Few things make a union negotiator and members as happy as a Panel order that makes a pay increase retroactive. A fistful of cash relieves a lot of membership frustration with management. But as with so many good things, this also may be too good to be legal. Consequently, unions should think twice before exerting effort and bargaining chips inviting a Panel member or private interest arbitrator to order retroactivity. Panel orders can be challenged via agency head review and as detailed below there is a whopper of a legal argument available to agencies that does not seem to have been raised until recently.

Without dwelling on the finer points of sovereign immunity, suffice it to say that the government is immune to lawsuits or other legal actions for money unless it waives that immunity. Some have argued that the Federal Service Labor-Management Relations Statute, which authorizes some bargaining units to negotiate wages and economic benefits with agencies, is just such a waiver.  FLRA disagrees. (See Federal Aviation Administration, Detroit, 64 FLRA 325 (2009))  The only waiver entitling bargaining unit employees to retroactive pay is that contained in the Back Pay Act (BPA).

In order to trigger the BPA waiver, the multi-part criteria of the Act must be met.  FLRA has overturned hundreds of grievance arbitrators (and a few ALJs) who granted back pay without complying with the Act.  Consequently, one can reasonably why the Panel or interest arbitrator need not similarly meet the criteria.  Once some agency objects to a Panel order imposing a retroactive salary increase, the odds seem very high that the Authority will rule even the Panel must comply with that law.

The gritty details of the arguments are likely to play out like this.

First, the Panel or arbitrator must show that there was an “unwarranted or unjustified personnel action” justifying a back pay award.  That can be done by showing a violation of a collective bargaining agreement, personnel policy, past practice, regulation, or statute.  But there must be a violation.  The neutral cannot simply pronounce that she believes it only fair to give employees retroactive pay consistent with the timing of raises in similarly situated bargaining units, nor even assert that retroactivity is justified because the bargaining moved slowly causing employees to lose out on a raise being effective when the prior contract terminated.  Neither is a violation of anything.

Complicating things even more for the employees trying to argue that the failure to give raises earlier was an unjustified and unwarranted act is the possibility that the salaries they ended up with under the prior agreement were the product of a prior Panel final and binding order.  How could the union argue that the current salaries are unjustified and unwarranted if they were legally imposed?  Much the same can be said even if the current salaries were arrived at via a voluntary agreement between the parties.  Assuming the voluntary agreements are approved by the agency head, they are binding for their terms.

Admittedly, if the agency refused to bargain over wages (or bargain in good faith) the Authority is likely to uphold an order that a salary increase be retroactively implemented because the refusal violated law. Panama Canal Commission, 41 FLRA 284 (1991). But that does not mean retroactive salary orders are always legal.

Second, even if there was an unjustified and unwarranted personnel action, the Authority has held that does not automatically entitle employees to back pay.  Neutrals must also show that there was a “withdrawal or reduction” of pay.  Stated differently, employee must actually have lost pay they were otherwise entitled to, not merely lost the opportunity to earn more. Oklahoma Air Logistics Center, 57 FLRA 715 (2002).

Complicating any union effort to argue there was a withdrawal or reduction will be the fact that in a salary negotiations dispute the union has 50% of the decision-making power, figuratively speaking, as to how much and when. If the failure to implement a negotiated salary increase earlier did open the door to retroactive pay it would give the union the ability to delay agreeing to an otherwise acceptable offer simply to increase the size of the inevitable back pay check.

Third, the neutral ordering the retroactive pay check also must be an “appropriate authority” to trigger the Back Pay Act waiver of sovereign immunity.  The Authority has ruled endlessly that grievance arbitrators are appropriate authorities, but it has yet to never address an agency claim that interest arbitrators and Panel members are not appropriate authorities in so far as changing the terms and/or conditions of a prior binding salary agreement.

The Panel and its designee are empowered to involve themselves “in resolving negotiation impasses.” (5 USC 7119(c)) However, once the prior or existing agreement went into effect there no longer was any impasse over its terms. Without an impasse over the conditions of employment established by that agreement, what authorizes the Panel to involve itself in it or the continuing conditions it established and under law are to remain in place until a new agreement is established?

Moreover, neither the union nor agency is obligated to renegotiate an existing or prior agreement. Once approved and implemented agreements are binding for their terms and can only be changed if both parties agree voluntarily.  Nothing in law gives the Panel or interest neutral the power to reopen and change the terms of an existing or prior agreement.  They can only resolve those matters over which there is an obligation to bargain, namely, the next agreement.

