ORAL ARGUMENT HAS NOT YET BEEN SCHEDULED

No. 22-1017

IN THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

INDEPENDENT UNION OF PENSION EMPLOYEES FOR 

DEMOCRACY AND JUSTICE, 

Petitioner,

v.

FEDERAL LABOR RELATIONS AUTHORITY,

Respondent.

ON PETITION FOR REVIEW OF DECISIONS OF

THE FEDERAL LABOR RELATIONS AUTHORITY

BRIEF FOR RESPONDENT

FEDERAL LABOR RELATIONS AUTHORITY

NOAH PETERS

Solicitor

REBECCA J. OSBORNE

Deputy Solicitor

Federal Labor Relations

Authority 1400 K Street, N.W.

Suite 200

Washington, D.C. 20424

(202) 218-7906

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CERTIFICATE OF PARTIES, RULINGS, AND RELATED CASES

A. Parties

Appearing before the Federal Labor Relations Authority 

(“Authority” or “FLRA”) were the Independent Union of Pension 

Employees for Democracy and Justice (“Union”) and the Pension 

Benefit Guaranty Corporation (“PBGC” or the “Agency”). The Union 

filed the Petition for Review in this Court proceeding against the 

Authority. The National Treasury Employees Union (“NTEU”) has 

appeared as amicus curie for the Union. Thus, the Union is the 

petitioner, NTEU is amicus curie for the petitioner, and the Authority is 

the respondent in this Court proceeding.

B. Rulings Under Review

The Union seeks review of two Authority decisions: Independent 

Union of Pension Employees for Democracy & Justice (“IUPEDJ I”), 72 

FLRA 281 (2021) (Chairman DuBester dissenting in part; Member 

Abbott dissenting in part) and Independent Union of Pension Employees 

for Democracy & Justice, 72 FLRA 571 (2021) (Chairman DuBester 

concurring) (denying reconsideration of IUPEDJ I).

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C. Related Cases

This case was not previously before this Court or any other court, 

nor is the Authority aware of any related cases pending before this 

Court or any other court.

/s/ Noah Peters

Noah Peters

Solicitor

Federal Labor Relations Authority

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TABLE OF CONTENTS

CERTIFICATE OF PARTIES, RULINGS, AND RELATED CASES.......i

TABLE OF CONTENTS ......................................................................... iii

TABLE OF AUTHORITIES......................................................................v

GLOSSARY ............................................................................................viii

STATEMENT REGARDING JURISDICTION ........................................1

STATEMENT OF THE ISSUES PRESENTED.......................................2

RELEVANT STATUTORY PROVISIONS ...............................................3

STATEMENT OF THE CASE ..................................................................3

STATEMENT OF THE FACTS ................................................................7

SUMMARY OF ARGUMENT.................................................................21

STANDARD OF REVIEW.......................................................................28

ARGUMENT ...........................................................................................31

I. The Court Lacks Jurisdiction to Consider the Petition for 

Review Because It Failed to Exhaust Its Administrative 

Remedies ........................................................................................31

II. The Petition for Review Fails on Its Merits Because the 

Authority Did Not Arbitrarily or Capriciously Decide that 

Article 3, Section 2(D) of the CBA, in Directly Specifying a 

Minimum Funding Percentage for Special Awards, Violated 

Management’s Right to Determine its Budget..............................38

A. Section 2(D) Limits How the Agency Can Allocate Its Funds 

Within Its Performance Awards Budget...................................41

B. Section 2(D) Directly Ties Bargaining-Unit Special Awards to 

the Agency’s Budget ..................................................................46

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CONCLUSION ........................................................................................52

CERTIFICATE OF COMPLIANCE........................................................53

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TABLE OF AUTHORITIES

Cases Pages

Am. Fed’n of Gov’t Emps. v. Chao,

409 F.3d 377 (D.C. Cir. 2005).........................................................29, 30

Am. Fed’n of Gov’t Emps., Loc. 2303 v. FLRA,

815 F.2d 718 (D.C. Cir. 1987)...............................................................31

Am. Fed’n of Gov’t Emps., Loc. 2343 v. FLRA,

144 F.3d 85 (D.C. Cir. 1998).................................................................30

Am. Fed’n of Gov’t Emps.,

31 FLRA 921 (1988)........................................................................27, 49

Am. Fed’n of Gov’t Emps., AFL-CIO,

2 FLRA 603 (1980)................................................................................39

Am. Fed’n of Labor v. NLRB,

308 U.S. 401 (1940)...............................................................................28

Bd. of Governors Off. of Cuba Broad. v. FLRA,

752 F.3d 453 (D.C. Cir. 2014)...............................................................28

Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc.,

419 U.S. 281 (1974)...............................................................................31

Carter v. Carson,

241 F. Supp. 3d 191 (D.D.C. 2017) .......................................................32

Cellco P’ship v. FCC,

357 F.3d 88 (D.C. Cir. 2004).................................................................30

Chevron USA Inc. v. Nat. Res. Def. Council, Inc.,

467 U.S. 837 (1984)...................................................................29, 30, 39

Entergy Corp. v. Riverkeeper, Inc.,

556 U.S. 208 (2009)...............................................................................30

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Fernandez v. Chertoff,

471 F.3d 45 (2d Cir. 2006) ....................................................................32

Fort Stewart Schs. v. FLRA, 

495 U.S. 657 (1990)...............................................................................44

Fraternal Ord. of Police v. Gates,

562 F. Supp. 2d 7 (D.D.C. 2008).................................................1, 29, 32

Indep. Union of Pension Emps. for Democracy & Just. v. FLRA,

961 F.3d 490 (D.C. Cir. 2020).................................................................7

Indep. Union of Pension Emps. for Democracy & Just.,

72 FLRA 281 (2021)...................... 1-3, 5, 7, 10, 16-20, 22, 25, 33, 35-37, 

 40-43, 46, 51

Indep. Union of Pension Emps. for Democracy & Just.,

72 FLRA 571 (2021).........................................................1-3, 6, 7, 20, 36

Int’l Fed’n of Pro. & Tech. Eng’rs, Loc. No. 1,

38 FLRA 1589 (1991)........................ 17-19, 24, 26, 27, 40-45, 48, 50, 51

Johnson v. Peterson,

996 F.2d 397 (D.C. Cir. 1993)............................................. 21, 22, 28, 32

Koch v. Walter,

934 F. Supp. 2d 261 (D.D.C. 2013) .......................................................33

Lujan v. Defs. Of Wildlife,

504 U.S. 555 (1992)...............................................................................28

Nat’l Ass’n of Gov’t Emps. Loc. R1 144 Fed. Union of Scientists & 

Eng’rs,

38 FLRA 456 (1990)......... 11-13, 15, 17-19, 27, 41, 42-45, 48, 49, 50, 51

Nat’l Ass’n of Gov’t Emps. Loc. R14-52,

41 FLRA 1057 (1991)............................................................................14

Nat’l Ass’n of Gov't Emps. Loc. R14-52,

48 FLRA 1198 (1993)................................... 26, 27, 40, 41, 43, 46-48, 50

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Nat’l Treasury Emps. Union v. FLRA,

754 F.3d 1031 (D.C. Cir. 2014).......................................................29, 30

Nat’l Treasury Emps. Union v. FLRA,

793 F.2d 371 (D.C. Cir. 1986).................................................................6

Shays v. Fed. Election Comm’n,

414 F.3d 76 (D.C. Cir. 2005)...........................................................29, 30

Steadman v. Governor, U.S. Soldiers’ & Airmen’s Home,

918 F.2d 963 (D.C. Cir. 1990)......................................... 1, 21, 22, 28, 32

United States v. L.A. Tucker Truck Lines, Inc.,

344 U.S. 33 (1952).................................................................................31

Woodford v. Ngo,

548 U.S. 81 (2006)...........................................................................31, 32

Statutes

5 U.S.C. § 7106 ..........3, 4, 10, 11, 17, 18, 20, 24-26, 39, 42, 46, 48, 50, 51

5 U.S.C. § 7121(a).......................................................... 2, 7, 22, 28, 32, 33

5 U.S.C. § 7123(a), (c)..............................................................1, 29, 30, 32

5 U.S.C. §§ 7101-7135 (2018) ....................................................................2

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GLOSSARY

Arbitrator Charles Feigenbaum

Authority The Federal Labor Relations Authority

Br. Petitioner’s opening brief 

IUPEDJ I Independent Union of Pension Employees for 

Democracy & Justice, 72 FLRA 281 (2021)

IUPEDJ II Independent Union of Pension Employees for 

Democracy & Justice, 72 FLRA 571 (2021)

FLRA The Federal Labor Relations Authority

JA Joint Appendix

NTEU National Treasury Employees Union

NTEU Br. NTEU Amicus for Petitioner Brief

PBGC The Pension Benefit Guaranty Corporation

Statute The Federal Service Labor-Management 

Relations Statute, 5 U.S.C. §§ 7101-7135 (2018)

ULP Unfair Labor Practice

Union Petitioner, the Independent Union of Pension 

Employees for Democracy and Justice

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STATEMENT REGARDING JURISDICTION

This Court lacks appellate jurisdiction over the Petition for 

Review because the Union failed to exhaust its administrative 

remedies. Passed as part of the Civil Service Reform Act (“CSRA”), the 

Federal Service Labor-Management Relations Statute, 5 U.S.C. 

