B-180303, FEB 1, 1974, 53 COMP GEN 542

B-180303: Feb 1, 1974

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WHEN CONSTRUED ON THE BASIS OF THE WHOLE ARRANGEMENT EXISTING BETWEEN THE PARTIES AND NOT ONLY FROM THE WORDING OF THE CONTRACT EVIDENCES THE FORMER EMPLOYEE WILL REPRESENT OEO IN CONNECTION WITH LABOR-MANAGEMENT GRIEVANCES AND ARBITRATION PROCEEDINGS THAT WILL REQUIRE A CLOSE WORKING RELATIONSHIP WITH AGENCY EMPLOYEES. A RELATIONSHIP THAT IS INCOMPATIBLE WITH AN INDEPENDENT CONTRACTOR RELATIONSHIP AND SHOULD THE FORMER EMPLOYEE ACCEPT EMPLOYMENT UNDER SUCH AN ARRANGEMENT HIS PAY WOULD HAVE TO BE REDUCED IN ACCORDANCE WITH 5 U.S.C. 8344(A) BY THE AMOUNT OF HIS CIVIL SERVICE ANNUITY. 1956 WAS SERVING. HIS SERVICE ON AND AFTER THE DATE HE WAS OR IS SO EMPLOYED IS COVERED BY THIS SUBCHAPTER.

B-180303, FEB 1, 1974, 53 COMP GEN 542

PERSONAL SERVICES - ARBITRATORS THE CONTRACT TO CONDUCT A STUDY OF LABOR MANAGEMENT ACTIVITY AND PROCESSES PROPOSED TO BE ENTERED INTO BETWEEN A RETIRED FEDERAL EMPLOYEE AND THE OFFICE OF ECONOMIC OPPORTUNITY (OEO) UNDER THE AUTHORITY GRANTED THE DIRECTOR IN SECTION 602 OF THE ECONOMIC OPPORTUNITY ACT OF 1964 TO OBTAIN THE SERVICES OF EXPERTS AND CONSULTANTS, EITHER THROUGH DIRECT EMPLOYMENT OR BY CONTRACT, IN ACCORDANCE WITH 5 U.S.C. 3109, WHEN CONSTRUED ON THE BASIS OF THE WHOLE ARRANGEMENT EXISTING BETWEEN THE PARTIES AND NOT ONLY FROM THE WORDING OF THE CONTRACT EVIDENCES THE FORMER EMPLOYEE WILL REPRESENT OEO IN CONNECTION WITH LABOR-MANAGEMENT GRIEVANCES AND ARBITRATION PROCEEDINGS THAT WILL REQUIRE A CLOSE WORKING RELATIONSHIP WITH AGENCY EMPLOYEES, A RELATIONSHIP THAT IS INCOMPATIBLE WITH AN INDEPENDENT CONTRACTOR RELATIONSHIP AND SHOULD THE FORMER EMPLOYEE ACCEPT EMPLOYMENT UNDER SUCH AN ARRANGEMENT HIS PAY WOULD HAVE TO BE REDUCED IN ACCORDANCE WITH 5 U.S.C. 8344(A) BY THE AMOUNT OF HIS CIVIL SERVICE ANNUITY.

TO THE DIRECTOR, OFFICE OF ECONOMIC OPPORTUNITY, FEBRUARY 1, 1974:

YOUR LETTER OF DECEMBER 14, 1973, FORWARDING A PROPOSED CONTRACT FOR THE SERVICES OF MR. GEORGE LOUTSCH, REQUESTS OUR OPINION AS TO WHETHER MR. LOUTSCH'S PERFORMANCE UNDER THE PROPOSED CONTRACT WOULD IN ANY WAY AFFECT HIS STATUS AS RETIRED FEDERAL EMPLOYEE OR HIS RIGHT TO ANNUITY AND/OR PAYMENTS UNDER THE CONTRACT.

