Petition for Writ of Certiorari — Equal Employment Opportunity Commission v. Federal Labor Relations Authority

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8417280 [om rp onus

No. MAY 2 1985

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In the Supreme Court of the United States

OCTOBER TERM, 1984

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,

PETITIONER

FEDERAL LABOR RELATIONS AUTHORITY AND

AMERICAN FEDERATION OF GOVERNMENT

EMPLOYEES, AFL-CIO,

NATIONAL COUNCIL OF EEOC LOCALS

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

REX E. LEE

Solicitor General

RICHARD K. WILLARD

Acting Assistant Attorney General

CHARLES FRIED

Deputy Solicitor General

CAROLYN F. CORWIN

Assistant to the Solicitor General

WILLIAM KANTER

HAROLD J. KRENT

Attorneys

Department of Justice

Washington, D.C. 20530

(202) 633-2217

QUESTION PRESENTED

Whether a federal agency’s compliance with Office of

Management and Budget Circular A-76, an Executive

Branch management policy directive that establishes

guidelines for agency decisions whether to contract out

functions to private enterprise, and with laws and regu-

lations concerning contracting out is a proper subject of

negotiation and arbitration between the agency and an

employee union under Title VII of the Civil Service Re-

form Act of 1978, 5 U.S.C. 7101 et seq.

(I)

TABLE OF CONTENTS

Page

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Reasons for granting the petition 8

, ˙ cctcccccces 24

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V 38a

, ud 40a

F ̃ ũ¶—᷑ rTrrr dcceccevcesces 49a

TABLE OF AUTHORITIES

Cases:

AFGE, AFL-CIO v. Carmen, 669 F.2d

// / / 666 6 19

AFGE, Local 225 and Dep't of the Army, 17

F.L.R.A. No 66 (Apr. 5, 1985) ...... 15, 18, 20

AFGE, Local 2017 v. Brown, 680 F.2d 722,

cert. denied, 459 U.S. 1104 ............ 16-17

Andrade v. Lauer, 729 F. 2d 1475. 23

Bureau of Alcohol, Tobacco & Firearms v.

FLRA, No. 82-799 (Nov. 29, 1983) 4

California National Guard v. FLRA, 697

, iii cc. 21, 22

Ae. 17

Dep’t of the Army, Oakland Army Base,

and AFGE, Local 1157, FMCS NO.

83K/24072 (Nov. 26, 1984) ............. 22

First National Maintenance Corp. v.

Ee 17

(IIT)

Cases—Continued:

Headquarters, 97th Combat Support Group

(SAC), Blytheville Air Force Base, and

AFGE, Local No. 2840, FMCS No.

82K/20840 (Aug. 9, 1982) ..............

Indiana Air National Guard v. FLRA, 712

BERR

Local 2855, AFGE (AFL-CIO) v. United

States, 602 F. 2d 574................05.

Myers v. United States, 272 U.S. 52

National Federation of Federal Employees

and Dep’t of the Air Force, Lowry Air

Force Base, 9 F. L. R. A. 151............

Naval Air Station, Whiting Field, and

AFGE, Local Union No. 1954, FMCS No.

83K/06143 (Apr. 29, 1983). .............

New Jersey Air National Guard v. FLRA,

677 F. 2d 276, cert. denied, 459 U.S. 988 .

Panama Canal Co. v. Grace Line, Inc., 356

State of Nebraska, Military Dep’t v. FLRA,

r ˙ cctiscees

U.S. Army Communications Command,

Fort McClellan, and Local No. 1941,

AFGE, FMCS No. 83K/00570 (Aug. 9,

o ek enh ante de cee

U.S. Army Communications Command

Agency—Redstone Arsenal, and AFGE

Local 1858, FMCS No. 83K/05094 (May

11700

United States Marshals Service v. FLRA,

J 0-00000s4 cdkcnnvovumeenee

Page

Statutes, rules and regulations: Page

Civil Service Reform Act of 1978, Pub. L.

No. 95-454, 92 Stat. 1111 et seq. ........ 3

Tit. VII, 5 U.S.C. 7101 et seg. 3

5 U.S.C. 7108(aX2) ............. 4

5 U.S.C. 7103(a)(9) ....... 2, 7, 8, 17, 19

5 U.S.C. 7103(a)(9(C)G)......... 5

5 U.S.C. 7103(a) (9 (CC) 17

SU . 4

5 U. S. C. 71030 -l) 4, 18

5 U.S.C. 7100 a) (2) (A )-) . 5

fb i 2, 13, 15, 16, 18

6 U.S.C. THOR)... cc neess 6, 7, 9, 18

5 U.S.C. 7106(a)(2)(B)........... 5, 18

D 15

D ere 5

5 U. S. C. 71060-b(3))) 5

5 U.S.C. 7110 % ůhꝙ))ꝛihrꝛ 4

D seeks ds ceevuns bet 20, 21

5 U.S.C. 7117(a)(1) .......-. 3, 5, 19, 20

an won cesecececes 4

5 U.S.C. 7119 005 ())) 4

5 U.S.C. 7119000 5% co) 4

r A bak enw 5, 17

D ⸗C vi ic cccudsenns 14

2 wo pccaecscnscess 5, 23

Ee 5

National Guard Technicians Act of 1968, 32

r 22

r 1

Statutes, rules and regulations—Continued:

pe se 8 PPT ree

Sa cis Ce ˙ . cnctne

Exec. Order No. 10988, 3 C. F. R.

(1959-1963 comp.)...............65:

IL ae

Exec. Order No. 11491, 3 C. F. R.

(1966-1970 comp. )))i „

Exec. Order No. 11616, 3 C. F. R.

. 5 oo wc ce ccincsiccces

Exec. Order No. 11636, 3 C.F.R.

PCP TTT eee ee

Exec. Order No. 11838, 3 C.F.R.

(1971-1975 comp.) ꝗ é

Miscellaneous:

521

— *

861

605

634

957

Cox, Reflections Upon Labor Arbitration,

72 Harv. L. Rev. 1482 (1959)........

H.R. Conf. Rep. 95-1717, 95th Cong., 2d

13, 20, 21

H.R. Rep. 95-1403, 95th Cong., 2d Sess.

r va vacances

GD x nnn ᷣ ˙ UA

Labor-Management Relations in the Federal

Service: Report and Recommendations of

the Federal Labor Relations Council on

the Amendment of Executive Order 11491

(1975), reprinted in Subcomm. on Postal

Personnel and Modernization of the House

Comm. on Post Office and Civil Service,

96th Cong., Ist Sess., Legislative History

of the Federal Service Labor-Management

Relations Statute, Title VII of the Civil

Service Reform Act of 1978 (Comm. Print

SUE Ck ncdcSkvws tenn vonvendeuse ss

4, 18

VII

Miscellaneous Continued: Page

Office of Management and Budget Circular

, tad a kno vn cec'ene cos passim

44 Fed. Reg. (1979):

GUC s uy «anne ess kee ee 11

D 10-11, 12

D ci oeebenevsussae ees 11, 14

NO eS re 12

45 Fed. Reg. 69322 (1980) ........... 11

47 Fed. Reg. (1982):

rr ĩ˙ ĩ˙•ʃUWW—W 11

D o ⸗ ôc˙ôc ˙˖ A.. 11

48 Fed. Reg. 37114 (19833) 11, 14

Supplement (1983) .................. 14

10 President’s Private Sector Survey on

Cost Control, Report on Management Of-

fice Selected Issues: Opportunities Be-

yond PPSSCC (1983) ................. 11-12

Shulman, Reason, Contract, and Law in La-

bor Relations, 68 Harv. L. Rev. 999

77 14

Study Committee Report and Recommenda-

tions, August 1969, reprinted in

Subcomm. on Postal Personnel and Mod-

ernization of the House Comm. on Post

Office and Civil Service, 96th Cong., Ist

Sess., Legislative History of the Federal

Service Labor-Management Relations

Statute, Title VII of the Civil Service Re-

form Act of 1978 (Comm. Print 1979)... . 16

2 U.S. General Accounting Office, Report of

the Comptroller General: Compendium of

GAO’s Views on the Cost Saving Propos-

als of the Grace Commission (1985) 12

VIII

Miscellaneous Continued:

U.S. Office of Management and Budget,

Budget of the United States Government,

Fiscal Year 1986 (1985)................

U.S. Office of Management and Budget,

Management of the United States Govern-

ment: Fiscal Year 1986 (1985)

In the Supreme Court of the United States

OCTOBER TERM, 1984

No.

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,

PETITIONER

FEDERAL LABOR RELATIONS AUTHORITY

AND AMERICAN FEDERATION OF GOVERNMENT

EMPLOYEES, AFL-CIO,

NATIONAL COUNCIL OF EEOC LOCALS

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA C'RCUIT

The Solicitor General, on behalf of the Equal Em-

ployment Opportunity Commission, petitions for a writ

of certiorari to review the judgment of the United

States Court of Appeals for the District of Columbia

Circuit in this case.

OPINIONS BELOW

The opinion of the court of appeals (App., infra,

la-37a) is reported at 744 F.2d 842. The decision and

order of the Federal Labor Relations Authority (App.,

infra, 40a-48a) is reported at 10 F. L. R. A. 3.

JURISDICTION

The judgment of the court of appeals (App., infra,

49a-50a) was entered on September 21, 1984. A timely

petition for rehearing was cenied on December 3,

(1)

1984 (App., infra, 38a-39a). On February 26, 1985, the

Chief Justice extended the time within which to file a

petition for a writ of certiorari to and including May 2,

1985. The jurisdiction of this Court is invoked under 28

U.S.C. 1254(1).

STATUTES INVOLVED

5 U.S.C. 7103(a)(9) provides:

“(G]rievance” means any complaint

(A) by any employee concerning any matter

relating to the employment of the employee;

(B) by any labor organization concerning any

matter relating to the employment of any em-

ployee; or

agency concerning—

(i) the effect or interpretation, or a claim of

breach, of a collective bargaining agreement;

(ii) any claimed violation, misinterpretation,

or misapplication of any law, rule, or regula-

tion affecting conditions of employment(. |

5 U.S.C. 7106 provides:

Management rights

(a) Subject to subsection (b) of this section, noth-

ing in this chapter shall affect the authority of any

management official of any agency—

(1) to determine the mission, budget, organiza-

tion, number of employees, and internal security

practices of the agency; and

(2) in accordance with applicable laws—

(A) to hire, assign, direct, layoff, and retain

employees in the agency, or to suspend, re-

move, reduce in grade or pay, or take other

disciplinary action against such employees;

(B) to assign work, to make determinations

with respect to contracting out, and to deter-

mine the personnel by which agency opera-

tions shall be conducted;

selections for appointments from—

(i) among properly ranked and certified

candidates for promotion; or

(ii) any other appropriate source; and

(D) to take whatever actions may be neces-

sary to carry out the agency mission during

emergencies.

(b) Nothing in this section shall preclude any

agency and labor organization from negotiating—

(1) at the election of the agency, on the num-

bers, types, and grades of employees or positions

assigned to any organizational subdivision, work

project, or tour of duty, or on the technology,

methods, and means of performing work;

(2) procedures which management officials of

the agency will observe in exercising any author-

ity under this section; or

(3) appropriate arrangements for employees

adversely affected by the exercise of any author-

ity under this section by such management

officials.

5 U.S.C. 7117(a)(1) provides:

Subject to paragraph (2) of this subsection, the

duty to bargain in good faith shall, to the extent

not inconsistent with any Federal law or any

Government-wide rule or regulation, extend to

matters which are the subject of any rule or regu-

lation only if the rule or regulation is not a

Government-wide rule or regulation.

STATEMENT

1. In October 1978 Congress enacted the Civil Serv-

ice Reform Act of 1978 (the Act), Pub. L. No. 95-454,

92 Stat. 1111 et seg. Title VII of the Act, 5 U.S.C. 7101

et seq., governs labor-management relations, including

collective bargaining, for nearly all federal agencies.

Title VII replaced the federal labor relations program

created in 1962 by Executive Order No. 10988, 3

C. F. R. 521 (1959-1963 comp.).”

Under the Act, a federal agency is required to bar-

gain in good faith with a federal employee union about

conditions of employment. 5 U.S.C. 7103(a) (12),

7114(b)(2); Bureau of Alcohol, Tobacco & Firearms v.

FLRA, No. 82-799 (Nov. 29, 1983), slip op. 2-3. [Clon-

ditions of employment” are defined as “personnel poli-

cies, practices, and matters, whether established by

rule, regulation, or otherwise, affecting working condi-

tions.” 5 U.S.C. 7103(a)(14). The Act provides that if an

impasse is reached, either party to the negotiations

may ask the Federal Service Impasses Panel (the

Panel) to intervene. 5 U.S.C. 7119(c). The Panel has

the authority to judge a proposal on its merits and to

order the parties to adopt it. 5 U.S.C. 7119(c)(5)(B) and

(C); see 5 C.F.R. 2471.11(a). Thus, unlike the situation

in the private sector, a determination that a bargaining

proposal is negotiable carries with it the possibility that

the proposal ultimately will be incorporated as part of

the collective bargaining agreement pursuant to an or-

der of the Panel. A union may use the grievance and ar-

bitration process to challenge management actions that

' Certain federal employees, including members of the uni-

formed services and the Foreign Service, and certain agencies, in-

cluding the General Accounting Office, Federal Bureau of Investi-

gation, Central Intelligence Agency, and National Security

Agency, are excluded from the coverage of Title VII. See 5

U.S.C. 7103(a)(2) and (3). United States Postal Service employees

also are excluded from Title VII coverage, since labor relations

matters involving those employees are within the jurisdiction of

the National Labor Relations Board. See 39 U.S.C. 1209.

