Order Code RL33052
CRS Report for Congress
Received through the CRS Web
Homeland Security and Labor-Management
Relations: NTEU v. Chertoff
August 25, 2005
Thomas J. Nicola and Jon O. Shimabukuro
Legislative Attorneys
American Law Division
Congressional Research Service ˜ The Library of Congress

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Homeland Security and Labor-Management Relations:
NTEU v. Chertoff
Summary
The Homeland Security Act of 2002 provides the Secretary of Homeland
Security and the Director of the Office of Personnel Management (“OPM”) with the
authority to develop a separate human resources management system for the
employees of the Department of Homeland Security (“DHS”). On February 1, 2005,
final regulations to define and implement the new system were published in the
Federal Register. Shortly after the regulations were issued, the National Treasury
Employees Union (“NTEU”) and several other labor organizations filed a lawsuit,
alleging that DHS and OPM exceeded the authority granted to the agencies under the
Homeland Security Act. On August 12, 2005, a U.S. District Court for the District
of Columbia enjoined parts of the new regulations involving labor-management
relations and the Merit Systems Protection Board in NTEU v. Chertoff. This report
will examine the court’s opinion.

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Contents
Collective Bargaining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Homeland Security Labor Relations Board . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Role of the Federal Labor Relations Authority . . . . . . . . . . . . . . . . . . . . . . . 5
Merit Systems Protection Board Mitigation of Penalties . . . . . . . . . . . . . . . . 6
Merit Systems Protection Board Procedures . . . . . . . . . . . . . . . . . . . . . . . . . 7

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Homeland Security and Labor-Management
Relations: NTEU v. Chertoff
The Homeland Security Act of 20021 provides the Secretary of Homeland
Security and the Director of the Office of Personnel Management (“OPM”) with the
authority to develop a separate human resources management system for the
employees of the Department of Homeland Security (“DHS”). On February 1, 2005,
final regulations to define and implement the new system were published in the
Federal Register.2 Shortly after the regulations were issued, the National Treasury
Employees Union (“NTEU”) and several other labor organizations filed a lawsuit,
alleging that DHS and OPM exceeded the authority granted to the agencies under the
Homeland Security Act. On August 12, 2005, a U.S. District Court for the District
of Columbia enjoined parts of the new regulations in NTEU v. Chertoff.3 This report
will examine the court’s opinion.
At issue in NTEU were those sections of the new regulations that involve labor-
management relations and the role of the Merit Systems Protection Board (“MSPB”),
the agency that hears and adjudicates appeals by federal employees who have been
subject to adverse personnel actions. Other sections of the new regulations, including
those concerned with pay administration and performance management, were not
challenged.
The court in NTEU concluded that subpart E of the new regulations, which
includes all of the labor-management sections, and section 9701.706(k)(6), which
restricts the MSPB’s ability to modify penalties imposed by DHS, must be enjoined.
The court maintained:
As currently proposed, those provisions would violate certain specific
requirements established by Congress in the [Homeland Security Act]. They
would not ‘ensure collective bargaining,’ would fundamentally alter [Federal
Labor Relations Authority] jurisdiction . . . and would create an appeal process
at MSPB that is not ‘fair.’4
The remaining sections of this report review the court’s opinion in greater detail.
1 P.L.. 107-296, 116 Stat. 2135 (2002) (codified in relevant part at 5 U.S.C. § 9701 et seq.).
2 Department of Homeland Security Human Resources Management System, 70 Fed. Reg.
5272 (Feb. 1, 2005) (to be codified at 5 C.F.R. pt. 9701).
3 No. CIV.A.05-201(RMC) (D.D.C. Aug. 12, 2005).
4 NTEU, No. CIV.A.05-201(RMC) at 56-57.

