H. Stephen Gordon, Gen. Counsel, Nat. Federation of Federal Employees, Alice L. Bodley, Deputy Gen. Counsel, Nat. Federation of Federal Employees, and Anne L. Morgan, Atty., Nat. Federation of Federal Employees, Washington, D.C., were on the brief, for intervenor.

Bruce P. Heppen, Washington, D.C., also entered an appearance, for intervenor.

Before WALD, Chief Judge, MIKVA, Circuit Judge, and HAROLD H. GREENE,* District Judge.

Opinion for the Court filed by District Judge HAROLD H. GREENE.

This case involves a conflict between the authority of a federal agency unilaterally to decree a smoking ban on premises occupied by its employees while at work and its duty to engage in collective bargaining with these employees. The Federal Labor Relations Authority (FLRA) determined that the agency's imposition of the ban without prior collective bargaining constituted an unfair labor practice. The matter is here on a petition for review of that determination.

* The Indian Health Service in Oklahoma City, an agency of the Department of Health and Human Services, Public Health Service, Health Resources and Services Administration, Oklahoma City Area, Oklahoma (hereinafter agency or IHS) decided in January 1985 to establish an areawide ban on smoking, and it later implemented that policy at its five Oklahoma City facilities. Most particularly at issue here, because the FLRA explicitly addressed implementation only there, is the W.W. Hastings Indian Hospital in Oklahoma City.

In the fall of 1985, the Oklahoma Area Indian Health Service Council, National Federation of Federal Employees (Union),1 wrote to the IHS, requesting negotiations on the smoke-free environment policy, preferably on the substance of the policy or, if that were not permissible under applicable law, on its impact and implementation. The parties met, and ultimately the Union presented four proposals as alternatives to the IHS total smoking ban. The first would have expressed a recognition of the rights of visitors and workers to a reasonably smoke-free environment, and it would also have acknowledged the rights of smokers, provided that the exercise of these rights did not cause discomfort or unreasonable annoyance to nonsmokers; the second would have required IHS to designate adequately ventilated smoking areas at each facility; the third would have established a labor-management committee at each facility to consider the implementation of a new tobacco usage policy; and the fourth would have delayed the implementation of any new smoking policy until January 1 of the following year.2 After further discussions, IHS stated that it considered the four proposals to be non-negotiable, and on October 7, 1985 it implemented its own smoke-free policy at the hospital and somewhat later at other facilities under its control. As a result, employees are no longer allowed to smoke anywhere within the particular facility but are required to go outside if they wish to smoke.

On December 16, 1985, the Union filed an unfair labor practice charge against IHS, and the FLRA General Counsel issued a complaint charging the agency with violating 5 U.S.C. Sec. 7116(a)(1), (a)(5), of the Federal Service Labor-Management Relations Statute (Statute). On July 23, 1987, an administrative law judge issued a decision in favor of IHS, but on exceptions filed by the General Counsel, the FLRA reversed, holding that there had been no showing how the Union's proposals interfered with the agency's purpose in establishing the smoking ban. The FLRA acknowledged that smoking could have a deleterious effect, but it further concluded that IHS had not shown that without a total ban it would not be able to achieve its objective of promoting American Indian health. It followed, according to the FLRA, that the Union's proposals regarding the IHS tobacco usage policy were negotiable, and that the agency had committed an unfair labor practice by refusing to negotiate with respect thereto. IHS filed a petition for review with this Court; the FLRA cross-petitioned for enforcement of its order; and the Union moved for and was permitted to intervene.

The Statute requires federal agencies to bargain in good faith with employees' representatives over "conditions of employment" which are broadly defined to include "personnel policies, practices, and matters ... affecting working conditions." 5 U.S.C. Sec. 7103(a)(14). Refusal to bargain over such matters constitutes an unfair labor practice. 5 U.S.C. Sec. 7116(a)(1), (a)(5). Smoking policy proposals plainly involve conditions of employment,3 and they are therefore subject to negotiations between an agency and a labor union representing the employees, unless the particular proposals are in conflict with management rights.