§§ 7101–7135 (2018) (the “Statute”) “requires a party to exhaust 

administrative remedies before obtaining judicial relief for an actual or 

threatened injury.” Fraternal Ord. of Police v. Gates, 562 F. Supp. 2d 7, 

12 (D.D.C. 2008) (citing 5 U.S.C. § 7123(a)); see also Steadman v. 

Governor, U.S. Soldiers’ & Airmen’s Home, 918 F.2d 963, 966 (D.C. Cir. 

1990).

Here, the Independent Union of Pension Employees for Democracy

and Justice (the “Union”) seeks to have this Court review the decisions 

of the Federal Labor Relations Authority (“FLRA” or the “Authority”) in 

Independent Union of Pension Employees for Democracy & Justice 

(“IUPEDJ I”), 72 FLRA 281 (Chairman DuBester dissenting in part; 

Member Abbott dissenting in part), reconsideration denied, 72 FLRA 

571 (2021) (“IUPEDJ II”) (Chairman DuBester concurring). In those 

decisions, the Authority granted in part, and denied in part, the Union’s 

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exceptions to an arbitration decision. The arbitrator’s decision was 

based on two grounds, and the arbitrator did not make clear whether 

they were independent of one another. (JA036-37.) In IUPEDJ I and 

IUPEDJ II, the Authority upheld one ground, rejected the other, and 

said nothing about what relief the arbitrator might ultimately order.

Section 7121(a)(1) of the Statute provides that collective 

bargaining agreement (“CBA”) “procedures shall be the exclusive 

administrative procedures for resolving grievances which fall within its 

coverage.” 5 U.S.C. § 7121(a). The governing CBA here states that 

“[a]ny dispute over the application of the arbitrator’s award shall be 

returned to the arbitrator for resolution.” (JA055.) But despite the 

CBA’s clear language, the Union failed to return to the arbitrator to 

seek relief or clarification after the Authority partially invalidated his 

award. Thus, the Union’s Petition for Review must be dismissed for 

failure to exhaust administrative remedies.

STATEMENT OF THE ISSUES PRESENTED

1. May this Court review the Authority’s ruling that partially 

invalidated an arbitration award without making clear what relief the 

arbitrator might ultimately order, where the governing CBA provides 

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that “[a]ny dispute over the application of the arbitrator’s award shall 

be returned to the arbitrator for resolution”?

2. Did the Authority act arbitrarily, capriciously, or contrary to 

law when it found that a CBA provision mandating that “at least 9%” of 

the Pension Benefit Guaranty Corporation’s (the “Agency” or “PBGC”) 

awards budget go towards funding Special Achievement Awards 

(“Special Awards”) violated management’s right under 5 U.S.C. § 

7106(a)(1) “to determine . . . the budget . . . of the agency”? 

RELEVANT STATUTORY PROVISIONS

All relevant statutory and regulatory provisions are in the 

attached Statutory Addendum. (Add. 1.)

STATEMENT OF THE CASE

This Petition for Review challenges IUPEDJ I and IUPEDJ II, 

two Authority decisions that granted in part and denied in part 

exceptions to an arbitrator’s award. (JA519-524, JA550.) The dispute 

stemmed from the Union’s grievance challenging PBGC’s cancellation of 

the Special Awards program described in Article 3, Section 2 of the 

parties’ CBA. (JA197-203.) PBGC claimed that it could unilaterally 

terminate “any permissive or illegal” provisions of the CBA. (JA194.) 

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And, it contended, the Special Awards program was a permissive 

provision. (JA194.)

The parties proceeded to arbitration. The arbitrator framed the 

issue as: “Did the Agency violate the CBA and Statute when it canceled 

Article 3, Section 2, of the Agreement? If so, what shall be the remedy?” 

(JA022.) The arbitrator held that PBGC could not unilaterally 

terminate any lawful section of the CBA while it was being 

renegotiated, because the Union had properly invoked the CBA’s 

continuance provision. (JA025-027.) 

But the arbitrator held that PBGC could terminate the Special 

Awards program because Article 3, Section 2 of the CBA violated 

PBGC’s management rights in two ways. First, Article 3, Section 2(D) 

violated management’s right to determine the agency’s budget under 5 

U.S.C. § 7106(a)(1) by requiring that at least 9% of PBGC’s awards 

budget be given to the Special Awards program. (JA031-JA034.) 

Second, Article 3, Section 2(A) violated the Agency’s management right 

“to determine the criteria for awarding employees” because it provided 

that a Joint Awards Committee (the “Committee”) would issue the 

Special Awards, and thus removed the discretion of Agency 

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management to distribute them. (JA034-036.) The arbitrator did not 

specify whether the two grounds were independent reasons for denying 

the Union’s grievance. (JA036-037.)

The Union filed exceptions with the Authority. (JA001-211). The 

Authority granted the Union’s exception as to the arbitrator’s ruling 

that the powers of the Committee to issue awards (Article 3, Section 

2(A)) violated PBGC’s management rights. IUPEDJ I, 72 FLRA at 282-

83. The Authority set aside the arbitrator’s ruling on this point because 

he had not identified a management right that Article 3, Section 2(A) 

violated. Id. at 282. At the same time, the Authority denied the 

Union’s exception to that portion of the arbitrator’s ruling that held 

that Article 3, Section 2(D) violated PBGC’s management right to 

determine its budget. Id. at 283-84.

Both the Union and PBGC filed motions for reconsideration of 

IUPEDJ I. (JA525-538.) PBGC contended that the management rights 

to assign work and direct employees supported the arbitrator’s ruling 

that Article 3, Section 2(A) was unlawful. (JA529-532.) The Union 

contended that the Authority’s decision in IUPEDJ I “is erroneous in 

that it fails to address the [Union’s] exception concerning the 

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repudiation of the agreement and [unfair labor practice, or “ULP”] and 

fails to order or dictate a remedy.” (JA536.)1 The Union urged that 

“[t]his absence of an appropriate remedial order constitutes error 

sufficient to justify reconsideration.” (JA536.)

The Authority denied PBGC’s motion for reconsideration. 

IUPEDJ II, 72 FLRA at 572-73. It found that PBGC had never raised 

with the arbitrator or Authority its arguments that the Special Awards 

program fell under the management rights to “assign work” and “direct 

employees.” Id. at 572. The Authority thus found that PBGC forfeited 

those arguments. Id. The Authority further found that even if PBGC 

had made these arguments, they would have been unavailing because 

“setting incentives for superior performance . . . does not fall within the 

management rights to assign work and direct employees.” Id. at 573 

(citing Nat’l Treasury Emps. Union v. FLRA, 793 F.2d 371, 375 (D.C. 

Cir. 1986)).

The Authority dismissed the Union’s motion for reconsideration 

because it had been filed electronically, and the Authority’s regulations 

 

1 The text of the Union’s motion in the Joint Appendix appears to have 

been garbled; the Union’s motion is reprinted without the formatting 

errors as Exhibit 4 to the Authority’s Motion to Dismiss in this matter.

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“permit the filing of motions only through commercial mail, first-class 

mail, certified mail, or facsimile.” Id. at 573 n.8. Nor had the Union 

corrected the improper filing even after being notified via an Order to 

Show Cause. (Id.) 

The Union filed this Petition for Review of IUPEDJ I and IUPEDJ 

II. The National Treasury Employees Union (“NTEU”), a nonparty, has 

submitted an Amicus for Petitioner Brief supporting the Union. 

STATEMENT OF THE FACTS

The Union represents employees of the PBGC. Indep. Union of 

Pension Emps. for Democracy & Just. v. FLRA, 961 F.3d 490, 492–93 

(D.C. Cir. 2020). The Union and PBGC are bound by a 2011 CBA. Id. 

at 495-97; see also JA025-027.

Section 7121(a)(1) of the Statute provides that CBA “procedures 

shall be the exclusive administrative procedures for resolving 

grievances which fall within its coverage.” 5 U.S.C. § 7121(a). In 

accordance with this provision, the CBA states that it contains “the 

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exclusive procedure available to employees, the Union, and the 

Employer for resolving grievances.” (JA091.)

If PBGC and the Union cannot resolve their grievance using 

informal means such as alternative dispute resolution, they may 

proceed to binding arbitration. (JA094-095.) Article 2 of the CBA sets 

forth arbitration procedures. It states: “where a violation of this 

Agreement is sustained, the arbitrator will fashion relief to achieve 

what the Agency action would have been but for the violation.” (JA 

055.) The arbitrator’s power in this regard is broad: “The arbitrator 

may order any relief that is just and proper, consistent with this 

Agreement, and permissible under law.” (JA055.) Further, the CBA 

provides, in a subsection titled “Disputes Over Application of 

Arbitration Award” that “[a]ny dispute over the application of the 

arbitrator’s award shall be returned to the arbitrator for resolution.” 

(JA055 (emphasis added).) 

Article 3, Section 2 of the CBA created a Special Awards program. 

(JA022-023, JA025.) The Special Awards are “intended to provide 

monetary recognition to eligible individual employees or teams of

employees for one time (1), non-recurring exceptional achievements or a 

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Special Performance Act that advances the [PBGC]’s mission, goals, or 

objectives.” (JA059.) Special Awards are open only to bargaining-unit 

employees represented by the Union. (JA058.) Any PBGC employee or 

supervisor may nominate a bargaining-unit employee for a Special 

Award; a bargaining-unit employee may self-nominate, but the selfnomination must be endorsed by another PBGC employee.