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Collective Bargaining
Although the Homeland Security Act grants the Secretary of Homeland Security
and the Director of OPM broad authority to develop a new personnel system, it
indicates that the system must meet certain conditions. For example, the new system
has to be “flexible,” “contemporary,” and may “not waive, modify, or otherwise
affect” various provisions of law.5 The Act identifies specific chapters of title 5, U.S.
Code, that may not be waived by the new system.6 While chapter 71 of such title,
which governs collective bargaining and labor-management relations for most federal
employees, is not identified and thus can be waived by the new system, the Act
includes other language that preserves some form of collective bargaining for DHS
employees:
[The new system] shall . . . ensure that employees may organize, bargain
collectively, and participate through labor organizations of their own choosing
in decisions which affect them, subject to any exclusion from coverage or
limitation on negotiability established by law.7
Congress did not define the term “collective bargaining” for purposes of the Act, and
the unions maintained that the personnel system established by the agencies lacked
the core elements of collective bargaining.8
The new regulations recognize that “each employee has the right to form, join,
or assist any labor organization.”9 At the same time, however, the regulations limit
the subjects that may be negotiated by the parties, restrict the powers and duties of
the Federal Labor Relations Authority (“FLRA”), and create a Homeland Security
Labor Relations Board (“HSLRB”) that will assume many of the FLRA’s functions.10
In addition, the regulations allow DHS to issue binding agency-wide opinions
without regard to the terms of a collective bargaining agreement, and permit DHS
managers to “take whatever other actions may be necessary to carry out the
Department’s mission.”11 In their complaint, the unions argued: “[U]nder the new
regime, management possesses an unlimited unilateral right to issue agency-wide
directives to take what few matters remain negotiable off the bargaining table, and/or
5 See 5 U.S.C. § 9701(b)(1)-(3).
6 See 5 U.S.C. § 9701(c)(2).
7 5 U.S.C. § 9701(b)(4).
8 See NTEU, No. CIV.A.05-201(RMC) at 34 (“The Plaintiff Unions argue that every system
of collective bargaining ever established by Congress has had three critical components: 1)
a requirement that labor and management bargain in good faith over conditions of
employment for purposes of reaching an agreement; 2) a provision that the agreements
reached as a result of bargaining are binding on both parties equally; and 3) the
establishment of a neutral forum for resolving disputes.”).
9 70 Fed. Reg. at 5333 (§ 9701.507).
10 See CRS Report RL32255, Homeland Security: Final Regulations for the Department of
Homeland Security Human Resources Management System (Subpart E) Compared With
Current Law (comparing the final regulations with existing law).
11 70 Fed. Reg. at 5335 (§§ 9701.509(b), 9701.511(a)(2)).

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to invalidate provisions of existing collective bargaining agreements.”12
Nevertheless, in response to the unions’ concerns, DHS and OPM insisted that the
regulations are necessary to ensure “maximum flexibility and accountability.”13
The Administrative Procedure Act permits a reviewing court to set aside formal
agency action if it is “arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law.”14 In general, a court will review such action in accordance
with a two-part test established by the U.S. Supreme Court in Chevron U.S.A. v.
N.R.D.C.15 First, the court will consider whether Congress has spoken directly to the
precise question at issue. If Congress has spoken directly to the question at issue, the
court “must give effect to the unambiguously expressed intent of Congress.”16
Second, the court will analyze the reasonableness of the agency’s interpretation.
If Congress has failed to speak directly to the question at issue, and the statute
is silent or ambiguous, the court will attempt to determine if the agency’s actions are
based on a permissible construction of the statute.17 If the agency’s interpretation is
reasonable, the court may not substitute its own construction of the statutory
provision. However, deference is not owed to the agency’s actions if they construe
a statute in a way that is contrary to congressional intent or that frustrates
congressional policy.18
Citing congressional understanding of what constitutes “collective bargaining,”
as evidenced by the Federal Sector Labor Management Relations Act,19 and general
contract principles, the court determined that the absence of an unmistakably
enforceable contract rendered the regulations impermissible:
The sine qua non of good-faith bargaining is an enforceable contract once the
parties reach agreement. The HR System does not lead to enforceable contracts
and thus fails to comply with the directions of Congress to ensure employee
collective-bargaining rights.
The Regulations fail because any collective bargaining negotiations pursuant to
its terms are illusory: the Secretary retains numerous avenues by which s/he can
12 Complaint for Declaratory and Injunctive Relief at 3, NTEU v. Chertoff, No. CIV.A.05-
201(RMC) (D.D.C. Aug. 12, 2005).
13 70 Fed. Reg. at 5273.
14 5 U.S.C. § 706(2)(A).
15 467 U.S. 837 (1984).
16 Id. at 843.
17 Chevron, 467 U.S. at 842-43.
18 See Chevron, 467 U.S. at 843 n.9 (“The judiciary is the final authority on issues of
statutory construction and must reject administrative constructions which are contrary to
clear congressional intent . . . If a court, employing traditional tools of statutory
construction, ascertains that Congress had an intention on the precise question at issue, that
intention is the law and must be given effect.”).
19 5 U.S.C. § 7101 et seq.