On that issue, the critical provision is section 7106(b)(1) of the Statute. That section exempts from the duty to bargain decisions concerning "the technology, methods, and means of performing work." With respect to decisions concerning these subjects, as we stated in American Federation of Government Employees, AFL-CIO, Local 2441 v. FLRA, 864 F.2d 178, 180 (D.C.Cir.1988) (Local 2441 ), an agency is permitted, but not required, to negotiate with a labor organization.4 Here, as indicated, the IHS elected not to negotiate, and it was entitled to be sustained with respect to that refusal if the Union proposal interfered with the right of management pursuant to section 7106(b)(1) to determine the technology, methods, and means by which work is performed.

The FLRA has consistently employed a two-part test to determine whether a proposal concerning a condition of employment interferes with that management prerogative. In order to sustain such a claim, an employer agency must show, first, "the technological relationship of the proposal to accomplishing or furthering the performance of the agency's work," and second, "how the proposal would interfere with the purpose for which the technology was adopted." American Federation of Government Employees, AFL-CIO, National Council of Social Security Field Office Locals and Department of Health and Human Services, Social Security Administration, 24 F.L.R.A. 842, 846-47 (1986); American Federation of State, County and Municipal Employees, AFL-CIO, Local 2477 and Library of Congress, Washington, D.C., 7 F.L.R.A. 578, 584 (1982),enforced as to other matters sub nom. Library of Congress v. F.L.R.A., 699 F.2d 1280 (D.C.Cir.1983). In other decisions, when the FLRA was presented with the question whether a proposal interfered specifically with the methods and means, rather than the technology,5 of performing an agency's work, it has required the employer agency to show (1) a direct and integral relationship between the particular method or means the agency chose for its use and that agency's mission,6 and (2) a direct interference by the proposal with the mission-related purpose for which the agency established such methods or means. See generally, Local 2441, 864 F.2d at 180-182 (describing FLRA's two-prong test); see also, National Treasury Employees Union and U.S. Customs Service, Region VIII, 2 F.L.R.A. 255, 260-61 (1979).

Essentially, these tests require the agency to demonstrate that its choice of policy or practice is related to its mission, and that the proposal at issue would interfere with that purpose. Under any formulation, therefore, the first part of the test focuses on the agency--what it is doing and is attempting to accomplish--and the second part examines the union proposal--whether and how that proposal would interfere with the agency's basic objectives. Thus, we have previously explained that

More disruptive adjustments to agency policy have been held to be outside the agency's duty to bargain, on grounds of 'direct interference.' And, not surprisingly, the [FLRA] has held consistently that a union proposal to abolish an agency policy or render it merely voluntary would constitute direct interference and thus falls outside the duty to bargain.

Local 2441, 864 F.2d at 182 (citations omitted).

In its decision in the instant case, the FLRA did not find that the agency failed the first part of the test; it did not even address that issue. In any event, it could hardly be contended that the no-smoking rule is not directly and integrally related to the agency's purpose. The IHS is concerned with the advancement of the health care of American Indians, and the Indian Health Care Improvement Act, 25 U.S.C. Sec. 1601 et seq., explicitly charges the agency with advancing the health of American Indians.7 In the execution of these objectives, the IHS administers a national program for improving the health of approximately 950,000 Indians. JA 2. And smoking is clearly inimical to health. See notes 10 and 11 infra. There can thus be no question but that the IHS passes the first part of the test for compliance with the Federal Service Labor-Management Relations Statute, and the FLRA does not seriously argue to the contrary in this Court.