THE CIVIL SERVICE RETIREMENT PROVISIONS AS CONTAINED IN SUBCHAPTER III, CHAPTER 83, TITLE 5, U.S. CODE, PLACE CERTAIN RESTRICTIONS ON THE PAY AN ANNUITANT MAY RECEIVE IF REEMPLOYED BY THE GOVERNMENT. SPECIFICALLY 5 U.S.C. 8344(A) PROVIDES IN PERTINENT PART:

(A) IF AN ANNUITANT RECEIVING ANNUITY FROM THE FUND *** BECOMES EMPLOYED AFTER SEPTEMBER 30, 1956, OR ON JULY 31, 1956 WAS SERVING, IN AN APPOINTIVE OR ELECTIVE POSITION, HIS SERVICE ON AND AFTER THE DATE HE WAS OR IS SO EMPLOYED IS COVERED BY THIS SUBCHAPTER. DEDUCTIONS FOR THE FUND MAY NOT BE WITHHELD FROM HIS PAY. AN AMOUNT EQUAL TO THE ANNUITY ALLOCABLE TO THE PERIOD OF ACTUAL EMPLOYMENT SHALL BE DEDUCTED FROM HIS PAY ***.

WE HAVE HELD THAT PAYMENTS UNDER A CONTRACT WHICH, AS BETWEEN THE GOVERNMENT AND THE CONTRACTOR, CREATES A RELATIONSHIP WHICH IS TANTAMOUNT TO THE RELATIONSHIP BETWEEN EMPLOYER AND EMPLOYEE ARE WITHIN THE PURVIEW OF THE ABOVE PROVISION REQUIRING SETOFF OF ANNUITY PAYMENTS AGAINST AMOUNTS RECEIVED UNDER THE CONTRACT. ON THE OTHER HAND, WHERE, UNDER A CONTRACT, THE RETIRED ANNUITANT FUNCTIONS ON A TRULY INDEPENDENT BASIS, HIS PAYMENTS ARE NOT SUBJECT TO BEING SETOFF BASED ON THE AMOUNT OF HIS ANNUITY. 39 COMP. GEN. 681 (1960); B-154204, SEPTEMBER 4, 1964; B-176681, OCTOBER 27, 1972.

WE HAVE REVIEWED THE PROPOSED CONTRACT WITH A VIEW TO DETERMINING WHETHER THE RELATIONSHIP CONTEMPLATED THEREBY OR THE RELATIONSHIP WHICH IT WILL ELICIT AS BETWEEN MR. LOUTSCH AND THE OFFICE OF ECONOMIC OPPORTUNITY (OEO) IS LIKELY TO HAVE THOSE ASPECTS OF AN EMPLOYEE EMPLOYER RELATIONSHIP. SUCH A RELATIONSHIP IS CONTEMPLATED BY THE TERMS OF THE CONTRACT OR IF SUCH A RELATIONSHIP WILL EXIST IN THE PERFORMANCE OF THE CONTRACT A SETOFF OF THE AMOUNT OF MR. LOUTSCH'S ANNUITY PAYMENTS AGAINST AMOUNTS TO WHICH HE WOULD OTHERWISE BE ENTITLED UNDER THE CONTRACT WOULD BE REQUIRED. ARE AWARE OF NO ADVERSE EFFECT ON THE ANNUITANT'S STATUS UNDER THE CIVIL SERVICE RETIREMENT WHICH WOULD RESULT FROM HIS ENTERING INTO A CONTRACT EVEN IF IT IS DETERMINED THAT THE CONTRACT WAS FOR EMPLOYMENT.

THERE IS NO QUESTION BUT THAT SECTION 602 OF THE ECONOMIC OPPORTUNITY ACT OF 1964, PUBLIC LAW 88-452, AUGUST 20, 1964, 78 STAT. 528, AS AMENDED 42 U.S.C. 2942, DOES GIVE YOU, AS DIRECTOR, AUTHORITY TO OBTAIN THE SERVICES OF EXPERTS AND CONSULTANTS, EITHER THROUGH DIRECT EMPLOYMENT OR BY CONTRACT, IN ACCORDANCE WITH THE PROVISIONS OF 5 U.S.C. 3109. THIS AUTHORITY IS MORE FULLY DISCUSSED IN B-174226, MARCH 13, 1972, ADDRESSED TO YOUR OFFICE.

