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United States Department of Commerce, Patent and Trademark Office v. Federal Labor Relations Authority

March 16, 2012


On Petition for Review of a Final Decision of the Federal Labor Relations Authority

The opinion of the court was delivered by: Karen Lecraft Henderson, Circuit Judge:

Argued December 8, 2011

Before: HENDERSON, ROGERS and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge HENDERSON.

Opinion concurring in the judgment filed by Circuit Judge ROGERS.

The Patent and Trademark Office of the United States Department of Commerce (PTO or Agency) seeks review of a decision of the Federal Labor Relations Authority (FLRA or Authority) upholding an arbitrator's award in favor of the Patent Office Professional Association (POPA or Union). U.S. Dep't of Commerce Patent & Trademark Office, 65 F.L.R.A. 290 (2010) (PTO II). The arbitrator concluded PTO committed an unfair labor practice in violation of the Federal Service Labor-Management Relations Statute (FSLMRS or Statute), 5 U.S.C. § 7116(a)(1) and (5), when it repudiated a provision in an agreement requiring that it make an annual request of the Office of Personnel Management (OPM) to increase PTO's special schedule pay rates and, if OPM refuses, to discuss "substantially equivalent alternatives" with POPA. Arbitration Decision in re Patent Office Prof'l Ass'n v. U.S. Dep't of Commerce, Patent & Trademark Office, FMCS Case No. 04-01463-3 (Arbitral Award of Arbitrator Arrigo) (July 25, 2006) (Award II). In particular, PTO challenges the Authority's determination that the provision constitutes an "appropriate arrangement" under 5 U.S.C. § 7106(b)(3). We grant PTO's petition on the ground that, under the collateral estoppel doctrine, the Authority was bound by its earlier decision concluding the provision did not constitute an appropriate arrangement. See U.S. Dep't of Commerce, Patent & Trademark Office, 60 F.L.R.A. 839 (2005) (PTO I), pet. for review dismissed, Patent Office Prof'l Ass'n v. FLRA, 180 F. App'x 176 (D.C. Cir. 2006).


In 2000, PTO patent examiners' wages, like those of most executive branch employees, were determined pursuant to the General Schedule (GS). Because it was experiencing problems recruiting and retaining employees, PTO requested and obtained OPM approval to pay employees special pay rates exceeding the comparable GS rates by ten or fifteen per cent, depending on the grade. Over time, however, special rates decrease in value relative to the corresponding GS rates because, while both rates receive annual general increases, only the latter include annual locality increases. Accordingly, PTO and POPA negotiated the following provision in an agreement effective January 2001:

The [PTO] shall request OPM approval for the next five years to increase the special pay schedule so as to maintain the 10% and 15% salary differentials relative to the updated GS rates, in a manner consistent with OPM regulations. If OPM refuses the request, the Agency shall enter into discussions with POPA in order to provide substantially equivalent alternatives.

Agreement on Initiatives for a New Millennium between [PTO and POPA], § A.2 (JA 69) (Millennium Agreement).

In 2002, federal employees in the Washington, D.C. region received a 3.6% general wage increase and a 1.17% locality pay increase. Pursuant to section A.2 of the Millennium Agreement, in February 2002, PTO requested that OPM increase the special pay rate by 1.17% to maintain the ten and fifteen per cent differentials, subsequently lowering the request to 1%. OPM denied PTO's request on the ground PTO's filings did not show it was "experiencing or . . . likely to experience significant handicaps in recruiting or retaining patent professionals."

Award II at 11 (internal quotations omitted). OPM recommended that PTO explore "the strategic use of other compensation flexibilities to address targeted recruitment and retention problems." Id. Accordingly, PTO entered into discussions with the Union regarding "substantially equivalent alternatives" pursuant to the second sentence of section A.2. When the discussions proved fruitless, the Union filed a grievance, which was then submitted to arbitration.

The arbitrator concluded that PTO had violated section A.2 of the Millennium Agreement and ordered it to "engage in . . . discussions [with POPA] in good faith with a sincere resolve to find a way to make-up for the lost locality pay." In re Arbitration Between Patent & Trademark Office &Patent Office Prof'l Ass'n, FMCS Case No. 04-00138 at 16 (Oct. 1, 2001) (Arbitral Award of Arbitrator Evans) (Award I). In his order, Arbitrator Evans "found that Section A.2 was intended to address the adverse effect of special rate erosion that would occur over time as non-special rate employees received locality pay increases." PTO I, 60 F.L.R.A. at 842 (citing Award I at 12).

On review, the Authority set aside the arbitral award as violating section 7106 of the FSLMRS. The Statute generally imposes on a federal agency a duty to bargain in good faith with a public employee union over conditions of employment but section 7106(a) exempts from the duty certain "management rights," including the right to retain its employees. See U.S. Dep't of the Treasury v. FLRA, ___ F.3d ___, ___; No. 11- 1102, slip op. at 4 (D.C. Cir. Feb. 7, 2012); 5 U.S.C. § 7106(a)(2)(A). Nonetheless, an agency must bargain over a proposal--including one that affects a management right--if the proposal constitutes an " 'appropriate arrangement[] for employees adversely affected' by the exercise of management rights." Nat'l Ass'n of Gov't Emps., Inc. v. FLRA, 179 F.3d 946, 948 (D.C. Cir. 1999) (quoting 5 U.S.C. § 7106(b)(3)). In PTO I, the Authority concluded section A.2 affected PTO's management right to retain employees and was not an "appropriate arrangement" within the meaning of 5 U.S.C. § 7106(b)(3) because, "as interpreted and enforced by the Arbitrator," it sought to ...

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