[Federal Register Volume 59, Number 205 (Tuesday, October 25, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26359]


[[Page Unknown]]

[Federal Register: October 25, 1994]


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DEPARTMENT OF EDUCATION
 

Arbitration Panel Decision Under the Randolph-Sheppard Act

AGENCY: Department of Education.

ACTION: Notice of Arbitration Panel Decision Under the Randolph-
Sheppard Act.

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SUMMARY: Notice is hereby given that on July 31, 1991, an arbitration 
panel rendered a decision in the matter of Minnesota Department of Jobs 
and Training, State Services for the Blind and Visually Handicapped v. 
Department of Veterans Affairs (Docket No. R-S/87-8). This panel was 
convened by the Secretary of Education pursuant to the Randolph-
Sheppard Act (the Act), 20 U.S.C. 107d-1(b), upon receipt of a 
complaint filed by the Minnesota Department of Jobs and Training, State 
Services for the Blind and Visually Handicapped on January 15, 1987. 
The Randolph-Sheppard Act creates a priority for blind individuals to 
operate vending facilities on Federal property. Under section 107d-
1(b), the State licensing agency (SLA) may file a complaint with the 
Secretary if the SLA determines that an agency managing or controlling 
Federal property fails to comply with the Act or regulations 
implementing the Act. The Secretary then is required to convene an 
arbitration panel to resolve the dispute.

FOR FURTHER INFORMATION CONTACT: A copy of the full text of the 
arbitration panel decision may be obtained from George F. Arsnow, U.S. 
Department of Education, 600 Independence Avenue, S.W., Room 3230, 
Switzer Building, Washington, D.C. 20202-2738. Telephone: (202) 205-
9317. Individuals who use a telecommunications device for the deaf 
(TDD) may call the TDD number at (202) 205-8298.

SUPPLEMENTARY INFORMATION: Pursuant to the Randolph-Sheppard Act, 20 
U.S.C. 107d-2(c), the Secretary publishes a synopsis of arbitration 
panel decisions affecting the administration of vending facilities on 
Federal property.

Background

    The Minnesota Department of Jobs and Training, the SLA, filed an 
arbitration complaint under the Act stating that it had provided 
vending machine services at the St. Cloud Veterans Administration 
Hospital since 1977 pursuant to a contract with the Veterans Canteen 
Service (VCS) under which the SLA paid commissions to VCS. The contract 
expired in June 1986, and the SLA requested from VCS that it be given a 
priority to operate the vending machines under the Act. Subsequently, 
the SLA submitted to the Veterans Administration (now the Department of 
Veterans Affairs (DVA)) a non-competitive bid that did not include the 
payment of commissions to DVA by blind vendors.
    DVA denied the permit application on the grounds that the Act does 
not apply to DVA medical and domiciliary facilities served by the VCS, 
and, therefore, all potential contractors, including the SLA, had to 
comply with the DVA's competitive bidding procedures. On June 19, 1987, 
the U.S. Department of Education (ED), Rehabilitation Services 
Administration (RSA), convened an arbitration panel to hear this 
dispute. In conjunction with the filing of the arbitration complaint 
against DVA/VCS, the SLA obtained a Federal court injunction. On July 
2, 1987, the court enjoined VCS from awarding a vending machine 
contract to anyone other than the SLA pending the completion of the 
arbitration panel's decision.
    In an Opinion and Order dated September 2, 1988, the arbitration 
panel convened by the Secretary (1) rejected DVA's claim that medical 
facilities served by VCS were exempt from the priority provisions of 
the Act, finding that the narrow exemption afforded VCS (and the 
military exchanges) from the income-sharing requirements of the statute 
did not incorporate a broader exemption from the priority provisions; 
and (2) found that both the Act and the VCS statute serve important 
public purposes and that the two statutes could be harmonized. The 
panel issued additional findings, conclusions, and orders as follows: 
the priority requirement of the Act is met when prior right or an 
opportunity exists for a licensed blind person to operate a vending 
facility. Normally this is accomplished through a permit application 
and approval process. However, in particular instances negotiated 
arrangements other than the standard permit application and approval 
process might be used that are mutually acceptable to all parties. 
While holding that VCS is not required to approve the SLA's permit 
application for vending machine services at the Medical Center, the 
arbitration panel maintained that VCS could not deny the SLA a priority 
for a licensed blind person to provide these services.
    The panel also held that the 17 percent commission rate on gross 
sales payable by the blind vendor, considering his income, was 
inequitable. Because of insufficient basis or guidelines in the record, 
the panel withheld prescribing any specific commission rate and ordered 
DVA to continue without interruption the existing arrangement under 
which the blind vendor provided vending machine services at the Medical 
Center. However, the panel ruled that commission payments were to be 
suspended until the SLA and the DVA could reach a new agreement or, in 
the absence of an agreement, until the panel issued a final award. The 
panel retained jurisdiction during a mandated six-month negotiation 
period.
    On February 10, 1989, DVA requested the panel to reconsider its 
decision, arguing that arbitration panels have no authority to issue 
binding rules and orders against Federal agencies and that contracting 
decisions made by the VCS Administrator are committed by law to that 
Administrator's sole discretion and are judicially unreviewable.
    On November 30, 1989, the panel issued an Interim Opinion and 
Directive. In this opinion, the panel rejected DVA's challenge to its 
authority to issue orders. The panel concluded that its powers under 
the Act were not limited to mere declaratory findings. The panel 
further ordered the parties to continue negotiations and to report back 
within 45 days if there were any unresolved issues at that time. The 
parties were specifically directed to present to the panel a joint 
submission of issues, if any, that remained unresolved.
    On January 24, 1990, the parties joined in a letter report to the 
panel stating they had not reached a contract or agreement and that 
other issues still remained unresolved.
    On February 12, 1990, the SLA and DVA sent to the panel a joint 
statement listing the unresolved issues. By letter dated June 19, 1990, 
RSA authorized the panel to reconvene and decide the issues jointly 
agreed upon by the parties, with any modifications deemed appropriate 
by the panel.

