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American Federation of Government Employees, AFL-CIO v. Rumsfeld

February 27, 2006

AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO, ET AL., PLAINTIFFS,
v.
DONALD H. RUMSFELD, SECRETARY, UNITED STATES DEPARTMENT OF DEFENSE, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Emmet G. Sullivan United States District Judge

MEMORANDUM OPINION

Plaintiffs, thirteen labor organizations that represent more than 350,000 employees of the Department of Defense ("DoD"), filed this lawsuit challenging final regulations implemented by defendants, the DoD and the Office of Personnel Management ("OPM"). The challenged regulations were promulgated in response to the National Defense Authorization Act for Fiscal Year 2004 ("NDAA"), which authorized defendants to develop a new human resources management system known as the National Security Personnel System ("NSPS"). 5 U.S.C. § 9902.

Plaintiffs raise five challenges to the regulations under Chevron U.S.A. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). First, plaintiffs argue that defendants did not comply with the statutory mandate that defendants act "in collaboration with, and in a manner that ensures the participation of, employee representatives in the development and implementation of [a] labor management relations system." 5 U.S.C. § 9902(m)(3).

Second, plaintiffs claim that the regulations establish a labor relations system that unlawfully departs from 5 U.S.C. §§ 7101 et. seq. ("chapter 71"), which governed labor-management relations at DoD prior to the passage of the NDAA. Plaintiffs contend that the statute permits only two narrow deviations from chapter 71: (1) the Secretary may bargain at a level above the level of exclusive recognition (commonly called "national level bargaining"); and (2) if the Secretary establishes a new labor relations system, the system must provide for "independent third party review" of labor relations decisions. 5 U.S.C. § 9902(m)(5) and (m)(6). Plaintiffs maintain that because only these two provisions directly conflict with chapter 71, they are the only circumstances in which the Secretary may depart from chapter 71.

Third, plaintiffs maintain that the labor relations system established by the new rule violates Congress' requirement that the NSPS "ensure that employees may organize, bargain collectively as provided for in this chapter. . . ." 5 U.S.C. § 9902(b)(4).

Fourth, plaintiffs argue that the National Security Labor Relations Board ("NSLRB") established by the new rule does not satisfy Congress' requirement that the new labor relations system provide for an "independent third party" to review labor relations decisions. 5 U.S.C. § 9902(m)(6).

Finally, plaintiffs maintain that, contrary to the statute, the regulations establishing an appeals process for disciplined employees fails to provide for "fair treatment" and "due process" as required by 5 U.S.C. § 9902(h)(1)(A) and (B)(i).

Pending before the Court are plaintiffs' Motion for Summary Judgment and defendants' Motion to Dismiss for lack of jurisdiction and failure to state a claim.*fn1 A hearing on the motions was held on January 24, 2006. Upon careful consideration of the parties' cross motions, the response and reply thereto, oral arguments, supplemental briefing filed by the parties,*fn2 the governing statutory and case law, and the entire record, the Court concludes: (1) defendants satisfied their statutory obligation to collaborate with plaintiffs; (2) defendants lawfully departed from chapter 71 in establishing a labor relations system; (3) the new rule fails to ensure that employees can bargain collectively; (4) the NSLRB does not meet Congress' requirement for "independent third party review" of labor relations decisions; and (5) the process for appealing adverse actions fails to provide employees with "fair treatment" as required by statute.

Accordingly, plaintiffs' Motion for Summary Judgment is GRANTED IN PART and DENIED IN PART and defendants' Motion to Dismiss is GRANTED IN PART and DENIED IN PART.

I. BACKGROUND

Plaintiffs are thirteen labor organizations that represent, collectively, more than 350,000 employees in the DoD(the "Unions"). Defendants are Donald H. Rumsfeld, the Secretary of the DoD and Linda M. Springer, Director of the OPM (the "Agencies"). Ms. Springer succeeded Kay Coles James, who was the OPM Director when the proposed regulations in this case were promulgated.