The executive order program was revised and continued by

Executive Order No. 11491, 3 C.F.R. 861 (1966-1970 comp.), as

amended by Executive Orders Nos. 11616, 11636, and 11838, 3

C. F. R. 605, 634, 957 (1971-1975 comp.).

allegedly violate the collective bargaining agreement. 5

U.S.C. 7103(a)(9\(C\Xi), 7121.

Congress excluded from the requirements of the Act

matters affecting certain management rights, including

the right “to make determinations with respect to con-

tracting out.” 5 U.S.C. 7106(a)(2)(B). An agency’s duty

to bargain with respect to these reserved rights is lim-

ited to the “procedures which management * * * will

observe in exercising” the rights and “appropriate ar-

rangements for employees adversely affected” by exer-

cise of the rights. 5 U.S.C. 7106(b)(2) and (3). The Act

also precludes an agency from bargaining when it would

be “inconsistent with any Federal law or any

Government-wide rule or regulation” and over any

“matters which are the subject of * * * a Government-

wide rule or regulation.” 5 U.S.C. 7117(a)(1).

The Act established the Federal Labor Relations Au-

thority (FLRA or Authority) as a three-member inde-

pendent body within the Executive Branch with re-

sponsibility for, inter alia, supervising the federal

collective bargaining process and the grievance and ar-

bitration machinery established by Title VII. Among

other responsibilities, the Authority adjudicates negoti-

ability disputes and unfair labor practice complaints and

reviews arbitral awards. 5 U.S.C. 7105(a)(2)(A)-(1).

The Authority may seek enforcement of its orders in

appropriate United States courts of appeals. 5 U.S.C.

7123(b). Persons, including federal agencies, who are

aggrieved by certain types of FLRA orders may seek

judicial review in the courts of appeals. 5 U.S.C.

7123(a).

2. In 1980, during the course of contract negotia-

tions with the Equal Employment Opportunity Com-

mission, respondent American Federation of Govern-

ment Employees, AFL-CIO, National Council of EEOC

Locals (the union) proposed the following contract

provision:

The EMPLOYER agrees to comply with OMB Cir-

cular A-76 and other applicable laws and regula-

tions concerning contracting-out.

App., infra, 40a. Office of Management and Budget

Circular A-76, to which the proposal refers, is a man-

agement policy directive applicable to all Executive

Branch agencies that establishes guidelines for agency

decisions whether to contract out to private enterprise

for products and services the government needs. The

EEOC took the position that the duty to bargain in

good faith did not extend to the union’s proposal and

that bargaining on such matters “would be inconsistent

with law, rule and regulations” (C.A. App. 9). The

union subsequently submitted the proposal to the

FLRA for a negotiability determination (id. at 1-2).

3. The FLRA ruled that the union’s proposal was ne-

gotiable (App., infra, 40a-48a). The Authority recog-

nized that the proposal addressed a subject listed in the

management rights provision of the Act, 5 U.S.C.

7106(a) (App., infra, 40a-41a). The Authority neverthe-

less concluded that the proposal would not contravene

that provision, because it “would contractually recog-

nize external limitations on management’s right but

would not establish, either expressly or by incorpora-

tion, any particular substantive limitations on manage-

ment” (id. at 41a).

The Authority also acknowledged that bargaining

about the union proposal ultimately could result in sub-

jecting disputes about compliance with Circular A-76 to

the grievance and arbitration process, in apparent con-

flict with the exclusive nature of the appeals procedure

provided in the Circular (App., infra, 42a). It con-

cluded, however, that even assuming the existence of a

conflict between the proposal and the Circular and that

the latter fit within the statutory definition of a

“Government-wide rule or regulation,” the Circular

could not “limit the statutorily prescribed scope and

coverage of the parties’ negotiated grievance proce-

dure” (ibid.; emphasis in original).*

4. A divided panel of the court of appeals enforced

the order of the Authority (App., infra, la-37a). The

court concluded that the union proposal would not un-

duly restrict management’s reserved right to make

contracting-out determinations for two reasons. First,

the court reasoned that the phrase “in accordance with

applicable laws” in the management rights clause, 5

U.S.C. 7106(a), operated to restrict the authority re-

served to management. Thus, while agencies generally

need not bargain with respect to their right to make

contracting-out determinations, the court concluded

that they were required to bargain about the duty to

comply with all “applicable laws” affecting that right.

App., infra, Sa-Ila.

Second, the court of appeals concluded that the union

proposal would not divest management of any existing

control over the contracting-out process. The court be-

lieved that a union claim that management had failed to

comply with contracting-out guidelines would fall

within the statutory definition of a grievance, 5 U.S.C.

7103(a)(9), and that arbitrators therefore would have

jurisdiction to decide such claims even if there were no

collective bargaining agreement provision requiring

compliance. App., infra, IIa-16a.

The Authority also found negotiable a proposal that the EEOC

should notify the union of its intention to solicit bids for contract

work that could result in reductions-in-force or transfers affecting

employees, with a full explanation of the reasons for the agency's

actions and opportunity for the union to respond in writing. The

Authority found nonnegotiable a proposal that would have re-

quired the EEOC to minimize the effect of contracting-out deci-

sions on employees, on the ground that the proposal would inter-

fere with management’s statutorily reserved right to lay off

employees. App., infra, 43a-47a. Neither of these determinations

is at issue at this stage of the proceedings.

The court of appeals also rejected the EEOC’s claim

that the union proposal was inconsistent with the exclu-

sive appeals procedure established by Circular A-76. In

the court’s view, allowing the text of the Circular to re-

strict the scope of grievances under the Act would in-

ject limitations not created by Congress. App., infra,

16a-17a.

Judge MacKinnon dissented (App., infra, 18a-37a).

He concluded that the union proposal conflicted with

the plain language of the management rights provision

because it required compliance with substantive policy-

making criteria for contracting out (id. at 22a-26a).

Judge MacKinnon also determined that alleged viola-

tions of Circular A-76 would not be statutorily grieva-

ble in the absence of a contractual provision requiring

compliance with such directives because the Circular

does not “affect{ ] conditions of employment” within the

meaning of 5 U.S.C. 7103(a)(9). Inciusion in a collective

bargaining agreement of an agency commitment to

comply with the terms of the Circular therefore would

permit a union to obtain arbitration of issues that other-

wise would not be grievable and would allow arbitra-

tors to review determinations specifically committed to

agencies by the management rights provision of the

Act. App., infra, 29a-36a.

The court of appeals denied the EEOC’s petition for

rehearing with suggestion for rehearing en banc, with

Judges Bork, Scalia, and Starr dissenting from denial of

the suggestion for rehearing en banc (App., infra,

38a-39a).

REASONS FOR GRANTING THE PETITION

This case presents an important question concerning

administration of the federal labor relations program

established under Title VII of the Civil Service Reform

Act of 1978. The court of appeals’ decision requires a

federal agency to bargain with the union about a pro-

posed collective bargaining agreement provision that

would require the agency to comply with Office of Man-

agement and Budget Circular A-76, an executive man-

agement policy directive that establishes guidelines for

determinations whether to contract out agency func-

tions to private enterprise.“ The decision opens the

door to a system under which labor arbitrators (with ul-

timate enforcement by the FLRA) may review substan-

tive agency contracting-out determinations, despite

Congress’s specific reservation of such determinations

to management under 5 U.S.C. 7106(a). In view of the

economic interest of their members in any determina-

tion to contract out an agency function, federal em-

ployee unions have a strong incentive to mount vigor-

ous challenges to such determinations and to search

diligently for arguable agency violations of the detailed

provisions of Circular A-76. As Judge MacKinnon ex-

plained, the decision creates an “extraordinary poten-

tial for vexatious litigation” (App., infra, 36a) and af-

fords unions “a fertile source of weapons for obstructing

or delaying contracting-out decisions, a situation Con-

gress specifically sought to prevent” (id. at 35a).

The system of arbitral review authorized by the deci-

sion below would undermine seriously the potential for

realizing efficiency gains through the contracting-out

process. The Office of Management and Budget advises

us that the estimated loss in cost savings to the federal

government from delays due to arbitral review of dis-

putes concerning future contracting-out determinations

would an.vunt to approximately $142 million for the pe-

* The union proposal refers to compliance with Circular A-76

and “other applicable laws and regulations concerning contracting-

out.” See App., infra, 40a. The EEOC does not have its own

contracting-out regulations, but it is generally subject to the provi-

sions of the federal acquisition regulations, 48 C.F.R. Ch. 1. Since

the parties in this case have focused on Circular A-76, we will re-

fer primarily to the Circular in this petition.

riod from fiscal year 1986 through fiscal year 1989.° Po-

tential contractors may become reluctant to bid on gov-

ernment projects, since market changes during the pe-

riod of arbitral review may render the original bids

obsolete. Losses also may result if an agency elects to

proceed with a project while a grievance is pending and

an arbitrator later disagrees with the agency’s judg-

ment concerning the application of Circular A-76 and

orders rescission of the contract and back pay for dis-

placed federal employees. The decision below thus cre-

ates a serious potential for slowing the contracting-out

process very significantly, or even halting it entirely.

The impact of the decision below extends beyond the

area of contracting out. Under the court of appeals’ rea-

soning, it appears that a union could obtain arbitral re-

view of an agency’s exercise of any of the enumerated

rights reserved to management under the Act merely

by asserting that the agency had failed to comply with

some relevant legal requirement. In addition, by ex-

tending its analysis to Circular A-76, an executive man-

agement policy directive, the court of appeals appears

to have created a precedent for other steps that would

infringe on the President’s inherent authority to man-

age Executive Branch agencies. Review by this Court

is plainly warranted.

1. OMB Circular A-76 was issued by the Office of

Management and Budget, a part of the Executive Of-

fice of the President, pursuant to delegated presidential

management authority. The Circular establishes “the

policies and procedures used 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.

® See page 11, infra, for an estimate of cost savings now being

realized by the Department of Defense from past contracting-out

determinations.

20557 (1979).“ The Cireular preseribes detailed steps

that agencies should follow in making the cost analyses

that are used to determine whether to contract out to

private industry for goods and services the government

needs or to retain performance of a function in-house.

The Department of Defense has reported that Circular

A-76 studies it has completed since 1979 now generate

more than $409 million annually in cost reductions. U.S.

Office of Management and Budget, Management of the

United States Government: Fiscal Year 1986, at 45

(1985). The President has established as a priority pro-

gram the implementation of various efficiency meas-

ures, including increased use of contracting out pursu-

ant to Circular A-76. Jd. at 43-46; U.S. Office of

Management and Budget, Budget of the United States

Government, Fiscal Year 1986, at 2-26 (1985).”

The longstanding policy of the federal government to acquire

needed goods and services from the private sector whenever it

would be feasible and efficient to do so was first recognized offi-

cially in Bureau of the Budget Bulletins, issued in 1955, 1957 and

1960. In 1967, this policy was expressed and implemented in a di-

rective known as Circular A-76. See 44 Fed. Reg. 20558 (1979).

The Circular was revised substantially in 1979. 44 Fed. Reg.

20556. It has been amended in several respects since then. See 45

Fed. Reg. 69322 (1980); 47 Fed. Reg. 6511 (1982); id. at 46783; 48

Fed. Reg. 37114 (1983). The 1979 version of the Circular was in ef-

fect at the time of the contract negotiations in this case.

In recent years Circular A-76 and amendments thereto have

been published in the notice section of the Federal Register. The

supplement to the current version of the Circular is not reprinted

in the Federal Register because of its length. We are lodging with

the Clerk of the Court and providing to counsel for respondents

copies of the supplement.

The President's Private Sector Survey on Cost Control (also

known as the Grace Commission) has strongly endorsed the use of

Circular A-76 to bring badly needed reform and cost savings to

governmental operations. The Grace Commission has estimated

that the federal government could save $7.39 billion over a three-

year period by implementing the Circular aggressively. 10 Presi-

The Circular provides that it “does not establish, and

shall not be construed to create, any substantive or pro-

cedural basis for any person to challenge any agency ac-

tion or inaction on the basis that such action was not in

accordance with this Circular,” except as provided in

the Circular itself. 44 Fed. Reg. 20558 (1979). See also

48 Fed. Reg. 37114 (1983). The Circular directs each

agency to establish an appeals procedure that protects

“the rights of all affected parties—Federal employees

and their representative organizations, contractors and

potential contractors, and contract employees and their

representatives.” 44 Fed. Reg. 20561 (1979). Under

such procedures, a party directly affected by an initial

agency contracting-out determination may file an objec-

tion; an impartial agency official at a level organiza-

tionally higher than the official who approved the origi-

nal decision must rule on any objection within 30 days.

The Circular provides that the decision on appeal is “fi-

nal” and that the appeals “procedure and agency deter-

minations may not be subject to negotiation, arbitra-

tion, or agreements.” Jbid. *

dent’s Private Sector Survey on Cost Control, Report on Manage-

ment Office Selected Issues: Opportunities Beyond PPSSCC 2-4

(1983). The Congressional Budget Office has estimated that in the

long term savings from full implementation of the Circular on a

government-wide basis would amount to $1.1 billion annually. 2

U.S. General Accounting Office, Report of the Comptroller Gen-

eral: Compendium of GAO’s Views on the Cost Saving Proposals

of the Grace Commission 230 (1985).

At the time the appeals procedure was first included in Cireu-

lar A-76, the Office of Management and Budget explained that it

was designed to “promote more effective and consistent implemen-

tation” of the Circular and to “provide a level of visibility and dis-

cipline that should significantly enhance implementation.” 44 Fed.

