FORT STEWART SCHOOLS v. FLRA

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Argument of Christopher J. Wright

Chief Justice Rehnquist: We'll hear argument first this morning No. 89-65, Fort Stewart Schools v. Federal Labor Relations Authority.

Mr. Wright.

Mr. Wright: Mr. Chief Justice, and may it please the Court:

The Army operates schools for the dependents of personnel stationed at Fort Stewart, Georgia.

This case arose when the union that represents the teachers at those schools made a number of proposals relating to wages and fringe benefits, including a proposal to increase wages across the board by 13.5 percent.

The Army refused to negotiate, relying on various provisions of the Federal Labor Management Relations statute and on a statute and a regulation specifically directed to the dependents' schools.

The FLRA held that the proposals are negotiable in a divided opinion, and the court of appeals affirmed.

We believe that the Army's refusal to bargain is justified for three reasons.

First, Congress did not make wages negotiable in the Federal sector.

Second, it instead gave agency management control of agency budgets.

And third, the salaries of teachers at the dependents' schools are to be set by comparison with the salaries of teachers at the local public schools.

Before I discuss those three reasons, I'd like to emphasize that it is undisputed that the vast majority of Federal employees may not bargain about pay.

The pay of most Federal employees is set by the general schedule and such employees, about a million and a half in all, are paid what Congress says in the general schedule they are paid.

The FLRA has changed its position with respect to another large group of employees--

Unknown Speaker: Mr. Wright, with respect to that first category of employees, is bargaining over their wages specifically excluded by the act, by the FLRA?

Mr. Wright: --It... it works that way.

We... we... it is undisputed we think for three reasons.

A... there is nothing in the act that says general schedule employees cannot bargain about wages in so many words.

However, the portion of the act that makes... that mandates bargaining, says that bargaining is not permitted where a matter is specifically provided by Federal statute.

That is Section 7109(a)(14)(c).

In addition, Section 7117 provides that a proposal cannot be in conflict with a Federal law, and a... and a proposal to pay someone differently than what Congress has set in the Federal schedule would be contrary to law.

Both the union and the FLRA would agree with that I believe.

They would not agree with our third point that the management rights provision which gives management control of the agency budget also means that... that the pay of general schedule employees can't be set by statute.

Unknown Speaker: Mr. Wright, the... the employees whose wages are at issue here are not employees where Federal law sets their wage, as I understand it.

Mr. Wright: That's correct.

We... we think that they are in many ways similar to prevailing rate employees.

Unknown Speaker: And before this statute was enacted, there was an executive order that provided substantially similar provisions?

Mr. Wright: It was similar in some ways.

The language was not identical.

It did provide... it provided for bargaining over working conditions.

Unknown Speaker: And under the former executive order, would the bargaining proposal here have been upheld?

Mr. Wright: The FLRC, the FLRA's predecessor, did hold in two cases that pay was negotiable.

And you've gone to the strongest point in their case, so let me... let me address it right now.

As the D.C. Circuit stated in its excellent opinion in the overseas schools case, we believe that the practice under the FLRC and the executive order regime has been superseded by the FLRA, for the reasons the D.C. Circuit gave and the reasons I will give in the bulk of my argument.

Namely, that the language Congress used, the statements it made in the legislative history, and its reservation to management of control of the budget confirm that Congress did not want bargaining over wages under the Federal Service Labor Management Relations statute.

I'd like to make two other points with respect to the FLRC decisions.

First, whether wages were working conditions was not raised in either of those cases.

The FLRC never specifically decided that issue.

Second, it's clear that Congress was not aware of those two decisions.

In fact, Senator Sasser told the Senate that, under the FLRC... the FLRC had held that under the executive order regime that wages are not negotiable.

Now, normally Congress does intend to carry forward prior practice.

But we think that it intends to carry forward the prior practice as it understands it.

Unknown Speaker: Well, don't we assume they understand?

When have we gone around examining whether the congressmen have the read cases?

Mr. Wright: I don't... I don't know any example of a case quite like this one where a senator specifically said that pay is not negotiable under the FLRC cases.

Unknown Speaker: But that comment could reflect the generality of the fact that most Federal employees are... are... their salaries are set by law.

Mr. Wright: It's possible.

Our primary answer would be, as the D.C. Circuit stated, that we think for the majority of the reasons I will try to give that Congress didn't want wages to be negotiable under the... under the--

Unknown Speaker: In what respect was the governing language here different from the language of the executive order, the FLRC--

Mr. Wright: --It did not specifically refer to conditions of employment.

The Act now says that conditions of employment are negotiable.

It... it defines it to include personnel policies, practices and matters affecting working conditions.

But... but it... but the executive order simply referred to working conditions.

Now, conditions of employment, we think are... are important because in the... in the NLRA Congress made wages, hours and other terms and conditions of employment negotiable.

It specifically said wages are negotiable.

Unknown Speaker: --You think conditions of employment, which is used in the statute, is a narrower term than working conditions?

Mr. Wright: Well, we think the different term--

Unknown Speaker: Do you think conditions of employment is less likely to include wages than working conditions?

Mr. Wright: --Well, they are obviously very similar.

My point in mentioning it--

Unknown Speaker: I don't think so.

I think a... a condition of employment might well be what you get paid for the employment, but I don't think that what you get paid for employment would normally be called a working condition.

Mr. Wright: --Well, in this case, of course, it's... conditions of employment are defined to include matters affecting working conditions.

So Congress has used somewhat a different language here.

What we think is most important is looking at both the NLRA and the Postal Reorganization Act.

The two times Congress has made wages negotiable, it has said so specifically.

The Postal Reorganization Act to our mind is actually the most analogous statute because it also affects Federal employees and because the committees here that drafted the bill... the House committee was the Committee on the Postal Service and the Civil Service.

