National Federation of Federal Employees, Locals 642, 1911, 1966, and 2024 and U.S. Department of the Interior, Oregon State Office, Bureau of Land Management (Authority decision, May 8, 1990)

Final FLRA decision. The Authority dismissed the union's negotiability petition because its proposed indemnity for drug testing litigation conflicted with the Anti-Deficiency Act. Judicial review of this negotiability order is governed by 5 U.S.C. § 7123(a).

Plain-English summary

NFFE locals proposed that the Bureau of Land Management cover the union's defense costs and any judgment if employees sued over the agency's drug testing program and joined the union as a defendant. The Authority found that the proposal would make the agency liable for potentially unlimited litigation costs without an appropriation or statutory authority for that expense. It held the proposal contrary to the Anti-Deficiency Act and outside the duty to bargain. The Authority dismissed the petition without reaching the agency's other objections.

Decision snapshot

• Authority: 5 U.S.C. § 7117(a)(1); 31 U.S.C. § 1341(a)(1)(B).
• Outcome: Indemnity proposal nonnegotiable; petition dismissed.
• Key point: An agency cannot agree to an open-ended indemnity obligation without funds or legal authority for the expenditure.

Full text (FLRA public release)

[ v35 p1034 ]
35:1034(113)NG

The decision of the Authority follows:

35 FLRA No. 113

FEDERAL LABOR RELATIONS
AUTHORITY

WASHINGTON, D.C.

NATIONAL FEDERATION OF FEDERAL
EMPLOYEES

LOCALS 642, 1911, 1966, and
2024

(Union)

and

U.S. DEPARTMENT OF THE
INTERIOR

OREGON STATE OFFICE

BUREAU OF LAND
MANAGEMENT

(Agency)

0-NG-1675

DECISION AND ORDER ON NEGOTIABILITY
ISSUE

May 8, 1990

Before Chairman McKee and Members Talkin and
Armendariz.

I. Statement of the Case

This case is before the Authority based on a
negotiability appeal filed under section 7105(a)(2)(E) of the Federal Service Labor-Management Relations Statute (the Statute). The case concerns the negotiability of a proposal requiring the Agency to indemnify the Union in any litigation involving the Union that arises from the Agency's drug testing program.

For the following reasons, we find that the proposal is nonnegotiable.

II. The Proposal

The agency agrees to hold the union harmless and to bear any expenses arising from the agency's acts committed in accordance with the drug testing program.

III. Positions of the Parties

A. The Agency

The Agency states that the proposal is intended to insulate the Union "from any liability that might arise from the agency's drug testing of employees if employees sued the agency for an invasion of privacy or deprivation of constitutional rights and joined the union because the union had negotiated the procedure with management." Agency's Statement of Position at 2. According to the Agency, the proposal would require it to pay all the costs of litigation in such cases.

The Agency contends that the proposal violates the Anti-Deficiency Act, 31 U.S.C. § 1341(a)(1). The Agency argues that the Anti-Deficiency Act prohibits indemnification of the Union because the proposal would require the Agency to obligate funds which have not yet been appropriated. The Agency states that, under the Anti-Deficiency Act, Agency officials do not have the authority to include an indemnification provision in a collective bargaining agreement in the absence of express prior statutory authorization.

The Agency provided an affidavit from its Director of Budget stating that "there has been no specific appropriation made for the indemnification of any party, including a union, for the costs of litigation (including attorney fees) involving the Department's drug testing program." Statement of Position at Exhibit A. Accordingly, the Agency asserts that the proposal violates the Anti-Deficiency Act and is nonnegotiable under section 7117(a)(1) of the Statute.

The Agency also contends that "there is no other specific statute making the Government absolutely liable for the litigation costs (which would include attorney fees) and payment of a judgment against another party (other than the United States) joined as a defendant (including a Union) in a suit by employees against the United States." Statement of Position at 5. The Agency argues that under the "American rule" and the doctrine of sovereign immunity, "attorney fees are not available in an action at law against the United States" unless specifically authorized by statute. Id. at 6. The Agency concludes that as there is no statutory authorization of attorney fees in the circumstances covered by the proposal, "the proposal is barred from negotiation by the doctrine of sovereign immunity." Id.