In the federal sector, bargaining takes place regarding the impact and implementation of an agency's management rights, negotiated procedures, and arrangements for adversely affected employees. Plaintiffs engage in impact and implementation, negotiated procedure, and appropriate arrangement negotiations. The American Federation of Government Employees, AFL-CIO ("AFGE"), for example, has negotiated agreements on the procedures DoD uses when determining which employees will work overtime; the procedures DoD will use when making staffing decisions, such as determining which employees will be transferred to new posts of duty or assigning work shifts; the procedures conducting a reduction-in-force ("RIF") such as buyouts, early retirement, placement in other positions within DoD, or placement in positions in other agencies; and appropriate arrangements for employees who are exposed to safety or health hazards on the job. These areas are also governed, in part, by government-wide procedures. Before Congress passed the NDAA, labor-management relations at DoD were governed by chapter 71 of Title 5 ("chapter 71"). 5 U.S.C. §§ 7101 et. seq.

The parties do not dispute that the issues of overtime, the changing of work schedules over an employee's objections, and safety and health concerns are important to DoD employees. Some or all of the plaintiffs have negotiated agreements addressing overtime, procedures for determining whose work schedules should be changed and how, and arrangements on behalf of employees who perform hazardous or dangerous work, including workplace safety practices, personal protective equipment, training, and improved ventilation. Plaintiffs have also been permitted to be present at any examination of a bargaining unit employee by an agency representative in connection with an investigation, if the employee reasonably believes the examination may result in disciplinary action against the employee and the employee requests representation. Plaintiffs have also represented DoD employees at formal discussions between management and bargaining unit employees. Some of the Unions, such as AFGE and National Association of Government Employees ("NAGE"), have represented certain employees of Non-Appropriated Fund Instrumentalities ("NAFIs") within the DoD and negotiated contracts on their behalf.

II. STATUTORY AND REGULATORY FRAMEWORK

A. The National Defense Authorization Act for Fiscal Year 2004

As part of the NDAA, Congress authorized the DoD and OPM to establish a human resources management system for organizational units of DoD. 5 U.S.C. § 9902(a)("Notwithstanding any other provision of this part, the Secretary may, in regulations prescribed jointly with the Director, establish, and from time to time adjust, a human resources management system for some or all of the organizational or functional units of the Department of Defense."). The system, embodied in final regulations published at 70 Fed. Reg. 66116-66220 (Nov. 1, 2005), is known as the National Security Personnel System ("NSPS"). The statute also authorizes defendants to establish and adjust a labor relations system for the Department of Defense. 5 U.S.C. § 9902(m)(1). The parties do not dispute that the labor system authorized by § 9902(m) is a part of the human resources management system authorized by § 9902(a). Motions Hr'g Tr. 9, 63, Jan. 24, 2006 ("Tr. 1/24/06").

1. Requirements of the Human Resources Management System

Section 9902(b) details six system requirements. Among other requirements, the human resources management system must:

(1) be flexible; (2) be contemporary; . . . (4) ensure that employees may organize, bargain collectively as provided for in this chapter, and participate through labor organizations of their own choosing in decisions which affect them, subject to the provisions of this chapter and any exclusion from coverage or limitation on negotiability pursuant to law; . . . and (6) include a performance management system that incorporates . . . [a] pay for performance evaluation system to better link individual pay to performance, and provide an equitable method for appraising and compensating employees.

5 U.S.C. § 9902(b)(1), (2), (4), and (6).

Section 9902(b)(3) states that the human resources management system "shall not waive, modify, or otherwise affect" a list of provisions. The list includes provisions that establish "merit systems principles," (5 U.S.C. § 2301) and "prohibited personnel practices" (5 U.S.C. § 2302). See 5 U.S.C. §§ 9902(b)(3)(A)-(C). Section 9902(b)(3) further provides that the system shall not waive, modify, or otherwise affect "any other provision of this part (as described in subsection (d))." 5 U.S.C. § 9902(b)(3)(D). Subsection (d), entitled "Other non-waivable provisions," lists five specified subparts and 11 chapters within Title 5 that are non-waivable "to the extent not otherwise specified in this title." 5 U.S.C. § 9902(b)(3)(D) and (d). The provisions listed in § 9902(d)(2) include chapter 71.