In the Postal Reorganization Act in 1971 Congress made wages, hours and conditions of employment... I'm sorry... wages, hours and working conditions negotiable.

It specifically said, as it said in the... in the NLRA, that wages are negotiable.

Unknown Speaker: Well, Mr. Wright, on conditions of employment, does it include, in your view, more than physical working conditions?

Mr. Wright: Yes, we agree, as we tried to explain in our reply brief, that basically our position would be in accord with Justice Stewart's statements in his concurring opinion in the Fibreboard case.

Unknown Speaker: Why do you think that a condition of employment might not be the wage that's paid?

Mr. Wright: Well, as Justice Stewart explained, and as the D.C. Circuit explained, the... the first impression you would get from that language is that Congress was talking about the physical conditions of work.

Safety--

Unknown Speaker: Well it isn't... the term isn't self-explanatory.

Mr. Wright: --That's true.

We think that--

Unknown Speaker: Then why wouldn't we defer to the agency's interpretation of it, the FLRA?

Mr. Wright: --Well, because we think that after this Court uses the traditional tools of statutory construction, as this Court said was appropriate in the Chevron case involving deference, that the Court will be left with the impression, like four courts of appeals, that the statute... clearly that Congress in the statute clearly did not mean to wait... to make wages negotiable.

As I have said--

Unknown Speaker: Well, there... do you feel that the FLRA's conclusion is unreasonable under the Chevron principle?

Mr. Wright: --Yes.

Once one looks at what Congress has done in other statutes, what the Congressmen said on the floor of the House and what Congress did in the budget right in the statute--

Unknown Speaker: It seems to me that that is a great big mountain for you to get across.

Mr. Wright: --Well, Your Honor, I am sorry to hear that.

[Laughter]

But as I say, the majority of the courts of appeals have agreed with our position, even though they've recognized that the FLRA is entitled to deference.

I might add that the FLRA is entitled to deference with respect to its interpretation of the Federal Labor Management law.

It is not entitled to deference with respect to its interpretation of the dependents' school statute.

Unknown Speaker: How... how much weight would we ordinarily give to the action of Congress in 1935 says wages are to be bargained about under the NLRA?

Congress in 1971 says they are to be bargained about in the Postal Service Act.

Then Congress comes along seven years after in '78 and says conditions of employment.

It seems to me that inference is not as strong, or as if you are talking about the same statute where Congress says one thing in one section and uses a different phrase in another section.

Mr. Wright: It would be a better case for us were that the case.

But those are the three situations were Congress has made matters bargainable.

The two times it has made wages bargainable, it has said wages.

The Postal Reorganization Act was very much on Congress' mind in... in enacting this statute.

Congressman Udall, who authored the compromise that was enacted, specifically contrasted the practice under the Postal Reorganization Act to what... the practice under his bill.

And he assured his colleagues that pay would not be negotiable under this statute, saying that the bargainability of wages for the Postal Employees had been very troublesome.

In addition, two proposals were made to Congress to make wages negotiable.

Congressman Ford proposed a bill that would have made wages generally negotiable, and Congressman Heftel introduced a more limited proposal that would have made pay negotiable so far as consonant with the law and regulation.

Neither of these proposals were enacted.

They were both rejected, and we think that that is significant.

Another--

Unknown Speaker: Is any part of your case that bargaining would be inconsistent with the statute that controls or organizes these dependent schools?

Mr. Wright: --Yes.

Yes.

That's... we... we think that in that statute, in a nutshell, Section 241 and Subsection (a) says that these schools are to be comparable to schools in the states where they are located.

Subsection (e) says that the per-pupil costs of the dependents' schools shall not exceed, so far as practicable, the per-pupil costs at the local public schools.

Now, the Army has interpreted that reasonably, in our view, to mean that if you are going to offer comparable education at a comparable per-pupil cost, you have to pay teachers comparably.

Teachers are, after all, the most important component in many educational--

Unknown Speaker: So if the Army has that authority under... to interpret its statute that way, you would say that... that bargaining would be inconsistent with some of the law.

Mr. Wright: --Yes.

That that's our third argument in this case.

It's independent ground for overturning the decisions below.

We think it's--

Unknown Speaker: Were the unions--

--Do you think it's your weakest argument?

Is that it?

Mr. Wright: --I don't believe so, Your Honor.

[Laughter]

It's... it's our narrowest argument.

[Laughter]

Unknown Speaker: Were the teachers here, the unions, asserting that... that they were entitled to wages that were not comparable?

I mean, comparable wages doesn't seem to me a very precise term and then there's... there's a lot of room for bargaining while still remaining within the... the playpen of comparability, it seems to me.

Mr. Wright: Well, in fact, the proposals do not purport to be comparable.

They are not comparable.

The--

Unknown Speaker: Are they admitted not to be comparable?

Mr. Wright: --The... I don't know if they would admit that they are not, but--

Unknown Speaker: All right.

Mr. Wright: --The salary schedules at these schools are actually set quite specifically.

There's a sheet of paper and across the top there are four categories: bachelor's degree, master's degree, special ed degree, and doctorate.

Then down the other side there's years of experience.

And so, if you have a special ed decree... degree and 11 years of experience, you find out that you get a certain amount of money and that's... that's the way these things are done.

So they're--

Unknown Speaker: Still in all, comparable isn't identical and you might say a couple of hundred dollars more in light of greater distance to travel to get to this school as opposed to those schools or some other things, wouldn't that be considered--

Mr. Wright: --Yes.

Unknown Speaker: --still comparable?

Mr. Wright: Yes, and... and--

Unknown Speaker: So why can't you bargain over it under this statute?

Mr. Wright: --Well, it seems to us that that sort of throws Congress' commands out the window.

The... the couple of hundred dollars here and there would still be comparable.