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unilaterally declare contract terms null and void, without prior notice to the
Unions or employees and without bargaining or recourse.20
The court concluded that a system of “collective bargaining” that permits the
unilateral repudiation of agreements by one party is not collective bargaining at all.21
Consequently, the court maintained that no Chevron deference was due to DHS and
OPM because Congress spoke directly to the issue of collective bargaining and
directed the agencies to ensure collective bargaining for DHS employees.
Although the court found that the new regulations failed to adequately allow
collective bargaining, it nevertheless maintained that limitations on the subjects that
could be bargained were permissible. Acknowledging the broad authority granted
to DHS and OPM by the Homeland Security Act, the court reasoned that the agencies
were entitled to Chevron deference for their decisions that identified subjects for
collective bargaining.22
Homeland Security Labor Relations Board
The new regulations provide for the creation of a new entity, the HSLRB, that
will adjudicate disputes concerning the scope of bargaining and the duty to bargain
in good faith; conduct hearings and resolve complaints of specified unfair labor
practices; resolve exceptions to arbitration awards; and resolve negotiation
impasses.23 The unions argued that the HSLRB was “inconsistent with the traditional
concept of ‘collective bargaining.’”24 In particular, the unions questioned the
independence of the HSLRB, whose members are to be selected by the Secretary of
Homeland Security.
The court concluded that the unions’ concerns with the HSLRB were based on
policy choices made by DHS and OPM, rather than the agencies’ failure to
appropriately implement the Homeland Security Act. The court deferred to the
agencies and their ability to establish a new personnel system that includes a new
labor relations entity:
[B]y deliberately and clearly giving the Agencies the authority to establish an HR
system for DHS without reference to the FLRA or any other adjudicative system
for labor-management disputes, Congress left it to the Executive Branch to
formulate that system.25
20 NTEU, No. CIV.A.05-201(RMC) at 35.
21 NTEU, No. CIV.A.05-201(RMC) at 39-40.
22 NTEU, No. CIV.A.05-201(RMC) at 41.
23 See 70 Fed. Reg. at 5334 (§ 9701.509).
24 NTEU, No. CIV.A.05-201(RMC) at 41.
25 NTEU, No. CIV.A.05-201(RMC) at 42.

