CRITICAL CONTRACT CLAUSES (#2)- Mandatory Suggestion Awards

Agencies pay consulting firms millions to suggest ways to improve operations. But very few union contracts force agencies to fairly compensate its own employees when their suggestions are accepted–and that is hurting employees as well as management.  This is a critical issue for future negotiations throughout government.

It has been decades since FLRA held that unions may negotiate clauses requiring management to pay a certain amount of money when it accepts an employee’s suggestion for improving operations, lowering costs, etc.  AFGE, 21 FLRA 90 established that a negotiated formula for compensating the suggesting employee would only violate the agency’s right to determine its budget if,

“. .. the proposal by its terms prescribed a particular program or an amount of funds to be included in the agency’s budget or if the agency made a substantial demonstration that the proposal would result in a significant and unavoidable increase in costs which would not be offset by compensating benefits.”

So long as the union avoided doing either in its proposal, budget was not to be an obstacle. The proposal in that case avoided those traps by requiring management to pay an employee a percentage of the savings achieved from the suggestion, e.g., 15% of the benefits up to $10,000.  A more recent NTEU contract contains the a clause similar to that:

The Employer and the Union agree that employees’ suggestions to improve work processes and working conditions provide a valuable and unique source of ideas which can greatly increase the efficiency of the Service and/or employee morale. In accordance with the Parties’ 2001 Suggestion Program Memorandum of Understanding and applicable law, rule and regulation, an employee who has a suggestion adopted by the Employer will receive twenty-five percent (25%) of the tangible first-year savings resulting from that suggestion, as well as additional monetary and nonmonetary benefits, as provided by the memorandum of understanding.  (See the “Compare Contract” button on our home page for the NTEU-IRS contract.)

As to “why” management should include a negotiated suggestion award formula in the agreement, there are several reasons. First and foremost, what possible reason on earth would there be for management to insist on the right not to compensate employees for their money-saving ideas or to insist that it have the power to compensate them at any rate it wanted, suggestion by suggestion? Such a position borders on lunacy.

Second, by setting a payment formula the agency avoids potential charges of disparate treatment when two employees have suggestions accepted that save the same amount of money for the agency but get substantially different award amounts. If an agency unwittingly gave a man $25,000 for a $100,000 suggestion savings but a woman only $20,000 for her $100,000 suggestion, it would totally exposed to a discrimination charge that could not only cost it the $5,000 difference, but attorney fees and emotional damages.

Third, no one knows the details and subtleties of how a particular task is performed better than employees who perform it every day. Agencies should take serious steps to encourage employees to suggest ways to improve operations and/or save money–and a suggestion awards program that GUARANTEES AS A MATTER OF UNION CONTRACT a pay-off is such a step.

Fourth, aside from civil rights liabilities for disparate treatment, the courts have also outlined a strong argument why agencies should specify through negotiations a number of rules about a suggestion award program.  In 2007 a SSA employee sued the government in federal court alleging that by underpaying for his suggestions the government violated an implied contract it had with all federal employees, it abused its discretion, etc.  The court stated,

(“[T]he [suggestion] program is an invitation to submit offers which, if accepted by the agency, entitle the offeror to recognition that may include a cash award determined in accordance with published guidelines. . . . [The program] gives rise to enforceable expectations correctly described as an implied-in fact contract.)  See Cooper v. United States (Fed. Cir., 2007)

In approaching negotiations unions should request reports showing the amount of savings and awards paid for suggestions over the last few years under management’s discretionary program, as well as some additional data about each payment, e.g., the organizational subdivision that made the payment will identify if the various subdivisions pay at different rates, the grade of the employee might reveal inequitable treatment of lower graded employees, etc..

The union should also ask for a demographic analysis showing the award to savings ratios by race, gender, and age, at least. Civil rights law absolutely require that management avoid illegally discriminating in how it awards this compensation and if no one has ever checked, it is quite possible management has a problem it needs the union’s help to solve in the next contract.

Finally, it might not hurt for the union to file an FOIA request asking for how much similarly situated agencies have paid their employees for suggestions in relation to the savings. It could be that your agency is underpaying, which would be a good argument at the bargaining table.

Aside from the percentage of savings the employee should receive, the following issues should also be addressed:

  • How will savings be calculated?
  • Will the savings figure include savings in future years?
  • How does an employee contest the fact that the agency implemented his suggestion even though it formally rejected it?
  • How does the employee contest the fact that the agency rejected her suggestion but then implemented something close to it?
  • What will the employee be told about the reasons for rejecting his suggestion?
  • What will determine whether the suggestion is part of his normal duty obligations in the position, which excludes the employee from a suggestion award, or something beyond that?

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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