THE CRITERIA BASIC TO ANY DETERMINATION OF WHETHER AN INDIVIDUAL IS A FEDERAL EMPLOYEE ARE SET FORTH AT 5 U.S.C. 2105(A). THE SAME CRITERIA ARE USED TO ESTABLISH WHETHER THE RELATIONSHIP BETWEEN THE GOVERNMENT AND THE CONTRACTOR OR CONTRACTOR PERSONNEL UNDER A GIVEN CONTRACT IS TANTAMOUNT TO THAT OF EMPLOYER AND EMPLOYEE THUS REQUIRING THAT THE SERVICES IN QUESTION BE OBTAINED IN ACCORDANCE WITH FEDERAL PERSONNEL LAWS INCLUDING THE EXCEPTION CONTAINED IN 5 U.S.C. 3109. THE SAME CRITERIA ARE TO BE APPLIED IN DETERMINING THE APPLICABILITY OF 5 U.S.C. 8344(A). THE TEST IS WHETHER THE EMPLOYEE IS:

1. APPOINTED IN THE CIVIL SERVICE BY A FEDERAL OFFICER OR EMPLOYEE,

2. ENGAGED IN THE PERFORMANCE OF A FEDERAL FUNCTION UNDER AUTHORITY OF LAW OR AN EXECUTIVE ACT,

3. SUBJECT TO THE SUPERVISION OF A FEDERAL OFFICER OR EMPLOYEE WHILE ENGAGED IN THE PERFORMANCE OF THE DUTIES OF HIS POSITION.

IN APPLYING THE ABOVE TEST THERE IS, AS HERE, GENERALLY NO DISPUTE AS TO WHETHER THE INDIVIDUAL IS TO BE ENGAGED IN A FEDERAL FUNCTION. FURTHER, WHILE THERE IS NO DIRECT APPOINTMENT BY A FEDERAL OFFICER WHICH WOULD FORMALLY ESTABLISH AN EMPLOYER-EMPLOYEE RELATIONSHIP, THE PRESENCE OF FACTS ESTABLISHING THE THIRD CRITERION, THAT OF DETAILED SUPERVISION, ORDINARILY WILL CONSTITUTE EVIDENCE THAT SUCH AN APPOINTMENT SHOULD HAVE OCCURRED. IN THE CASE OF INDIVIDUALS WHOSE SERVICES ARE SECURED AS EXPERTS OR CONSULTANTS UNDER 5 U.S.C. 3109 OR SIMILAR AUTHORITY, THE USUAL RESTRICTIONS ON APPOINTMENT IN THE FEDERAL SERVICE ARE NOT APPLICABLE AND AN AGREEMENT BETWEEN SUCH AN INDIVIDUAL AND AN AGENCY IS CONSIDERED AS CREATING AN EMPLOYMENT RELATIONSHIP BASED PRIMARILY UPON THE EXISTENCE OF DETAILED SUPERVISION.

THE CONTINUING EFFICACY OF THE ABOVE TEST OF AN EMPLOYER-EMPLOYEE RELATIONSHIP AS IT WAS DISCUSSED IN THE OPINION OF THE GENERAL COUNSEL, UNITED STATES CIVIL SERVICE COMMISSION, ON LEGALITY OF SELECTED CONTRACTS, GODDARD SPACE FLIGHT CENTER (PELLERZI OPINION) HAS BEEN RECENTLY AFFIRMED BY THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA IN LODGE 1858, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES ET AL. V. ADMINISTRATOR, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, CIVIL ACTION NUMBER 3261- 67, DECIDED NOVEMBER 30, 1973.