The key issue, then, is whether the Union's proposals would interfere with the advancement by IHS of the health status of American Indians, and, more particularly in light of the substance of those proposals, whether they would interfere with the legitimate IHS objectives regarding smoking on the hospital premises.8III

On that issue, it is appropriate first to recall the standard by which the Court reviews FLRA decisions. As is true of the review of other types of agency action, decisions of the FLRA may be set aside only if arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C. Secs. 7123(c) and 706(2)(A); NTEU v. FLRA, 826 F.2d 114, 121 (D.C.Cir.1987); EEOC v. FLRA, 744 F.2d 842, 847 (D.C.Cir.1984), cert. dismissed, 476 U.S. 19, 106 S. Ct. 1678, 90 L. Ed. 2d 19 (1986). Moreover, the Court must apply the usual Chevron standard with respect to the FLRA's construction of its enabling act, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844, 104 S. Ct. 2778, 2782, 81 L. Ed. 2d 694 (1984),9 that is, "considerable weight should be accorded to an [agency's] construction of a statutory scheme it is entrusted to administer," and the Court "may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency." Finally, if the FLRA's construction is "reasonably defensible" and if its findings of fact are supported by substantial evidence, its decision must be upheld. Local 2441, 864 F.2d at 184; American Federation of Government Employees, Local 3748 v. FLRA, 797 F.2d 612, 615 (8th Cir.1986); see also, NLRB, Local 6 v. FLRA, 842 F.2d 483, 486 (D.C.Cir.1988), Department of Defense v. FLRA, 659 F.2d 1140, 1153 n. 74 (D.C.Cir.1981), cert. denied, 455 U.S. 945, 102 S. Ct. 1443, 71 L. Ed. 2d 658 (1982). These rules applicable to the review of government action are not altered merely because one of the parties to the dispute is also a governmental agency; none of the precedents suggests otherwise, and the IHS does not claim a special exemption.

We now examine the application of the general legal principles governing the FLRA's responsibilities to the particular factual situation involved in this case.

As indicated above, the IHS operates, among other things, a hospital for American Indians, and it is clear that, in the exercise of its responsibility for operating the hospital, as for its other functions, it has a mandate from the Congress to advance the health of American Indians. It may also be taken for granted, and the FLRA does not dispute, that the smoking of tobacco is detrimental not only to the person who smokes,10 but also to those who are exposed to passive or secondary smoke.11 Finally, it is true that, as the agency asserts, it was "completely sensible for IHS as a means of advancing its health care mission ... to seek entirely to eliminate a health hazard to patients within its own health care facilities." Brief for Petitioner at 25.12

Where the IHS errs is in its contention that, inasmuch as the FLRA required bargaining regarding the Union's several proposals, it must have concluded that such bargaining is required "unless the smoking ban was the sole means for accomplishing the health improvement objective." Id. (emphasis in original). That line of reasoning misconceives the rationale for the FLRA decision. The Authority did not hold that bargaining is required unless the means chosen by an agency are the only ones suited for accomplishment of that agency's purpose, but that bargaining is required if the alternative proposed by the labor union does not improperly interfere with that purpose.13 As explained above, that is an entirely appropriate standard that comports in every respect with the statute and the precedents.

The question here, then, is whether the Union's proposals--in particular its proposal for the establishment of well-ventilated rooms where employees may smoke during breaks in their work schedules--interfere with the purpose underlying the smoking restrictions, that is, the furthering of the health of the Indian people.

In confronting that question, the IHS argues that, when the FLRA determined that the Union's proposals would not directly interfere with the agency's mission, it was acting contrary to its prior application of the direct interference standard and of court decisions sustaining that application.14 In support of its contention, IHS relies on our recent decision upholding a FLRA determination that a labor union's proposal to eliminate a Bureau of Prisons dress code requirement directly interfered with that Bureau's purpose, Local 2441, 864 F.2d at 187, and on the decisions of four other courts of appeals upholding FLRA determinations that National Guard decisions to require military uniforms constituted non-negotiable "methods and means" of performing work, New York Council, Ass'n. of Civilian Technicians v. FLRA, 757 F.2d 502, 509-10 (2d Cir.), cert. denied, 474 U.S. 846, 106 S. Ct. 137, 88 L. Ed. 2d 113 (1985); AFGE, Local 3013, AFL-CIO v. F.L.R.A., 762 F.2d 183, 184 (1st Cir.1985); NAGE, Locals R5-91, R5-107, R5-120 v. F.L.R.A., 771 F.2d 1449, 1452-53 (11th Cir.1985); AFGE, Local 2986, AFL-CIO v. FLRA, 775 F.2d 1022, 1026 (9th Cir.1985).15

