with the Circular.

HHS moved for reconsideration, and when that motion was denied by the FLRA as untimely, appealed to this court. A divided panel enforced the FLRA's order. United States Department of Health and Human Services v. FLRA, 822 F.2d 430 (4th Cir.1987). Review by the en banc court followed.

C.

The FLRA "is entitled to considerable deference when it exercises its 'special function of applying the general provisions of the [Civil Service Reform] Act to the complexities' of federal labor relations." Bureau of Alcohol, Tobacco & Firearms v. FLRA, 464 U.S. 89, 97, 104 S.Ct. 439, 444, 78 L.Ed.2d 195 (1983). We may overturn the FLRA's interpretation of Title VII only if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. Secs. 706(2)(A), 7123(c).

Despite the deference owed the FLRA, however, we must "decide all relevant questions of law [and] interpret constitutional and statutory provisions." 5 U.S.C. Secs. 706, 7123(c). We may "not 'rubber-stamp ... administrative decisions that [we] deem inconsistent with a statutory mandate or that frustrate the congressional policy underlying a statute.' " Bureau of Alcohol, Tobacco & Firearms v. FLRA, 464 U.S. at 97, 104 S.Ct. at 444. Here the FLRA has misconstrued the provisions of Title VII and undermined the intent of Congress to ensure the efficient and effective operation of government. The union's proposal violates both the management rights clause of Sec. 7106 and Sec. 7117(a)(1). Accordingly, we deny enforcement of the Authority's order.

II.

A.

Congress enacted the management rights clause to ensure that the collective bargaining system in Title VII would not undermine the effectiveness of government through unwarranted intrusion on management prerogatives. In broad and sweeping language, that clause declares that, with certain prescribed exceptions, "nothing in this chapter shall affect the authority of any...