IN AN OPINION SUPPLEMENTAL TO THE PELLERZI OPINION - GENERALLY REFERRED TO AS THE MONDELLO OPINION - THE SIGNIFICANCE OF THE PRESENCE OF GOVERNMENT SUPERVISION OF CONTRACTOR OR CONTRACTOR EMPLOYEES IS DISCUSSED AS FOLLOWS:

THE MOST SIGNIFICANT OF THESE CRITERIA, IN PROVIDING GUIDANCE TO THE AGENCIES, IS THAT OF SUPERVISION OF A CONTRACTOR EMPLOYEE BY A FEDERAL OFFICER OR EMPLOYEE. VIEWED IN THE CONTEXT OF SUPPORT SERVICE CONTRACTS, THIS CRITERION WOULD BE MET WHEN THE OPERATIONS UNDER A CONTRACT ARE SUCH THAT AN INDIVIDUAL EMPLOYEE OF A CONTRACTOR IS ACTUALLY SUPERVISED BY A GOVERNMENT EMPLOYEE WHILE PERFORMING HIS DUTIES.

FOR THE PURPOSE OF SATISFYING THE "SUPERVISION" TEST OF THE STATUTE, IT MUST BE SHOWN THAT THERE IS SUCH CLOSE AND CONTINUOUS GOVERNMENT CONTROL OVER THE WORK PERFORMED BY THE INDIVIDUAL CONTRACTOR EMPLOYEES THAT THE CONTRACTOR DOES NOT HAVE THE INDEPENDENCE OF ACTION, NOR THE INITIATIVE OR DECISION-MAKING AUTHORITY, NORMALLY ASSOCIATED WITH PERFORMANCE BY CONTRACT. THE ESSENCE OF THIS TEST IS THAT THE GOVERNMENT EMPLOYEE, ON A CLOSE AND CONTINUOUS BASIS, NOT ONLY CONTROLS WHAT THE INDIVIDUAL CONTRACTOR EMPLOYEE DOES, BUT HOW HE DOES IT, TO SUCH AN EXTENT THAT THIS CONTROL NULLIFIES THE INDEPENDENCE OF PERFORMANCE OF THE CONTRACTOR THAT IS ESSENTIAL WHEN THE GOVERNMENT CONTRACTS FOR SERVICES.

CLAUSE I OF THE PROPOSED CONTRACT, ENTITLED "STATEMENT OF WORK," CALLS FOR MR. LOUTSCH TO CONDUCT A STUDY OF LABOR MANAGEMENT ACTIVITY AND PROCESSES IN THE OFFICE OF ECONOMIC OPPORTUNITY, CONSIDERING DATA HE IS TO COLLECT FROM OUTSTANDING GRIEVANCES, ARBITRATION PROCEEDINGS, APPEALS OF ARBITRATION AWARDS AND DECISIONS OF THE ASSISTANT SECRETARY OF LABOR, AS WELL AS RECORDS, METHODS, POLICIES AGREEMENTS AND APPROACHES USED IN THE LABOR MANAGEMENT PROGRAM. AS A PRODUCT THE STATEMENT OF WORK CALLS FOR TWO INTERIM AND ONE FINAL REPORT CONTAINING RECOMMENDATIONS REGARDING PROCESSING OF GRIEVANCES, CONDUCT OF ARBITRATION, HANDLING OF APPEALS, RECORD KEEPING ACTIVITIES, AS WELL AS RECOMMENDATIONS FOR IMPROVEMENT OF THE LABOR MANAGEMENT PROGRAM.

CONSIDERED ALONE, THE "STATEMENT OF WORK" DOES NOT SUGGEST THAT THE CONTRACTOR IS EXPECTED TO PERFORM UNDER CLOSE GOVERNMENT SUPERVISION AND THE STUDY CALLED FOR IS OF A NATURE THAT, IN OUR OPINION, IT COULD BE CONDUCTED ON AN INDEPENDENT CONTRACTOR BASIS. HOWEVER, AS POINTED OUT IN THE MONDELLO OPINION, SUPRA, "ANY EVALUATION OF A SUPPORT SERVICE CONTRACT MUST BE BASED ON A REALISTIC VIEW OF THE PROVISIONS OF THE ENTIRE CONTRACT AS WELL AS THE MANNER IN WHICH IT IS TO BE PERFORMED AND ADMINISTERED."