2. The Labor Relations System

A key provision in this dispute is § 9902(m), in which Congress authorized the establishment of a new labor relations system for DoD. Entitled "Labor management relations in the Department of Defense," Subsection (m) provides, "Notwithstanding section 9902(d)(2), the Secretary, together with the Director, may establish and from time to time adjust a labor relations system for the Department of Defense to address the unique role that the Department's civilian workforce plays in supporting the Department's national security mission." 5 U.S.C. § 9902(m)(1). Congress required that the new system "allow for a collaborative issue-based approach to labor management relations." 5 U.S.C. § 9902(m)(2).

The statute also provides for collaboration and bargaining with employee representatives at a level "above the level of exclusive recognition" of labor organizations, §§ 9902(g) and 9902(m)(4) and (m)(5), and requires that the labor relations system "provide for independent third party review of decisions, including what definitions are reviewable by the third party, what third party would conduct the review, and the standard or standards for that review," 5 U.S.C. § 9902(m)(6).

The statute further requires that the new labor relations system "shall be binding on all bargaining units within the [DoD], all employee representatives of such units, and the [DoD] and its subcomponents, and shall supersede all other collective bargaining agreements for bargaining units within the [DoD] . . . except as otherwise determined by the Secretary." 5 U.S.C. § 9902(m)(8).

Unless extended, the labor relations system created under subsection (m) will sunset six years after the enactment of this subsection, "at which time the provisions of chapter 71 will apply." 5 U.S.C. § 9902(m)(9).

3. Collaboration Requirements for the Labor Relations System

The NDAA sets forth several requirements that the Secretary and the Director must observe "to ensure that the authority [to establish NSPS] is exercised in collaboration with, and in a manner that ensures the participation of, employee representatives in the development and implementation of the labor management relations system. . . ." 5 U.S.C. § 9902(m)(3). The Secretary and the Director must "afford employee representatives and management an opportunity to have meaningful discussions concerning the development of the new system," they must permit employee representatives 30 days to review any proposal and make recommendations, and they must "give any recommendations received full and fair consideration." 5 U.S.C. § 9902(m)(3)(A). If defendants do not accept the recommendations, they must meet and confer for an additional 30-day period "in an attempt to reach agreement on whether or how to proceed with those parts of the proposal . . . ." 5 U.S.C. § 9902(m)(3)(B). However, no agreement is ultimately necessary. "If the Secretary, in his discretion, determines that further consultation and mediation is unlikely to produce an agreement," the statute authorizes him to implement "any or all" of the disputed provisions, including any modifications made in response to the Unions' recommendations "the Secretary deems advisable." 5 U.S.C. § 9902(m)(3)(C)(ii).

4. The Appeals Process for the Human Resources Management System

Subsection (h) addresses appellate procedures for employees governed by the human resources management system. It authorizes the Secretary to "establish an appeals process that provides employees . . . fair treatment in any appeals that they bring in decisions relating to their employment." 5 U.S.C. § 9902(h)(1)(A). The system also must "ensure that employees . . . are afforded the protections of due process." 5 U.S.C. § 9902(h)(1)(B)(i).

"Regulations implementing the appeals process may establish legal standards and procedures for personnel actions, including standards for applicable relief, to be taken on the basis of employee misconduct or performance that fails to meet expectations." 5 U.S.C. § 9902(h)(2). "Legal standards and precedents applied before the effective date of [§ 9902] by the [MSPB] and the courts under chapters 43, 75, and 77 of [Title 5]" are applicable to NSPS employees "unless such standards and precedents are inconsistent with the legal standards established under [§ 9902(h)]." 5 U.S.C. § 9902(h)(3). However, "[n]othing in [subsection (h)] shall be construed to authorize the waiver of any provision of law . . . that is not otherwise waivable under subsection (a) [of § 9902]." 5 U.S.C. § 9902(h)(7).