Simply untying the wages at the dependents' schools from the wages at the local schools--

Unknown Speaker: Well, Congress should have said precisely then, you know, shall not comparable to... shall be... shall be those prescribed by.

It didn't say that.

It said comparable to.

Mr. Wright: --And they need to be comparable.

We... we think the Army has... in fact, per-pupil costs have to be comparable and... and Congress recognized that you couldn't have identical per-pupil costs.

The Army would have to make sure that it had, you know, so many teachers with doctorates and five years of experience if all costs were to be--

Unknown Speaker: Well, you are talking about regulations not the statute now, aren't you?

The statute just says that the education has to comparable.

Mr. Wright: --The statute says that the education has to be comparable and that the per-public costs have to be comparable.

It is the regulation that says that salaries schedules have to be comparable.

I'd like to make one other point with respect to our... our primary contention, our contention that wages are not negotiable.

This statute is different from the private sector in that, if a matter is negotiable, the Federal Service Impasses Panel can impose a proposal on an agency over its objection.

So, in this case, if the FLRA prevails, the salaries of dependents' school's teachers could ultimately be set by arbitrators rather than by the agency.

We think, especially in that circumstance, if Congress wanted not only to make wages negotiable but to allow a system where they might ultimately be set by... outside the agency, it surely would have said so in the statute.

Unknown Speaker: How is the Federal Services Impasses Panel appointed?

I'm not familiar with the manner of its appointment.

Mr. Wright: It's an agency within the FLRA, and it is my understanding that the FLRA has a semi-permanent panel of members of the Impasses Panel, but that they also... that the Impasses Panel itself relies very heavily on the Federal Mediation Service.

And it in turn sends many matters to arbitrators under the Federal Mediation Service.

Unknown Speaker: Is there any review authorized of a decision of the Impasse Panel?

Mr. Wright: Not that I know of.

The FLRA reviews grievance decisions by arbitrators, but I do not understand that they review Impasse Panel decisions.

Unknown Speaker: Those decisions can be arbitrary and capricious, as far as we--

Mr. Wright: They certainly can.

Let me make one other point with respect to our argument that wages aren't conditions of employment, and... and that is that after the Ford and Heftel proposals were rejected, congressman after congressman got up on the floor of the House and assured their colleagues that wages weren't negotiable.

And... and we think that that reinforces our conclusion.

In addition, on our second argument that the budget right gives agencies control of the budget, the first thing I would like to say with respect to that is that the... the budget right, which says that nothing in the... in the Civil Service Reform Act shall affect the authority of agency management to determine the budget of the agency reinforces our first position.

We think that it would be contradictory for Congress to state simultaneously that management has control of the budget but wages are on the bargaining table.

Since wages could ultimately be set by arbitration--

Unknown Speaker: --But, Mr. Wright, it is... it is not your position, is it, that all proposals must be cost-free?

Mr. Wright: --No, it is not our position.

Unknown Speaker: Okay.

Mr. Wright: We... we would certainly allow that something that had a relatively de minimis impact on the budget would... would not be negotiable.

The FLRA has gone to the other extreme.

Unknown Speaker: Excuse me.

Is it your position that any proposal over a matter that is otherwise bargainable, becomes nonbargainable if it would cost a lot of money?

Mr. Wright: Yes.

If it would... if it would be so large as to interfere with the agency's budget, yes, it is our position that it becomes nonbargainable.

Unknown Speaker: More than de minimis in other words?

Mr. Wright: Well, it would be for the FLRA to determine ultimately what that standard might be.

Whether it would be more than de minimis or would have to substantial has simply not been litigated to this point.

Unknown Speaker: And who has the burden on the issue on the budget?

Mr. Wright: Well, the FLRA has--

Unknown Speaker: Says you do.

Mr. Wright: --placed the burden on... on management--

Unknown Speaker: Right.

Mr. Wright: --not only to show the costs of the proposal... and here it seems to us a cost of a 13.5 percent pay increase seeks... speaks for itself.

Unknown Speaker: Well, it doesn't really because what's really at issue is the difference between 13.5 and what you were prepared to give anyway.

Mr. Wright: Which, of course, we're not prepared... we're not about to announce before a negotiations--

Unknown Speaker: Well, there is something in the papers that suggests you... you did indicate a willingness to give something like 10 or 11 percent, didn't you?

Mr. Wright: --The... the... in this particular school year the agency gave the teachers a 6 percent pay raise and then in the middle of the year gave them... I think it was a 6.8 percent pay raise... and then in the middle of the year gave them another 4 percent.

Unknown Speaker: So the difference between 13.5 and 10.8 or whatever it is, is really what is the impact on the budget that would otherwise have been--

Mr. Wright: In this particular year.

But we think that this proposal here calls in... calls into question the entire agency budget, the largest item in the agency's budget.

And it obviously, therefore, deprives the agency of control over its budget.

Unknown Speaker: --Well, but as I understood the FLRA, they took the position that you had the burden of explaining just to what extent it impacted on the budget.

And if was... if it looked substantial, they were prepared to listen to you.

Mr. Wright: Well, they also wanted us to prove that the benefits that flowed from the union proposal wouldn't outweigh the costs.

In other words, they put the burden on management of proving the benefits that would flow from the union proposal.

Now, we don't know what benefits might flow from this proposal.

Unknown Speaker: Well, sometimes you might.

I mean... I don't know.

But is it... but is it perfectly clear that in every case it's unreasonable to ask management to explain its understanding of what impact this would have on the budget?

Mr. Wright: No.

No.

Certainly not in every case.

If... if it were totally unclear, if it weren't something like a 13.5 percent increase, it might well be reasonable.

Unknown Speaker: Is it your understanding that when they asked you to... to show that no benefits would come from it, they were talking about non-economic benefits?