The CBA permits the Committee to decide which bargaining-unit 

employees receive Special Awards. (JA058.) The Committee consists of 

eight members: four appointed by PBGC and four appointed by the 

Union. (JA059.) If the Committee cannot agree on whether an 

individual should receive an award, the matter may be sent to a Review 

Board composed of one PBGC representative, one Union representative, 

and a third member chosen by the other two. (JA060-061.) In addition, 

if the Committee’s decision is not unanimous, an employee may ask the 

Review Board to reconsider the Committee’s decision not to grant an 

Award. (JA060.) 

The CBA further provides that:

Special Achievement Awards will be distributed quarterly. 

The monies allocated for bargaining[-]unit Special 

Achievement Awards will be at least 9% of all monies 

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allocated for all awards, excluding amounts allocated to 

Committee.

(Id.)

In 2015, the Union gave notice of its intent to renegotiate the 2011 

CBA. (JA026-027.) While negotiations were ongoing, PBGC told the 

Union that it was cancelling the Special Awards program. PBGC 

claimed that it could unilaterally terminate “any permissive or illegal” 

provisions of the CBA. (JA023, JA025.) And, it contended, the Special 

Awards program was a permissive provision. (JA025-026.) PBGC 

further contended Article 3, Section 2 of the CBA, which mandated that 

9% of PBGC’s awards budget go to Special Awards program, violated 

PBGC’s management right to determine its budget under 5 U.S.C. 

§ 7106(a)(1). (JA195.)

The Union grieved PBGC’s termination of the Special Awards 

program. IUPEDJ I, 72 FLRA at 281. In support, it asserted that the 

CBA (including provisions related to the Special Awards program) 

remained binding even after the Union sought to renegotiate it.

The parties proceeded to arbitration. The arbitrator framed the 

issue as: “Did the Agency violate the CBA and Statute when it canceled 

Article 3, Section 2, of the Agreement? If so, what shall be the remedy?” 

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(JA022.) In his decision, the arbitrator held that PBGC could not 

unilaterally terminate any lawful section of the CBA while it was being 

renegotiated, because the Union had properly invoked the CBA’s 

continuance provision. (JA025-027.) The CBA’s continuance provision 

said, “[i]n the event that the Parties elect to renegotiate the Agreement, 

the current terms of the Agreement will remain in effect until 

superseded by a new Agreement.” (JA191.)

But the arbitrator held that PBGC could terminate the Special 

Awards program because Article 3, Section 2 of the CBA violated 

PBGC’s management rights in two ways: 1) by violating management’s 

right to determine its budget, and 2) by granting the Committee the 

right to distribute Special Awards. (JA036.)

The arbitrator first found that Article 3, Section 2(D) violated 

management’s right to determine the agency’s budget under 5 U.S.C. 

§ 7106(a)(1) because it required that at least 9% of PBGC’s awards 

budget be allocated to the Special Awards. (JA031-034.) In so holding, 

the arbitrator relied on National Association of Government Employees

Local R1 144, Federal Union of Scientists & Engineers (“Naval 

Underwater”), 38 FLRA 456 (1990), which involved the negotiability of 

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several union proposals. The arbitrator found two in particular to be 

relevant: 

Proposal 7 - Proper and equitable performance ratings and 

resulting payments and awards will be granted to covered 

employees. If management decides to give awards within any 

given grouping, then the budget allocations in that grouping 

will be 1.5% of base aggregate payroll. Responsibility for 

ensuring that the 1.5% limit is not exceeded and the 1.5% is 

set aside in a fund to be distributed as awards to employees 

is delegated to the Activity Head Designees. . . . 

Proposal 10 - The money in each Activity Head Designee[’]s 

fund shall be split into two pools[,] one for GS-12 and below 

and another for GS-13 and above. The funds in each pool 

shall be obtained from % of payroll for the respective 

grouping. Awards for GS-12 and below shall be only from 

their pool and likewise for GS-13 and above. 

(JA031 (citing Naval Underwater, 38 FLRA at 475-76 (emphases 

added)).)

In Naval Underwater, the Authority ruled that the italicized 

sentences were non-negotiable. 38 FLRA at 475-76. The Authority 

read the provisions as requiring 1.5% of base aggregate payroll be 

allocated to awards, rejecting the union’s argument that “under the 

proposal the [a]gency is free to refrain from giving any awards and, 

thereby, avoid the funding requirements of the proposals.” Id. at 479.

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But the Authority’s concern went further. It found that “[e]ven 

assuming that the proposals would legitimately leave the [a]gency with 

a means of avoiding the requirement that 1.5 percent of base aggregate 

payroll be allocated in budgets for ‘Activity Head Designee groupings’ 

. . . the question of whether the funding requirement violates the 

[a]gency’s right to determine its budget would still exist.” (Id.) The 

Authority found this to be the case because “a proposal that prescribes 

the amount to be allocated in an agency’s budget for a particular 

program or operation violates management’s right to determine its 

budget.” (Id.) And the Authority found “that the second and third 

sentences of Proposal 7 and the second sentence of Proposal 10, all of 

which integrally relate to the 1.5 percent funding requirement, directly 

interfere with the Agency's right to determine its budget.” (Id. at 480.) 

The arbitrator found that Naval Underwater’s analysis showed 

that Article 3, Section 2 of the CBA violated PBGC’s right to manage 

the budget. As he explained,

Article 3, [Section 2(D)], suffers from the same defect as the 

non-negotiable sentences in Naval Underwater Systems 

Center. Those sentences “prescribe[d] an amount to be 

allocated in the [a]gency’s budget for a particular program or 

operation.” In the case before me, Article 3, [Section 2(D)], 

“prescribes [a percentage] to be allocated in the Agency’s 

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budget for a particular program or operation.” Here, the 

“particular program or operation” is Special Achievement 

Awards for bargaining[-]unit employees.

(JA032.) 

The arbitrator then distinguished a case cited by the Union, Nat’l 

Ass’n of Gov’t Emps. Loc. R14-52 (“Red River Army Depot I”), 41 FLRA 

1057 (1991), which involved a proposal that the amount budgeted by the 

agency for a gainsharing program be divided evenly between 

management and employees. In Red River Army Depot I, the Authority 

found that the proposal did not “prescribe[] the programs and 

operations to be included in the agency’s budget or . . . the amount to be 

allocated for them.” (JA032 (quoting Red River Army Depot I, 41 FLRA 

at 1066-67).) Instead, the Authority found that “the proposal is limited 

to a matter that occurs within the context of, and reflects, a budget that 

already has been formulated.” Red River Army Depot I, 41 FLRA at 

1067. Assessing the significance of Red River Army Depot I, the 

arbitrator found, 

Special Achievement Awards and gainsharing are not 

similar programs except in the broad sense that they are 

both incentive programs. Otherwise, they are two different 

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animals. What may be negotiated for one does not 

necessarily mean it can be negotiated for the other.

(JA033.) 

Nor, in the arbitrator’s view, was Article 3, Section 2 similar to the 

“pool” proposal in Naval Underwater; that is, the first and third 

sentences of Proposal 10: 

The money in each Activity Head Designee[’]s fund shall be 

split into two pools[,] one for GS-12 and below and another 

for GS-13 and above. . . . Awards for GS-12 and below shall 

be only from their pool and likewise for GS-13 and above. 

(JA033 (quoting Naval Underwater, 38 FLRA at 476).) The arbitrator 

reasoned the creation of those pools did not control the agency’s budget, 

but “merely outline a procedure for the Agency to follow in 

implementing its decision concerning the amount of funds budgeted for 

performance awards.” (Id.) 

The arbitrator found that this case was different because under 

Article 3, Section 2, at least 9% of the total amount management 

budgeted for awards “must go to Special Achievement Awards for 

bargaining[-]unit members.” (JA034.) The arbitrator found that

Section 2 “does not change the total amount that management has 

budgeted for awards, but it affects how much PBGC can allocate” for 

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“non-bargaining[-]unit employees, and also for other awards, essentially 

performance awards.” (Id.)

Along with finding that Section 2(D) violated management’s right 

to determine its budget, the arbitrator found that Article 3, Section 2(A) 

violated the Agency’s management right “to determine the criteria for 

awarding employees” because it provided that the Committee—not 

Agency management—had the authority to issue the awards. (JA034-

036.) 

The arbitrator concluded his decision by reiterating that “Article 

3, [Section] 2, violates PBGC’s management rights on two statutory 

counts.” (JA036.) But he did not specify whether the two grounds were 

independent reasons for denying the Union’s grievance. (Id.)

The Union filed exceptions to the arbitrator’s ruling with the 

Authority. The Authority first denied a Union exception that the 

arbitrator had been biased because the Union had not raised that issue 

with the arbitrator, as required by the Authority’s regulations. 

IUPEDJ I, 72 FLRA at 282. 

The Authority then granted the Union’s exception as to the 

arbitrator’s ruling that the powers of the Committee in Article 3, 

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Section 2(A) violated PBGC’s management rights. Id. at 282-83. The 

Authority faulted the arbitrator for not identifying a management right 

that Article 3, Section 2(A) violated. It also held that “there is no 

management right to ‘determine the criteria for performance awards’ in 

the Statute.” Id. at 282. 