Employees subject to certain major personnel actions (e.g., removal, suspension for more than 14 days, or reduction in pay), who are not serving under a probationary period, and "who would otherwise be eligible to appeal a performance-based or adverse action under pre-existing provisions in chapter 43 or 75" of Title 5 have "the right to petition the full [MSPB] for review of the record of [DoD's] decision pursuant to regulations established under [§ 9902(h)(2)]." 5 U.S.C. § 9902(h)(4). The MSPB may, in turn, order "corrective action" only if it determines that DoD's decision was "(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (B) obtained without procedures required by law, rule or regulation having been followed; or (C) unsupported by substantial evidence." 5 U.S.C. § 9902(h)(5). An employee who is adversely affected by a final order or decision of the MSPB may obtain judicial review of the decision in the Federal Circuit, as provided for by 5 U.S.C. § 7703. 5 U.S.C. § 9902(h)(6).

B. Legislative History

The issue of whether the Secretary may waive chapter 71 when establishing the labor relations system for the NSPS was addressed by Congress at length. The language for Section 9902 was derived from section 1111 of H.R. 1588, passed by the House of Representatives on May 21, 2003. H.R. 1588, 108th Cong. (2003). Three aspects of this bill are particularly pertinent here. First, the bill incorporated a provision with language identical to § 9902(b)(4), which requires the HR system to "ensure that employees may organize, bargain collectively as provided for in this chapter . . . ." 149 CONG. REC. H4417 (May 21, 2003). Second, in contrast to the legislation ultimately enacted, chapter 71 was not included in the list of "other non-waivable provisions" contained in the House-passed bill. § 9902(c)(2). Third, the House-passed bill did not contain § 9902(m). 149 CONG. REC. H4461 (May 21,2003).

After the House passed the bill, the Senate amended H.R. 1588 by substituting its own version of the NDAA that did not include any provision analogous to chapter 99. 149 CONG. REC. S7297 (June 4, 2003). On June 2, 2003, Senators Collins, Levin, Voinovich, and Sununu introduced S. 1166, which was similar to chapter 99 and listed chapter 71 as a non-waivable provision. S. 1166, 108th Cong. § 9902(c) (2003). The bill was referred to the Senate Committee on Governmental Affairs. Although S. 1166 was not passed by the Senate, the Committee on Governmental Affairs approved it by a 10-1 vote. 149 CONG. REC. S14490 (Nov. 12, 2003).

On June 4, 2003, the Senate Committee on Governmental Affairs held a hearing at which Senators expressly discussed the issue. Secretary Rumsfeld testified:

[T]he National Security Personnel System we are proposing . . . will not end collective bargaining. . . . To the contrary, the right of defense employees to bargain collectively would be continued. What it would do is bring collective bargaining to the national level so that the Department could negotiate with national unions instead of dealing with more than 1,300 different union locals, a process that is inefficient.

Transforming the Department of Defense Personnel System: Finding the Right Approach: Hearing Before the United States Senate Committee on Government Affairs, 108th Cong. 21 (2003) (statement of Donald Rumsfeld, Secretary of Defense). Senator Levin, however, noted that the legislation sought by DoD and passed by the House went "way beyond" bargaining at the national level. Id. at 27 (statement of Senator Carl Levin, Member, Senate Committee on Government Affairs). He expressed concern that the bill desired by DoD would allow the Secretary to eliminate "bargaining rights in general" because it would authorize the Secretary to waive all of chapter 71. Id. Undersecretary Chu then testified that the reason the Department wanted authority to waive all of chapter 71 was "to get the bargaining [process] to come to a conclusion." Id. (statement of David Chu, Undersecretary of Defense).

Senator Collins, Chair of the Committee, rejected Undersecretary Chu's reasoning, explaining, "I think there are other ways to ensure that bargaining comes to a conclusion than having the authority to waive the entire chapter governing collective bargaining." Id. at 28 (statement of Senator Susan Collins, Chair, Senate Committee on Governmental Affairs). Senator Voinovich concurred, saying "Our bill [S. 1166] would provide that you would remain in chapter 71, as explained by our Chairman." Id. at 29 (statement of Senator George Voinovich, Member, Senate Committee on Governmental Affairs).