Reg. 20557 (1979).

The appeals procedure provisions are now found in the supple-

ment to Circular A-76 (at I-14 to I-15). Under the current proce-

dures, a party directly affected by an agency decision to contract

out may request detailed documentation supporting the agency’s

2. The court of appeals’ holding that the EEOC must

bargain about compliance with Circular A-76 is plainly

inconsistent with the Act.

a. Congress enacted the management rights provi-

sion of the Act, 5 U.S.C. 7106, “to preserve the essen-

tial prerogatives and flexibility Federal managers must

have.” H.R. Rep. 95-1403, 95th Cong., 2d Sess. 43-44

(1978). Section 7106(a) specifically provides that “noth-

ing” in the Act shall affect “the authority of any man-

agement official of any agency * * * in accordance with

applicable laws * * * to make determinations with re-

spect to contracting out.” On its face the provision

renders nonnegotiable any bargaining proposal that

would affect substantive agency decisions involving

contracting out for goods and services. See H.R. Conf.

Rep. 95-1717, 95th Cong., 2d Sess. 154 (1978) (Section

7106 “requires the agency to retain the right to make

determinations with respect to contracting out work”).

Since the union proposal at issue in this case requires

management to comply with substantive policy

guidelines for contracting-out determinations, it en-

croaches on a reserved management right and is

nonnegotiable under Section 7106.

Moreover, bargaining about the union’s proposal ulti-

mately means that labor arbitrators, rather than fed-

eral agencies, may be making substantive contracting-

out decisions. As we explained above (at page 4), if the

Federal Service Impasses Panel orders inclusion of the

union proposal at issue here as part of the collective

bargaining agreement, the union may file grievances

challenging management’s determinations to contract

out certain functions, by alleging some arguable viola-

tion of the detailed provisions of Circular A-76. If the

cost comparison analysis; appeals must be filed within 15 working

days of receipt of the documentation. As in the 1979 version of the

Circular, a decision must be rendered within 30 calendar days of

receipt of the appeal.

agency denies the grievance, the union may request ar-

bitration. Review by the Authority of any arbitral

award is not plenary. See 5 U.S.C. 7122. And it is

unclear whether and to what extent the agency could

obtain judicial review of an order of the Authority

upholding an award against the agency. See page 23

note 20, infra.

The introduction of labor arbitrators into the

contracting-out process inevitably would affect an agen-

cy’s freedom to act. The grievance and arbitration pro-

cedure, followed by FLRA review, may last months or

even years, thus delaying final resolution of the validity

of a determination to contract out. See App., infra,

35a-36a. Moreover, since arbitrators normally are ori-

ented toward compromise and solutions that will reduce

labor-management friction, rather than precise inter-

pretation of applicable provisions,“ they may well dis-

agree with management concerning application of Cir-

cular A-76. The problem is compounded by the fact that

management necessarily uses discretion in applying the

terms of the Circular. For instance, the Circular directs

management to develop a “staffing estimate” of the an-

nual productive hours necessary to accomplish an activ-

ity in-house as part of the cost analysis, but recognizes

that there may be no way to make a precise estimate

and that “informed judgment” is a “tool” to be used in

the calculation. Supplement to OMB Circular A-76, at

IV-7 (1983). As another example, management must re-

tain in-house those commercial activities involving pro-

grams related to the direction of “national defense.” 48

Fed. Reg. 37114 (1983); 44 Fed. Reg. 20558 (1979). De-

veloping a staffing estimate or deciding whether an ac-

tivity involves direction of the national defense may

See, e.g., Cox, Reflections Upon Labor Arbitration, 72 Harv.

L. Rev. 1482, 1487-1489, 1493-1507 (1959); Shulman, Reason, Con-

tract, and Law in Labor Relations, 68 Harv. L. Rev. 999,

1016-1024 (1955).

well involve exercise of the specialized expertise and

discretion of agency managers. In view of the

judgmental nature of such determinations, an arbitra-

tor might well arrive at a different conclusion from that

of the agency. Thus, while negotiation concerning

agency compliance with Circular A-76 might appear at

first glance to be harmless (as the court of appeals

assumed), in fact it ultimately could deprive agencies of

control over substantive contracting-out

determinations.

b. The court of appeals conciuded (App., infra, 8a-9a)

that the union proposal would not interfere with an

agency’s right to make contracting-out determinations

reserved under Section 7106 because the phrase “in ac-

cordance with applicable laws” in that section operates

to limit the scope of reserved rights.“ That is a mis-

reading of the statutory language. The reference to

“applicable laws” appeared in a comparable manage-

ment rights provision at the inception of the original

federal labor relations program created by executive

order in 1962.'' The President plainly could not have in-

The court of appeals also noted (App., infra, 8a) that proce-

dures used in the exercise of management rights are negotiable

under 5 U.S.C. 7106(b) and suggested (App., infra, 9a-10a n. 12)

that the union’s proposal here was more procedural than substan-

tive. The FLRA, however, did not find the proposal to be proce-

dural in nature in the decision and order it rendered in this case,

although in another, subsequent case it has referred to the pro-

posal in this case and has characterized it as “only procedural in

nature.” AFGE, Local 225 and Dep't of the Army, 17 F. L. R. A.

No. 66 (Apr. 5, 1985), slip op. 6. As we show in the text, the pro-

posal imposes substantive criteria on management and ultimately

could be read to permit arbitrators to second guess an agency's

substantive contracting-out determinations. Thus, the proposal

cannot be regarded as “procedural.”

The original management rights provision of the executive or-

der program stated that “[mjanagement officials of the agency re-

tain the right, in accordance with applicable laws and regulations,”

to exercise enumerated management rights. Exec. Order No.

10988, § 7(2), 3 C. F. R. 525 (1959-1963 comp.).

tended that language to provide a basis for limiting the

exercise of management rights, particularly since there

was no mechanism for binding arbitration in place in

1962.'2 The words “in accordance with applicable laws”

are most naturally read as an indication that agencies

were not to rely on the management rights provision as

itself a source of legal authority for exercise of those

rights, but were to base such activities on an independ-

ent source of authority.

It is most unlikely that Congress would have used

the “applicable laws” language to create a private right

of action through which unions could enforce the terms

of internal management directives without express

mention of such an intention. The court of appeals’

reading of Section 7106 is particularly questionable in

light of the fact that several courts of appeals have held

that Circular A-76 and other contracting-out guidelines

do not create rights that are enforceable by third par-

ties. In Local 2855, AFGE (AFL-CIO) v. United

States, 602 F.2d 574 (3d Cir. 1979), the court observed

that the studies and evaluations on which a contracting-

out decision “rested involved ‘questions of judgment re-

quiring close analysis and nice choices.’ Id. at 580-581

(quoting Panama Canal Co. v. Grace Line, Inc., 356

U.S. 309, 318 (1958)). The court therefore concluded

that Circular A-76, as well as pertinent agency regula-

tions governing contracting-out determinations,

failled] to provide meaningful criteria against which a

court may analyze the lageney's] decision” (602 F. 2d at

581). See also AFGE, Local 2017 v. Brown, 680 F.2d

'2 See Study Committee Report and Recommendations, August

1969, reprinted in Subcomm. on Postal Personnel and Moderniza-

tion of the House Comm. on Post Office and Civil Service, 96th

Cong., Ist Sess., Legislative History of the Federal Service Labor-

Management Relations Statute, Title VII of the Civil Service Re-

form Act of 1978, at 1240-1241 (Comm. Print 1979) [hereinafter

cited as Legislative History).

722, 726-727 (11th Cir. 1982), cert. denied, 459 U.S.

1104 (1983) (Army’s determination to contract out was

“an inappropriate subject for judicial review because

the decision involves military and managerial choices

inherently unsuitable for the judiciary to consider”).

Since disputes concerning compliance with guidelines

for contracting out are considered unsuitable for judi-

cial review, there is no reason to think that Congress

would have acted sub silentio to make such guidelines

enforceable through labor arbitration. Cf. Cort v. Ash,

422 U.S. 66, 82-84 (1975).

The court of appeals was untroubled by the fact that

the union proposal ultimately could result in arbitration

of challenges to substantive agency contracting-out de-

terminations, because, in the court’s view, such chal-

lenges were subject to the statutory grievance and ar-

bitration procedure even in the absence of a provision

in the collective bargaining agreement requiring com-

pliance with applicable laws and regulations (App.,

infra, 1la-16a). The court’s reference was to the griev-

ance procedure that may be invoked under the Act in

the case of, inter alia, “any claimed violation, misinter-

pretation, or misapplication of any law, rule, or regula-

tion affecting conditions of employment.” 5 U.S.C.

7103(aX9C)ii), 7121.

Even if the court of appeals had been correct in

characterizing guidelines for contracting out as a “law,

rule, or regulation affecting conditions of employment”

within the meaning of 5 U.S.C. 7103(a)(9),"* the man-

'S Congress’s reference to “any law, rule, or regulation affecting

conditions of employment” in Section 7103(a)(9) should not be read

to encompass guidelines for substantive decisions to shift agency

operations to the private sector “purely for economic reasons.”

First National Maintenance Corp. v. NLRB, 452 U.S. 666, 686

(1982) (private employer's decision to terminate a part of its busi-

ness was not part of the “terms and conditions of employment” as

to which Congress mandated bargaining under the National Labor

agement rights provision would bar application of the

statutory grievance and arbitration procedure to dis-

putes concerning compliance with such guidelines. The

explicit statement in Section 7106(a) that “nothing in

this chapter” shall affect management’s authority to

make determinations with respect to contracting out

constitutes an express limitation on the statutory griev-

ance and arbitration procedure created by the Act.“ As

Judge MacKinnon noted in dissent, Aiſt is absurd to

construe the act to say that ‘nothing’ in the rest of

Chapter 71 affects management’s right, but that the

rest of Chapter 71 does affect that right” (App., infra,

28a; emphasis in original). The majority’s reading of

Section 7106 would effectively nullify Congress’s ex-

press reservation to management of the enumerated

rights.

The court of appeals compounded its error in resting

its analysis on the implicit assumption that OMB Circu-

lar A-76 qualifies as “applicable laws,” within the mean-

ing of Section 7106, or as “any law, rule, or regulation

Relations Act). Judge MacKinnon correctly noted (App., infra,

29a-33a) that the term “conditions of employment” is defined un-

der the Act as “personnel policies, practices, and matters * * * af-

fecting working conditions” (5 U.S.C. 7103(a)(14)) and that the

term “working conditions” generally has been defined narrowly.

The Authority itself recently concluded that a union proposal

that “would extend the coverage of the negotiated grievance pro-

cedure to the decision to contract out itself * * * [is] inconsistent

with [5 U.S. C.] 7106(a\(2)(B).” AFGE, Local 225 and Dep't of the

Army, slip op. 6.

Under the pre-Act federal labor relations program it was clear

that employees could not grieve “matters otherwise excluded from

the negotiations by [the management rights clause of Executive

Order No. 11491.“ Labor-Management Relations in the Federal

Service: Report and Recommendations of the Federal Labor Rela-

tions Council on the Amendment of Executive Order 11491 (1975),

Legislative History 1317. There is no indication that Congress

meant to change that practice when it passed the Act in 1978.

„,“ within the meaning of Section 7103(a)(9). Circu-

lar A-76, like most OMB Circulars, is an executive man-

agement policy directive issued pursuant to delegated

presidential budgetary and management authority. As

an internal Executive Branch management directive,

the Circular is interpreted and enforced internally, ulti-

mately through the President’s authority over ap-

pointed officials (see, e. g., Myers v. United States, 272

U.S. 52, 163-164 (1926)). The court of appeals’ reading

of the statutory terms apparently would make

arbitrators—rather than the President himself—the fi-

nal arbiters of whether agencies have adhered ade-

quately to the President’s management policy direc-

tives. The result would be to transform a tool of

presidential management authority into an occasion for

interference by outsiders into that management proc-

ess. At least in the absence of some explicit statement

to the contrary in the legislative history, there is no

reason to believe that Congress, in using the statutory

terms construed by the court of appeals, intended to

encroach on the President’s authority in this manner.

Compare, e.g., AFGE, AFL-CIO v. Carmen, 669 F. 2d

815, 822-826 (D.C. Cir. 1981).

c. The union’s proposal is nonnegotiable for the addi-

tional reason that it is inconsistent with the exclusive

appeals procedure prescribed by the Circular. Under

the Act, 5 U.S.C. 7117(a)(1), the duty to bargain in

good faith exists only “to the extent not inconsistent

with any Federal law or any Government-wide rule or

regulation;” it does not extend to “matters which are

the subject of any * * * Government-wide rule or regu-

lation.” Congress intended that Circular A-76, while

not a “rule” or “regulation” within the meaning of 5

U.S.C. 7103(a)(9) (see pages 17-19, supra), be treated

as a “Government-wide rule or regulation” within the

specialized meaning of Section 7117(a)(1)."° The union’s

proposal conflicts with the express provisions of the

Circular (see page 12, supra) that its appeals proce-

dures are to be exclusive; that agency contracting-out

determinations are not to be subject to negotiation, ar-

bitration, or agreement; and that agency decisions pur-

suant to the appeals procedure of the Circular shall be

final. The lengthy grievance and arbitration procedures:

that would be introduced as a result of the union’s pro-

posal would render pointless the Circular provisions re-

quiring expedited resolution of contracting-out

disputes.“ And if the grievance and arbitration proce-

dures of the Act may override the appeals procedure

prescribed by the Circular, contractors and their em-

ployees would no longer be represented in connection

Although executive management policy directives do not con-

stitute “rules” or “regulations” within the ordinary meaning of

those terms, the legislative history of the Act makes clear that

Congress intended the phrase “Government-wide rule or regula-

tion” to include such policy directives for the limited purposes of

Section 7117. See H.R. Conf. Rep. 95-1717, supra, at 158 (term

“rules or regulations” used in Section 7117 is to be interpreted as

including “official declarations of policy of an agency which are

binding on officials and agencies to which they apply”). See also

AFGE, Local 225 and Dep't of the Army, slip op. 4 (Circular A-76

constitutes a “Government-wide rule or regulation” within the

meaning of Section 7117(a)(1)); National Federation of Federal

Employees and Dep't of the Air Force, Lowry Air Force Base, 9

F. L. R. A. 151, 154 (1982) (Congress interded that the term

“Government-wide rule or regulation” used in Section 7117(a)(1)

“not be confined only to those rules or regulations which meet for-

mal requirements for notice and comment”). Congress presumably

wished to make certain that the collective bargaining process

would not interfere with government-wide directives, regardless

of their nature.