Finally, the Authority denied the Union’s challenge to the 

arbitrator’s ruling that Article 3, Section 2(D) violated PBGC’s 

management right to determine its budget under 5 U.S.C. § 7106(a)(1). 

Id. at 283-84. The Authority noted that Article 3, Section 2(D) was 

similar to proposals the Authority had found to be non-negotiable in 

International Federation of Professional & Technical Engineers, Local

No. 1 (“Norfolk”), 38 FLRA 1589, 1595 (1991) and Naval Underwater. 

IUPEDJ I, 72 FLRA at 283.

The Authority observed that “[i]n Norfolk, the relevant proposal 

established a formula that set a maximum funding allowance for 

performance awards at 1.5% of base payroll.” Id. (citing Norfolk, 38 

FLRA at 1595). The Norfolk proposal further “establishe[d] a specific 

budgetary restriction on the funding levels for performance awards and 

. . . that limitation directly affect[ed] the amount of money the [a]gency 

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may include in its budget for that purpose.” Id. (alterations in original)

(quoting Norfolk, 38 FLRA at 1595). Thus, it was nonnegotiable 

because it “directly interfere[d] with the Agency's right to determine its 

budget under § 7106(a)(1) of the Statute.” Id. (alterations in original) 

(quoting Norfolk, 38 FLRA at 1595).

Similarly, the Authority found that Naval Underwater “considered 

a proposal requiring that whenever the agency allocated awards 

funding to a particular group of employees, the awards budget for that 

group would be 1.5% of base payroll.” IUPEDJ I, 72 FLRA at 283 

(citing Naval Underwater, 38 FLRA at 475-76). In Naval Underwater, 

the Authority held that “even if the agency could potentially avoid the 

1.5% requirement by electing not to fund any performance awards for a 

particular group, the proposal ‘prescribe[d] an amount to be allocated in 

the [a]gency’s budget for a particular program or operation’ and, 

therefore, affected management's right to determine the budget.” 

IUPEDJ I, 72 FLRA at 283 (alterations in original) (quoting Naval 

Underwater, 38 FLRA at 478-80)).

The Authority found that although Article 3, Section 2(D) “does 

not set a specific amount for” the Special Awards, “it operates in the 

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same manner as the proposals in Norfolk and Naval Underwater by 

limiting how the Agency can allocate funds—specifically, by preventing 

it from allocating to special-achievement awards less than ‘9% of all 

monies allocated for all awards.’” Id. (quoting JA059). 

The Authority rejected the Union’s argument “that the Agency 

could avoid the special-achievement-awards funding requirement by 

electing not to fund any awards.” Id. It observed that “in Naval 

Underwater, the Authority rejected a similar argument stating that 

even if the agency could avoid the requirement, ‘the question of whether 

the funding requirement violates the [a]gency's right to determine its 

budget would still exist.’” Id. (quoting Naval Underwater, 38 FLRA at 

479.)

Both the Union and PBGC filed motions for reconsideration of 

IUPEDJ I. PBGC claimed that it had preserved its arguments that the 

way Special Awards were distributed violated specific management 

rights. (JA528-529.) It also contended that when the arbitrator ruled 

that Section 2(A) violated management rights, he was essentially ruling 

that Section 2(A) violated the management rights to assign work and 

direct employees. (JA529-532.)

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For its part, the Union contended that IUPEDJ I “is erroneous in 

that it fails to address the [Union’s] exception concerning the 

repudiation of the agreement and [ULP] and fails to order or dictate a 

remedy.” (JA536.) The Union asked the Authority to “fashion a 

remedy” for PBGC’s unilateral termination of the Special Awards 

program. (Id.) And it urged that “[t]his absence of an appropriate 

remedial order constitutes error sufficient to justify reconsideration.” 

(Id.)

In IUPEDJ II, the Authority denied PBGC’s motion for 

reconsideration. 72 FLRA at 572-73. The Authority reiterated that 

“[a]mong the nineteen explicit management rights in § 7106, no ‘right to 

determine the criteria for awarding employees’ exists.” Id. at 572. It 

found that arbitrator’s reliance on that “nonexistent right[]” could not 

support his ruling that the Committee’s power violated PBGC’s 

management rights. Id. The Authority also determined that PBGC 

had never raised its arguments about the management rights to “assign 

work” and “direct employees,” and had thus forfeited them. Id. Even if 

PBGC had made those arguments, the Authority noted, the arguments 

would have been insufficient. Id. at 573.

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The Authority dismissed the Union’s motion for reconsideration 

because it had been filed electronically, and the Authority’s regulations 

“permit the filing of motions only through commercial mail, first-class 

mail, certified mail, or facsimile.” Id. at 573 n.8. The Authority noted 

that the Union had not corrected the improper filing even after it was 

notified via an Order to Show Cause. Id. 

The Union then filed this Petition for Review.

SUMMARY OF ARGUMENT

This Court should dismiss the Petition for Review because it lacks 

jurisdiction over it. Even if the Court had jurisdiction over the Petition, 

denial of it is appropriate because the Authority’s decision is neither 

arbitrary nor capricious.

With the Statute, as with all of the CSRA, “Congress passed an 

enormously complicated and subtle scheme to govern employee 

relations in the federal sector, including the authorization of collective 

bargaining.” Steadman, 918 F.2d at 967. “Under the CSRA, the 

negotiated grievance procedure prescribed in a collective bargaining 

agreement is generally the exclusive path to redress for a federal 

employee with a grievance.” Johnson v. Peterson, 996 F.2d 397, 398 

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(D.C. Cir. 1993) (citing 5 U.S.C. § 7121(a)). Thus, petitioners are 

“obliged to pursue their available remedies under the CSRA,” including 

through CBA procedures, before bringing suit. Steadman, 918 F.2d at 

966; Johnson, 996 F.2d at 398; 5 U.S.C. § 7121(a)). 

In this case, the Union’s Petition for Review should be dismissed 

because it has not exhausted its remedies through its CBA grievance 

procedure. That is because the arbitrator’s award and Authority’s 

decision leaves open a question that can be resolved only by the 

arbitrator.

The arbitrator gave two reasons why PBGC could lawfully 

terminate the Section 2 Special Awards program. First, he found that 

Section 2(A)—related to the structure of the Special Awards program—

violated an unspecified management right. Second, he found that 

Section 2(D)—which required the Agency to spend 9% of its awards 

budget on the Special Awards program—violated the management right 

to determine its own budget. 

Although the Authority upheld the second finding, it set aside the 

first. IUPEDJ I, 72 FLRA at 282-83. The arbitrator’s award, however, 

was unclear as to whether the two findings were independent of one 

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another and whether he might have awarded remedies for PBGC’s 

cancellation of the Special Awards absent his first finding. (JA036-037.) 

To answer that question, the Union was required, under the CBA and 

Statute, to return to the arbitrator to clarify the scope of his award and 

decide what remedy (if any) was appropriate. 

If the Union had sought such clarification, the arbitrator may 

have found that Article 3, Section 2 remained binding, so long as the 

budgetary provision of Section 2(D) was effectively redlined from it. He 

could further have awarded appropriate remedies for PBGC’s refusal to 

comply with the remaining portions of Article 3, Section 2. As the 

Union never sought further proceedings, however, the arbitrator had no 

chance to clarify his award after the Authority’s partial invalidation of 

it. 

The Union failed to return to the arbitrator even though it 

informed the Authority of the arbitrator’s failure to fashion such a 

remedy. (See JA536 (asking the Authority to “fashion a remedy” for 

PBGC’s unilateral termination of the Special Awards program in the 

wake of its partial invalidation of the arbitrator’s award).) The Union 

provides no reason why it did not return to the arbitrator to allow him 

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to “fashion a remedy” or clarify his award—as was its right and 

obligation under Article 2, Section 10 of the CBA. (JA055.) Thus, the 

Union failed to exhaust its administrative remedies.

If the Court finds that it has jurisdiction over the Petition for 

Review, it should still deny the Petition because the Authority correctly 

held that Article 3, Section 2(D) violates PBGC’s management right to 

determine its budget under § 7106(a)(1) of the Statute. 

The Statute sets forth certain nonnegotiable management rights 

over which agencies retain exclusive authority. See 5 U.S.C. § 7106. As 

relevant here, the Statute specifies that “nothing in this chapter shall 

affect the authority of any management official of any agency . . . to 

determine the . . . budget.” Id. § 7106(a)(1). To establish that a 

proposal affects management’s right to determine its budget, an agency 

must either show that the proposal: “(1) prescribes the particular 

programs to be included in the budget or the amount to be allocated in 

the budget for those programs; or (2) entails an increase in costs that is 

significant and unavoidable and is not offset by compensating benefits.” 

Norfolk, 38 FLRA at 1593.

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Here, the Authority applied the first budget test. See IUPEDJ I, 

72 FLRA at 283. The Authority reasonably concluded Section 2(D) of 

the CBA “affects management’s right to determine its budget” by 

“limiting how the agency can allocate funds.” Id. at 283-84. By 

requiring that the Special Awards for bargaining-unit employees be “at 

least 9% of all monies allocated for all awards” (JA059), Article 3, 

Section 2(D) fixes a budget floor for the Special Awards and a ceiling for 

all other awards. Every time PBGC wishes to increase its budget for 

other awards, it must also increase the budget amount for the Special 

Awards to stay above the required 9% threshold. In doing so, Article 3, 

Section 2(D) prescribes the amounts that PBGC must allocate to its 

awards budget, violating PBGC’s management right to determine its 

budget. 