Arbitration Panel Decision

    After reviewing the evidence and arguments at the original hearings 
in 1988, DVA's Petition for Reconsideration in 1989, and the evidence 
and arguments submitted at the reconvened hearing in 1990, the panel 
issued a final Decision and Order dated July 31, 1991. The panel 
reaffirmed the findings contained in its original Opinion and Order 
that the priority requirement of the Act is met when a prior right or 
an opportunity exists for a licensed blind person to operate a vending 
facility. In view of the longstanding and recognized practice of DVA in 
contracting out vending machine services and receiving commissions 
pursuant to authority granted to the VCS Administrator to enter into 
agreements with outside suppliers for canteen services, the panel found 
that these contract arrangements have carried out the mission of VCS in 
an effective, high-quality, and self-sustaining manner. Accordingly, 
the panel concluded that the SLA, in providing vending service under a 
contract or agreement with VCS, should pay a commission to VCS. Upon 
concluding that a 17 percent commission rate on gross sales generated 
at the St. Cloud Medical Center was in fact fair and equitable, the 
panel ordered the SLA to pay a commission to the VCS of 17 percent 
effective as of the date of the issuance of the Decision and Order. The 
panel found that the SLA need not pay commissions to the VCS from the 
effective date of the panel's order dated September 2, 1988, suspending 
payment of commissions, to the effective date of this current Decision 
and Order. In addition, the panel (1) held that the SLA in providing 
services under contract or agreement with VCS need not pay for costs of 
storage and utilities; (2) concluded that, under the terms of the 
contract to be negotiated and executed between the parties, VCS should 
have no right to install and operate its own vending machines at the 
Veterans Administration Medical Center in St. Cloud; (3) directed the 
parties to proceed to implement by contractual arrangement the elements 
tentatively agreed upon for providing vending services at the St. Cloud 
Medical Center as indicated in the parties' joint progress report on 
July 24, 1990; (4) ordered that the contract be entered into between 
the SLA and VCS for a term of five years subject to renegotiation; (5) 
ordered that disputes that may arise in negotiating the contract 
between the SLA and VCS be resolved in accordance with the procedures 
under the Randolph-Sheppard Act until there is further clarification or 
delineation as to the proper forum for resolving the particular 
dispute; and (6) ordered the parties to enter into an agreement for the 
continued operation of vending machines by a blind person at the 
Medical Center in St. Cloud consistent with the Decision and Order.
    One panel member concurred in part and dissented in part, 
concluding that (1) the VCS may not require the SLA or its assigned 
blind vendor to pay a commission as a condition for the right to 
operate vending machines at the VA Medical Center in St. Cloud; and (2) 
the blind vendor's assignment to a facility under the Act being for an 
indefinite period, the vendor's license to operate the facility may not 
expire except for cause.
    The decision of the arbitration panel was appealed to the United 
States District Court for the District of Minnesota by the State of 
Minnesota, Department of Jobs and Training, State Services for the 
Blind and Visually Handicapped and, subsequently, to the United States 
Court of Appeals for the Eighth Circuit by the Department of Veterans 
Affairs and the Department of Education. On March 11, 1994, the U.S. 
Court of Appeals for the Eighth Circuit upheld the District Court's 
findings that the DVA/VCS is not exempt from the Randolph-Sheppard Act 
and must comply with ED regulations on blind vendors' operation of 
vending facilities. Specifically, the court found that the regulations 
require the issuance of permits for an indefinite period of time and 
prohibit the charging by VCS of commissions on sales from blind 
vendors' operations without the approval of the Secretary of Education. 
The court rejected the VCS contention that the Randolph-Sheppard Act's 
permit system interferes with its mission to provide merchandise to 
hospitalized veterans at reasonable prices and to remain self-
sustaining. Although the Veterans Canteen Act empowers the VCS to 
operate canteens on DVA property, nothing in the Veterans Canteen Act 
authorizes the VCS to exercise this statutory control over Randolph-
Sheppard vendors who also operate on DVA property. Because blind 
vendors operate vending facilities under the Randolph-Sheppard Act and 
ED regulations, the blind vendors' operation is neither a VCS canteen 
nor subject to the Veterans Canteen Act and the VCS regulations.
    The views and opinions expressed by the arbitration panel do not 
necessarily represent the views and opinions of the U.S. Department of 
Education.

    Dated: October 19, 1994.
Judith E. Heumann,
Assistant Secretary for Special Education and Rehabilitative Services.
[FR Doc. 94-26359 Filed 10-24-94; 8:45 am]
BILLING CODE 4001-01-P