The FLRA has made it quite clear that in order to award back pay a party must show that there is a direct causal connection between the unwarranted and unjustified personnel action and the loss of pay, allowances or differentials.  That is easy to show when an agency skips the next person on the OT assignment list in violation of the contract.  The issue of the agency’s ability to pay never comes into play.  But what if an agency unilaterally made massive changes in its overtime assignment practices in order to increase the service it provides.  For example,

let’s assume that IRS realized in early March that if it continued to assign overtime pursuant to its current practice, most of the assignment would go to the highest paid unit employees.  As a result, it would only be able to fund 1,000 hours of overtime for the employees answering panicked taxpayers’ questions the last two weeks before income tax returns are due on April 15. However, if it immediately changed the practice to use substantially lower-paid employees on the phones it would be able to schedule another 433 hours of telephone service time.

If IRS unilaterally made that change to sue the lower cost employees, most arbitrators and ALJs would order the agency to return to the status quo ante, and assign the 1,433 hours it actually assigned to the employees who properly should have received it.  If the agency filed exceptions arguing that there was no direct causal connection or even an unjust personnel action, it would lose.  That is almost guaranteed.

But what if the agency argued that it should only be required to retroactively award back pay equal to what it would have been able to fund if it followed the long-standing practice?  For example, supposed it said that when it made its decision to change the practice it only had an overtime budget of $43,000. to finish out the filing season telephone work.  That would have provided enough to  cover 1,000 hours for employees paid on average $28.70 an hour (or $43.00 per overtime hour), but it would have funded 1,433 hours for employees paid on average $20.00 an hour (or $30.00 per overtime hour).  So, isn’t the status quo ante an order to distribute overtime under the prior formula until the agency has distributed $43,000 hours’ worth of work?  At that point the employees would have received what they otherwise would have if the practice had not been changed. Stated differently, the agency would be required to retroactively pay $43,000 (and perhaps some minor interest above that) rather than $61,619 dollars which is the total of 1,433 hours paid at an average OT hourly rate of $43.00.

Agencies are shortchanging themselves when they fail to raise this argument before arbitrators and FLRA. They will never win in the case of a single employee or even small number, but where the back pay figure is very high and the agency can demonstrate funding limitations constraining the situation at the time of the violation, it has a chance to limit the size of the back pay award. This is different than arguing that the agency does not have the money to pay presently without doing seriously jeopardizing its mission. That is a current year argument about money as opposed to prior years.

Unions also should think about this wrinkle in back pay cases because it makes settlement more likely.  Finally, arbitrators need to be prepared to step up to this defense when raised in a hearing. They need to learn some of the basic funding rules that have the potential to leave the agency no discretion but to stop spending money.

Oddly, no one seems to have raised this defense to large back pay awards to date.

About AdminUN

FEDSMILL staff has over 40 years of federal sector labor relations experience on the union as well as management side of the table and even some time as a neutral.
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