As Article 3, Section 2(D) forces PBGC to fund the Special Awards 

for at a specific minimum percentage of PBGC’s overall awards budget, 

it also interferes with the Agency’s discretion to determine the size of its 

budget. PBGC’s management right to determine its budget under 

§ 7106(a)(1) of the Statute includes its right to determine “the amounts 

required to fund [its programs and operations].” Nat’l Ass’n of Gov't 

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Emps. Loc. R14-52 (“Red River Army Depot II”), 48 FLRA 1198, 1206 

(1993) (emphasis added). 

Under Red River Army Depot II, Article 3, Section 2(D) would “not 

be inconsistent with the first part of the budget test” if it required 

PBGC to pay a specified amount every time the Committee determined 

that an employee had earned an Award. Cf. id. This is because it 

would not require an agency to “place a specified amount in its budget.” 

See id. at 1207-08.

But Section 2(D) does much more than this—it requires the 

Agency to place a specified amount “for the purpose of funding” Special 

Awards within its overall awards program budget. Id. at 1208 

(emphasis added). It thus “directly prescribes the substantive 

composition of the estimates and plans that constitute the budget 

process.” Id. That is because “[p]roposals requiring a ‘budget 

allocation’ of a specified amount to fund performance awards, even if 

expressed solely in percentage terms, directly interfere with 

management’s right to determine its budget under section § 7106(a)(1) 

of the Statute.” Norfolk, 38 FLRA at 1594 (emphasis added). 

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Applying Norfolk, the Authority agreed with the arbitrator that 

Article 3, Section 2(D) “prescribes [a percentage] to be allocated in the 

Agency’s budget for a particular program or operation.” (JA032.) By 

specifying that the budget for Special Awards will be set as a specific 

minimum percentage of the entire performance awards budget, Article 

3, Section 2(D) impacts the “agency’s plan for allocating funds among its 

operations.” Red River Army Depot II, 48 FLRA at 1206. 

NTEU argues that a funding proposal that governs only “the 

relative proportion” of the total budget does not interfere with the 

Agency’s management right to determine its budget under the two-part 

test. (NTEU Br. 7-8 (citing Am. Fed’n of Gov’t Emps. (“AFGE”), 31 

FLRA 921, 931 (1988).) But AFGE is readily distinguishable, because, 

unlike the proposals/provisions in Norfolk, Naval Underwater and this 

case, the proposal in AFGE did not set any specific percentage floor or 

ceiling on the agency’s awards budget.

The Authority’s decisions were neither arbitrary nor capricious. 

Denial of the Petition for Review would therefore be appropriate even if 

this Court had jurisdiction over the case.

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STANDARD OF REVIEW

Before the Court considers the merits of the Union’s arguments, it 

“must determine whether [it] has subject matter jurisdiction.” Broad. 

Bd. of Governors Off. of Cuba Broad. v. FLRA, 752 F.3d 453, 465 (D.C. 

Cir. 2014). The Union bears the burden of establishing jurisdiction. 

Lujan v. Defs. Of Wildlife, 504 U.S. 555, 561 (1992). Congress confers 

federal court jurisdiction and may limit or foreclose judicial review as it 

sees fit. Am. Fed’n of Labor v. NLRB, 308 U.S. 401, 404 (1940) (“Such 

jurisdiction as [a court] has, to review directly the action of 

administrative agencies, is specially conferred by legislation relating 

specifically to the determinations of such agencies made subject to 

review, and prescribing the manner and extent of the review.”).

Under the Statute, petitioners are “obliged to pursue their 

available remedies under the CSRA,” including through CBA 

procedures, before bringing suit. Steadman, 918 F.2d at 966; Johnson, 

996 F.2d at 398; 5 U.S.C. § 7121(a)). Otherwise, the courts would be 

“improperly interjected . . . at a premature stage into the CSRA’s 

carefully developed system of administrative review.” Steadman, 918 

F.2d at 966. A petitioner’s failure to exhaust its remedies deprives this 

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Court of jurisdiction over a case. Fraternal Ord. of Police, 562 F. Supp. 

2d at 12 (citing 5 U.S.C. § 7123(a)).

If a petitioner can establish jurisdiction, the Court “reviews the 

Authority’s interpretation of the [Statute] under the two-step 

framework announced in [Chevron USA Inc. v. Natural Resources

Defense Council, Inc., 467 U.S. 837, 842–43 (1984)]” because “Congress 

has clearly delegated to the Authority the responsibility in the first 

instance to construe the [Statute].” Nat’l Treasury Emps. Union v. 

FLRA (“NTEU 2014”), 754 F.3d 1031, 1041 (D.C. Cir. 2014) (alteration 

in original) (quotation omitted). Under Chevron step one, the Court 

considers “whether Congress has spoken directly to the precise question 

at issue.” Shays v. Fed. Election Comm’n, 414 F.3d 76, 96 (D.C. Cir. 

2005). If a law is silent or ambiguous, this Court moves to step two. 

NTEU 2014, 754 F.3d at 1042. 

At Chevron step two, “‘the question for the [C]ourt is whether the 

agency’s interpretation is based on a permissible construction of the 

statute in light of its language, structure, and purpose.’” Id. (quoting 

Am. Fed’n Govt’ Emps. v. Chao, 409 F.3d 377, 384 (D.C. Cir. 2005)). 

The Court “need not conclude that the Authority’s interpretation of the 

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Statute is ‘the only one it permissibly could have adopted,’” id. (quoting 

Chevron, 467 U.S. at 843 n.11), or “‘even the interpretation deemed 

most reasonable’” by the Court, id. (quoting Entergy Corp. v. 

Riverkeeper, Inc., 556 U.S. 208, 218 (2009). On the contrary, the Court 

will “defer to an agency’s interpretation of a statute so long as it is 

reasonable.” Id. (citations omitted). 

Chevron step two analysis “overlaps with” the APA’s arbitrary and 

capricious standard. Shays, 414 F.3d at 96 (quotation omitted). “Under 

this highly deferential standard of review, the court presumes the 

validity of agency action and must affirm unless the [Authority] failed 

to consider relevant factors or made a clear error in judgment[.]” Cellco 

P’ship v. FCC, 357 F.3d 88, 93-94 (D.C. Cir. 2004) (internal quotation 

marks and citations omitted). 

Thus, Courts uphold Authority decisions unless they are 

“arbitrary, capricious, an abuse of discretion, or otherwise not in 

accordance with law.” NTEU 2014, 754 F.3d at 1041 (quoting Am. Fed’n 

of Gov’t Emps., Loc. 2343 v. FLRA, 144 F.3d 85, 88 (D.C. Cir. 1998)); see 

also 5 U.S.C. § 7123(c) (incorporating Administrative Procedure Act 

standards of review). The scope of such review is narrow. See, e.g., Am. 

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Fed’n of Gov’t Emps., Loc. 2303 v. FLRA, 815 F.2d 718, 722 (D.C. Cir. 

1987) (citing Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 

419 U.S. 281, 285-86 (1974)).

ARGUMENT

I. The Court Lacks Jurisdiction to Consider the Petition 

for Review Because It Failed to Exhaust Its

Administrative Remedies

The Union’s Petition for Review should be dismissed for lack of 

jurisdiction because the Union has not exhausted its administrative 

remedies. 

The doctrine of administrative exhaustion provides “that no one is 

entitled to judicial relief for a supposed or threatened injury until the 

prescribed administrative remedy has been exhausted.” Woodford v. 

Ngo, 548 U.S. 81, 88-89 (2006). Thus, “as a general rule . . . courts 

should not ‘topple over administrative decisions unless the 

administrative body not only has erred, but has erred against objection 

made at the time appropriate under its practice.’” Id. (quoting United 

States v. L.A. Tucker Truck Lines, Inc., 344 U.S. 33, 37 (1952)). It is not 

enough that the Union “may conclude—correctly or incorrectly—that 

exhaustion is not efficient in that party’s particular case.” Woodford, 

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548 U.S. at 89. Exhaustion requirements, by their very nature, “are 

designed to deal with parties who do not want to exhaust.” Id. 

The Statute is no exception to this rule. Passed as part of the 

Civil Service Reform Act (“CSRA”), the Statute “requires a party to 

exhaust administrative remedies before obtaining judicial relief for an 

actual or threatened injury.” Fraternal Ord. of Police, 562 F. Supp. 2d 

at 12 (citing 5 U.S.C. § 7123(a)); see also Steadman, 918 F.2d at 966. 

With the Statute, as with all of the CSRA, “Congress passed an 

enormously complicated and subtle scheme to govern employee 

relations in the federal sector, including the authorization of collective 

bargaining.” Steadman, 918 F.2d at 967.“Under the CSRA, the 

negotiated grievance procedure prescribed in a collective bargaining 

agreement is generally the exclusive path to redress for a federal 

employee with a grievance.” Johnson, 996 F.2d at 398 (citing 5 U.S.C. § 

7121(a)). Thus, petitioners are “obliged to pursue their available 

remedies under the CSRA,” including through CBA procedures before 

bringing suit. Steadman, 918 F.2d at 966; Johnson, 996 F.2d at 398; 

Carter v. Carson, 241 F. Supp. 3d 191, 197–99 (D.D.C. 2017), aff’d, 715 

F. App'x 16 (D.C. Cir. 2018); Fernandez v. Chertoff, 471 F.3d 45, 52–53 

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(2d Cir. 2006); Koch v. Walter, 934 F. Supp. 2d 261, 268–69 (D.D.C. 