However, these precedents do not support the agency's position here. What they and other precedents in the uniform or dress code area and elsewhere demonstrate is that, if a labor union proposal would completely eliminate, vitiate, or make optional an agency's requirements, it is not subject to bargaining.16 By contrast, proposals which do not interfere with the agency's purpose are not beyond the scope of collective bargaining even if they differ in details from the methods and means adopted by that agency.17

In the latter category are such matters as a union proposal providing for grooming standards which vary from those adopted by the Immigration and Naturalization Service for the purpose of ready identification of its personnel,18 and a proposal to permit firefighters to wear teeshirts and ballcaps with agency insignia instead of the full firefighters' uniform.19 Particularly instructive in this regard is American Federation of Government Employees, Local 217 and Veterans Administration Medical Center, Augusta, Georgia, 21 F.L.R.A. 62, 67 (1986). In that case, the FLRA concluded that, since the requirement of the wearing of a uniform facilitated the accomplishment of the agency's mission because it allowed for ready identification of agency employees, a union proposal which would have made the wearing of the uniform optional was not negotiable. However, in the same case a proposal which only sought to ensure that the uniforms would be suitable for the climatic conditions under which the employees must work was held to be negotiable since it did not interfere with the identification function.

One conclusion to be drawn from these and similar precedents is that the distinction, with respect to the statute, between those union proposals which do and those which do not interfere with the purpose for which an agency's technology, methods, and means were adopted, is not always simple or self-evident but may be complex and involve both expertise and judgment. The decision may depend, inter alia, upon the degree of departure from agency policy implicit in a particular union proposal, the type of agency involved, and the agency's specific needs and requirements. Thus, as we have seen, a uniform requirement adopted by the National Guard or a dress code prescribed by the Bureau of Prisons may be regarded as integral to the mission of these agencies in every respect, while a dress code applicable to the INS, a fire department, or a Veterans Administration hospital may be subject to collective bargaining with respect to details. Because of the need for expertise and judgment, the drawing of the lines between negotiable and non-negotiable union proposals is ultimately within the jurisdiction of the FLRA, which has been vested by Congress with administration of the Statute, whose decision must be sustained absent arbitrary action.

In this case, the FLRA found that there was "nothing in the record which indicates that the proposals would interfere with the Agency's objective." JA 27. That conclusion can hardly be characterized as arbitrary or capricious.

One of the Union proposals, as noted above, calls for the establishment of well-ventilated rooms to be used by employees for smoking during scheduled breaks. The number, size, and location of these rooms and the length and frequency of the breaks would be left to local negotiation.20 Moreover, the designated areas would be for employees only, so that patients and visitors could not observe smoking by the employees.21

The Union proposal22 met both of the objectives sought to be achieved by the IHS: it would remove the employees who smoke from areas where other employees and patients could be harmed by exposure to passive or secondary smoke, and by removing smokers from their sight it would not interfere with the agency's purpose to set a good example for the Indian patients and their visitors. Indeed, in one respect, the establishment of designated smoking areas within the facility could actually be regarded as preferable to the IHS' own plan, in terms of the agency's announced objectives. As the record shows, JA 97-98, 186-87, when employees are required to step outside of either the facility's main entrance or its emergency entrance in order to smoke--as they must do now--both patients and visitors can see them smoke, and the educational value of the no-smoking policy is to that extent undermined.23 At the very least, however, the Union's proposals could not simply be labeled non-negotiable on the theory that, if implemented, they would directly and improperly interfere with the agency's mission and purpose.

For these reasons, we find that the exercise of authority by the Federal Labor Relations Authority in this case was neither arbitrary nor capricious but entirely reasonable. Accordingly, the petition for review is denied, and the Authority's cross-application for enforcement is granted.

So ordered.