CLAUSE XI OF THE CONTRACT, ENTITLED "OEO PROJECT MANAGER" PROVIDES:

THE TECHNICAL PERFORMANCE OF THIS CONTRACT SHALL BE UNDER THE MONITORSHIP OF THE OEO PROJECT MANAGER WHO SHALL BE A REPRESENTATIVE OF THE CONTRACTING OFFICER FOR THE SOLE PURPOSE OF MONITORING THE TECHNICAL PERFORMANCE OF THIS CONTRACT. IT IS UNDERSTOOD AND AGREED THAT THE WORK TO BE PERFORMED UNDER THIS CONTRACT IS SET FORTH IN CLAUSE I. "STATEMENT OF WORK" IN GENERAL TERMS ONLY AND THAT PROPER PERFORMANCE OF THIS CONTRACT WILL REQUIRE CLOSE COORDINATION BETWEEN THE CONTRACTOR AND THE OEO PROJECT MANAGER. IT IS FURTHER UNDERSTOOD AND AGREED THAT THE OEO PROJECT MANAGER'S GUIDANCE IN THE PERFORMANCE OF THIS CONTRACT SHALL BE FOLLOWED BY THE CONTRACTOR PROVIDED THAT NO CHANGE IN THE TERMS AND CONDITIONS OF THIS CONTRACT SHALL BE EFFECTED EXCEPT BY MODIFICATION DULY EXECUTED BY THE CONTRACTOR AND THE CONTRACTING OFFICER. ***.

THE ABOVE LANGUAGE CASTS SUBSTANTIAL DOUBT UPON THE EXTENT OF INDEPENDENCE TO BE ENJOYED BY THE CONTRACTOR IN THE PERFORMANCE OF THE CONTRACT WORK. IT CALLS NOT ONLY FOR CLOSE COORDINATION BETWEEN THE CONTRACTOR AND THE PROJECT MANAGER BUT REQUIRES THE CONTRACTOR TO FOLLOW THE GUIDANCE GIVEN BY THE PROJECT MANAGER IN THE PERFORMANCE OF THE CONTRACT WORK. IF THE GUIDANCE TO BE GIVEN BY THE PROJECT MANAGER RELATES ONLY TO IDENTIFYING WITH GREATER SPECIFICITY THE WORK TO BE PERFORMED UNDER THE CONTRACT, A CONCLUSION THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP WOULD EXIST WOULD NOT BE REQUIRED. ON THE OTHER HAND, IF THE GUIDANCE CONTEMPLATES INSTRUCTING THE CONTRACTOR IN THE RESULTS TO BE ACCOMPLISHED OR IN THE DETAILS AND MANNER OF ACCOMPLISHING THE CONTRACT WORK, THE LEGAL RELATIONSHIP BETWEEN THE AGENCY AND THE CONTRACTOR THAT WOULD BE CREATED WOULD BE THAT OF EMPLOYER-EMPLOYEE.

IT IS NOTED, FURTHER, THAT DOCUMENTATION ANNEXED TO THE PROCUREMENT REQUEST, SUBMITTED IN CONNECTION WITH THE PROPOSED CONTRACT, INCLUDES A STATEMENT OF WORK SIGNIFICANTLY BROADER THAN THAT CONTAINED IN THE CONTRACT. THAT STATEMENT IS AS FOLLOWS:

THE PURPOSE OF THE CONTRACT WILL BE FOR AN INDUSTRIAL RELATIONS SPECIALIST TO PERFORM FOR A PERIOD OF 90 DAYS AN INDEPENDENT INVESTIGATION OF GRIEVANCES FOR WHICH ARBITRATORS HAVE CURRENTLY BEEN DESIGNATED.