2013); 5 U.S.C. § 7121(a)). 

Section 7121(a)(1) of the Statute provides that CBA procedures 

“shall be the exclusive administrative procedures for resolving 

grievances which fall within [their] coverage.” The CBA in this case, 

which sets forth the governing arbitration procedures, is clear: “Any 

dispute over the application of the arbitrator’s award shall be returned 

to the arbitrator for resolution.” (JA055 (emphasis added).) 

The Authority’s decision granted in part, and denied in part, the 

Union’s exceptions to an arbitration ruling, and set aside, in part, the 

arbitrator’s award. IUPEDJ I, 72 FLRA at 282-83. The arbitrator’s 

decision was unclear whether the two grounds he cited for denying the 

Union’s grievance were independent of one another. (JA036-037.) 

Thus, under the Statute and CBA, the Union was required, after the 

Authority’s ruling, to return to the arbitrator to clarify the scope of his 

award and decide what remedy (if any) was appropriate. (See JA536 

(asking the Authority to “fashion a remedy” for PBGC’s unilateral 

termination of the Special Awards program in the wake of its partial 

invalidation of the arbitrator’s award).) That is, the Union had to seek 

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34

clarification from the arbitrator before it could seek review from this 

Court. 

If the Union had sought such clarification, the arbitrator may well 

have found that Article 3, Section 2 remained binding, so long as the 

budgetary provision of Section 2(D) was redlined from it. He could 

further have awarded appropriate remedies for PBGC’s refusal to 

comply with the remaining portions of Article 3, Section 2. As the 

Union never sought further proceedings, however, the arbitrator had no 

chance to clarify his award after the Authority’s partial invalidation of 

it. Thus, the Union failed to exhaust its administrative remedies.

The Union’s failure to exhaust contrasts with PBGC’s actions. 

PBGC sought reconsideration of the Authority’s decision to partially 

invalidate the arbitrator’s award. (See JA525-533.) It presumably did 

so because it expected that the arbitrator, in subsequent proceedings, 

could have found that PBGC committed a ULP by repudiating Section 

2(A), which the Authority found to be lawful. That is because the CBA 

requires that “[a]ny dispute over the application of the arbitrator’s 

award shall be returned to the arbitrator for resolution.” (JA055.) 

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Again, the Union knew, or should have known, that it needed to 

exhaust its claims before the arbitrator.

The Union’s failure to pursue further arbitration is even more 

puzzling given that its Motion for Reconsideration before the Authority 

faulted “the arbitral award’s failure to remedy the ULP,” and demanded 

that the Authority “fashion a remedy” for PBGC’s unilateral 

termination of the Special Awards program. (JA535-536.) In that 

motion, the Union urged that “[IUPEDJ I] d[id] not address the

[Union]’s arguments concerning the ULP, the Agency’s repudiation of 

Article 3, and the arbitral award’s failure to remedy the ULP.” (JA535 

(emphasis added).) The Union “request[ed] that the Authority address 

the argument or clarify whether the decision to set aside the award 

with respect to Article 3, Section 2(A) [wa]s intended to encompass 

and/or validate the [Union]’s ULP/repudiation exception.” (Id.) In the 

Union’s view, far from settling the issue, IUPEDJ I “fail[ed] to 

acknowledge the ULP or fashion a remedy.” (JA536.) “It is important 

to carve out the exception concerning the ULP/repudiation of the 

agreement and seek reconsideration,” the Union urged back then, 

“because the decision to deny the remaining exceptions does not clarify 

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36

whether the ULP/repudiation exception is inclusive.” (Id. (emphasis 

added).) 

But the Union failed to properly serve this motion, and never 

responded to the Authority’s show-cause order. IUPEDJ II ̧ 72 FLRA at 

572 n.8. Thus, the Authority dismissed the Union’s motion for 

reconsideration. Id. And the Union never returned to the arbitrator so 

that he could clarify his award or enter a remedial order—again, 

despite the CBA’s requirement that the parties present disputes over 

awards to the arbitrator. (JA055.)

Instead, the Union brought the matter to this Court. Attempting 

to stave off dismissal, it now takes the precise opposite position that it 

took in its motion for reconsideration before the Authority. Now, the 

Union claims that IUPEDJ I “clarified that the arbitrator would not 

need to fashion a remedy.” (Br. 11). And the Union urges that IUPEDJ 

I held that “no remedy would be required even if the Agency’s additional 

reasons violated the Statute or its repudiation of a viable portion of the 

CBA constituted a ULP.” (Id.) Thus, the Union’s current position is 

that there is no “dispute concerning the applicability of the award after” 

IUPEDJ I, and thus IUPEDJ II “was a final order within the meaning 

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37

of the Statute.” (Id. at 6-7). In sum, the Union’s new position is the 

exact opposite of the position it took before the Authority. 

The Union was right the first time. IUPEDJ I did not state “that 

the arbitrator would not need to fashion a remedy” for PBGC’s alleged 

violation of Article 3, Section 2(A) of the CBA. (Br. 11.) Nor did the 

Authority hold that “no remedy would be required even if the Agency’s 

additional reasons violated the Statute or its repudiation of a viable 

portion of the CBA constituted a ULP,” as the Union now claims. (Id.) 

Instead, the Authority was completely silent on whether the arbitrator 

could properly award a remedy for violating Article 3, Section 2(A), 

given the Authority’s holding that the arbitrator’s management rights 

analysis about that provision was erroneous.

The Union points to footnote 43 of IUPEDJ I as the basis for its 

new position. (Br. 10-11.) But that footnote said nothing about what the 

arbitrator could or could not do given IUPEDJ I’s partial invalidation of 

his ruling. IUPEDJ I, 72 FLRA at 284 n.43. Instead, it merely held 

that the arbitrator did not exceed his authority by his previous decision 

not to award a remedy. Id. Specifically, the Authority stated, “While 

we set aside the arbitrator’s conclusion regarding Section 2(A), we find 

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38

the award directly responsive to the issue that the arbitrator framed. 

Accordingly, we deny this exception.” Id. Nothing in that statement 

precluded the arbitrator from awarding the Union relief given the 

Authority’s decision to set aside his award in part. Nor did that 

statement mean, as the Union now implausibly claims, that “no remedy 

would be required even if the Agency’s additional reasons violated the 

Statute or its repudiation of a viable portion of the CBA constituted a 

ULP.” (Br. 11.) 

The Union’s failure to return to the arbitrator to allow him to 

“fashion a remedy” or clarify his award—as was its right and obligation 

under Article 2, Section 10 of the CBA (JA055), amounts to a failure to 

exhaust administrative remedies that deprives this Court of 

jurisdiction. Dismissal is therefore appropriate.

II. The Petition for Review Fails on Its Merits Because the 

Authority Did Not Arbitrarily or Capriciously Decide

that Article 3, Section 2(D) of the CBA, in Directly 

Specifying a Minimum Funding Percentage for Special 

Awards, Violated Management’s Right to Determine its 

Budget.

If the Court finds that it has jurisdiction over the Petition for 

Review, it should still deny the Petition because the Authority decision 

that Article 3, Section 2(D) violates PBGC’s management right to 

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39

determine its budget under § 7106(a)(1) of the Statute was not arbitrary 

or capricious.

The Authority’s decisions are entitled to Chevron deference. As to 

Chevron step one, although Congress broadly defined management 

rights under § 7106, key aspects of those rights are undefined and 

Congress did not dictate how the Statute would apply in cases such as 

this. As to Chevron step two, the Authority’s interpretation and 

application of the Statute was reasonable.

The Statute sets forth certain nonnegotiable management rights 

over which agencies retain exclusive authority. See 5 U.S.C. § 7106. 

The Statute specifies that “nothing in this chapter shall affect the 

authority of any management official of any agency . . . to determine the 

. . . budget” of the agency. Id. § 7106(a)(1). The Statute does not define 

“budget.” The Authority thus uses a dictionary definition for the term: 

“a statement of the financial position of a body for a definite period of 

time based on detailed estimates of planned or expected expenditures 

during the period and proposals for financing them.” Am. Fed’n of Gov’t 

Emps., AFL-CIO, 2 FLRA 603, 608 (1980). Thus, “an agency’s authority 

to determine its budget extends to the determination of the programs 

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and operations that will be included in the estimate of proposed 

expenditures and the determination of the amounts required to fund 

them.” Red River Army Depot II, 48 FLRA at 1202. 

To establish that a proposal affects management’s right to 

determine its budget, the Authority requires agencies to show either 

that the proposal: “(1) prescribes the particular programs to be included 

in the budget or the amount to be allocated in the budget for those

programs; or (2) entails an increase in costs that is significant and 

unavoidable and is not offset by compensating benefits.” Norfolk, 38 

FLRA at 1593.

In this case, the Authority reasonably applied the first budget test 

when assessing whether Section 2 affected PBGC’s ability to determine 

its budget. See IUPEDJ I, 72 FLRA at 283. The first budget test 

“encompasses the specific process that is dedicated to formulating . . . 