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Role of the Federal Labor Relations Authority
The new regulations provide that the FLRA may conduct hearings and resolve
complaints of specified unfair labor practices.26 In addition, the regulations require
the FLRA to review HSLRB decisions and issue final decisions.27 Under the
regulations, the FLRA must defer to the findings of fact and interpretations made by
the HSLRB and sustain the HSLRB’s decision unless the party requesting review
shows that the decision was either (1) arbitrary, capricious, an abuse of discretion,
or otherwise not in accordance with law; (2) based on error in applying the HSLRB’s
procedures; or (3) unsupported by substantial evidence.28
The unions argued that DHS and OPM exceeded their statutory authority by
dictating to the FLRA, an independent agency, the “kinds of disputes it will or will
not adjudicate and how it will do so.”29 The unions emphasized that the FLRA’s
jurisdiction is established by statute, and that its role and functions are not subject to
the control of other executive branch agencies. Moreover, Congress did not confer
additional jurisdiction upon the FLRA in the Homeland Security Act.
Although the court acknowledged that DHS and OPM could have waived the
application of chapter 71 of title 5, U.S. Code, and were not required to use the
FLRA, it concluded that the agencies could not “commandeer the resources of an
independent agency” and “fundamentally” transform its functions absent a clearer
indication of congressional intent.30 The court found that the regulations impose an
appellate role that is foreign to the FLRA, and require a deferential standard of
review that is at odds with the FLRA’s status as an independent agency.31 The court
noted that an agency’s interpretation of a statute is not entitled to deference when it
goes beyond the meaning that the statute can bear.32 Here, the court maintained that
the regulations imposed changes to the FLRA that exceeded the agencies’ statutory
authority under the Homeland Security Act to “modify” or “affect” chapter 71 of title
5, U.S. Code.
26 70 Fed. Reg. at 5335 (§ 9701.510). The FLRA may conduct hearings and resolve
complaints of unfair labor practices under 5 C.F.R. § 9701.517(a)(1)-(4), (b)(1)-(4).
27 Id.
28 70 Fed. Reg. at 5334 (§ 9701.508(h)(1)).
29 Complaint, supra note 12 at 14.
30 NTEU, No. CIV.A.05-201(RMC) at 46.
31 Id.
32 Id.

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Merit Systems Protection Board Mitigation of Penalties
The unions challenged the authority of DHS and OPM in jointly issuing final
DHS regulations to change the standard by which the MSPB might mitigate the
penalty for employee misconduct. One of those regulations, to be codified at 5
C.F.R. § 9701.706(k)(6), provides that the Board may not modify a penalty imposed
by DHS unless it is “so disproportionate to the basis for the action as to be wholly
without justification” and that when a penalty is mitigated “the maximum justifiable
penalty must be applied.”
The unions asserted that this regulation violates 5 U.S.C. § 9701(f)(2)(C), a
provision of the Homeland Security Act, which provides that any regulations issued
pursuant to section 9701 “shall modify procedures under chapter 77 [of title 5 of the
U.S. Code entitled “Appeals”] only insofar as such modifications are designed to
further the fair, efficient, and expeditious resolution of matters involving the
employees of the Department.”
DHS and OPM countered that they were not constrained by the requirement in
section 9701(f)(2) because, they alleged, the mitigation standard is not derived from
chapter 77 of title 5, U.S. Code, which relates to appeals, but instead from chapter 75
“Adverse Actions,” which states that “an agency may take an adverse action against
an employee ‘only for such cause as will promote the efficiency of the [civil]
service.’” They argued in the alternative that modifying the mitigation authority of
the Board fully comports with statutory requirements as interpreted by the court that
reviews MSPB decisions, the Court of Appeals for the Federal Circuit.
The court rejected both contentions submitted by DHS and OPM. The court
found that the mitigation standard is derived from chapter 77, the appeals chapter of
title 5, not chapter 75, the adverse actions chapter, and, consequently, that any
modification of chapter 77 procedures, to comply with section 9701(f)(2)(C) of title
5, had to be “fair, efficient, and expeditious.” The court also observed that the
contention by DHS and OPM that the modification to the Board’s mitigation
authority fully meets statutory requirements as interpreted by the Court of Appeals
for the Federal Circuit was seriously flawed and that the cases cited by these agencies
did not support this assertion.
The court said that the mitigation standard in the final regulation violates the
congressional requirement in 5 U.S.C. § 9701(f)(2)(C) because that standard
modifies chapter 77 procedures in a manner that is not fair. The court indicated that
when Congress insisted on fairness, it did not intend that DHS could discipline or
discharge employees without effective recourse. The mitigation standard in the
DHS-OPM regulation that limits the ability of MSPB to mitigate a penalty only
found to be “so disproportionate” as to be “wholly without justification” would
render MSPB review “almost a nullity.”33 Because the decision of the MSPB rather
than the decision of the employing agency is subject to judicial review, the court
33 NTEU, No. CIV.A.05-201(RMC) at 52.