The short deadlines established by the Circular are critical to

the contracting-out process, because data must be current in order

for cost comparisons to be valid and because contractors normally

are expected to adhere to a firm bid.

with the ultimate resolution of any dispute. See

page 12, supra."

The court of appeals disregarded these inconsisten-

cies between the union proposal and the terms of Circu-

lar A-76, on the ground that “the Circular’s restrictive

language cannot be construed to limit the statutory

right to file grievances asserting a violation of

contracting-out regulations” (App., infra, 16a). But the

whole point of Section 7117 is that a “Government-wide

rule or regulation” does limit the scope of rights under

the Act. Section 7117 expresses Congress’s intention

that agencies not be required to bargain about propos-

als that, if incorporated into the collective bargaining

agreement, would be inconsistent with a government-

wide directive ike Circular A-76. See H.R. Conf. Rep.

95-7117, supra, at 155 (Section 7117 “authorizes * * *

the issuance of governmentwide rules or regulations

which may restrict the scope of collective bargaining

which might otherwise be permissible under the provi-

sions of this title”). Since bargaining about the union

proposal in this case ultimately would introduce a form

of third-party review that would be inconsistent with

the terms of the Circular, Section 7117 precludes such

Under the system authorized by the decision below, the arbi-

trator apparently may reach a result different from that of the

agency appeals procedure prescribed by the Circular It is unclear

from the decision what weight (if any) is to be given to the latter

result, which normally would be available long before any arbitral

proceeding was resolved.

In the case of a similar conflict between the grievance proce-

dures authorized by the Act and exclusive appeal procedures pre-

scribed by the National Guard Technicians Act of 1968, the courts

of appeals have uniformly held that the former must yield to the

latter. See Indiana Air National Guard v. FLRA, 712 F.2d 1187

(7th Cir. 1983); State of Nebraska, Military Dep't v. FLRA, 705

F. 2d 945 (8th Cir. 1983); California National Guard v. FLRA, 697

F. 2d 874 (9th Cir. 1983); New Jersey Air National Guard v.

3. We recognize that there is currently no conflict

among the circuits on the question presented by this

petition. However, we view the decision below as of

special importance to the federal government, both be-

cause of its potential threat to the integrity of the

rights reserved to management under the Act and be-

cause of the precedent it appears to create for interfer-

ence with the President’s ability to manage the Execu-

tive Branch through written policy directives. The

decision also is of concern because of the magnitude of

its potential financial impact. Indeed, there is already

evidence of that impact; arbitrators in several cases

have ordered the rescission of agency contracting-out

determinations that were alleged by unions to have vio-

lated some part of Circular A-76 or related guidelines

and have awarded back pay against the agencies.

F LRA, 677 F.2d 276 (3d Cir.), cert. denied, 459 U.S. 988 (1982).

The National Guard Technicians Act of 1968, 32 U.S.C. 70%e)5),

provides that “[njotwithstanding any other provision of law

**** a right of appeal which may exist with respect to [an ad-

verse action] shall not extend beyond the adjutant general of the

jurisdiction concerned.” The courts have reasoned that union pro-

posals calling for a negotiated grievance procedure in connection

with adverse actions affecting National Guard technicians were not

negotiable, “since the Labor-Management Act itself provides that

an agency's duty to bargain in good faith exists ‘to the extent not

— — Caliſornia National Guard

v. FLRA, 697 F.2d at 879 (quoting 5 U.S.C. 7117(a(1)).

In one case, the Navy estimates that it may be required to ex-

pend approximately $400,000 in back pay as a result of an arbitra-

tor’s order to terminate a contract and to reinstate displaced em-

ployees with full back pay and fringe benefits. See Naval Air

Station, Whiting Field, and AFGE, Local Union No. 1954, FMCS

No. 83K/06143 (Apr. 29, 1983). See also Dep't of the Army,

Oakland Army Base, and AFGE, Local 1157, FMCS No.

83K/24072 (Nov. 26, 1984) (directing termination of contract,

reinstatement of displaced employees, and back pay from date of

termination to date of reinstatement), US Army Communica-

tions Command, Fort McClellan, and Local No. 1941, AGE.

FMCS No. 83K/00570 (Aug. 9, 1983) (ordering agency to cease and

Moreover, there is some uncertainty whether the gov-

ernment will be able to obtain review of future arbitral

awards entered on the authority of the decision

below.?“ We therefore believe that review by this

Court is warranted at this time.

desist from contracting out telephone services and implementing

reduction in force pending proper notification to union and to rein-

state any displaced employees); U.S. Army Communications

Command Agency—Redstone Arsenal, and AFGE, Local 1858,

FMCS No. 83K/05094 (May 16, 1983) (contract must be cancelled

until agency complies with arbitrator’s interpretation of collective

bargaining agreement provisions involving provision of documents

to union); Headquarters, eth Combat Support Group (SAC),

Blytheville Air Force Base, and AFGE, Lecal No. 2840, FMCS

No. 82K/20840 (Aug. 9, 1982) (ordering cancellation of procure-

ment action). Exceptions to these awards have been filed with the

FLRA, but the Authority has not yet ruled on any of the

exceptions.

We are lodging with the Clerk of the Court and providing to

counsel for respondents copies of the cited arbitral decisions.

2° Under 5 U.S.C. 7123(a), not all orders of the Authority on ex-

ceptions to arbitral awards are reviewable. The decision of the

Ninth Circuit in United States Marshals Service v. FLRA, 708

F.2d 1417 (1983), has created uncertainty about the extent to

which an agency may obtain judicial review of the Authority's or-

der affirming an arbitral award alleged to infringe on a reserved

management right. See Andrade v. Lauer, 729 F. 2d 1475, 1485 &

n.16 (D.C. Cir. 1984); App., infra, 35a-36a n.17. If further judicial

review of this issue were foreclosed, a conflict among the circuits

could never arise.

A case involving the negotiability of a bargaining proposal that

would require correction of in-house estimates that are not pre-

pared in accordance with existing contracting-out directives is cur-

rently pending in the Ninth Circuit. Defense Language Institute v.

FLRA, Nos. 84-7498 and 84-7610 (argued Mar. 11, 1985).

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted.

Rex E. LEE

Solicitor General

RICHARD K. WILLARD

Acting Assistant Attorney General

CHARLES FRIED

Deputy Solicitor General

CAROLYN F. CORWIN

Assistant to the Solicitor General

WILLIAM KANTER

HAROLD J. KRENT

Attorneys

MAY 1985

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 82-2310

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,

PETITIONER

FEDERAL LABOR RELATIONS AUTHORITY,

RESPONDENT

AMERICAN FEDERATION OF GOVERNMENT

EMPLOYEES, AFL-CIO, ETC., INTERVENOR

Petition for Review and Cross-Application for

Enforcement of an Order of the

Federal Labor Relations Authority

Argued October 26, 1983

Decided September 21, 1984

Before WRIGHT and TAMM, Circuit Judges, and

MACKINNON, Senior Circuit Judge.

Opinion for the court filed by Circuit Judge TAMM.

Dissenting opinion filed by Senior Circuit Judge

MACKINNON.

TAMM, Circuit Judge: This is an appeal from a deci-

sion of the Federal Labor Relations Authority (the Au-

thority) ordering petitioner Equal Employment Oppor-

tunity Commission (EEOC) to bargain over a union

contract proposal that requires compliance with applica-

ble laws and regulations regarding “contracting-out.”

EEOC contends that it has no duty to bargain because

the proposal concerns a subject exclusively reserved to

management. The Authority has cross-petitioned for

(la)

enforcement. For the reasons stated below, we enforce

the Authority’s order.

I. BACKGROUND

A. Statutory Framework

Title VII of the Civil Service Reform Act of 1978 (the

Act), 5 U.S.C. §§ 7101-7135 (1982), substantially re-

vised labor-management relations in the federal sector.

The Act was designed to balance the right of federal

employees to engage in concerted activity with the

need of federal managers to achieve an “effective and

efficient [federal] Government.” 5 U.S.C. § 7101(b). To

administer the Act and establish labor-management re-

lations policy, Congress created the Federal Labor Re-

lations Authority. The Authority’s responsibilities in-

clude resolving issues relating to the duty to bargain.

The Act established a system of collective bargaining

that requires federal agencies and employee unions to

bargain in good faith “with respect to ... conditions of

employment.” 5 U.S.C. § 7103(12). The term “condi-

tions of employment” is expansively defined in the Act

as “personnel policies, practices, and matters, whether

established by rule, regulation, or otherwise, affecting

working conditions.” 5 U.S.C. § 7103(14).

This broad duty to bargain is subject to certain limi-

tations. Specifically, the Act contains a management

rights clause that reserves certain prerogatives to man-

agement. 5 U.S.C. § 7106(a). Most important, for this

case, the management rights clause reserves to man-

agement the authority “to make determinations with

respect to contracting out.” 5 U.S.C. § 7106(a)(2)(B).

The procedures used in exercising these reserved man-

agement rights are subject to negotiation. 5 U.S.C.

§ 7106(b).'

' Section 7106 provides in pertinent part:

(a) Subject to subsection (b) of this section, nothing in this

chapter shall affect the authority of any management official

of any agency—

B. The Facts

The facts in this case are undisputed. During contract

negotiations with the EEOC, the union? advanced the

following proposal:

“The EMPLOYER agrees to comply with OMB

Circular A-76 and other applicable laws and regula-

tions concerning contracting- out.“

Joint Appendix (J.A.) at 2. EEOC declared the pro-

posal nonnegotiable and refused to bargain over it. To

(2) in accordance with applicable laws—

* (B) to assign work, to make determinations with re-

spect to contracting out, and to determine the personnel

by which agency operations shall be conducted;

(b) Nothing in this section shall preclude any agency and

any labor organization from negotiating—

2 procedures which management officials of the

agency will observe in exercising any authority under this

section;

5 U.S.C. §§ 7106(a)(2)(B), (b)(2).

The union, intervenor in this appeal, is the American Federa-

tion of Government Employees, AFL-CIO, National Council of

EEOC Locals.

* OMB Circular A-76 (the Circular) prescribes guidelines for de-

termining whether the goods and services needed by the federal

government should be acquired from the private sector or obtained

“in-house” with government facilities and personnel. Joint Appen-

dix (J.A.) at 37. The Circular specifies that the government gener-

ally should acquire its goods and services from private enterprise

if it is cost-effective. The Circular contains a Cost Comparison

Handbook outlining procedures to be followed in determining

whether contracting-out is most cost-effective. Since the petition

in this case was filed, OMB Circular A-76 has been revised. The

revision in no way affects the issues before us.

resolve the dispute, the union filed a petition for review

with the Authority. J.A. at 1.4

EEOC argued before the Authority that the union

proposal was nonnegotiable primarily for two reasons.“

First, it contended that the proposal conflicted with the

Act’s express reservation to management of the right

“to make determinations with respect to contracting

out.” 5 U.S.C. § 71066 CB). Second, the EEOC ar-

gued that OMB Circular A-76 (the Circular) itself pro-

hibited negotiation over the proposal.“ J. A. at 12-13.

5 U.S.C. S 7105(aX2)E) provides that the authority shall re-

Solvel] issues relating to the duty to bargain.” The Act further

provides that “if an agency involved in collective bargaining .. al-

leges that the duty to bargain in good faith does not extend to any

matter, the [union] may appeal the allegation to the Authority.” 5

U.S.C. Site). The Authority is required to issue a written

decision containing reasons for its determination. If the Authority

concludes that the disputed issue is within the scope of the duty to

bargain, it orders the agency to bargain in good faith. The Author-

ity does not, however, address the merits of the proposal. See Li-

brary of Congress v. FLRA, 699 F.2d 1280, 1284 (D.C. Cir. 1983).

If a proposal is determined to be within the duty to bargain, the

parties must negotiate, although they may adhere to a particular

position to the point of impasse. If an impasse is reached, the par-

ties may refer the dispute to the Federal Service Impasses Panel.