(1) the budget estimate for an agency . . . (2) estimates for funding the 

operations and programs of an agency . . . and (3) an agency’s plan for 

allocating funds among its operations and programs.” Red River Army 

Depot II, 48 FLRA at 1206. Using the first budget test, the Authority’s 

conclusion that Section 2(D) of the CBA “affects management’s right to 

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determine its budget” by “limiting how the agency can allocate funds” 

was not arbitrary or capricious. IUPEDJ I, 72 FLRA at 283-84. 

A. Section 2(D) Limits How the Agency Can Allocate Its 

Funds Within Its Performance Awards Budget. 

By setting a floor of 9% for Special Awards, Section 2(D) 

impermissibly limits how the Agency determines its overall 

performance awards budget. It fixes a budget floor for the Special 

Awards and a ceiling for all other awards, including those for nonbargaining-unit employees. Thus, the provision affects PBGC’s “plan 

for allocating funds among its operations and programs”—in other 

words, Section 2(D) affects PBGC’s budget. See Red River Army Depot 

II, 48 FLRA at 1206. 

The Authority’s conclusion in this regard follows its own precedent 

in Norfolk and Naval Underwater, which it cited in support. IUPEDJ I, 

72 FLRA at 283 (citing Norfolk, 38 FLRA 1589; Naval Underwater, 38 

FLRA 456). Norfolk, for example, involved a provision that set a 

“maximum funding allowance for performance awards at 1.5% of base 

payroll.” Norfolk, 38 FLRA at 1595. The Authority applied the first 

budget test and found the proposal directly interfered with 

management’s right to determine the budget. Id. The Authority 

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reasoned that “[p]roposals requiring a ‘budget allocation’ of a specific 

amount to fund performance awards, even if expressed solely in 

percentage terms, directly interfere with management’s rights to 

determine its budget under section 7106(a)(1) of the Statute.” Id. at 

1594. 

Similarly, in Naval Underwater, the Authority had “considered a 

proposal requiring that whenever the agency allocated awards funding 

to a particular group of employees, the awards budget for that group 

would be 1.5% of base payroll.” Naval Underwater, 38 FLRA at 475-76. 

The Authority found this proposal non-negotiable under the first budget 

test. See id. at 477-80. It held that by specifying a pool of funds defined 

in terms of a percentage of base aggregate payroll, the proposal 

prescribed an amount to be allocated in the agency’s budget overall, 

violating its management rights. Id.

The Authority’s conclusion that Article 3, Section 2(D) imposes 

similar budget restrictions as the proposals in Norfolk and Naval 

Underwater was not arbitrary or capricious. IUPEDJ I, 72 FLRA at 

283. By requiring that the Special Awards for bargaining-unit 

employees be “at least 9% of all monies allocated for all awards,” 

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(JA059), Article 3, Section 2(D) fixes a budget floor for the Special 

Awards and a ceiling for all other awards. The provision thus “pertains 

to what the budget itself can include” by impermissibly limiting how 

PBGC may allocate funds within its performance award budget. 

IUPEDJ I, 38 FLRA at 1596. 

Moreover, Article 3, Section 2(D) affects the Agency’s “plan for 

allocating funds among its operations and programs” by fixing a specific 

percentage floor for Special Awards as a proportion of the entire 

performance awards budget. See Red River Army Depot II, 48 FLRA at 

1202. Every time PBGC wishes to increase its budget for other awards, 

it must also increase the budget amount for the Special Awards to stay 

above the required 9% threshold. In so doing, Article 3, Section 2(D) 

prescribes the amounts that PBGC must allocate to its awards budget, 

violating PBGC’s management right to determine its budget. 

In its amicus brief, the NTEU labels Norfolk and Naval 

Underwater “inapposite” because “the proposals in Norfolk and Naval 

Underwater tied performance-award funding to a specified percentage 

of base aggregate payroll—a baseline over which the agency had no

discretion or control.” (NTEU Br. 4-5.) 

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To be sure, the Authority in Norfolk and Naval Underwater was

not concerned with the agencies’ control over base aggregate payroll—

the source of the performance-award funding. Rather, the Authority in 

Norfolk found that limiting performance award funding to 1.5% of 

aggregate base payroll itself “prescribe[d] a ‘ceiling,’ which the Agency is 

prevented from exceeding.” Norfolk, 38 FLRA at 1595. Although the 

proposals did “not prescribe a specific amount or a specific program to 

be included in the [a]gency’s budget,” the proposals still “pertain[ed] to 

what the budget itself can include.” Id. at 1595-96. “By imposing a 

ceiling on what the Agency’s budget can contain in the way of funds for 

incentive awards,” the Authority explained, “Proposal 1 goes directly to 

the budget per se.” Id. at 1596 (emphasis added); see Fort Stewart Schs. 

v. FLRA, 495 U.S. 657, 658 (1990). 

Here too, Article 3, Section 2(D) goes directly to the budget per se. 

By requiring “at least 9% of all monies allocated for all awards” be 

allocated for Special Awards (JA059), the proposal prescribes a specific 

percentage floor that PBGC must maintain in funding the Special 

Awards program. Cf. Norfolk, 38 FLRA at 1595. 

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Similarly, by setting a floor on the funding of the Special Awards 

program, the provision also fixes a ceiling for all other awards, 

including those for non-bargaining-unit employees. (See JA057-64.) 

Indeed, the arbitrator relied on just this reasoning in finding Article 3, 

Section 2(D) violates PBGC’s management rights. (JA034.) The 9% 

floor for Special Awards for bargaining-unit employees “affects how 

much PBGC can allocate (budget) for Special Achievement Awards for 

non-bargaining[-]unit employees, and also for other awards.” (JA034 

(emphasis added).) Thus, just like the provisions in Norfolk and Naval 

Underwater, Article 3, Section 2(D) imposes a budget ceiling for all nonSpecial Awards program awards and thus goes directly to the budget 

per se. 

Therefore, this is not a provision “that would result in 

expenditures by an agency and, consequently, have a [general] impact 

on the budget process” or one that “simply ha[s] cost ramifications.” 

Naval Underwater, 38 FLRA at 478. This CBA provision “limit[s] how 

[PBGC] can allocate funds” by specifically preventing PBGC from 

allocating less than 9% of its performance awards budget to Special 

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Awards. IUPEDJ I, 72 FLRA at 283. Thus, the provision violates 

PBGC’s management right to determine its budget. 

B. Section 2(D) Directly Ties Bargaining-Unit Special 

Awards to the Agency’s Budget. 

The Authority’s conclusion that Section 2(D) violated 

management’s right to determine its budget was similarly not arbitrary 

and capricious. As Article 3, Section 2(D) forces PBGC to allocate a 

specific minimum percentage of PBGC’s overall awards budget to the 

Special Awards program, it also interferes with PBGC’s discretion to 

determine the size of its budget. PBGC’s management right to 

determine its budget under § 7106(a)(1) of the Statute includes its right 

to determine “the amounts required to fund [its programs and 

operations].” Red River Army Depot II, 48 FLRA at 1206 (emphasis 

added). 

Red River Army Depot II, the principal case cited by NTEU 

(NTEU Br. 6-7), held that under the first part of the budget test, “a 

proposal that directly prescribes the . . . amounts that will be specified 

in an agency’s plan to fund its programs and operations . . . interferes 

with the agency’s right to determine its budget.” Red River Army Depot 

II, 48 FLRA at 1208. The Authority explained: 

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[A] proposal requiring that an agency pay a specified amount 

toward health benefits premiums for bargaining[-]unit 

employees would not be inconsistent with the first part of the 

budget test. However, a proposal requiring that the 

agency place a specified amount in its budget for the 

purpose of funding health benefits premiums for 

bargaining[-]unit employees would.

Id. (emphasis added).

Applying that logic here, Article 3, Section 2(D) would “not be 

inconsistent with the first part of the budget test” if it required PBGC to 

pay a specified amount every time the Committee determined that an 

employee had earned an Award. Cf. id. Such a term would be a 

proposal “that could result in a cost to an agency” but does not require 

an agency to “place a specified amount in its budget.” See id. at 1207-

08. 

But Section 2(D) does much more than this—it requires the 

Agency to place a specified amount “for the purpose of funding” Special 

Awards within its overall awards program budget. Red River Army 

Depot II, 48 FLRA at 1208 (emphasis added). Article 3, Section 2(D)

“directly prescribes the substantive composition of the estimates and 

plans that constitute the budget process.” Id. at 1208. 

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Recall too, “[p]roposals requiring a ‘budget allocation’ of a specified 

amount to fund performance awards, even if expressed solely in 

percentage terms, directly interfere with management’s right to 

determine its budget under section § 7106(a)(1) of the Statute.” 

Norfolk, 38 FLRA at 1594 (emphasis added). Applying Norfolk and 

Naval Underwater, the Authority agreed with the arbitrator that 

Article 3, Section 2(D) prevents the agency from “allocating to specialachievement awards less than 9% of all monies allocated for all 

awards.” IUPEDJ I, 72 FLRA at 283 (quotation omitted); see JA032

(Article 3, Section 2(D) “prescribes [a percentage] to be allocated in the 

Agency’s budget for a particular program or operation.”). By specifying 

that the budget for Special Awards will be set as a specific minimum 

percentage of the entire performance awards budget, Article 3, Section 

2(D) impacts the “agency’s plan for allocating funds among its 

operations.” Red River Army Depot II, 48 FLRA at 1206. 

