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09/21/84 Equal Employment v. Federal Labor

September 21, 1984





Petition for Review and Cross-Application for Enforcement of an Order of the Federal Labor Relations Authority. 1984.CDC.252


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.


This is an appeal from a decision of the Federal Labor Relations Authority (the Authority) ordering petitioner Equal Employment Opportunity Commission to bargain over a union contract proposal that requires compliance with applicable laws and regulations regarding "contracting-out." EEOC contends that is has no duty to bargain because the proposal concerns a subject exclusively reserved to management. The Authority has cross-petitioned for 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 revised 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 relations policy, Congress created the Federal Labor Relations Authority. The Authority's responsibilities include 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(a)(12). The term "conditions 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(a)(14).

This broad duty to bargain is subject to certain limitations. Specifically, the Act contains a management rights clause that reverses certain prerogatives to management. 5 U.S.C. § 7106(a). Most important, for this case, the management rights clause reserves to management the authority "to make determinations with respect to contracting-out." 5 U.S.C. § 7106(a)(2). The procedures used in exercising these reserved management rights are subject to negotiation. 5 U.S.C. § 7106(b). *fn1

B. The Facts

The facts in this case are undisputed. During contract negotiations with the EEOC, the union*fn2 advanced the following proposal:

"The EMPLOYER agrees to comply with OMB Circular A-76 and other applicable laws and regulations concerning contracting-out."*fn3

Joint Appendix at 2. EEOC declared the proposal nonnegotiable and refused to bargain over it. To resolve the dispute, the union filed a petition for review with the Authority. J.A. at 1.*fn4

EEOC argued before the Authority that the union proposal was nonnegotiable primarily for two reasons. *fn5 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. § 7106(a)(2). Second, the EEOC argued that OMB Circular A-76 (the Circular) itself prohibited negotiation over the proposal.*fn6 J.A. at 12-13.

On September 2, 1982, the Authority issued a decision holding that the union proposal was a mandatory subject of bargaining. American Federation of Government Employees, AFL-CIO National Council of EEOC Locals and Equal Employment Commission, 10 F.L.R.A. 3 (1982). The Authority concluded that the proposal did not impair EEOC's statutory right to make contracting-out decisions because it recognized only existing limitations on EEOC's power. By its terms, ruled the Authority, the proposal established no substantive limitations on management discretion. Id.

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.*fn7 The Authority rejected EEOC's underlying assumption that contracting-out disputes are not grievable in the absence of the proposed contract language. 10 F.L.R.A. 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 procedure.*fn8 10 F.L.R.A. at 4-5. Concluding that the contract proposal was not prohibited by either the Act or the Circular, the Authority ordered EEOC to bargain. Id. at 5.

EEOC filed a timely petition for review in this court.*fn9 The FLRA filed a cross-petition for enforcement. We have jurisdiction pursuant to 5 U.S.C. § 7123.*fn10 II. STANDARD OF REVIEW

The Act provides that the Authority's rulings are reviewable in accordance with section 10(e) of the Administrative Procedure Act , 5 U.S.C. § 706 (1982). See 5 U.S.C. § 7123(c) (1982). The Authority's determinations will thus be upheld "if they are supported by substantial evidence. . . are not arbitrary, capricious, or an abuse of discretionand are otherwise in accordance with law." National Treasury Employees Union v. FLRA, 232 U.S. App. D.C. 241, 721 F.2d 1402, 1405 (1983). Review is further circumscribed where, as here, the Authority has construed its enabling legislation. Indeed, the Authority is entitled to "considerable deference" when interpreting and applying the Act's provisions to specific situations. Bureau of Alcohol, Tobacco and Firearms v. FLRA, 464 U.S. 89, 104 S. Ct. 439, 444, 78 L. Ed. 2d 195 (1983). Accordingly, we will uphold the Authority's interpretation of the Act if it is "reasonably defensible," Department of Defense v. FLRA, 212 U.S. App. D.C. 256, 659 F.2d 1140, 1162 n.121 (1981), cert. denied, 455 U.S. 945, 102 S. Ct. 1443, 71 L. Ed. 2d 658 (1982]A; Bureau of Alcohol, Tobacco and Firearms v. FLRA, 104 S. Ct. at 444 (1983), and not inconsistent with any congressional mandate or policy.*fn11 III. ANALYSIS

EEOC asserts that the Authority improperly construed 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 management 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 restrict this authority, EEOC suggests that the management rights clause renders nonnegotiable all proposals regarding contracting-out.

EEOC's argument is untenable in light of the plain text of the clause. The management rights clause provides that "nothing in [Title VII] shall affect the authority of any management official of any agency -- . . . in accordance with applicable laws -- . . . to make determinations with respect to contracting out." 5 U.S.C. § 7106(a)(2). This language plainly restricts the authority reserved to management by requiring that it be exercised "in accordance with applicable laws." In addition, section 7106(b) provides that procedures used to exercise rights are negotiable. See supra note 1. Because the Act does not grant to management unqualified authority to contract-out, union proposals touching upon that authority are not automatically rendered nonnegotiable. Rather, management may refuse to bargain 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 that 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 authority, within the meaning of the statutory language, to make contracting-out decisions.*fn12

EEOC points to no expression of intent in the legislative 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 reserve 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.*fn13 Thus, as one member explained, the clause was designed to protect "genuine managerial prerogatives."*fn14 Indeed, Congress directed that the clause was to "be read to favor collective bargaining whenever there is doubt as to the negotiability of a subject or a proposal."*fn15

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 Authority 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 next 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, the EEOC contends that the proposal would invade its reserved management 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 procedures and ultimately to arbitral review. According to EEOC, contracting-out decisions could thus become the prerogative 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 asserting that a contracting-out determination was not made in accordance with applicable laws, including the Circular, would not be grievable in the absence of the contract proposal. ...

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