5 U.S.C. §§ 7119%b), (e).

In addition to the two arguments noted here, the agency also

asserted that the proposal fell outside the scope of the duty to bar-

gain because it involved matters that do not directly affect condi-

tions of employment. The FLRA's decision did not address this

contention. American Federation of Government Employees,

AFL-CIO, National Council of EEOC Locals and Equal Employ-

ment Opportunity Commission, 10 FLRA 3 (1982). Since the

EEOC did not raise this argument in its petition to this court, we

the Circular provides that its text “shall not be construed to

create] any substantive or procedural basis for any person to chal-

lenge any agency action or inaction on the basis that such action

was not in accordance with (this) Circular, except as specifically

set forth in this Circular. J. A. at 37. The Circular further di-

On September 2, 1982, the Authority issued a deci-

sion holding that the union proposal was a mandatory

subject of bargaining. American Federation of Govern-

ment Employees, AFL-CIO National Council of

EEOC Locals and Equal Employment Commission, 10

FLRA 3 (1982). The Authority concluded that the pro-

posal did not impair EEOC’s statutory right to make

contracting-out decisions because it recognized only ex-

isting limitations on EEOC’s power. By its terms, ruled

the Authority, the proposal established no substantive

limitations on management discretion. /d.

The Authority further concluded that the proposal

was not rendered nonnegotiable by the terms of the

Circular. EEOC apparently asserted that adoption of

the proposal would result in subjecting all contracting-

out disputes to the negotiated grievance procedure,

thus conflicting with the Circular’s intent to allow

EEOC to resolve such disputes internally.’ The Au-

thority rejected EEOC’s underlying assumption that

contracting-out disputes are not grievable in the ab-

sence of the proposed contract language. 10 FLRA at

4-5. Rather, the Authority found that such disputes

were already grievable under section 7121 of the Act

and that the Circular alone could not limit the

statutorily prescribed scope of the grievance proce-

rects agencies to develop procedures for an informal review of de-

terminations made pursuant to its provisions and states that those

procedures and agency determinations are not subject to negotia-

tion or arbitration. J.A. at 50.

This argument is not expressly articulated in the EEOC’s

statement of position before the Authority. We therefore rely on

the Authority’s characterization of the agency's position. See

American Federation of Government Employees, AFL-CIO, Na-

tional Council of EEOC Locals and Equal Employment Opportu-

nity Commission, 10 FLRA at 4-5 (1982).

dure. 10 FLRA at 4-5. Concluding that the contract

proposal was not prohibited by either the Act or the

Circular, the Authority ordered EEOC to bargain. /d.

at 5.

EEOC filed a timely petition for review in this

court.“ The FLRA filed a cross-petition for enforce-

ment. We have jurisdiction pursuant to 5 U.S.C.

§ 7123."°

II. STANDARD OF REVIEW

The Act provides that the Authority’s rulings are re-

viewable in accordance with section 10(e) of the Admin-

istrative Procedure Act (APA), 5 U.S.C. § 706 (1982).

See 5 U.S.C. § 7123(c) (1982). The Authority’s determi-

nations will thus be upheld “if they are supported by

substantial evidencel, ... are not arbitrary, capricious,

or an abuse of discretion{,] and are otherwise in accord-

ance with law.” National Treasury Employees Union

v. FLRA, 721 F.2d 1402, 1405 (D.C. Cir. 1983). Review

is further circumscribed where, as here, the Authority

has construed its enabiue legislation. Indeed, the Au-

5 U.S.C. § 7121(a) requires all collective bargaining agree-

ments to include a system for settling grievances. The negotiated

grievance procedure must provide for binding arbitration for

grievances not settled through the procedure. 5 U.S.C.

§ 7121(b3KC). “Grievance” is broadly defined in the Act as any

complaint concerning employment, the terms of a collective agree-

ment, or the interpretation of any law, rule or regulation affecting

conditions of employment. 5 U.S.C. § 7103(aX9).

* EEOC filed a request for reconsideration with the Authority

on September 16, 1982. J.A. at 64. On March 18, 1983, the Author-

ity issued an order denying the EEOC’s request. Brief for Federai

Labor Relations Authority at C-1.

5 U.S.C. —— tae Ons — ＋—U

any final order of the Authority ... may ... institute an action for

judicial review of the Authority's order . in the United States

Court of Appeals for the District of Columbia.” The Authority may

petition any appropriate United States court of appeals for en-

forcement of any of its orders. 5 U.S.C. § 7123(b).

thority is entitled to “considerable deference” when in-

terpreting and applying the Act’s provisions to specific

situations. Bureau of Alcohol, Tobacco and Firearms

v. FLRA, 104 S. Ct. 439, 444 (1983). Accordingly, we

will uphold the Authority's interpretation of the Act if

it is “reasonably defensible,” Department of Defense v.

FLRA, 659 F. 2d 1140, 1162 n.121 (D.C. Cir. 1981),

cert. denied, 455 U.S. 945 (1982); Bureau of Alcohol,

Tobacco and Firearms v. FLRA, 104 S. Ct. at 444

(1983), and not inconsistent with any congressional

mandate or policy.

The dissent contends that the Act's reservation to manage-

ment of the right to contract. out is a limitation on the Authority's

tinction between proposals encroaching on management's

nonnegotiable substantive authority and those concerning properly

— —— — — —

thority in an exertion of its expertise. National Treasury Em-

ployees Union v. FLRA, 691 F. 20 553, 561 (D.C. Cir. 1982) (foot-

note omitted) (citing Department of Defense v. FLRA, 659 F. 2d

1140, 1161 (D.C. Cir. 1981), cert. denied, 455 U.S. 945 (1982)).

The dissent's reliance on Vanguard Interstate Tours, Inc. v.

ICC, 735 F.2d 591 (D.C. Cir. 1984), is misplaced. In the statute at

issue in Vanguard, Congress expressly limited the discretion pre-

viously granted to the ICC and set out the precise criteria gov-

erning the issue in the case. Here, in contrast, Congress has ex-

— — ine Getinie amet eamaiaiet’

entitled to deference.

III. ANALYSIS

EEOC asserts that the Authority improperly con-

strued the terms of the management rights clause, as

well as the probable effect of the disputed proposal.

EEOC suggests first that the plain text of the manage-

ment rights clause insulates from collective bargaining

all proposals regarding contracting-out. Second, EEOC

contends that the proposal is nonnegotiable because its

adoption would subject contracting-out decisions to the

statutorily prescribed grievance procedure, thus

infringing on EEOC’s reserved authority to make

contracting-out decisions. Finally, EEOC argues that

the proposal is inconsistent with the Circular.

EEOC asserts that the management rights clause

gives management unfettered authority to make

contracting-out determinations. Apparently assuming

that any proposal regarding contracting-out will re-

strict this authority, EEOC suggests that the manage-

ment rights clause renders nonnegotiable all proposals

EEOC’s argument is untenable in light of the plain

text of the clause. The management rights clause pro-

vides that “nothing in [Title VIII shall affect the au-

thority of any management official of any agency—. ..

in accordance with applicable laws—... to make deter-

minations with respect to contracting out.” 5 U.S.C.

§ 7106(a)(2)B). This language plainly restricts the au-

thority reserved to management by requiring that it be

exercised “in accordance with applicable laws.” In addi-

tion, section 7106(b) provides that procedures used to

exercise rights are negotiable. See supra note 1. Be-

cause the Act does not grant to management unquali-

fied authority to contract-out, union proposals touching

upon that authority are not automatically rendered

nonnegotiable. Rather, management may refuse to bar-

gain over only those proposals that would expand upon

the restrictions contained in the Act. See infra note 12.

The union proposal here suggests contract language

that essentially echoes the statutory requirement thai

contracting-out determinations be made in accordance

with applicable laws. Any restriction imposed by the

proposal on management’s contracting-out authority

thus stems from the Act’s mandate. EEOC, of course,

must comply with these requirements regardless of

whether the proposal is adopted as part of the collective

agreement. The union proposal at issue here thus does

not of itself establish any substantive criteria guiding

management’s contracting-out determinations. We

therefore agree with the Authority’s conclusion that the

proposal does not affect management’s reserved author-

ity, within the meaning of the statutory language, to

make contracting-out decisions. '

'2 The precise scope of management's reserved authority is diffi-

cult to define. In previous rulings, the Authority has effectively

defined the protection accorded management by classifying pro-

posals as either negotiable procedures under section 7106(b) or

nonnegotiable substantive rights. To distinguish between the two,

the Authority has developed a “direct interference” test. Under

this test, a proposal involves a nonnegotiable substantive right if it

would “directly interfere” with management's ability to make the

releva ‘etermination. We have repeatedly affirmed the Authori-

ty’s use of this test. See Department of Defense v. FLRA, 659

F.2d 1140, 1159 (D.C. Cir. 1981), cert. denied, 455 U.S. 945 (1982).

Although in the present case the Authority did not expressly clas-

sify the proposal as procedural and did not explicitly apply the di-

rect interference test, the analysis used was quite similar. In con-

cluding that the proposal was negotiable, the Authority focused on

the agency's retention of the full degree of discretion that exists in

the absence of the proposal. We find this analysis fully acceptable

as a guideline to determine the scope of substantive rights re-

served to management.

The dissent misconstrues both the direct interference test and

the import of our conclusion here. The direct interference test is

essentially definitional. It determines whether a particular pro-

10a

EEOC points to no expression of intent in the legisla-

tive history that contradicts this conclusion. Though far

from conclusive, the legislative history indicates that

the management rights clause should not be interpreted

to negate the Act’s broad duty to bargain. In adopting

the management rights clause, Congress sought to re-

serve to management the authority necessary to

achieve an effective and efficient government. At the

same time, however, Congress intended to broaden the

scope of bargaining beyond that sanctioned under the

previous labor-management relations system.“ Thus,

as one member explained, the clause was designed to

protect “genuine managerial prerogatives. Indeed,

directed that the clause was to “be read to fa-

vor collective bargaining whenever there is doubt as to

the negotiability of a subject or a proposal.

posal is in fact substantive and therefore nonnegotiable. Although

the Authority did not expressly apply this test here, it did use the

same functional analysis: only proposals that limit substantively

management's contracting-out determinations involve nonnego-

tiable rights. Implicit in the Avthority’s opinion is the conclusion

that the disputed proposal represents more of a procedural than a

substantive limitation on management's right to contract-out.

1 H. R. REP. No. 1403, 95th Cong., 2d Sess. 43 (1978), re-

printed in House of Representatives Committee on Post Office

and Civil Service, 96th Cong., Ist Sess. Legislative History of the

Federal Service Labor-Management Relations Statute, Title VII

of the Civil Service Reform Act of 1978 [hereinafter cited as Legis-

lative History] at 689 (1979); see National Treasury Employees

Union v. FLRA, 691 F.2d 553, 559 (D.C. Cir. 1982).

4 124 Conc. REC. 29,199 (1978) (remarks of Rep. Ford), re-

printed in Legislative History at 956.

% H.R. Rep. No. 1403, 95th Cong., 2d Sess. 44 (1978), re-

printed in Legislative History at 690. The management rights

clause that appears in the Act was adopted as an amendment on

the House floor to the clause reported by the House Committee on

Post Office and Civil Service. This amendment, however, did not

change the purpose behind the clause as explained in the report ac-

companying the Committee version of the bill. “This substitute

lla

In sum, neither the text nor the legislative history

mandates a conclusion other than that reached by the

Authority. We cannot say, therefore, that the Author-

ity acted arbitrarily in concluding that the proposal

does not affect EEOC’s reserved rights. We reject

EEOC’s argument that the management rights clause

renders the proposal nonnegotiable.

EEOC argues that even if the text of the proposal

does not impose additional restrictions, its adoption

would effectively hinder EEOC’s ability to make

contracting-out decisions. Specifically, EEOC contends

that the proposal would invade its reserved manage-

ment rights by making compliance with the Circular a

contractual prerequisite of any decision regarding

contracting-out. The union could then challenge

EEOC’s decisions to contract-out by alleging that

EEOC violated the collective agreement in failing to

comply with appropriate procedures. Any contracting-

out decision would then be subject to grievance proce-

dures and ultimately to arbitral review. According to

EEOC, contracting-out decisions could thus become the

not of management, but of the arbitrator.

In this way, EEOC implies, the union would be able to

achieve precisely what the management rights clause

was intended to prevent.

EEOC’s argument assumes that a complaint as-

serting that a contracting-out determination was not

[the amendment that was adopted on the floor) strengthens the

‘Management rights’ section reported by the Committee, but it is

still to be treated narrowly as an exception to the general obliga-

tion to bargain over conditions of employment.” 124 Conc. REC.

29,183 (1978), reprinted in Legislative History at 924. The amend-

ment adopted on the House floor was adopted by the House-

Senate Conference Committee without change. H.R. REP. No.

1717, 95th Cong., 2d Sess. 153-54 (1978) (Conference Report), re-

printed in Legislative History at 821-22.

trary to the text of the Act.

The Act defines the subjects covered un-

der the statutory grievance Grievances in-

5 U.S.C. § 7103(a) (9) provides in full:

(9) “grievance” means any complaint—

application of any law, rule. or regulation affecting con-

ditions of employment.

13a

with any other law or rule governing contracting-out,

plainly falls within this expansive definition.“

1s The dissent contends that a complaint asserting a failure to

comply with the Circular does not fall within the statutory defini-

tion of grievance. Because the Act defines grievance to include

claims alleging violations of regulations “affecting conditions of em-

ployment,” and because “conditions of employment” is in turn de-

fined as “matters affecting working conditions,” the dissent main-

tains that grievances are restricted to claims involving

surroundings and hazards.