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maintained that this mitigation standard “could effectively insulate DHS adverse
actions from review.”34
The court said that this standard “fails to measure up to the sense of Congress
that ‘employees of the Department are entitled to fair treatment in any appeals,’ 5
U.S.C. § 9701(f)(1)(A), or Congress’s express requirement that any [modifications
to chapter 77] procedures ‘further the fair . . . resolution of matters involving the
employees of the Department.’ Id. § 9701(f)(2)(C).”35 The court concluded that
because the agencies failed to apply the plain meaning of section 9701(f) of title 5,
U.S. Code, section 9701.706 of their regulations was not entitled to Chevron
deference and enjoined it.
Merit Systems Protection Board Procedures
The unions alleged that DHS and OPM exceeded authority granted by the
Homeland Security Act at section 9701(f)(2) of title 5, U.S. Code, when they
modified the Board’s procedural regulations for DHS employees. They challenged,
specifically, the following regulations: section 9701.706(k)(1), which shortens the
time for appeal to the Board; section 9701(k)(3), which limits discovery in MSPB
appeals; and section 9701.706(k)(5), which authorizes a summary judgment
procedure when there are no facts in dispute.
The court found that Congress in section 9701(f)(2) of title 5, U.S. Code, clearly
authorized DHS and OPM to waive or modify provisions “within the purview of
chapter 77”of title 5 “Appeals,” and that there could be no doubt that the agencies
acted within their authority when they adopted these procedural regulations. Their
interpretation of the section was found to be reasonable and consistent with the
statutory purpose and, consequently, was entitled to deference under step two of the
Chevron case.
The unions also asserted that DHS and OPM exceeded authority granted in the
Homeland Security Act when they assigned an appellate role to MSPB to review
decisions of the Mandatory Review Panel in 5 C.F.R. § 9701.707(c). This regulation
provides that an employee who is discharged for a Mandatory Removal Offense will
receive advance notice, an opportunity to respond, and a written decision from
DHS.36 The DHS decision would be subject to review by the Mandatory Review
Panel, which would conduct a hearing and issue a written decision binding on DHS.
Appeals from Panel decisions could be reviewed by the Board, whose decision
would be based on the record without a second hearing, and would be appealable to
the Court of Appeals for the Federal Circuit under section 7703 of title 5, U.S.
Code.37 Under 5 C.F.R. § 9701.707(c)(1)(I), the Board would sustain a Panel
decision unless the Board finds it to be “arbitrary and capricious.” The Board is more
34 Id.
35 Id.
36 See 70 Fed. Reg. at 5342 (§ 9701.607(b)).
37 See 70 Fed. Reg. at 5346 (§ 9701.707(c)).

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likely to sustain a Panel decision under the arbitrary and capricious standard than
under the one that the Board uses in a typical removal case in which an agency must
establish its case by a “preponderance of evidence.”38 The court concluded that DHS
and OPM were entitled to Chevron deference in their interpretation of the broad
authority granted by the Homeland Security Act to issue this regulation. The court
granted the motion by the agencies to dismiss the count relating to MSPB procedures
and denied the plaintiff’s motion for summary judgment on it.
It is not clear whether the court’s opinion will be appealed by either the unions
or DHS. NTEU may appeal the portions of the court’s opinion that went against the
unions.39 It has been reported that DHS has not yet determined whether it will appeal
the decision.40 The parties have 60 days to appeal the decision to the U.S. Court of
Appeals for the District of Columbia Circuit.41
38 See 5 U.S.C. § 7701.
39 See DHS Officials Meet With Union Leaders in Wake of Court’s Ruling on Max[HR]
System, Gov’t Empl. Rel. Rep (BNA), Aug. 23, 2005, at 827.
40 Id.
41 Id.

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