Mr. Wright: Yes, I believe so because what they... near as we can tell, they seemed to think that an across the board pay increase would improve employee morale and that would be the compensating benefit here that would outweigh the costs of the 13.5 percent proposal.

Now, I suppose employee morale improving might cut down on turnover and ultimately lead to some monetary saving.

Unknown Speaker: You are in control of your budget so long as you have high employee morale?

Is that the... is that the theory of that?

Mr. Wright: Well, I think that's the other side's position.

The heart of the problem with the FLRA's test on the budget, I'd like to say, is made clear on page 15 of its brief where it says cost doesn't matter.

More specifically, it says that the cost of a proposal alone is an insufficient basis to find interference with the statute's budget right.

In the NRC case, which this Court... which is pending before the Court right now, a 20 percent pay raise was proposed, which would cost the agency $32 million annually.

The cost of that proposal alone doesn't rule it out under FLRA's agency... under the FLRA's budget test.

If there are no further questions at this time, I would like to reserve the remainder of my time.

Unknown Speaker: Thank you, Mr. Wright.

Mr. Persina.

Argument of William E. Persina

Mr. Persina: Thank you, Mr. Chief Justice, and may it please the Court:

The Authority's holding in this case, affirmed by a unanimous court of appeals, stands on three eminently reasonable points.

First, that the compensation paid to a Federal employee for work performed constitutes an aspect of that employee's work relationship with his or her employer.

Indeed, compensation is probably the primary condition upon which the employment relationship is initiated and maintained.

So for the relative handful of Federal employees, such as those in this case, whose compensation is not established in statute, compensation is a mandatory bargaining subject under the Federal Sector Labor law.

The authorities second point is that simply because a bargaining proposal entails an initial or facial cost, that is not enough of a reason in itself to conclude that implementation of the proposal will interfere with the agency's budget right.

Rather, that agency employer must show that the real cost impact of that proposal, after its compensating benefits are taken into account, will require the agency to seek more money through the budget process to conduct its affairs than it had originally determined was necessary.

And that is a showing that the employer agency in this case has not made.

Unknown Speaker: Is it... would that showing have to discount not only the economic benefit of... but the tangible economic benefit for the agency but also the kind of intangible, such as employee morale factor?

Mr. Persina: Well, as Mr. Wright indicated, some of the intangibles will very frequently be able to be converted into tangibles.

Really, the analysis is little more than the familiar cost/benefit analysis that is a commonly used tool both inside and outside the government for management planning.

Unknown Speaker: Now, cost/benefit analysis takes account of intangibles.

Mr. Persina: Yes, it does.

Unknown Speaker: The word "budget" does not.

Mr. Persina: Well, but the point here is whether or not the cost impact of the proposals will be sufficient to offset.

Now, certainly some of these intangibles, we think, for instance... and morale I think is a good example.

If employee morale is good, that can logically--

Unknown Speaker: You need fewer teachers and therefore wouldn't have to spend as much.

Mr. Persina: --Well, that's a possibility.

Unknown Speaker: It's conceivable.

Mr. Persina: There would be... there would be reduced turnover.

Unknown Speaker: Is it... is it only the intangibles that have that economic effect that the Authority is... is willing to take into account?

Mr. Persina: Well, I think it would be a mix of intangibles and... and best estimates as to how those intangibles would convert into monetary figures.

But, no, even--

Unknown Speaker: But, if an intangible has no economic effect, then it's irrelevant.

Is that right?

Mr. Persina: --No.

I think an intangible may be taken into account by the Authority in its compensating benefits analysis.

Unknown Speaker: How so?

Mr. Persina: I don't think it has to--

Unknown Speaker: How... how can an intangible that has no economic effect have any impact on whether the agency's budget is going to be affected or not?

Mr. Persina: --Well, I think is an intangible that may not be reducible to a specific dollar and cent term.

But there can be some general basis, such as morale, and think that is a good example, as to whether or not there is bad morale.

For instance, if this employer and come in and say--

Unknown Speaker: You didn't answer my question.

Tell me how... how it can affect whether the agency's budget is going to have to go up or not, if it does not have a demonstrable economic impact.

Mr. Persina: --Well, again, I think that it would be largely a question of how those intangibles--

Unknown Speaker: Let me... let me ask it as a question.

Can it possibly have any effect on whether the budget goes up or down if it has no economic impact?

Mr. Persina: --If the proposal does or the benefit does?

Unknown Speaker: The benefit.

If it's a benefit that has no economic impact, can it possibly affect whether the budget goes up or down?

Mr. Persina: I think that would be an aspect of the employer's compensating benefits analysis--

Unknown Speaker: I think you can answer the question yes or no.

You think it can?

Mr. Persina: --I think it is possible that taking the collection of tangibles and intangibles together, it can be assessed whether this proposal--

Unknown Speaker: I'm just... just talking about the intangibles.

Can an intangible affect the budget if it has no economic impact?

Mr. Persina: --That would be very difficult to say that it did.

Unknown Speaker: I think so.

Mr. Persina: But I think that there--

Unknown Speaker: But the Authority is saying, nonetheless, as I understand your argument, that you somehow must weight those non-economic intangibles and offset them against this budget provision here.

Mr. Persina: --Well, I think it would probably be very much like the cost/benefit analysis that's called for in Executive Order 12221 which places on regulatory agencies of the government the requirement to engage in cost/benefit analysis when they regulate an industry, and that specifically identifies--

Unknown Speaker: But that... but that executive order is not dealing with a statute that uses the word budget.

This agency is said to have to be in control of its budget.

Not in control of the general good done by the agency, but in control of its budget in particular.

That's talking about money.

Mr. Persina: --Well, Your Honor, I think that it really is more of a question to be worked out as agencies make the showing that is required here.

And habit... I think it is a case for another day to see how it is the Authority treats those issues.

