The Homeland Security Department’s proposed merit-based personnel system took a hit last month when a federal appeals court upheld a lower court’s decision that the system would illegally limit the scope of collective bargaining.

Office of Personnel Management director Linda Springer expressed disappointment with the ruling, but noted that it “left intact key provisions of the DHS personnel system which establish a performance-based compensation system.”

Springer is “glad [DHS] and the Defense Department are moving forward with their compensation provisions with nonbargaining-unit employees.” She said OPM “strongly believes that for the federal government to meet its hiring objectives for the 21st century workforce, it is essential to have a compensation system which recognizes and rewards performance.”

The 50-page decision on National Treasury Employees Union vs. Chertoff, written by Judge Harry T. Edwards, senior circuit judge for the U.S. Court of Appeals for the District of Columbia Circuit, characterized DHS’ position on collective bargaining as “utterly unreasonable,” a “flagrant departure” from the meaning of collective bargaining.

The panel upheld the decision by the lower court that DHS’ attempt to reserve the right to cancel negotiated agreements after the fact is “plainly unlawful.” The appeals court also said that the DHS personnel system gives management too much power in making decisions about working conditions.

This is the third time the National Treasury Employees Union has won a decision regarding the collective bargaining rights of DHS employees.

NTEU president Colleen Kelley said the appeals court ruling “should effectively end DHS’ effort to impose these unjust and unnecessary rules that would constrict employees’ workplace rights, deny them fair treatment and further erode their morale.”