THE SPECIALIST IS AUTHORIZED TO HOLD INDEPENDENT FACT FINDING DISCUSSIONS, TO DEAL DIRECTLY WITH THE GRIEVANT OR HIS APPOINTED REPRESENTATIVE TO ASCERTAIN WHAT MIGHT BE AN AMICABLE RESOLUTION OF THE GRIEVANCE. IF NECESSARY, THE SPECIALIST WILL WORK ON ARBITRATIONS, OR APPEAR AS A WITNESS ON BEHALF OF OEO AS A RESULT OF THESE GRIEVANCES. THE SPECIALIST WILL MAKE RECOMMENDATIONS TO THE DIRECTOR OF PERSONNEL WITH REGARD TO GRIEVANCE RESOLUTION OR CONDUCT OF ARBITRATIONS, OR APPEALS OF AWARDS OR DECISIONS. SPECIALISTS WILL MEET AND CONSULT WITH THE OFFICE OF THE GENERAL COUNSEL.

THE SPECIALIST WILL PREPARE A MONTHLY STATUS REPORT AND A FINAL REPORT TO THE DIRECTOR OF PERSONNEL.

WE UNDERSTAND THROUGH INFORMAL CONTACTS WITH YOUR OFFICE THAT IT IS CONTEMPLATED THAT MR. LOUTSCH WILL PERFORM THE SERVICES DESCRIBED IN THE SECOND PARAGRAPH OF THE QUOTED STATEMENT EVEN THOUGH THOSE SERVICES ARE NOT EXPRESSLY COVERED BY THE TERMS OF THE PROPOSED CONTRACT AND NOTWITHSTANDING THAT THOSE SERVICES MIGHT BE FOUND TO BE BEYOND THE SCOPE OF WORK CONTAINED THEREIN.

UNDER THE CIRCUMSTANCES THE CONTRACT TERMS MUST BE CONSTRUED IN THE LIGHT OF THE WHOLE ARRANGEMENT EXISTING BETWEEN THE PARTIES AND NOT ONLY FROM THE WORDING OF THE CONTRACT ITSELF. FROM AN ANALYSIS OF THE WHOLE ARRANGEMENT - THE SPECIFIC CONTRACT LANGUAGE, THE STATEMENT OF WORK CONTAINED IN THE DOCUMENTATION ANNEXED TO THE PROCUREMENT REQUEST AND THE REPRESENTATIONS CONCERNING THE SCOPE OF THE CONTRACT WORK OBTAINED INFORMALLY FROM REPRESENTATIVES OF YOUR OFFICE - IT IS CLEAR THAT MR. LOUTSCH'S SERVICES ARE DESIRED, IN PART AT LEAST, AS A REPRESENTATIVE OF OEO IN CONNECTION WITH LABOR-MANAGEMENT GRIEVANCE AND ARBITRATION PROCEEDINGS. THE NATURE OF THE CONDUCT OF SUCH PROCEEDINGS IS SO COMPLEX AND REQUIRES SUCH A CLOSE WORKING RELATIONSHIP AMONG EMPLOYEES WITHIN THE AGENCY THAT WE SERIOUSLY DOUBT THAT MR. LOUTSCH WOULD FUNCTION EFFECTIVELY IN THAT CAPACITY WITHOUT ACTING AS A GOVERNMENT EMPLOYEE. ACCORDINGLY WE REGARD THE TASKS TO BE PERFORMED BY MR. LOUTSCH AS MANAGEMENT REPRESENTATIVE IN LABOR-MANAGEMENT PROCEEDINGS AS CONTEMPLATED BY THE STATEMENT OF THE SCOPE OF WORK TO BE PERFORMED AS BEING INCOMPATIBLE WITH AN INDEPENDENT CONTRACTOR RELATIONSHIP.

WHEN CONSTRUING THE SPECIFIC CONTRACT LANGUAGE IN THE LIGHT OF THE ENTIRE ARRANGEMENT CONTEMPLATED BY THE PARTIES THE CONCLUSION IS REQUIRED THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP WOULD, IN FACT, BE CREATED AND SHOULD MR. LOUTSCH ACCEPT EMPLOYMENT UNDER SUCH ARRANGEMENT HIS PAY FROM SUCH EMPLOYMENT WOULD HAVE TO BE REDUCED BY THE AMOUNT OF HIS CIVIL SERVICE ANNUITY.