What we have here is the--

Unknown Speaker: It's a case for another day if... if the way the Authority is defending its... its position on this budget point is by saying the agency has to take into account non-economic factors.

I think that's a question for today.

That's... that's the theory the Authority is using, as I understand it.

Mr. Persina: --Well, Your Honor, we think that the test is reasonable as an implementation of the competing interests of the statute.

On the one hand it does recognize the employers' allegations, or the ability of an employer to allege that the real cost impact of the proposal, after the compensating benefits are considered, may require the agency to seek more money to run its operations than it had originally determine was necessary.

But on the other hand it recognizes that cost alone, or a cost consequence alone, cannot be said to require that agency to go to the budget process and... and seek more money.

It really requires a consideration of all of those benefits and debits of the proposal.

And I think that's a reasonable--

Unknown Speaker: But I don't understand what you just said, that cost alone cannot require it to go to the budget process and ask for more money.

Mr. Persina: --Well, for instance, let's take the proposals in this case--

Unknown Speaker: I mean, cost alone, it has to... it has to spend another million dollars for teachers' salaries--

Mr. Persina: --But--

Unknown Speaker: --and you're telling me that alone will not require it go to the budget process unless there is an offsetting economic benefit.

Mr. Persina: --Well, no.

That is correct, Your Honor.

I'm not saying that because what I am saying is that it's not known whether that step is necessary until it is know whether a pay increase will reduce the turnover problem that this agency has, will reduce recruitment costs, will reduce new employee training, things like that.

And there are also grievance--

Unknown Speaker: They are all economic benefits.

Those are all--

Mr. Persina: --Well, Your Honor, I would think--

Unknown Speaker: --economic benefits.

Mr. Persina: --I would think... well, all I'm trying to get across here, I think, is that I think primarily the economic issues are going to be the primary issues in compensating benefits analysis.

But the Authority has not ruled out the showing or the ability of an agency employer to show intangibles as well.

But I think that--

Unknown Speaker: More than... more than not ruled out.

You've required the employer to show that no offsetting benefits, including non-economic benefits, justify the act.

Mr. Persina: --Well, I think what... as I remember in the Wright-Patterson test, the types of compensating benefits in Volume 2 of FLRA deal with such things as grievance filing rates, productivity, and I believe morale may be mentioned as one of the compensating benefits factors.

But I think the state of the law right now is the Authority has not ruled it out.

It would take that showing, if... if the employer suggested it.

I don't think the offset need be a dollar and cent exact figure as far as requiring the agency to show that.

An agency that shows that there's enough of a chance, that there is a substantial amount of money that will be needed or a significant amount of money that would be needed to be obtained in addition to what they thought they need to run the schools, I would think would win their compensating benefits analysis.

But we don't even have an employer here who is attempting to make any showing on that issue.

And I think what we really have here is the reasonableness of the test.

And how the Authority treats things like intangible benefits of a proposal as opposed to tangible, I think really remains to be seen over time when some agency employers start trying to meet the test on its terms rather than attacking it.

We think it's a reasonable test that's entitled to a chance, and no agency employer has done that yet.

So, I think that's where the state of the law is on the issue now.

Unknown Speaker: Mr. Persina, what's your answer to the Solicitor General's contention that in the Postal Service Reorganization Act in '71 the statute dealing with what was bargainable specifically said wages; the NLRA specifically said wages.

This statute just says conditions of employment?

Mr. Persina: Well, Your Honor, I think in those laws, the Postal Reorganization Act and the NLRA, Congress manifestly wanted to make pay negotiable for all employees who were covered under that law.

Under the Federal Sector statute, the situation is very different.

Congress manifestly wanted to make pay non-negotiable for the overwhelming majority of Federal employees but had no concern with the relatively few pockets of Federal employees who are free to negotiate their wages because Congress has not... has chosen not to set them through legislation.

Really, for this sort of reason, we think it highly inappropriate to be considering these other laws with their different purposes, their different policies, their different employee coverage and particularly their different policies as to the negotiability of--

Unknown Speaker: Maybe they left wages out deliberately?

Is that it?

Mr. Persina: --Well, Your Honor, I think that a Congress that was looking to make wages non-negotiable for 97 percent of the Federal work force would not normally include wages as something that could be bargained and then take it out through 7103(a)(14)(C) by saying that matters specifically established in statute are nonnegotiable.

I think if I were a Congress that wanted to make pay non-negotiable for 97 percent of the employees to be covered under the statute, but didn't have a concern with the few small groups of employees who could negotiate their wages because the Congress chooses not to set them, I would write the law in just the way that the statute is written to allow--

Unknown Speaker: You mean the conditions of employment just doesn't include wages for 97 percent of the people?

Mr. Persina: --Well, it does not include wages because of the operation of the statutory exclusion from the substantive definition.

It does not exclude wages because of the substantive definition itself.

And that is a large part of our point here.

Yes, indeed, Congress did seek to make pay nonnegotiable for the great majority of Federal employees, but it did it in 7103(a)(14)(C), not in the substantive definition.

The term personnel policies, practices and matters affecting working conditions clearly fits wages.

All three of those categories, we think, eminently cover wages.

Indeed, we think a claim that the main quid for working... the quo for working, is compensation.

And we think that is plain in terms of just looking at an employee who is dissatisfied with his or her pay.

That employee will seek to sever that employment relationship.

So pay can go to the very existence of the employment relationship itself.

And, indeed, we think it's a major failing of the schools' case here, that they have offered us no workable theory whatsoever for why it is that compensation does not constitute personnel policies, practices and matters affecting working conditions.

But the strength of that point, that compensation is a condition of employment in this case for these employees, is supported not just by the plain language of the definition itself.

It is also supported by the executive order practice that took place prior to the statute.

Both Executive Orders 10988 and 11491 delineated the scope of bargain subjects by saying that personnel policies and practices and matters affecting working conditions were within the scope of the bargaining obligation.

