Department of Treasury, Internal Revenue Service v. Federal Labor Relations Authority

Syllabus During collective-bargaining negotiations, respondent National Treasury Employees Union (NTEU) proposed that contractual grievance and arbitration provisions be designated as the "internal appeals procedure" required for employee complaints by an Office of Management and Budget (OMB) Circular relating to the "contracting out" of work. Petitioner Internal Revenue Service (IRS) refused to bargain over the proposal, claiming that its subject matter was nonnegotiable under Title VII of the Civil Service Reform Act of 1978 (Act), 5 U.S.C. § 7101 et seq. The Federal Labor Relations Authority (FLRA), which is charged with administering the Act, held that the IRS was required to negotiate over the NTEU proposal by § 7114, which requires agency management and employee unions to bargain in good faith to reach an agreement, and by § 7121, which specifies that such agreements must contain grievance-settlement procedures. Held: The FLRA erred in holding that the Act requires the IRS to bargain over the NTEU proposal. Pp. 926-934. (a) The plain text of § 7106(a)(2)(B)-which provides that "nothing in this [Act] shall affect the authority of [agency management officials] in accordance with applicable laws . . . to make [contracting-out] determinations" (emphasis added) demonstrates that the section supersedes § 7121. P. 928. (b) The arguments presented by the FLRA to overcome § 7106(a)(2)(B)'s plain meaning lack merit. First, § 7121(c), which exempts certain appointment, suspension, and removal decisions from the grievance requirements, is not rendered superfluous if such decisions are already insulated from those requirements by § 7106(a), subsection (2)(A) of which refers to those same decisions as protected management rights. Although the two provisions sometimes overlap, each also has a distinct effect on such decisions: § 7121(c) removes them from the coverage of only the grievance provisions regardless of whether they are made in accordance with applicable laws, while § 7106 removes them from the coverage of the entire Act, but only if they are made in accordance with such laws. Second, agency management cannot be subjected to grievance procedures over the exercise of reserved rights on the theory that § 7121 is among the "applicable laws" referred to in § 7106(a)(2), since that phrase clearly refers to laws outside the Act. Third, § 7106(a) is applicable even though the NTEU proposal would not establish any substantive limitation on management's contracting-out decisions, but would only provide for the enforcement of "external limitations" on those decisions contained in the OMB Circular's mandatory and nondiscretionary provisions. Insofar as union rights are concerned, it is entirely up to the IRS whether it will comply at all with the Circular's requirements, except to the extent that such compliance is required by an "applicable law." Fourth, it is not reasonable to interpret the latter phrase as being synonymous with the term "any law, rule, or regulation" in § 7103(a)(9)(C)(ii), which defines "grievance" as a claimed "violation, misinterpretation, or misapplication of any law, rule, or regulation affecting conditions of employment." (Emphasis added.) Thus, it cannot be said that all agency contracting decisions that violate rules or regulations are, by definition, "not in accordance with applicable laws." Pp. 928-932. (c) This Court will not decide in the first instance whether the OMB Circular is an "applicable law" under § 7106(a)(2). Pp. 932-933. (d) The question whether § 7117(a)-which provides that the "duty to bargain . . . shall, to the extent not inconsistent with . . . any Government-wide rule or regulation, extend to matters which are the subject of any [non-Government-wide] rule or regulation" (emphasis added)-renders the FLRA proposal nonnegotiable as inconsistent with "no arbitration" language in the OMB Circular is not properly presented, since it was not raised or considered by the court below. Nor will this Court consider whether the FLRA properly held the Circular to be a "rule" or "regulation" within § 7103(a)(9)'s meaning, since the IRS did not argue that question here. P. 934. 274 U.S.App.D.C. 135, 862 F.2d 880, reversed and remanded. SCALIA, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and WHITE, BLACKMUN, O'CONNOR, and KENNEDY, JJ., joined. BRENNAN, J., filed a dissenting opinion, in which MARSHALL, J., joined, post, p. 934. STEVENS, J., filed a dissenting opinion, post, p. 937. David L. Shapiro, Washington, D.C., for petitioner. Robert J. Englehart, Washington, D.C., for respondent, Federal Labor Relations Authority. Gregory O'Duden, Washington, D.C., for respondent, National Treasury Employees Union. Justice SCALIA delivered the opinion of the Court.