BEWARE THE RETROACTIVE CONTRACT CLAUSE

It does not happen often, but every few years we hear about an interest arbitrator or fact-finder imposing a contract clause that has retroactive effect. For example, suppose the parties went to the FSIP in 2007 and had imposed on them a contract clause that required the agency to fund the incentive awards pool for bargaining unit employees at the same percentage of total salary level it funds the pool for non-unit employees. Then, when the contract reopened into 2011 the union proposed that the awards funding formula be adjusted retroactively to sweeten the amount of money that should have been distributed for the last two years of the 2007-11 contract? If the 2011 negotiations go to impasse could the Panel or a private arbitrator acting in its place order the union’s proposal that effectively requires the agency to send out back pay checks to unit employees covering the last two award years? We doubt it and here’s why.

First, the nature of the interest arbitrator’s job is to set the terms of the next collective bargaining agreement.  We have never seen anything suggesting that they are empowered to second guess a prior contract and issue retroactive remedies for anything they consider unjust.

Second, the prior agreement was a “final and binding” legal document. Nothing in the law suggests that collective bargaining agreements are “final and binding subject to constant reconsideration at any time in the future.” If a party violates an agreement, it should grieve. If it does not like the terms of an agreement, it should propose changes when the agreement officially reopens or give the other party a very good reason to change the contract’s terms even before it opens for renegotiations. Even if the Panel or an interest arbitrator worked the previous contract impasse between the parties and issued a decision, that neutral is functus officio. They had their chance and if they blew it they are limited to prospective

Third, in the federal sector no agreement can be effective until an agency head has had an opportunity to review and approve its terms. If the Panel or interest arbitrators were allowed to give a contract clause or benefit retroactive effect that would effectively evade agency head review.

Fourth, a retroactive clause obligating the agency to grant back pay to unit employees who worked for the agency sometime in the past it likely would be an order to compensate some who have left the unit. Maybe they have gone into management, another agency or left the government. In any case, they are outside the unit and the interest arbitration award would seem to be defective for that reason alone.

Fifth, while retroactive bargaining orders are allowed in the federal sector the Authority has limited them to a very small set of situations. In Dept. of the Army and NFFE Local 1442, 60 FLRA 456 (2004) FLRA said they were to be used “…where a Respondents unlawful conduct has deprived the exclusive representative of an opportunity to bargain in a timely manner over negotiable conditions of employment….”   In Dept. of VA and AFGE, Local 446, 51 FLRA 1572 (1996) it also used them where a status quo ante order was not appropriate.  FLRA has left no doubt that giving an agreement retroactive effect is a non-traditional remedy to violations of law, not a mechanism to second guess some prior interest arbitration award.

Sixth, the Authority has repeatedly highlighted that a fundamental purpose of the labor relations statue is to bring “stability and repose” to the workplace and the parties’ relationship. “One of the most important benefits of having a collective bargaining agreement is to provide the parties to the agreement with some semblance of ‘stability and repose’ with respect to matters reduced to writing in the agreement which extends to the procedures the parties agree to regarding changes during the term of an agreement and the opportunity to negotiate regarding such changes.” Dept. of Air Force, Ohio, and AFGE, Council 214, CH_CA-30438 (1995)

Seventh, if it were kosher to demand retroactive changes in existing contract terms from an impasse neutral, then wouldn’t that open the door to an agency demanding retroactive modifications it wants. Perhaps it asks the union to repay some official time its reps used under the last contract by substituting annual leave or that employees who got awards the agency now considers overly generous to repay the excess amount. That sounds like a great way to screw up workplace morale and even break a union—neither of which should be allowed under our statute.

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We put this topic on our agenda to address in case any unions are in the middle of bargaining and asking for impasse decisions that include giving retroactive effect to certain benefits. If you are our message is that you may not be able to enforce that even if the Panel or an arbitrator imposes it. Consequently, you might want to think about trading a retroactive effect clause for something just as valuable and more defensible in agency head review.