And that language is obviously virtually identical in all significant respects to the definition of conditions of employment here.

And really, contrary to my brother Wright's remarks earlier in the argument that the executive orders did not reference conditions of employment, in the preambles to both those executive orders, Congress did just that.

It said that employees should be able to work... to negotiate on the conditions of their employment.

In Section 11(a) of the executive orders it then said that personnel policies and practices and matters affecting working conditions were proper bargaining subjects.

So we think it plain that Congress was looking in the statute to carry over that executive order practice.

And I would also indicate that in the Federal Labor Relations Council's Merchant Marine decision, which we've cited in our brief, Congress did explicitly say that compensation... or the Council, rather, said that compensation is a personnel policy and practice and matter affecting working conditions.

And the only way under the executive orders that compensation was made non-negotiable, was through its being established in legislation and that is precisely the system that Congress carried over under the statute.

So the situation in Federal sector labor relations at the time that Congress considered the statute was clear.

Compensation did constitute personnel policies, practices and matters affecting working conditions and was only non-negotiable if it was established through legislation.

And there is nothing in the legislative history of the statute which shows that Congress wanted to change that situation.

In fact, there are a number of indicators that Congress wanted to maintain just that state of affairs under the statute, both in its language... in its choice of language in the statute and the debates that took place.

As to the language, we've already seen.

Congress adopted the same substantive parameters for the bargaining relationship and it made pay non-negotiable for most employees by... by inserting the proviso that matters specifically established in Federal statute are non-negotiable.

That's just the way it was done under the executive orders.

And I would also point to Section 7135(b) of the statute where Congress said that it wanted, among other things, the decisions of the Federal Labor Relations Council to continue in effect or until changed by the statute itself or through decisions of the FLRA.

And neither of those events have occurred.

So we think it plain that Congress' treatment of the executive order practice makes it clear that it intended to carry that practice over.

But the debates among the key legislators in the bill also support that conclusion.

The legislators... and among them I am speaking of Congressmen Clay, Ford, Udall and Collins, who are among some of the most important figures in the enactment of the statute... all said and made clear their understanding that compensation would not be negotiable under the statute because it would be set by legislation of the Congress.

And we have cited these passages on pages 28 and 29 of our brief.

And these remarks must form our backdrop for the selected excerpts from the legislative history that the schools rely on so heavily here, where legislators would simply say that pay would be non-negotiable without specifying how that result would be achieved.

And yet that is the key inquiry for the legislative history.

How is that result to be achieved?

And as I've indicated, we think it plain that the only intent for those remarks can be to make it non-negotiable through operation of legislation.

And I can state this conclusion with a very sound foundation, and that is the language of the statute itself.

Because if Congress really meant by those remarks that it wanted to pay... make pay non-negotiable as a subject matter per se, it would have said so in the statute.

And yet we will look long and hard in that law before we will find an express exclusion of pay matters.

Rather, what we see is, well, the Authority's view of the legislative history and that is that pay is made non-negotiable to the extent, considerable as it is, that Congress wanted to control that matter through legislation.

So it is the Authority's view of the legislative history that finds voice in the language of the statute and not the schools'.

And for that reason we think the Authority's view should be affirmed.

Unknown Speaker: Mr. Persina, could you satisfy my curiosity as to who the Impasse Panel is.

Who appoints them?

Mr. Persina: The President of the United States.

Unknown Speaker: The President does.

Mr. Persina: They are appointed by the President.

They are not, as I understand it, confirmed by the Senate, but they are Presidential appointees.

And it is required that they be expert in the field of labor relations and Federal sector labor relations.

And I would point out--

Unknown Speaker: Is it a full-time job?

It's--

Mr. Persina: --No, it is not.

Unknown Speaker: --It is not.

Mr. Persina: Panel members, as I understand it, meet approximately once a month to resolve impasses, but they are part-time Federal employees and officials.

Unknown Speaker: Is it... is it correct that their decisions are nonreviewable?

Mr. Persina: That is not correct, Your Honor.

Panel decisions are reviewable indirectly for sufficiency with law.

And the D.C. Circuit has so held, among other circuits I believe.

If an agency employer believes their panel decision is contrary to law, it can refuse to comply with that panel decision, take an unfair labor practice which the Authority would resolve, and the Authority's unfair labor practice ruling would be reviewed in an appropriate circuit court of appeals.

So there is indirect review.

Counsel Prison Locals v. Brewer is the primary case which talks about that.

That is in volume 735 F. 2d, although the page number is forgotten to me at the moment.

But we would also note, while we are talking about the panel, there is at least one case that I know of where, for Merchant Marine Academy instructors, the panel had a bargaining pay... an impasse in bargaining that dealt with setting pay.

And the... this is a Merchant Marine case where the panel went with the employer's point of view.

That is the one we know of where salary rates themselves were the primary focus of the impasse.

Again, these don't come up very often for the panel, because pay is non-negotiable for so many employees.

But they ruled for the employer in that case.

And we think that the notion that the panel is some rogue body that is off doing irrational things and can't be reviewed is simply wrong.

They have demonstrated responsible conduct in this area, and their decisions are subject to review.

So the--

Unknown Speaker: Are those decisions... is it like baseball free agency where the panel has to pick either one proposal or the other, or can it come up with a... can it say... can it say either your proposal is... has to be accepted or your proposal can be rejected?

Or can it have some sort of a compromise?

Mr. Persina: --Well, Your Honor, under the plain language of Section 7119 it can take any action it deems necessary to resolve an impasse and that could include... and the panel has frequently not adopted either the employer or the union, but has developed some third course.

In concluding on the conditions of employment point, I would just like to note briefly concerning these... this battle over the outside statutes that we seem to be engaged in here, inappropriate as it is, we think.