The dissent’s narrow definition of “working conditions” does not

apply in the context of this Act. The definition of working condi-

tions as hazards and surroundings derives from Corning Glass

Works v. Brennan, 417 U.S. 188, 201-03 (1974), a case construing

the language of the Equal Pay Act. The Court in Corning Glass

Works based its definition of the term “working conditions” on

Congress’s intent as expressed in an extensive discussion of the

term in the legislative history of the Equal Pay Act. The Court

noted that “working conditions” has a generally accepted meaning

in the “specialized language of job evaluation systems.” 417 U.S.

at 202. A definition adopted in the context of a specific statute and

in light of a detailed legislative history, however, is not immedi-

ately transferable to this case. See Copper Valley Machine Works,

Inc. v. Andrus, 653 F.2d 595, 600 n.7 (D.C. Cir. 1981). The legisla-

tive history of Title VII nowhere indicates that Congress intended

such a restriction on the rights granted employees. Indeed, the

Authority has consistently adopted, with this court’s sanction, a

broad interpretation of the phrase “conditions of employment.” See

Department of Defense v. FLRA, 685 F.2d 641, 647-48 & n.3

(D.C. Cir. 1982); National Treasury Employees Union and Inter-

nal Revenue Service, 3 FLRA No. 112 at 693, 695 (1980) (condi-

tions of employment concerns working situation and employment

relations of bargaining unit employee). Moreover, as the dissent it-

self notes, the term “conditions of employment” includes personnel

policies and practices as well as matters affecting working condi-

tions. See Dissent at n.12. Even if the phrase “matters affecting

working conditions” comprises only hazards and surroundings,

contracting-out decisions, which ultimately may result in a layoff,

undoubtedly fall under the umbrella of personnel policies or

In addition, we note that the dissent’s restrictive definition

applies only to grievances defined in section 7103(a)(9)(C)(ii) as vio-

lations of regulations affecting conditions of employment. The dis-

sent’s analysis, of course, does not apply to grievances defined in

l4a

EEOC maintains, however, that in addition to the

five subjects expressly designated in section 7121 of the

Act, all prerogatives reserved to management under

the management rights clause are excluded from the

scope of matters grievable. EEOC asserts that because

the management rights clause provides that “nothing in

this chapter shall affect” management’s authority to

contract-out, such decisions are removed from griev-

ance procedures. 5 U.S.C. § 7106(a) (emphasis added).

A grievance alleging noncompliance with the Circular,

however, does not affect management’s substantive au-

thority, 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.“

Any substantive limitation on management’s authority

stems from the externally established criteria contained

in the Circular. See supra text accompanying note 12.

We therefore find that a grievance asserting that man-

agement failed to comply with its statutory or regula-

tory parameters in making a contracting-out decision is

not precluded by the management rights clause.””

sections 7103(a)(9)(A) or (B) as any matter relating to the employ-

ment of an employee. A claim that work was improperly con-

tracted out surely falls within this definition of grievance.

1° The dissent maintains that grievances alleging a failure to

comply with applicable laws regarding contracting-out will affect

management by delaying implementation of a decision. Of course,

any review of an agency decision, whether conducted by the courts

or through a contractual grievance mechanism, may cause some

delay. This court has previously recognized that a proposal that

may result in delay, including delay created by the arbitral proc-

ess, need not infringe management’s reserved authority, and may

thus be negotiable. See Department of Defense v. FLRA, 659

F.2d at 1153-58.

2° Our reading of the text of the Act is supported by the legisla-

tive history. Congress unambiguously stated that the management

rights clause, at least in one instance, does not affect an employ-

ee’s right to enforce the Act’s requirement that management exer-

15a

The statutorily defined grievance procedure there-

fore encompasses a claim that a contracting-out deter-

mination was not made in accordance with law. EEOC’s

initial assumption that including the proposal in the col-

lective bargaining agreement would expose for the first

time EEOC’s contracting-out determinations to em-

ployee grievance challenges, and arbitral review, is

contradicted by the plain text of the Act. We thus con-

clude that adoption of the proposal in no way expands

an employee’s right to challenge management’s

contracting-out decisions under the grievance proce-

cise its reserved right in accordance with applicable laws and

regulations.

Mlanagement nas the reserved right to make the final deci-

sion to “remove” an employee, but that decision must be

made in accordance with applicable laws and procedures, and

the provisions of any applicable collective agree-

ment. The reserved management rights to “remove” would in

no way affect the employee's right to appeal the decision

through statutory procedures or, if applicable, through the

procedures set forth in a collective bargaining agreement.

124 CONG. REC. 29,183 (1978), reprinted in Legislative History at

924. Similarly, we believe that EEOC’s reserved right to make de-

terminations regarding contracting-out does not insulate EEOC

from challenges, through the grievance mechanism, asserting vio-

lations of applicable laws or regulations. Cf. National Treasury

Employees Union v. FLRA, 691 F.2d 558, 564-65 (D.C. Cir. 1982)

(noting that although establishment of performance standards is

encompassed within management's reserved rights, employees

may challenge those standards in grievance proceedings).

The dissent suggests that this conclusion requires us to construe

the statutory grievance mechanism as an applicable law with

which management must comply. This construction, suggests the

dissent, does not comport with the statutory language which

states that “nothing in Title VII shall affect” management’s au-

thority to make determinations regarding contracting-out. We do

not determine here whether the section 7121 grievance mechanism

is an “applicable law.” Rather, we conclude only that a grievance

alleging that management has not complied with externally estab-

lished criteria does not affect management’s reserved substantive

authority.

16a

dure.” Accordingly, we reject EEOC’s contention that

the proposal will impair its management rights by mak-

ing compliance with the Circular a contractual prerequi-

site of contracting-out decisions.

Finally, EEOC argues that the language of the OMB

Circular renders the proposal iable. As noted,

the Circular states that its provisions not be con-

strued to create” dny right of appeal except as provided

in the Circular itself. J.A. at 37. EEOC maintains that

the Authority’s ruling that the proposal is negotiable

conflicts with the Circular’s limiting language because it

allows alternative enforcement actions through the

grievance mechanism. Two considerations compel us to

reject this argument.

First, the proposal is not inconsistent with the Circu-

lar’s limiting language. The proposal does not “create”

any new right of appeal. Rather, as we have already

determined, the right to file grievances regarding

contracting-out decisions is created by the Act.

Second, and more important, the Circular’s restric-

tive language cannot be construed to limit the statutory

right to file grievances asserting a violation of

contracting-out regulations. There is no indication in

the Act or elsewhere of a congressional intent to allow

agencies to limit by regulation the statutorily defined

grievance procedure. To allow the text of the Circular

to restrict the scope of grievances would place “limita-

tions in the statute not placed there by Congress.”

Colgate-Palmolive Peet Co. v. NLRB, 338 U.S. 355,

21 The scope of the grievance procedure can of course be limited

in negotiation. We address here only the statutorily defined griev-

ance procedure.

17a

363 (1949). Accordingly, we reject EEOC’s argument

that the Circular bars negotiation over the proposal.~

IV. CONCLUSION

For the reasons stated herein, we conclude that the

Authority’s interpretation should be upheld and that its

order should be enforced.

Judgment accordingly.

18a

MACKINNON, Senior Circuit Judge, dissenting: Be-

cause I believe that the majority opinion seriously mis-

reads the statute which controls this case, I consider it

my duty to dissent. The opinion of the majority holds

that the EEOC must bargain over a proposal which,

under the Federal Labor Relations Authority’s

(FLRA’s) interpretation of the statute, is a total nul-

lity. The majority holds that incorporation into the col-

lective bargaining agreement of a promise to comply

with applicable regulations, including OMB Circular

A-76, does require that all “contracting-out” decisions

be subject to grievance determinations, but that such a

provision affects neither management’s authority to

contract out nor the existing union remedies for viola-

tions of that

The FLRA essentially held that (1) management has

a right to make determinations regarding contracting

out; (2) such determinations must be made in accord-

ance with applicable regulations; (3) violations of such

regulations are already grievable under the Civil Serv-

ice Reform Act of 1978 without regard to the necessity

of making them grievable in a collective bargaining

agreement; and thus (4) a provision in a collective bar-

gaining agreement requiring adherence to such regula-

poy the 5 —

right to contract out” because it does not make non-

grievable matters grievable. The essential flaw in the

' The FLRA has previously held that a proposal which pur-

ported to bind an agency to the specific terms of Circular A-76 as

of the date of the proposal—thus, in effect, prohibiting the govern-

ment from subsequently changing the regulation—was non-

. Seg National Federation of Federal Employees, Local

1167, 6 F. L. R. A 574, 577 (1981). In the instant case, the language

at issue (“The [agency] agrees to comply with OMB Circular

A-76”) can also be read, like that in Local 1167, to require compli-

ance with the present terms of the Circular. The FLRA, however,

apparently has interpreted the proposal only to require the agency

to comply with the Circular as it is amended from time to time.

19a

FLRA's reasoning—and the one adopted by the major-

ity—is that, contrary to its assertion, violations of Cir-

cular A-76 and other regulations regarding substantive

Hence, inclusion in a collective bargaining agreement of

a promise to comply with the Circular’s terms would

permit the union to seek arbitration on issues that are

not now grievable, and would create arbitral review of

determinations specifically entrusted by Congress to

the EEOC and all other federal agencies. This far-

ben t terity implicit! —

nothing it did not already possess? Far from being a

nullity, the decision of the majority seriously infringes

on the authority, specifically reserved to the EEOC and

ali other agencies by Congress, “to make determina-

tions with respect to contracting out.” 5 U.S.C.

§ 7106(a)(2)(E).

I. STANDARD OF REVIEW

The majority recognizes that “[rjeview of the Author-

ity’s order shall be on the record in accordance with [5

U.S.C. § 706].” 5 U.S.C. § 7123(c). Section 706

provides.

The reviewing court shall—

(2) hold unlawful and set aside agency action,

findings, and conclusions found to be—

(A) arbitrary, capricious, an abuse of discre-

tion, or otherwise not in accordance with law;

lor]

thority, or limitations, or short of statutory

20a

(Emphasis added.) Thus, the standard of review for

v. FLRA, 104 S. Ct. 439, 444 (1983):

Like the National Labor Relations Board, ... the

FLRA was intended to develop specialized exper-

that

111

sumption by an agency of major policy decisions

properly made by Congress.” ... Accordingly,

while reviewing courts should uphold reasonable

and defensible constructions of an agency's

cuaimoasy severed the PLRA’ oon eonstrestion of

Courts should be especially cautious abont giving un-

due deference to agen y construction of enabling legis-

lation when the particular provision being construed is

one designed to act as a limitation on the agency. As

this court recently pointed out,

21a

the agency, we must undertake full interpretive re-

sponsibility ourselves, and we look to the agency

view as a relevant, but not controlling, principle.

It remains for this court initially to exercise its re-

sponsibility to interpret the statute to determine

whether Congress delegated the definitional func-

tion to the agency.

Vanguard Interstate Tours v. ICC, 735 F.2d 591, 596

(D.C. Cir. 1984); Trailways, Inc. v. ICC, 727 F.2d

1284, 1288 (D.C. Cir. 1984).

If Congress intended a particular provision to limit

the authority of an agency, deferring to an agency deci-

of an agency, a court is remiss if it permits the agency

to circumvent that limitation through construction of

the statute.” It is doubly remiss if in doing so it violates

a clear grant of specific management discretion to an-

other agency.

In Chapter 71 of Title 5 (“Labor-Management Rela-

tions”), which creates the FLRA, Congress specifically

provided that “nothing in [Chapter 71] shall affect the

authority of any management official of any agency . .

in accordance with applicable laws . . to make determi-

nations with respect to contracting out.” 5 U.S.C.

§ 7106(a(2)(B) (emphasis added). This specific recogni-

tion of authority in all federal agencies affirmatively

In Department of Justice v. FLRA, 709 F. 2d 724, 729-30 (D.C.

Cir. 1983), the FLRA tried to require bargaining by an agency

over procedural protections for probationary employees. (The

right to dismiss probationary employees is reserved to manage

ment under provisions in other parts of U.S.C. Title 5.) This court

refused to defer to the agency’s construction of the labor relations

provisions at issue. But in AFGE, Local 2963 v. FLRA, 730 F. 2d

1534, 1547-48 (D.C. Cir. 1984), we affirmed the agency's decision

that a proposal requiring National Guard units to ignore military

efficiency when implementing reductions-in-force was non-

bargainable.

denies to the FLRA any authority to “affect” the au-

thority of an agency to “contract out.” An FLRA deci-

sion which encroached on this specifically recognized

power would thus violate the plain intent of Congress.

Since Congress cannot have intended to give the FLRA

discretion to erode the limitations it specifically placed

on that Authority by statute, it cannot have intended

that courts give great deference to the FLRA’s con-

struction of such limitations.* To the extent, then, that

the FLRA’s decision exceeds its “statutory jurisdiction,

authority, or limitations, 5 U.S.C. 706(2)(C), it is not

entitled to deference. This court “must undertake full

interpretive responsibility [itself], and ... look to the

agency view as a relevant, but not controlling, princi-

ple.” Vanguard Interstate, supra, 735 F. 2d at 596.

II. ANALYSIS

Although the majority asserts that the plain language

of the relevant statutory provisions supports its con-

struction, see Maj. at 9, 16, the relevant language

points plainly to exactly the opposite interpretation.

Section 7106 provides:

(a) Subject to subsection (b) of this section, noth-

ing in this chapter shall affect the authority of any

(1) to determine the mission, budget, organiza-

tion, number of employees, and internal security

practices of the agency; and

CO CED SES —7

0 to assign work, to make determinations

with respect to contracting out, and to deter-

mine the personnel by which agency opera-

tions shall be conducted

(b) Nothing in this section shall preclude any

agency and any labor organization from

(1) at the election of the agency, on the num-

— ee

work;

(2) procedures which management officials of

the agency will observe in exercising any author-

ity under this section; or

(3) arrangements for employees

by the exercise of any author-

ity under this section by such management

5 U.S.C. § 7106 (emphasis added). In other words, this

section of the Act on its face specifically provides that

contracting

except for the limitations in § 7106(b). Subsection

7106(b) provides that management may negotiate (1)

“procedures which ... the agency will observe in

exercising [its reserved] authority,” (2) “appropriate

arrangements for employees adversely affected by the

exercise of [such] authority” (emphasis added), and (3)

at its election, assignment of employees to particular

work projects and the means of carrying out such

projects.

