United States Dep't of Commerce v. Fed. Labor Relations Auth.

• Decision Date: 16 March 2012
• Docket Number: No. 11–1019.,11–1019.
• Citation: 192 L.R.R.M. (BNA) 3281,18 Wage & Hour Cas.2d (BNA) 1660,672 F.3d 1095
• Parties: UNITED STATES DEPARTMENT OF COMMERCE, PATENT AND TRADEMARK OFFICE, Petitioner v. FEDERAL LABOR RELATIONS AUTHORITY, Respondent.Patent Office Professional Association, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

18 Wage & Hour Cas.2d (BNA) 1660

192 L.R.R.M. (BNA) 3281

672 F.3d 1095

UNITED STATES DEPARTMENT OF COMMERCE, PATENT AND TRADEMARK OFFICE, Petitioner

v.FEDERAL LABOR RELATIONS AUTHORITY, Respondent.Patent Office Professional Association, Intervenor.

No. 11–1019.

United States Court of Appeals, District of Columbia Circuit.

Argued Dec. 8, 2011.Decided March 16, 2012.

On Petition for Review of a Final Decision of the Federal Labor Relations Authority.Howard S. Scher, Attorney, United States Department of Justice, argued the cause for the petitioner. Tony West, Assistant Attorney General, and William Kanter and Thomas M. Bondy, Attorneys, were on brief.

Rosa M. Koppel, Solicitor, Federal Labor Relations Authority, argued the cause for the respondent. Joyce G. Friedman, Attorney, Federal Labor Relations Authority, entered an appearance.

Richard J. Hirn argued the cause for intervenor Patent Office Professional Association in support of the respondent.Gregory O'Duden, Larry J. Adkins, Peyton H.N. Lawrimore, Andres M. Grajales and Teresa J. Idris were on brief for the amici curiae, American Federation of Government Employees et al. in support of the respondent.

Before: HENDERSON, ROGERS and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge HENDERSON.

Opinion concurring in the judgment filed by Circuit Judge ROGERS.

KAREN LECRAFT HENDERSON, Circuit Judge:

The Patent and Trademark Office of the United States Department of Commerce (PTO or Agency) seeks review of a decision of the Federal Labor Relations Authority (FLRA or Authority) upholding an arbitrator's award in favor of the Patent Office Professional Association (POPA or Union). U.S. Dep't of Commerce Patent & Trademark Office, 65 F.L.R.A. 290 (2010) ( PTO II ). The arbitrator concluded PTO committed an unfair labor practice in violation of the Federal Service Labor–Management Relations Statute (FSLMRS or Statute), 5 U.S.C. § 7116(a)(1) and (5), when it repudiated a provision in an agreement requiring that it make an annual request of the Office of Personnel Management (OPM) to increase PTO's special schedule pay rates and, if OPM refuses, to discuss “substantially equivalent alternatives” with POPA. Arbitration Decision in re Patent Office Prof'l Ass'n v. U.S. Dep't of Commerce, Patent & Trademark Office, FMCS Case No. 04–01463–3 (Arbitral Award of Arbitrator Arrigo) (July 25, 2006) ( Award II ). In particular, PTO challenges the Authority's determination that the provision constitutes an “appropriate arrangement” under 5 U.S.C. § 7106(b)(3). We grant PTO's petition on the ground that, under the collateral estoppel doctrine, the Authority was bound by its earlier decision concluding the provision did not constitute an appropriate arrangement. See U.S. Dep't of Commerce, Patent & Trademark Office, 60 F.L.R.A. 839 (2005) ( PTO I ), pet. for review dismissed, Patent Office Prof'l Ass'n v. FLRA, 180 Fed.Appx. 176 (D.C.Cir.2006).

I.

In 2000, PTO patent examiners' wages, like those of most executive branch employees, were determined pursuant to the General Schedule (GS). Because it was experiencing problems recruiting and retaining employees, PTO requested and obtained OPM approval to pay employees special pay rates exceeding the comparable GS rates by ten or fifteen per cent, depending on the grade. Over time, however, special rates decrease in value relative to the corresponding GS rates because, while both rates receive annual general increases, only the latter include annual locality increases. Accordingly, PTO and POPA negotiated the following provision in an agreement effective January 2001:

The [PTO] shall request OPM approval for the next five years to increase the special pay schedule so as to maintain the 10% and 15% salary differentials relative to the updated GS rates, in a manner consistent with OPM regulations. If OPM refuses the request, the Agency shall enter into discussions with POPA in order to provide substantially equivalent alternatives.

Agreement on Initiatives for a New Millennium between [PTO and POPA], § A.2 (JA 69) (Millennium Agreement).