Nonetheless, we think these outside laws are very much supportive of our case.

The National Labor Relations Act expressly equates wages with conditions of employment.

We would also prefer to look closer to home for the statute.

That is, the Senior Executive Service Act, which again expressly equates compensation with conditions of employments, as we've pointed out in our brief.

The Senior Executive Service law is another title of the Civil Service Reform Act, Title IV, the Authority is under Title VII.

And here in the Reform Act itself is Congress' recognition that compensation is a form of a condition of employment.

So if we are to engage in this... this debate about what do outside law show, we think, if anything, it's supportive.

But the real point, we think, on conditions of employment, is to look at our statute.

That's the statute that's before us and that statute defines the very term that we are seeking to construe and apply here.

And it does it in a way that clearly encompasses compensation.

And that should be the end of the matter.

I would just like to conclude on the condition of employment point by being so presumptuous, I think, as to suggest to this Court what kind of opinion it would have to write in order to grant the schools' position here.

First of all, it would have to explain why it is that compensation is not a personnel policy, practice or matter affecting working conditions.

Failing that, it would have to engraft under the statute an exception for pay which is not in the law.

It would also have to explain why it is that the key legislators in the statute kept saying that pay would be non-negotiable because it would be regulated through legislation.

And the Court would also have to identify exactly where it is in the legislative history that the... that the Congress decided that it did not want to carry over the executive order practice.

That is a very daunting task, I would suggest.

We think that it is a task that need not be confronted because the--

Unknown Speaker: xxx.

Mr. Persina: --It would be very interesting, challenging, and I would enjoy reading it--

[Laughter]

--very much, needless to say, Your Honor.

Unknown Speaker: I bet you would.

[Laughter]

Mr. Persina: Certainly.

But the task need not be faced because the right view of this case on this issue is the Authority's point.

I'd like to now turn to the budget issue and that test that we consider here, whether the union's proposals constitute or entail significant and unavoidable costs that are not offset by compensating benefits.

And this analysis is called for under the Authority's long-established budget test for determining when a proposal interferes with the budget right.

I do want to stress again the reasonableness of this test is an accommodation.

Many of the bargaining proposals entail a facial or initial cost, and that reason is... cannot be enough in itself to find that proposal to be non-negotiable.

And indeed, we think it--

Unknown Speaker: Well, it is difficult to think that you place an economic value on some of the intangibles, such as morale, to try to see whether in fact the agency has to increase its budget to pay for the cost.

I think--

Mr. Persina: --Your Honor--

Unknown Speaker: --I think the FLRA position on that requires a little more explanation than you've given.

Mr. Persina: --Well, Your Honor, I can think of little to add beyond what I already have.

But I do think that many of the intangibles have a tangible outlet and that we cannot separate the intangible from the tangible because so often they will relate.

And, again, I would stress that the Authority has at no time indicated that it is seeking an exact dollar and cent offset as an accounting certainty in order to satisfy the test.

But I do think that the particulars of the administration of the test, as far as how intangibles and tangibles are married up by the Authority, is... is one that the Authority is entitled to develop through case law as agency employers seek to comply with the test, which this one and others have not done.

But the test... to do otherwise, we think... to do otherwise in a compensating benefits analysis would restrict the scope of bargaining so severely under the statute that Congress could not have intended that.

Unknown Speaker: Mr. Persina, as I understand it, the Authority puts the burden on the Federal employer to--

Mr. Persina: Yes, sir.

Unknown Speaker: --to negate any benefits.

Is that... is that--

Mr. Persina: Well, to negate... to negate the costs--

Unknown Speaker: --Not... not for the union to show that there will be benefits that will compensate against the increase... taxing on the budget, but for the employer to prove that there aren't.

Is that right?

Mr. Persina: --Well, yes, Your Honor.

The burden is placed on the employer, and I think its properly placed, at least as an initial matter, for two very good reasons.

Number one, it is the employer who is asserting the right.

Number two, it is the employer who knows best what its operation is all about and what sort of effects a particular bargaining proposal will have on that operation as a cost matter.

And again, I come back to this sort of analysis as being something that is not at all, or should not be at all, alien to... to agency employers.

So we don't think that the burden is inappropriately placed.

What the... what the employer must show is that the benefits do not offset the costs.

And again, that is a matter that is... we think should be within the ability of agency managers to do.

I would assume they do it in the absence of a compensating benefits test for a particular course of action they may have under consideration.

Unknown Speaker: I would... I would stop hectoring you on this if... if you would say that when the agency says the employer must show the benefits do not offset cost, the agency means economic benefits do not outset the cost.

But you... you cannot say that, can you?

Mr. Persina: Well, Your Honor, I cannot say that the Authority has ever addressed whether it will look at only economic benefits, or it will look at economic and intangible benefits.

I would really refer... the Authority's spoken word on this is in the Wright-Patterson test where it gives examples of compensating benefits.

Unknown Speaker: Could I ask... I probably should know, but here we've got two... two different representatives for the United States Government.

Do you have... how is that?

[Laughter]

Mr. Persina: It's not the first time the question's been asked, Your Honor.

Unknown Speaker: Well, I'm sure it isn't and... and I'm not sure I've ever had an answer.

Mr. Persina: Well, Congress, when it decided to regulate labor relations affairs in the Federal government, set up an independent establishment in the Executive Branch--

Unknown Speaker: Right.

Mr. Persina: --the Authority, to adjudicate matters between the private party, unions--

Unknown Speaker: Right.

Mr. Persina: --and a governmental agency in its capacity as an employer.

Unknown Speaker: Humphries Executor v. United States is the answer, right?

Mr. Persina: Excuse me, Your Honor?

Unknown Speaker: Humphries Executor v. United States.

Mr. Persina: Well, I believe that is the case.