Significantly, the FLRA did not attempt to construe

the contract proposal at issue as relating to “procedures

... the agency will observe” in implementing its

contracting-out decisions, a fact which the majority rec-

ognizes. See Maj. at n.12. Indeed, it is difficult to com-

how OMB Circular A-76 could fit under the

provisions of § 7106 (b). The purpose and scope of that

Circular are spelled out in its first paragraph:

Purpose. This Circular establishes Federal pol-

N Ir

ities. Supplement to the Circular sets forth

activities should be performed under contract with

commercial sources or in-house using Government

OMB Circular No. A-76 (rev. Aug. 4, 1983) (emphasis

added). In other words, the Circular and its accompa-

nying Supplement are designed to offer guidance to

agencies in making the decision to contract out—.e., to

dures for carrying out decisions already made. If (1) the

Circular provides substantive criteria for contracting

out, and (2) bargaining over substantive criteria for

contracting out is prohibited by law, then (3) a collect-

ive bargaining proposal which purports to require an

agency to meet substantive criteria is not negotiable. It

therefore does not appear that the FLRA could ration-

ally have based its decision on the “procedures” provi-

sion of § 7106(b). In any event—even assuming that the

language could be twisted into supporting that

FLRA did not do so, and this court is

from relying on a ground not advanced by

the agency. See SEC v. Chenery Corp., 318 U.S. 80, 95

(1943) (“administrative order cannot be upheld unless

the grounds upon which the agency acted in exercising

its powers were those upon which its action can be sus-

tained”); NLRB v. Enterprise Association of

Pipefitters, 429 U.S. 507, 522 n.9 (1977) (Chenery rule

“has not been disturbed” by subsequent decisions).

2 11111 171 1144

aunt 1 17117

He 2171121 Ht 1

1 0 fit

Li ihe tal

He abe 1

may well be

27a

Under the plain language of section 7106(a), of

course, “nothing” in the Statute shall “affect the

authority” of an agency to exercise the rights enu-

merated therein. Hence, no matter could be

grieved under a procedure negotiated pursuant to

section 7121 of the Statute which would deny the

authority of an agency to exercise its statutory

rights under section 7106.

AFGE Local 2782, 6 F.L.R.A. 314, 319-21 (1981) (foot-

note omitted). There is no suggestion in Local 2782 that

the phrase “in accordance with applicable laws” can be

used to permit grievance review of non-negotiable sub-

stantive decisions.“

But even assuming that the FLRA had proffered this

interpretation,’ it could not withstand scrutiny. Con-

The FLRA’s decision in Local 2782 dealt with a proposal for

repromoting individuals who had been reduced in grade due to

management cutbacks. It was not a case where substantive regula-

tions were involved; the FLRA carefully pointed out, 6 F.L.R.A.

at 321, that it involved simply “appropriate arrangements for em-

ployees adversely affected by management’s exercise of its author-

ity under section 7106(a),” which are negotiable under the explicit

provisions of 5 U.S.C. § 7106(b)(3).

This interpretation arguably was advanced by the FLRA in

National Federation of Federal Employees, Local 1497, 9

F. L. R. A. 151 (1982). In that case, the union proposed that “(work

assignments shall not be in violation of prohibited personnel prac-

tices nor any relevant law, rule, or regulation.” The right to assign

work is one of the management rights reserved under § 7106(a).

The FLRA held that since the agency was required to exercise its

management rights “in accordance with applicable law,” a contract

provision binding it to do so did not interfere with its rights. 9

F.L.R.A. at 156. Implicit in this determination is the assumption

that a violation of the work assignment regulations would fall

within the grievance procedure of § 7121, the same argument

relied on in this case; as demonstrated here, this view is at odds

with the statutory scheme of the Act. But even assuming that the

result in Local 1497 is correct, it does not control this case. The as-

signment of work to employees in that case—unlike the decision to

contract out in this case—arguably does have an impact on “work-

28a

gress provided that, except for § 7106(b), nothing in

Chapter 71 shall affect management’s authority, “in ac-

cordance with applicable laws,” to make determinations

with respect to contracting-out. To reach its conclusion

that the whole grievance procedure is somehow ex-

cluded from that sweep, the majority must read the

phrase “applicable laws” to include the remainder of

Chapter 71. Thus, it in effect reads the statute as fol-

lows: “Nothing in this chapter [71], EXCEPT ALL

THE OTHER PROVISIONS OF CHAPTER 71, IN-

CLUDING § 7121 (PRESCRIBING GRIEVANCE

PROCEDURES), shall affect the authority of any man-

agement official of any agency ... to make determina-

tions with respect to contracting out ...” (italicized

matter supplied). It is absurd to construe the act to say

that “nothing” in the rest of Chapter 71 affects manage-

ment’s right, but that the rest of Chapter 71 does affect

that right. This construction is at variance with any

reasonable interpretation of the statute. The majority

points to nothing in the legislative history which indi-

cates that specifically denominated, non-negotiable

rights conferred on “management officials” were never-

theless to be subjected to grievance and arbitral

review.

It may be that the majority is not reading the statute

that broadly, that not all of the remainder of Chapter

71 falls under “applicable laws.” It may, perhaps, be

suggesting simply that Congress’ (unarticulated) intent

in § 7106(a) was to shield the decision-making process

from negotiation, but not from subsequent review by la-

bor arbitrators and the FLRA. Again, there is no shred

of legislative history which indicates that Congress in-

tended contracting-out decisions to be grievable. But

the intent of Congress can be inferred from what it

wrote. It did not say that contracting-out decisions (and

ing conditions,” and | int fall under the ine definiti

of “grievance” in § 7103(a)(9). See pages 12-13 infra.

29a

the other management rights) are “non-negotiable.”

Had it done so, grievance review arguably would still

remain. Instead, it said that, except for § 7106(b), noth-

ing in Chapter 71 can affect the right of the agency to

make contracting-out decisions. The latter phrase

would be singularly inept if what Congress meant was

the former, and at least in the absence of clear Con-

gressional intent or a manifestly unsound result this

court should refrain from directly violating the express

language adopted by Congress.

Next, even if we assume that (1) the term “applicable

laws” does include all the rest of Chapter 71, and (2) the

exercise of a non-negotiable management right is sub-

ject to the grievance provisions, it is far from clear that

a failure to comply with Circular A-76 would meet the

definition of a “grievance” for purposes of 5 U.S.C.

§ 7121.

The term “grievance” is defined restrictively by Con-

gress in 5 U.S.C. § 7103(a)(9)(C)(ii), as here relevant,

to mean® “any claimed violation, misinterpretation, or

misapplication of any law, rule, or regulation affecting

conditions of employment” (emphasis added).“ The

A statute that defines a term with the phrase “to mean” is gen-

erally restrictive; “to include” is generally expansive. The majori-

ty’s description of the term “conditions of employment” as “expan-

sive,” see Maj. at 3, is thus incorrect.

® The majority also notes that the definition of “grievance” also

includes “any matter relating to the employment of any em-

ployee,” 5 U.S.C. § 7103(aX9)(B), and then asserts that a violation

of substantive contracting-out criteria “surely falls within this defi-

nition.” Maj. at n.18. But there is nothing “sure” about it. Again,

the Authority has not made this claim and the majority offers no

support. I note that under the majority’s apparent reasoning, the

very decision to adopt a particular economic formula itself would

be grievable, because it might at some time in the future, if imple-

mented, have some effect on employment. There is no indication

30a

term “conditions of employment” is also restrictively

defined to mean “personnel policies, practices, and mat-

ters ... affecting working conditions.” 5 U.S.C.

§ 7103(a)(14) (emphasis added). Thus, even under the

majority’s interpretation of the statute, a violation of

agency regulations is a “grievance” under

§ 7103(aX(9)(C)ii) only to the extent that such violation

involves personnel policies and practices or the working

conditions of the employees. These are plainly words of

limitation—i.e., not all violations are grievable—and

there is no indication that such limitation was inserted

inadvertently.

The majority’s footnote suggestion that Circular A-76

may have something to do with personnel policies or

practices is insubstantial. “ It must, then, be fitted (if

anywhere) under the phrase “matters ... affecting

working conditions.” But a contracting-out decision,

even when it results in a loss of jobs, is not necessarily

a decision affecting the working conditions of the em-

ployees. While ordinarily the term “working conditions”

is to be broadly interpreted, see Independent Federa-

tion of Flight Attendants v. Trans World Airlines,

that Congress intended such decisions to be subject to arbitral

review.

10 The majority asserts that even if the Supreme Court's inter-

pretation of “working conditions” (see infra) applies, failure to

comply with the Circular’s substantive economic guidelines for

making contracting-out decisions would nevertheless “undoubtedly

fall under the umbrella of personnel policies or practices.” Not

even the Authority in this case has suggested that substantive

contracting-out criteria are transmuted into “personnel policies or

practices” by virtue of the fact that they may at some point have

some sort of impact on the continued employment of particular em-

ployees. Not surprisingly, the majority offers no support whetever

for this extraordinarily broad reading. Had Congress intended the

term “conditions of employment” to include “anything which has or

may at some time in the future have an impact on the employment

of an employee,” it could easily have said so. It did not.

3la

Inc., 1655 F. 2d 155, 157 (8th Cir. 1981), it nevertheless

“has a... specific meaning in the language of industrial

relations,” Corning Glass Works v. Brennan, 417 U.S.

188, 202 (1974), and clearly means “something less than

the employment relationship in its entirety.” Southern

Railway Co. v. OSHRC, 539 F.2d 335, 339 (4th Cir.),

cert. denied, 429 U.S. 999 (1976). In interpreting the

same term in another statute, the Supreme Court ex-

plained that “the element of working conditions encom-

passes two subfactors: ‘surroundings’ and ‘hazards.’”

Corning Glass, supra, 417 U.S. at 202 (interpreting the

Equal Pay Act). This court subsequently noted that

only “surroundings” and “hazards” fall within the labor

relations meaning of “working conditions,” Laffey v.

Northwest Airlines, Inc., 567 F.2d 429, 452 n. 153 (D.C.

Cir. 1976), and in the FLRA we are dealing with a la-

bor relations” act. With reference to the term “working

conditions” in yet another act, other circuits have held

that the term refers to the “environmental area in

which an employee customarily goes about his daily

tasks.” Columbia Gas of Pennsylvania, Inc. v.

Marshall, 636 F.2d 913, 916 (3d Cir. 1980); Southern

Railway, supra, 539 F. 2d at 339. There is no indication

that the term “working conditions” in the statute at is-

sue here (which was used by Congress several years af-

ter the Corning Glass decision, presumably with

knowledge of the meaning assigned to those words by

the Court) was intended to have a different, much

broader meaning that it enjoys in other labor relations

statutes passed by Congress.“

The majority relies on Department of Defense v. FLRA, 685

F. 2d 641 (D.C. Cir. 1982), as sanctioning a “broad” construction of

the phrase “conditions of employment” in the Act. That case, how-

ever, involved union proposals reiating to (1) registration of em-

ployee automobiles, and (2) provision of certain consumer goods to

employees in overseas post exchanges. Both provisions fall clearly

within the scope of personnel practices and procedures, and nei-

32a

It might be argued, on analogy to the National Labor

Relations Act (NLRA), that contracting-out decisions

do fall within the term “conditions of employment.” In

one NLRA case, Fibreboard Paper Products Corp. v.

NLRB, 379 U.S. 203, 210 (1964), the Supreme Court in-

terpreted the term—which is not defined in the

NLRA—to include contracting-out. However, in the

Federal Labor Relations Act, unlike the NLRA,

Congress—which presumably was aware of both Fibre-

board Paper and Corning Glass—chose to define the

term strictly in a much narrower fashion: it means only

personnel poiicies and practices and matters affecting

“working conditions.” The meaning attached to a term

in one statute, where Congress has not defined it, is ir-

relevant to its meaning in another statute where Con-

gress has defined it. It is the phrase working condi-

tions, not conditions of employment, which acts to

narrow the scope of grievances under the FLRA.

ther even remotely interferes with any reserved management

right.

I am unpersuaded by the majority’s flat assertion—it is nothing

more—that Congress’ definition of “working conditions” in one

statute simply “does not apply” in another statute. Noting that

Congress did not elaborate on its definition in the statute’s legisla-

tive history, the majority just presumes that it must have meant

something different in this statute than it meant when it used the

identical phrase in other statutes. But the most plausible explana-

tion for the lack of discussion in the legislative materials is that

Congress assumed that its use of the words “working condi-

tions”—words that it had used previously and which the Supreme

Court recognized have a definite, specialized meaning in the labor

relations field—made it unnecessary to waste additional pages of

its committee reports illuminating the obvious.

‘2 | must note that, contrary to the majority’s assertion, I do not

maintain | that grievances are restricted to claims involving sur

roundings and hazards.” See Maj. at n.18. On the contrary, the

statute at issue requires bargaining over (1) personnel policies,”

and (2) personnel “practices,” as well as (3) “matters . affecting

working conditions.” 5 U.S.C. § 7108(a)(14).

tract out; it does not specify the internal agency person-

nel policies which would implement such decisions. It

That would, as pointed out supra, submit each work project

contracted out to mandatory negotiation, in violation of the purely

elective negotiation provided for in § 7106(b)\(1).