In what Senator Collins called "an extremely challenging conference with the House of Representatives," the Conference Committee forged a compromise between the House and Senate bills. 149 CONG. REC. S14428 (Nov. 11, 2003). The Conference Committee added chapter 71 to the list of "non-waivable provisions" in § 9902(d), but also added § 9902(m), which authorized the defendants to establish a new labor relations system.

While commenting on the conference report, Senator Collins admitted the product "was not the one I would have preferred," but she nevertheless stated that it did not waive chapter 71:

Another very important provision in this bill has to do with the collective bargaining rights of the Department's employees. The Department of Defense has repeatedly claimed it has no desire to waive the collective bargaining rights of its employees. Indeed, the bill before the Senate specifically states the Department does not have the authority to waive the chapter of Title 5 that governs labor-management relations. Thus, I fully expect the labor relations system developed by the Department will abide by the principles enumerated in chapter 71, such as the duty to bargain in good faith-a duty that applies to both labor and management, incidentally-and the prohibition against unfair labor practices.

149 CONG. REC. S14428-29 (Nov. 11, 2003) (statement of Senator Susan Collins, Conference Committee Member, Chair, Senate Committee on Governmental Affairs).

Senator Levin, who also described the outcome on collective bargaining issues as a "mixed bag" echoed Senator Collins' statement and described the Conference Committee bill in greater detail:

This conference report does not include any authority to waive the requirements of chapter 71. On the contrary, as the Chairman of the House Government Reform Committee pointed out on the House floor last week, this bill specifically lists the provisions of chapter 71 as being non-waivable. . . . .

The conference report also states that, notwithstanding the provision preserving the full force and effect of chapter 71, the Secretary "may establish and from time to time adjust a labor relations system for the Department of Defense to address the unique role that the Department's civilian workforce plays in supporting the Department's national security mission."

These two provisions must be read together and both must be given meaning. The first provision states that chapter 71 may not be waived or modified. The second provision states that the Secretary may establish a unique labor relations system. For both provisions to have meaning, the unique labor relations system established by the Secretary must be consistent with the requirements of chapter 71. . . .

Unfortunately, the conference report does provide for exceptions to the applicability of chapter 71. In this regard, the conference report specifically provides that the labor relations system established by the Secretary "shall provide for independent third party review of decisions, including defining what decisions are reviewable by the third party, what third party would conduct the review, and the standard or standards for that review." It also states that national level collective bargaining shall "be subject to review by an independent third party only to the extent provided" under this process. This language appears to preclude the appeal of such issues to the Federal Service Impasses Panel under section 7119 of Title 5.

149 CONG. REC. S14428, 14439 (Nov. 11, 2003) (statement of Senator Carl Levin, Member, Conference Committee and Ranking Member of the Senate Armed Services Committee).

Speaking on the Senate floor on November 12, 2003, Senator Lieberman, a member of the Conference Committee, also noted that the bill drafted by the Conference Committee "included the provision of S. 1166 stating that the Secretary of Defense has no authority to waive chapter 71." He said the bill "overrides chapter 71 only where" the bill "and chapter 71 are directly inconsistent with each other" and "that the Secretary of Defense has no authority" to depart from chapter 71 in any other area.

149 CONG. REC. S14490 (Nov. 12, 2003) (statement of Senator Joseph Lieberman, Member, Conference Committee and Ranking Member of the Senate Committee on Government Affairs).

C. Process Leading to Publication of the Final Rule

Prior to the publications of the challenged regulations, the final version of which is the subject of these proceedings, the Unions and the Agencies held several meetings to discuss the establishment of a new labor relations system. No representative from OPM attended the first of these meetings, which was the only meeting held within the 60-day period after enactment of the statute. See 5 U.S.C. § 9902 (m)(3)(D)("The process for collaborating with employee representatives provided for under this subsection shall begin no later than 60 days after the enactment of this subsection."). At some of these meetings, the Unions objected to the Agencies' concept for a new labor relations system. During the meetings, DoD presented documents to the Unions outlining some new concepts for the labor relations system, but they were not proposed rules.