Consequently, it appears that the Panel is limited to constructing the terms of a future agreement not yet negotiated because its members (and interest arbitrators acting in their place) do not appear to be appropriate authorities under the Back Pay Act.  Stated differently, even if the Panel imposed the terms of the prior or existing agreement it was functus officio as to the terms of that agreement once it issued its order.

The appropriate authority argument is even more powerful where the parties addressed the status of the prior agreement during the time between the reopening of negotiations and implementation of a new agreement.  For example, agreements commonly have clauses such as “, “…in the event either party reopens this agreement for modification, the terms and conditions of this Agreement shall remain in effect until that bargaining is concluded and new provisions are executed and approved in accordance with law.” If the Panel or interest arbitrator retroactively modified the salary provisions of that agreement, s/he would be flying in the face of two fundamental principles of almost every labor relations system. An imposed retroactive modification would appear to be a “manifest disregard” for the terms of the parties’ agreement as well as a denunciation of the statute’s twin goals of stability and repose. The Authority favors interpretations that enable parties to, “…rely on the agreements that they reach, once they have reached them.” SSA, ODAR, New Orleans and AFGE, Local 3506, 67 FLRA 597 (2014)

Any lingering doubt about whether it is appropriate for the Panel or interest arbitrators to dictate any conditions of employment other than those that will be effective after the agreement is approved, should be dispelled by putting the proverbial shoe on the other foot.  If the Panel can change impose new conditions of employment that go into effect while the prior to existing agreement remains effective, would that not also permit them to retroactively lower unit salaries and trigger unit-wide debt collection efforts?  Yes, it would.

The union rebuttal seems limited to arguing that once it is given the right to bargain wages in a unit neutrals are permitted the spread the money around anyway they see fit without regard to other laws and regulations. If true, could the neutral also impose salary plans that violate the civil rights law or Constitution? No, of course not.

Unions may also argue that money is money and any defect in retroactive money is without financial impact on the agency because the Panel could have simply created a prospective lump sum salary entitlement of equal value and not linked in any way to retroactivity. If these “could-a, would-a, should-a” arguments had any weight there would not be hundreds of grievance arbitration back pay awards voided by the Authority.

The union options appear to be few. It could nonetheless ask the Panel for retroactivity, and if challenged by an agency, defend it through the agency head disapproval process (or something that takes even longer). If the union wins, fine. Big checks for everyone because the back pay checks will likely cover another two years during which time no raises were given. If it loses, not only do any dreams for the retroactive money evaporate, but any legitimate post-agreement prospective raise the Panel ordered will have been delayed years without any way to get that money back. The primary purpose of this post has been to suggest that is a very big gamble for the union, especially if the agency went ahead and implemented the same raise for the non-unit employees.

A third potential response to the union retroactivity demand is that the Panel defers action on the entire dispute until the FLRA decides whether retroactive pay increases can be imposed by neutrals. Case law holds that when the negotiability is in doubt FSIP does not have the power to address the substance of the dispute unless the FLRA has ruled on a virtually identical proposal. (Carswell Air Force Base, Texas and American Federation of Government Employees, Local 1364, 31 FLRA 620 (1988) and Dep’t of the Interior, Bu. of Reclamation, Lower Colorado Region, Yuma, Ariz., 41 FLRA 3 (1991))  While the Authority has ruled that wages are negotiable that is not the same as ruling that any kind of salary proposal is negotiable?  Presumably a demand to be paid with gold rather than currency or to be paid a year in advance would not be seen as authorized by the infamous Fort Stewart salary negotiation case. (110 sp. Ct. 2043 (1990)

Another option would be to not argue for contract language imposing retroactivity, but point to the grounds for retroactivity as reason to boost prospective salary increases an extra notch to make up for lost time. If a union is already too far down the impasse road to redirect the neutral to a more legally defendable salary increase, it faces the difficult reality that it may be better to drop the retroactive claim all together so at least the prospective raises kick in as soon as possible. Its bargaining power in that situation is limited.

A third option would be to adopt ground rules that avoid drawn out, multi-year negotiations in favor of an expedited conclusion to bargaining. Typically, this requires the parties agree to a condensed bargaining schedule in the ground rules followed by the use of a private neutral to act as fact-finder/mediator with the additional power to issue recommendations. Expedited negotiations should also limit the union’s cost of bringing in professional staff to assist or even lead its officers at the bargaining table.

This was originally posted in March 2017 and followed by a Part 2.

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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