“ FLRA review of an arbitrator's decision is very similar to ju-

dicial review of ordinary arbitral awards. It may set aside an

FLRA, finding that the request

presented no “extrace-

Hence, under

the FLRA’s construction, every alleged violation of the

Circular, the basic purpose of which is to provide SUB-

dinary circumstances,” curtly denied it.

STANTIVE guidance for management decisions re-

garding contracting out, must go to an arbitrator.

The FLRA’s cavalier, conclusory treatment of the

EEOC’s legitimate request can be seen as an implicit

admission that disclosure of the parts it considers might

be grievable would amount to such an extreme denial of

F 73 ay

intent expressed by Congress. ‘The same conclusion can

be reached with respect to the construction adopted by

the majority here. The majority’s construction assures

that every managerial decisioa with respect to

“contracting-out,” if questioned, will ultimately be

made, not by the agency, but by an arbitrator, subject

to very limited review. This results in a complete nega-

tion of the intent expressed by Congress.

This interpretation of the grievance procedure offers

the union a fertile sour-e of weapons for obstructing or

delaying contracting-out decisions, a situation Congress

specifically sought to prevent. It is not difficult to visu-

alize what will happen. The union can file a grievance,

claiming that one of the technical standards of the Cir-

cular (wholly unrelated to working conditions) was not

and months—or, drawing on the experience of the Na-

§ 712%), which grants review to:

sti

HHP

HIE

completely

statutes, drastically undercuts the specific statutory

right of management to contract out, and effectively

guts the specific reserved limitations that Congress

placed on the agency’s duty to bargain and the author-

ity of the FLRA.

I accordingly dissent.

Ik, as the majority claims, it is entirely obvious from the stat-

ute that violations of the Circular are already grievable as a mat

ter of law, why would the union waste its time, effort, and money

in pursuing first the contract proposal and now this action? Even if

EEOC eventually agrees to

UNITES STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

SEPTEMBER TERM, 1984

No. 82-2310

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,

PETITIONER

FEDERAL LABOR RELATIONS AUTHORITY,

RESPONDENT

AMERICAN FEDERATION OF GOVERNMENT

EMPLOYEES, AFL-CIO, ET AL.

INTERVENOR

[Filed Dec. 3, 1984)

Before: WRIGHT and TAMM, Circuit Judges and

MACKINNON, Senior Circuit Judge*

ORDER

On consideration of petitioner's petition for rehear-

ing, it is ORDERED, by the Court, that the petition is

denied.

Per Curiam

For the Court

Grone A. Fenn, Cen

Chief Deputy Clerk

*Senior Circuit Judge MacKinnon would grant the petition for

rehearing.

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

SEPTEMBER TERM, 1984

No. 82-2310

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,

PETITIONER

FEDERAL LABOR RELATIONS AUTHORITY,

RESPONDENT

AMERICAN FEDERATION OF GOVERNMENT

EMPLOYEES, AFL-CIO, ET AL.

INTERVENOR

Filed Dee. 3, 1984

Before: ROBINSON, Chief Judge, WRIGHT, TAMM,

WILKEY, WALD, MIKVA, EDWARDS, GINSBURG,

BORK, SCALIA, and STARR, Cirewit Judges“

APPENDIX C

UNITED STATES OF AMERICA

BEFORE THE

FEDERAL LABOR RELATIONS AUTHORITY

WASHINGTON, D.C.

Case No. O-NG-314

TBH

Hi il

1 ul

Hi if 11 i

EMPLOYEES, AFL-CIO,

NATIONAL COUNCIL OF EEOC LOCALS

AMERICAN FEDERATION OF GOVERNMENT

UNION

and

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION

AGENCY

4la

right to make contracting out determinations in accord-

ance with whatever applicable laws and regulations ex-

ist at the time of such action. Hence, it would

contractually recognize external limitations on manage-

ment’s right but would not establish, either expressly

or by incorporation, any particular substantive limita-

tions on management.

Thus, this proposal is distinguishable from proposal 1

which was held nonnegotiable in National Federation

of Federal Employees, Local 1167 and Department of

the Air Force, Headquarters, 31st Combat Support

Group (TAC), Homestead Air Force Base, Florida, 6

FLRA No. 105 (1981), affirmed as to other matters sub

nom. National Federation of Federal Employees, Lo-

cal 1167 v. Federal Labor Relations Authority,.

F.2d — (D.C. Cir. 1982). That proposal, in contrast

with the present disputed proposal, would have incor-

sions of OMB Circular No. A-76; hence, it would have

required management to comply with those terms dur-

ing the life of the contract regardless of whether the di-

rective from which they were derived were to be re-

vised or rescinded. In reaching that decision the

Authority stated, at 4 of the decision, as follows:

This [ J is to be

Are

— — OMB directives/

——— — —

* ee tamer ent ,

acts, it

— — — 45D dee

tives existing at the time.

Accordingly, it is concluded that the present proposal is

not inconsistent with section 7106(a)(2)B).

_ The Agency’s further claim that the proposal would

conflict with OMB Circular No. A-76, itself, because it

would subject grievances concerning application of the

42a

Circular to the negotiated grievance procedure, also

cannot be sustained. The Agency states in this regard

that grievances arising in connection with the applica-

tion of the Circular only can be pursued through the

procedures prescribed by the Circular, i. e., that the

provisions of the Circular limit the scope and coverage

of grievance procedures negotiated pursuant to the

Statute. This contention is without merit. A materially

identical argument with respect to directives of the

Office of Personnel Management was considered and re-

jected in American Federation of Government Employ-

ees, AFL-CIO, Local 2782 and Department of Com-

merce, Bureau of the Census, Washington, D.C., 6

FLRA No. 56 (1981). There, the Authority concluded,

at 9 of the decision, that “OPM regulations ... may not

be applied in a manner inconsistent with the scope of

negotiated grievance procedures allowed under section

7121 of the Statute.” [Footnote omitted.) Rather, the

Authority held that the Statute and its relevant legisla-

tive history required that grievance procedures negoti-

ated under section 7121 cover all matters that under

the provisions of law could be submitted to the griev-

ance procedure unless the parties exclude them through

bargaining. Consequently, even assuming in the pres-

ent case that a conflict between the proposal and the

Circular exists, as claimed by the agency, and that the

Circular is a Government-wide rule or regulation within

the meaning of the Statute, it must be concluded

herein, for the reasons stated in Bureau of the Census,

that the Circular in question does not limit the

statuiorily prescribed scope and coverage of the par-

ties’ negotiated grievance procedure.

It must be emphasized in this regard that the Agency

has misinterpreted the legal effect of the disputed pro-

posal: the proposal would not itself change the scope

and coverage of the parties’ grievance procedure. That

is, under the Statute, even in the absence of the con-

ton, D.C., 6 FLRA No. 114 (1981) (proposal 3)) or un-

less the parties exclude such grievances through

negotiations (see, e.g., American Federation of Govern-

ment Employees, AFL-CIO, Local 3354 and U.S. De-

partment of Agriculture, Farmers Home Administra-

tion, St. Louis, Missouri, 3 FLRA 320 (1980)).

In view of the above, the Authority concludes that

Union Proposal 1 is within the duty to bargain.

Union Proposal 2

Section II—The EMPLOYER shall notify the

council and appropriate Local President(s) of

its intention to solicit bids for contract work

which could result in a reduction-in-force or

transfer or abolition of function affecting em-

ployees in the unit. Such advance notice shall

provide a full explanation of the reasons for

such actions and provide the UNION sufficient

opportunity to respond in writing.

This proposal would provide the Union with advance

notice and an opportunity to respond to the Agency’s

reasons for its “intention” to contract out work when

such action could adversely impact unit employees. Giv-

ing the language of the proposal its common meaning in

the absence of any contrary indication in the record, the

Authority finds that the proposal would apply when

management has decided to solicit bids for contract

work which in its judgment could lead to, e. g., a reduc-

tion in force, but has not yet implemented its decision.

It is concluded, as claimed by the Union, that under

44a

these circumstances the proposal is not too remote and

speculative, and instead would directly affect the condi-

tions of employment of unit employees under the Stat-

ute so as to be within the duty to bargain to the extent

American Federation of Government Employees, AF L-

CIO, Local 1999 and Army-Air Force Exchange Serv-

ice, Diz-McGuire Exchange, Fort Dix, New Jersey, 2

FLRA 152 (1979), enforced sub nom. Department of

Defense v. Federal Labor Relations Authority, 659

F.2d 1140 (D.C. Cir. 1981), cert. denied sub nom.

AFGE v. FLRA, — U.S. , 102 S. Ct. 1443 (1982).

Cf. National Federation of Federal Employees, Local

1167 and Department of the Air Force, Headquarters,

Ist Combat Support Group (TAC), Homestead Air

Force Base, Florida, 6 FLRA No. 105 (1981), affirmed

that they could bar negotiation of a conflicting proposal,

the Agency has not established that Union Proposal 2 is

inconsistent with such regulations. Specifically, section

1-1.011-2 declares that Congress’ policy is to promote

under the Statute and the Agency has not

Union Proposal 3

Section III The parties shall negotiate the

[e}ffect of any contracting-out decision which

could alter the conditions of employment in the

bargaining unit prior to implementing the deci-

sion to contract-out. The EMPLOYER agrees

46a

to eliminate or minimize any potential adverse

lelffeet through reassignment or training and

to take whatever other action may be neces-

sary to protect bargaining unit employees.

The Union’s statement before the Authority indicates

that its proposal would require the Agency to minimize

the effect of contracting out as to “all persons being af-

fected.” Thus, under the language of the disputed pro-

posal, confirmed by the Union's statement as to its in.

tended meaning, the proposal would go beyond

— for applicable laws including the Statute, as did

held negotiable by the Authority in /nter-

—— Association of Machinists and Aerospace

Workers, Local 2424 and Department of the Army, Ab-

erdeen Proving Ground, Maryland, 8 FLRA No. 117

(1982). Rather, the instant proposal would specifically

require the Agency to reassign or train “all persons”

who would be adversely affected by contracting out and

to take “whatever other action may be necessary” to

protect each one of them.

Accordingly, in agreement with the Agency, the Au-

thority concludes that this proposal in effect would pre-

serve absolute employment security for such employ-

ees. As a consequence it would not constitute an

“appropriate” arrangement for employees adversely af-

fected by management's exercise of its statutory

rights.' Cf. National Federation of Federal Employ-

Section 7106(b\3) of the Statute provides:

= Management nghts

(b Nothing in this section shall preclude any agency and

22238 —

47a

ees, Local 1167 and Department of the Air Force,

Headquarters, 31st Combat Support Group (TAC),

Homestead Air Force Base, Florida, 6 FLRA No. 105

(1981), affirmed as to other matters sui nom. National

Federation of Federal Employees, Local 1167 v. Fed-

eral Labor Relations Authority, — F.2d — (D.C.

Cir. 1982) (wherein proposal 4, requiring the agency

only to consider restricting new hires in order to retain

arrangement

tion 7106(b)(3)). Rather, this proposal would directly in-

terfere with the Agency’s exercise of, inter alia, its

right under section 7106(a)(2)(A) of the Statute to “lay-

off” employees and. thus, is outside the duty to bar-

gain.” National Treasury Employees Union and Inter-

nal Revenue Service, 7 FLRA No. 42 (1981) (proposal

5).

Therefore, pursuant to section 2424.10 of the Author-

ity’s Rules and Regulations, IT IS ORDERED that the

by the parties) bargain concerning Union Proposals 1

and 2. IT IS FURTHER ORDERED that the portion

qe ee

the exercise of any authority under this section

by such management officials.

In view of this decision, the Authority finds its unnecessary to

rule as to other statutory rights claimed by the Agency to be vio-

lated by the proposal.

In finding these proposals to be negotiable, the Authority

makes no judgment as to their merits.

48a

of the Union’s petition for review concerning Union

Proposal 3 be, and it hereby is, dismissed.

Issued, Washington, D.C. September 2, 1982

/s/ Ronald W. Haughton

RONALD W. HAUGHTON, Chairman

/s/ Henry B. Frazier III

HENRY B. FRAZIER III, Member

/s/ Leon B. Applewhaite

LEON B. APPLEWHAITE, Member

FEDERAL LABOR RELATIONS AUTHORITY

49a

APPENDIX D

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

SEPTEMBER TERM, 1984

No. 82-2310

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,

PETITIONER

FEDERAL LABOR RELATIONS AUTHORITY,

RESPONDENT

AMERICAN FEDERATION OF GOVERNMENT

EMPLOYEES, AFL-CIO, ET AL.,

INTERVENOR

PETITION FOR REVIEW AND CROSS-APPLICATION FOR

ENFORCEMENT OF AN ORDER OF

THE FEDERAL LABOR RELATIONS AUTHORITY

[Filed Sept. 21, 1984]

Before: WRIGHT AND TAMM, Circuit Judges, and

MACKINNON, Senior Circuit Judge.

JUDGMENT

This cause came on to be heard in a petition for re-

view and cross-application for enforcement of an order

of the Federal Labor Relations Authority, and was ar-

gued by counsel. On consideration thereof it is

50a

ORDERED, and ADJUDGED, by this Court, that

the Authority’s order is enforced, in accordance with

the Opinion for the Court filed herein this date.

Per Curiam

For the Court

GEORGE A. FISHER, Clerk

Date: September 21, 1984

Opinion for the Court filed by Circuit Judge Tamm.

Dissenting opinion filed by Senior Circuit Judge

MacKinnon.

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