During the summer of 2004, the Unions learned that the Agencies had convened working groups to draft proposed regulations for a new labor relations system. Plaintiffs requested the opportunity to participate in these groups and information about the groups' progress, including preliminary draft proposals or other work products seen or produced by the groups. The Agencies did not provide or agree to provide the requested information.

On February 14, 2005, defendants published the proposed regulations in the Federal Register. 70 Fed. Reg. 7552. Plaintiffs submitted comments which contained objections to various provisions of the regulations. The parties met to discuss the proposed regulations in April, May, and June of 2005. Plaintiffs continued to press their objections to the regulations and presented packages of their own proposals. Defendants responded by informing plaintiffs that the Agencies are entitled to modify the provisions of chapter 71 pursuant to 5 U.S.C. § 9902.

The last meeting before the final regulations were issued took place on June 16, 2005. At that meeting, plaintiffs contend, they were advised that defendants had no intention of changing any portion of the proposed labor-management regulations to accommodate plaintiffs' objections. Defendants note that the Agencies made numerous changes to the proposed regulations in response to objections and comments from plaintiffs.

On November 1, 2005, the DoD Secretary and OPM Director jointly promulgated final regulations establishing a labor relations system and a human resources management system for DoD. 70 Fed. Reg. 66116-66220 (Nov. 1, 2005).

D. Regulations Governing Labor Management Relations System (Subpart I)

Subpart I, 70 Fed. Reg. 66210-66220 (§§ 9901.901-9901.928), contains the regulations that establish DoD's labor-management relations system under 5 U.S.C. § 9902(m). The regulations purport to satisfy the NDAA's requirements that the new labor relations system "address[] the unique role that the Department's civilian workforce plays in supporting the Department's national security mission," "promote[] a collaborative issue-based approach to labor management relations," and to "recognize the rights of DoD employees to organize and bargain collectively, as provided for in 5 U.S.C. 9902." Id.

1. Duty to Bargain and Consult

The rule provides that "[e]ach employee has the right to form, join, or assist any labor organization . . . freely and without fear of penalty or reprisal . . . [and] [t]o engage in collective bargaining with respect to conditions of employment through representatives chosen by employees . . . ." 5 C.F.R. § 9901.906. DoD must "meet and negotiate in good faith . . . for the purpose of arriving at a [collective bargaining agreement]," 5 C.F.R. § 9901.917(a). In addition, it is an unfair labor practice ("ULP") for DoD to "refuse . . . to negotiate in good faith or to consult with a labor organization as required by [subpart I of the rule]." 5 C.F.R. § 9901.916(a)(5).

As in chapter 71, the term "collective bargaining" is defined as "to consult and bargain in a good faith effort to reach agreement . . . with respect to the conditions of employment affecting such employees . . . ." 5 C.F.R. § 9901.903; 5 U.S.C. § 7103(a)(12). The new rule defines "conditions of employment" to include "personnel policies, practices and matters affecting working conditions -- whether established by rule, regulation or otherwise . . . ." 5 C.F.R. § 9901.903. Management is prohibited from bargaining over "policies, practices, and matters" relating to, among other things, "[t]he pay of any employee or for any position, including any determinations regarding pay or adjustments thereto under subpart C of [the regulations]." Id.

Consistent with chapter 71, the duty to bargain does not extend to "matters that are inconsistent with law or the regulations in [Part 9901], Governmentwide rules and regulations." Id., 5 U.S.C. § 7117(a)(1). In a departure from chapter 71, the new regulations also exclude from the duty to bargain "issuances and implementing issuances." Id. at 66217 (§ 9901.917(d)(1)); 5 U.S.C. § 7117(a)(1)-(3). Management also "has no obligation to bargain or consult over a change to a condition of employment unless the change is otherwise negotiable . . . and ...


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