The Agency also contends that because the proposal pertains to a suit against the Agency, joining the Union as a party-defendant, jurisdiction would lie under the Tucker Act, 28 U.S.C. § 1346(a)(2). The Agency argues that the Tucker Act does not authorize awards of attorney fees. Id.

The Agency further asserts that, under the Equal Access to Justice Act, 28 U.S.C. § 2412(b), (c), and (d) (EAJA), the Union may recover costs and attorney fees only if the court determines that the Union is the prevailing party, "unless the court finds that the position of the United States was substantially justified or special circumstances make an award unjust." Id. at 7. Because the proposal provides for "an absolute obligation by the Agency to indemnify the Union" without regard to the statutory requirements, the Agency argues that it is inconsistent with the EAJA and outside the duty to bargain under section 7117(a)(1) of the Statute. Id. at 7-8 (emphasis in original).

Finally, the Agency contends that because the proposal concerns circumstances in which unit employees would be plaintiffs and the Union a defendant, the proposal relates to the Union's own "internal operations" and not to the working conditions of unit employees. Id. at

8. The Agency asserts that, because there is no connection between
   indemnification of the Union and employee working conditions, the proposal does not concern "conditions of employment" within the meaning of section 7103(a)(14) and is nonnegotiable. In the alternative, the Agency argues that even if the proposal concerns conditions of employment, the proposal is nonnegotiable under section 7103(a)(14)(C) of the Statute because the requirements for recovery of costs and attorney fees are specifically provided for by statute. Id. at 10.

B. The Union

The Union states that the proposal seeks to insulate the Union from any liability that might arise from suits filed by employees against the Agency as a result of the Agency's drug testing program. The proposal would apply to suits in which the Union is joined with the Agency as a defendant because it negotiated the procedures used to conduct the drug testing of employees. Under the proposal, the Union explains, the Agency would bear the Union's costs of defense and any judgment. The Union also states that the proposal does not apply to situations arising from the Union's actions, such as a breach of the duty of fair representation, even if those actions arose in a drug testing situation.

IV. Analysis and Conclusion

We find that the proposal is contrary to law because it would obligate the Agency to indemnify the Union for all the costs of litigation, including the costs of any judgment, in the absence of statutory authority for the expenditure of Federal funds for those purposes. Consequently, we conclude that the proposal is nonnegotiable under section 7117(a)(1) of the Statute.

Contractual indemnification clauses that would bind a Federal agency to pay money before an appropriation is made for that purpose are unenforceable under the Anti-Deficiency Act, 31 U.S.C. § 1341(a)(1)(B), unless the agency is authorized by law to obligate funds in advance of an appropriation. See Frank v. United States, 797 F.2d 724, 727 (9th Cir. 1986); California-Pacific Utilities Co. v. United States, 194 Ct. Cl. 703, 715 (1971). In an affidavit filed by the Agency, the Agency's Director of Budget stated that no funds have been appropriated in the Agency's budget for indemnification of any party, including a union, for costs of litigation in connection with the Agency's drug testing program. The Union cites no statute that would authorize the Agency to indemnify the Union for the costs of litigation in the circumstances covered by the proposal in this case, specifically, where the Union is joined as a defendant with the Agency, nor is any apparent.

If the proposal in this case were to be incorporated into the parties' collective bargaining agreement, the Agency would be required to indemnify the Union during the life of the contract for potentially unlimited costs of litigation involving drug testing in which it is joined as a defendant with the Agency, even though no funds have been appropriated for that purpose and no statute authorizes such indemnification. Consequently, consistent with Frank and California-Pacific Utilities Company, we conclude that, by requiring the indemnification of any litigation expenses in the absence of appropriation or statutory authority, the proposal is inconsistent with law and nonnegotiable under section 7117(a)(1) of the Statute. Compare 62 Comp. Gen. 361 (1983), in which the Comptroller General, in a discussion of a clause intended for use in cost-reimbursement supply and research and development contracts, stated that "not all indemnity contracts are proscribed[,]" and that his office "ha[s] never objected to an indemnity where the maximum amount of liability is fixed or readily ascertainable, and where the agency had sufficient funds in its appropriation which could be obligated or administratively reserved to cover the maximum liability." Id. at 365 (citations omitted).

In view of our conclusion that the proposal is
inconsistent with law, we find it unnecessary to address the Agency's other contentions.

V. Order

The petition for review is dismissed.

FOOTNOTES:
(If blank, the decision does not
have footnotes.)