In 2002, federal employees in the Washington, D.C. region received a 3.6% general wage increase and a 1.17% locality pay increase. Pursuant to section A.2 of the Millennium Agreement, in February 2002, PTO requested that OPM increase the special pay rate by 1.17% to maintain the ten and fifteen per cent differentials, subsequently lowering the request to 1%. OPM denied PTO's request on the ground PTO's filings did not show it was “experiencing or ... likely to experience significant handicaps in recruiting or retaining patent professionals.” Award II at 11 (internal quotations omitted). OPM recommended that PTO explore “the strategic use of other compensation flexibilities to address targeted recruitment and retention problems.” Id. Accordingly, PTO entered into discussions with the Union regarding “substantially equivalent alternatives” pursuant to the second sentence of section A.2. When the discussions proved fruitless, the Union filed a grievance, which was then submitted to arbitration.

The arbitrator concluded that PTO had violated section A.2 of the Millennium Agreement and ordered it to “engage in ... discussions [with POPA] in good faith with a sincere resolve to find a way to make-up for the lost locality pay.” In re Arbitration Between Patent & Trademark Office & Patent Office Prof'l Ass'n, FMCS Case No. 04–00138 at 16 (Oct. 1, 2001) (Arbitral Award of Arbitrator Evans) ( Award I ). In his order, Arbitrator Evans “found that Section A.2 was intended to address the adverse effect of special rate erosion that would occur over time as non-special rate employees received locality pay increases.” PTO I, 60 F.L.R.A. at 842 (citing Award I at 12).

On review, the Authority set aside the arbitral award as violating section 7106 of the FSLMRS. The Statute generally imposes on a federal agency a duty to bargain in good faith with a public employee union over conditions of employment but section 7106(a) exempts from the duty certain “management rights,” including the right to retain its employees. See U.S. Dep't of the Treasury v. FLRA, 670 F.3d 1315, 1317 (D.C.Cir.2012); 5 U.S.C. § 7106(a)(2)(A). Nonetheless, an agency must bargain over a proposal—including one that affects a management right—if the proposal constitutes an “ ‘appropriate arrangement[ ] for employees adversely affected’ by the exercise of management rights.” Nat'l Ass'n of Gov't Emps., Inc. v. FLRA, 179 F.3d 946, 948 (D.C.Cir.1999) (quoting 5 U.S.C. § 7106(b)(3)). In PTO I, the Authority concluded section A.2 affected PTO's management right to retain employees and was not an “appropriate arrangement” within the meaning of 5 U.S.C. § 7106(b)(3) because, “as interpreted and enforced by the Arbitrator,” it sought to “ameliorate[ ] adverse effects” that result not from the exercise of a management right but from “the operation of law, specifically, the fact that under 5 C.F.R. § 531.606, special rate employees are not permitted to receive locality pay adjustments.” 60 F.L.R.A. at 842. Thus, the Authority concluded section A.2 was not a statutory “arrangement” at all and set aside the arbitral award as “contrary to management's right to retain employees under § 7106(a)(2)(A).” Id. at 842, 843. In making this determination, the Authority specifically rejected as “unsupported” POPA's claim that section A.2 was intended as an arrangement for employees adversely affected by PTO's decision “to eliminate paper files and to include a customer service element in the performance plans.” ¹

In 2003, the locality pay rate for the Washington, D.C. region again increased by 1.17%. PTO determined it could not certify to OPM that a special pay rate increase was “critical to the mission of the Agency” and, accordingly, notified POPA it would not submit a request that OPM increase the rate. PTO II, 65 F.L.R.A. at 291. POPA again filed a grievance, which was again submitted to arbitration.

Arbitrator Arrigo found section A.2 affected the Agency's management right to retain employees because “ ‘the essential facts and circumstances' ” were “ ‘substantially identical’ ” to PTO I. Id. at 292 (quoting Award II at 24). He further concluded that section A.2 was an “appropriate arrangement” because “ ‘the entirety of [§] A,’ including § A.2, ‘was negotiated as a quid pro quo for the elimination of paper patents and the addition of customer service duties for employees[,]’ two changes desired by the Agency and opposed by the Union.” Id. (quoting Award II at 24) (alteration in original). Arbitrator Arrigo specifically found that “the linkage between a special pay schedule and the paper file and customer service issues was established ‘in every document concerning the discussions between the parties,’ ” id. (quoting Award II at 25), and the special pay rate provisions were “a ‘balm’ to ‘ameliorate the adverse effects upon employees for the Union's acceding to the Agency's desire to exercise its management rights regarding the elimination of paper files ... and employees being assigned additional duties' and were enforceable as appropriate arrangements under § 7106(b)(3).” Id. (quoting Award II at 25–26). He further determined PTO's breach of both sentences of section A.2—by declining to submit a request to OPM, then failing to enter discussions with POPA—“ ‘went to the heart of the parties' agreement’ ” because it was a “ ‘critical part’ of § A, which was, in turn, necessary to [POPA's] acceptance of the rest of the [Millennium Agreement].” Id. (quoting Award II at 27). Accordingly, Arbitrator Arrigo concluded PTO repudiated the agreement in violation of 5 U.S.C. § 7116(a)(1) and (5). ² He decided that “the appropriate remedy was to ‘require the Agency to fulfill its obligations under the agreement and to “enter discussions with [the Union] in order to provide substantially equivalent alternatives” to the erosion of the agreed-upon pay...