NTEU argues that a funding proposal that governs only “the 

relative proportion” of the total budget does not interfere with the 

Agency’s management right to determine its budget under the two-part 

test and cites AFGE for that proposition. (NTEU Br. 7-8 (citing AFGE, 

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31 FLRA at 931).) But AFGE is readily distinguishable, because, unlike 

the proposals/provisions in Norfolk, Naval Underwater and this case, 

the proposal in AFGE did not set any specific percentage floor or ceiling 

on the agency’s awards budget. Instead, AFGE considered a proposal 

that required the amount of money allocated by the agency for employee 

performance awards to “not be less than the highest percentage 

allocated to any other pool.” AFGE, 31 FLRA at 926. Thus, AFGE’s 

flexible requirement did not prescribe “an amount of funds to be 

included in the [a]gency’s budget.” Id. at 931. Instead, the proposal 

was “concerned only with the relative proportion of the total resources 

which the agency decided to devote to performance awards.” Id. at 931.

By contrast, Section 2(D) is not “concerned only with the relative 

proportion,” because the mandatory floor forces PBGC to allocate even 

more funds to the total awards budget that would otherwise have been 

unnecessary. AFGE, 31 FLRA at 926. Given the 9% floor on funding 

the Special Awards in Article 3, Section 2(D), if PBGC wants to increase 

spending on other awards, it must fund its overall performance awards 

budget at a higher level than initially estimated due to the restriction 

that at least 9% of those funds go to the Special Awards program. This 

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is because the floor is measured as a minimum percentage rather than 

a particular dollar amount or a flexible benchmark. 

So, for example, if PBGC wished to increase funding for a separate 

performance awards program by $100,000, it would need to increase its 

total performance awards budget by at least $109,000 to account for the 

9% floor. In other words, the 9% floor unlawfully impacts how much 

money PBGC needs to allocate to the total performance awards budget 

to provide for any other specific awards programs that PBGC desires to 

fund. 

Article 3, Section 2(D) therefore interferes with PBGC’s right to 

decide “the amounts required to fund [its programs and operations].” 

Red River Army Depot II, 48 FLRA at 1206. Since Article 3, Section 

2(D) sets a strict floor at a fixed percentage, it interferes with PBGC’s 

discretion to determine the size of its performance awards budget. As a 

result, Article 3, Section 2(D) goes directly to PBGC’s budget per se and 

violates PBGC’s management right to determine its budget under 

§ 7106(a)(1) of the Statute.

The Authority had clear precedent in Norfolk and Naval 

Underwater dealing with proposals that set specific percentage floors 

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for specific awards budgets. Article 3, Section 2(D), in setting a specific 

percentage floor for the Special Awards budget, affected PBGC’s 

discretion to fund other awards and to set its overall performance 

awards budget. (JA031-034.) Given the obvious similarity of Article 3, 

Section 2(D) to the proposals considered in Norfolk and Naval 

Underwater, the Authority adequately explained why Article 3, Section 

2(D) impermissibly interfered with management’s right to determine 

the agency’s budget under 5 U.S.C. § 7106(a)(1). IUPEDJ I, 72 FLRA at 

283–84. Its conclusions were thus not arbitrary and capricious and the 

Petition for Review should be denied on its merits.

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CONCLUSION

For the foregoing reasons, the Authority respectfully requests that 

the Court dismiss the Petition for Review for lack of jurisdiction or deny 

it on its merits. 

Respectfully submitted,

/s/Noah Peters

NOAH PETERS

Solicitor

REBECCA J. OSBORNE

Deputy Solicitor

Federal Labor Relations Authority

1400 K Street, NW

Washington, DC 20424

(202) 218-7908

September 6, 2022

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FED. R. APP. P. RULE 32(a) CERTIFICATION

Pursuant to Fed. R. App. P. 32(a)(7)(B)(i), I hereby certify that this 

brief is double-spaced (except for extended quotations, headings, and 

footnotes) and is proportionally spaced, using Century Schoolbook font, 

14-point type. Based on a word count of my word processing system, 

this brief contains fewer than 13,000 words. It contains 9,743 words 

excluding exempt material. 

/s/ Rebecca J. Osborne

Rebecca J. Osborne

Deputy Solicitor 

Federal Labor Relations Authority

CERTIFICATE OF SERVICE

I hereby certify that on this 6th day of September, 2022, I 

electronically filed the foregoing with the Clerk of the Court for the 

United States Court of Appeals for the District of Columbia Circuit by 

using the CM/ECF system. I also certify that the foregoing document is 

being served on counsel of record and that service will be accomplished 

by the CM/ECF system. 

/s/ Rebecca J. Osborne

Rebecca J. Osborne

Deputy Solicitor 

Federal Labor Relations Authority

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ADDENDUM

Relevant Statutes

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1

TABLE OF CONTENTS

Authority Page

STATUTES................................................................................................2

5 U.S.C. § 7106. Management rights.....................................................2

5 U.S.C. § 7121(a). Grievance procedures .............................................3

5 U.S.C. § 7123 (a), (c). Judicial review; enforcement...........................3

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2

STATUTES

5 U.S.C. § 7106. Management rights

(a) Subject to subsection (b) of this section, nothing in this chapter shall 

affect the authority of any management official of any agency--

(1) to determine the mission, budget, organization, number of 

employees, and internal security practices of the agency; and

(2) in accordance with applicable laws--

(A) to hire, assign, direct, layoff, and retain employees in the 

agency, or to suspend, remove, reduce in grade or pay, or take 

other disciplinary action against such employees;

(B) to assign work, to make determinations with respect to 

contracting out, and to determine the personnel by which agency 

operations shall be conducted;

(C) with respect to filling positions, to make selections for 

appointments from--

(i) among properly ranked and certified candidates for 

promotion; or

(ii) any other appropriate source; and

(D) to take whatever actions may be necessary to carry out the 

agency mission during emergencies.

(b) Nothing in this section shall preclude any agency and any labor 

organization from negotiating--

(1) at the election of the agency, on the numbers, types, and grades of 

employees or positions assigned to any organizational subdivision, 

work project, or tour of duty, or on the technology, methods, and 

means of performing work;

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3

(2) procedures which management officials of the agency will observe 

in exercising any authority under this section; or

(3) appropriate arrangements for employees adversely affected by the 

exercise of any authority under this section by such management 

officials.

5 U.S.C. § 7121(a). Grievance procedures

(a)(1) Except as provided in paragraph (2) of this subsection, any 

collective bargaining agreement shall provide procedures for the 

settlement of grievances, including questions of arbitrability. Except as 

provided in subsections (d), (e), and (g) of this section, the procedures 

shall be the exclusive administrative procedures for resolving 

grievances which fall within its coverage.

(2) Any collective bargaining agreement may exclude any matter 

from the application of the grievance procedures which are provided

for in the agreement.

5 U.S.C. § 7123 (a), (c). Judicial review; enforcement

(a) Any person aggrieved by any final order of the Authority other than 

an order under--

(1) section 7122 of this title (involving an award by an arbitrator), 

unless the order involves an unfair labor practice under section 

7118 of this title, or

(2) section 7112 of this title (involving an appropriate unit 

determination),

may, during the 60-day period beginning on the date on which the order 

was issued, institute an action for judicial review of the Authority's 

order in the United States court of appeals in the circuit in which the 

person resides or transacts business or in the United States Court of 

Appeals for the District of Columbia.

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* * * * *

(c) Upon the filing of a petition under subsection (a) of this section for 

judicial review or under subsection (b) of this section for enforcement, 

the Authority shall file in the court the record in the proceedings, as 

provided in section 2112 of title 28. Upon the filing of the petition, the 

court shall cause notice thereof to be served to the parties involved, and 

thereupon shall have jurisdiction of the proceeding and of the question 

determined therein and may grant any temporary relief (including a 

temporary restraining order) it considers just and proper, and may 

make and enter a decree affirming and enforcing, modifying and 

enforcing as so modified, or setting aside in whole or in part the order of 

the Authority. The filing of a petition under subsection (a) or (b) of this 

section shall not operate as a stay of the Authority's order unless the 

court specifically orders the stay. Review of the Authority's order shall 

be on the record in accordance with section 706 of this title. No objection 

that has not been urged before the Authority, or its designee, shall be 

considered by the court, unless the failure or neglect to urge the 

objection is excused because of extraordinary circumstances. The 

findings of the Authority with respect to questions of fact, if supported 

by substantial evidence on the record considered as a whole, shall be 

conclusive. If any person applies to the court for leave to adduce 

additional evidence and shows to the satisfaction of the court that the 

additional evidence is material and that there were reasonable grounds 

for the failure to adduce the evidence in the hearing before the 

Authority, or its designee, the court may order the additional evidence 

to be taken before the Authority, or its designee, and to be made a part 

of the record. The Authority may modify its findings as to the facts, or 

make new findings by reason of additional evidence so taken and filed. 

The Authority shall file its modified or new findings, which, with 

respect to questions of fact, if supported by substantial evidence on the 

record considered as a whole, shall be conclusive. The Authority shall 

file its recommendations, if any, for the modification or setting aside of 

its original order. Upon the filing of the record with the court, the 

jurisdiction of the court shall be exclusive and its judgment and decree 

shall be final, except that the judgment and decree shall be subject to 

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review by the Supreme Court of the United States upon writ of 

certiorari or certification as provided in section 1254 of title 28.

* * * * *

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