I... there is a... there is a Supreme Court case and I do not have the cite at my fingertips--

Unknown Speaker: But some--

Mr. Persina: --which says so long as there is a private party in the litigation, then all of the elements of... of--

Unknown Speaker: --Well, sometimes statutes give some agencies specific authority to represent itself.

Mr. Persina: --Well, the Authority does have specific authority to represent itself in the district courts and the courts of appeals.

Unknown Speaker: Right.

Mr. Persina: We do not have that authority to represent ourselves in this Court by statute, although when the interests of the Solicitor General's office and those of the Authority are at odds, the Solicitor General's office has delegated to the Authority that responsibility and it is as a--

Unknown Speaker: Is that in a sort of a regulation or a writing or a--

Mr. Persina: --It is--

Unknown Speaker: --or is it just case-by-case giving consent?

Mr. Persina: --Case-by-case giving consent is the practice that has developed.

The Authority by letter, requests, delegation--

Unknown Speaker: Right.

Mr. Persina: --from the Solicitor General's office, and that delegation is given in writing.

Unknown Speaker: Which was true in this case?

Mr. Persina: Which was true in this case.

Unknown Speaker: Yes.

Mr. Persina: As a final matter, I would like to turn to the issue of Section 241 and the agency regulation which purports to implement that statutory section.

And here we deal with the Authority's compelling need criterion as to whether the regulation is a nondiscretionary implementation of a statutory mandate.

In other words, is this regulation the only regulation that can be written to be consistent with the statute?

And we submit that it clearly is not, that the regulation is an exercise of discretion by this agency and therefore cannot bar bargaining under the Federal Sector Labor Statute.

Even a cursory examination of Section 241 reveals that it does not require identity of compensation between Section 6 schools and local schools.

Rather, Section 241 sets two goals.

The first is of comparable education quality to local schools, and the second is that that education be provided at a comparable cost or equivalent cost to local schools.

Overall per-pupil costs, I would stress.

But it is clear that this section does not restrict the discretion of how the agency goes about meeting those bottom-line statutory goals.

Under Section 241 these schools have the discretion to bargain on these pay proposals and still to meet those goals.

Schools can configure their costs over the various aspects of providing an education in a variety of different ways, and no one way can be said to provide a better education than any other way.

It would simply be a different approach to the problem of providing a quality education to students.

For example in this case, Section 6 schools could seek to teach math through... in order to implement these proposals, could teach math by hiring more master's degree teachers.

And because, if they... if there were salary increases in the schools, then they would be attracting more highly-qualified people to teach in the schools.

And therefore, they could teach with higher quality people but be teaching may be with pencil and paper instead of having bachelor's degree teachers, which would teach with electronic calculators.

Those choices under--

I notice that my time has expired.

Unknown Speaker: Thank you, Mr. Persina.

Mr. Wright, you have five minutes remaining.

Rebuttal of Christopher J. Wright

Mr. Wright: I'd like to make just a few points.

First, with respect to the first issue as to whether wages are negotiable conditions of employment, I believe Justice White pointed out that it appears that the FLRA's position is that Congress deliberately left wages out of the... out of the statute.

It knew that 97 percent of the employees couldn't bargain about wages, and so it took wages out of the statute.

We think that rather than... that this Court would have to engraft wages into the statute to... to write an opinion going the other way.

With respect to the legislative history on that issue, no one ever said on the floor of Congress that employees, like these teachers, could bargain about pay.

With respect to the other statutes that have been mentioned, not one of those makes wages negotiable without saying wages are negotiable.

On the budget point, as I understand the discussion that went on, the FLRA's position is not only that intangibles might outweigh the costs but that--

Unknown Speaker: May I interrupt there, Mr. Wright?

It's true that is what they have argued today, but I'm not sure their opinion in this case relies on the possibility of intangible benefits.

I think one can say that in this case they said that you failed in two respects.

One, that you don't show tangible benefits and, two, that you didn't even show the impact on the budget itself.

Mr. Wright: --Well, of course, our primary argument is that weighing costs and benefits is the heart of the budget-making process.

Unknown Speaker: Well, that may be but--

Mr. Wright: That Congress has reserved the budget-making process--

Unknown Speaker: --but don't you have to respond to the argument that at least you've got to show that it has a 50 cent impact on the budget?

And you didn't even show that.

And we don't know it to be true simply because its 13.5 percent because you might have prepared a budget that considered the contingency of a 20 percent increase.

We don't know what your budget was.

Mr. Wright: --We... we think that any... any proposal that calls into account the salaries of the schools--

Unknown Speaker: But what if you had previously determined in your own budget that you'd sent to the Commander-in-Chief of the Army, or whoever it would go to, that you... you think the union is going make an outrageous demand because all the local schools have gone up 20 percent, so we'd better budget for 20 percent, even though we may not have to pay it?

Mr. Wright: --Well, our position is that salaries are just... are just off the negotiating table.

That--

Unknown Speaker: Well, I understand, but your... and your budget argument... just confining it to the budget argument, how can you could say on that hypothetical there would be any impact on the budget?

Mr. Wright: --Well, in your example, Justice Stevens, we've already... the Army has already lost control of the budget process.

It's taken into account the negotiability, a demand that would be made--

Unknown Speaker: But what if... no, say that it's not negotiable.

Suppose they just decided as a matter of policy they think these teachers ought to be increased even more than the union later demanded, and they budgeted that amount?

That's not impossible.

Mr. Wright: --It's not impossible.

Our position is that opening the wages of teachers at schools to negotiation, will... will deprive the management of control of the... of the school's budget.

Unknown Speaker: Even if they ask for less than you had budgeted?

Mr. Wright: Even in that unlikely event, which is not presented here.

If there are no further questions--

Chief Justice Rehnquist: Thank you, Mr. Wright.

The case is submitted.