U.S. Merit Systems Protection Board 
Case Report for October 23, 2015

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Note:  These summaries are descriptions prepared by individual MSPB employees. They do not represent official summaries approved by the Board itself, and are not intended to provide legal counsel or to be cited as legal authority.  Instead, they are provided only to inform and help the public locate Board precedents.

COURT DECISIONS

Petitioners:  National Federation of Federal Employees, Locals 1442 and 2109
Respondents:  Department of the Army and Watervliet Arsenal
Tribunal:  U.S. Court of Appeals for the Federal Circuit
Docket Numbers:  2014-3175 and 2014-3189
Issuance Date:  October 20, 2015

Furloughs of 30 Days or Less
 - Respondent "Agency"
 - Efficiency of the Service
 - Working Capital Fund Entities

These related cases were appeals from arbitrators' decisions denying grievances filed by two locals of the National Federation of Federal Employees (NFFE), which challenged furloughs imposed on bargaining unit employees at Letterkenny Army Depot (LEAD) in Pennsylvania and Watervliet Arsenal (WVA) in New York.  Both LEAD and WVA report to the Army Materiel Command, and both are Army Working Capital Fund (WCF) entities.  WCFs are created and controlled by the Office of the Secretary of Defense.  The primary customers of WCF entities are DOD entities that transfer their own congressionally-appropriated funds to make "purchases" from WCFs.  Appropriated funds flow from from a DOD customer to a WCF entity as work is performed by the WCF entity.  Obligated funds can be de-obligated by a customer, even in the middle of a WCF entity's performance of ordered work.  

The sequestration of federal funds in Fiscal Year 2013 formed the backdrop for these appeals. DOD's yearly budget was cut by $37 billion on March 1, 2013, roughly halfway through Fiscal Year 2013.  The Secretary of Defense issued a memorandum on May 14, 2013 directing DOD managers to furlough most of the Department's civilian employees, providing that "[f]urloughs will be imposed in every military department as well as almost every agency and in our working capital funds."  An Under Secretary of Defense stated that "working capital fund personnel savings provide [DOD] the flexibility to adjust maintenance funding downward to meet higher-priority needs."  Both LEAD and WVA officials furloughed bargaining unit employees for periods of less than 30 days.  NFFE filed grievances for both sets of employees, arguing in both proceedings that, as self-supporting WCF entities, their units were not faced with a funding shortfall and that the furloughs did not promote the efficiency of the service.  NFFE contended that LEAD and WVA were the appropriate agencies for considering the validity of the furloughs, not DOD.  Both arbitrators ruled that DOD was the appropriate entity for considering the validity of the furloughs, and that the furloughs promoted the efficiency of the service.  

Holdings: The court affirmed both arbitration decisions, finding that the furloughs promoted the efficiency of the service:

1. The arbitrators correctly analyzed the efficiency of the service issue by focusing on DOD as a whole rather than on the local WCF entity (LEAD OR WVA).  

a. Section 7513(a) provides that "an agency may take an action covered by this subchapter," and a furlough of 30 days or less is a covered action.  

b. The term "agency" is not defined in Chapter 75 of Title 5.  Chapter I of Title 5 divides "Agencies Generally" into five different groups.  The first, section 101 is Executive departments, and the Department of Defense is an Executive department.  Section 105 provides that, for purposes of Title 5, "Executive agency means an Executive department."  In contrast, Title 5 nowhere defines "agency" as specifically including WCF entities or any other agency subdivision or local employing office.  

c. The court was not persuaded by NFFE's argument that, because adverse actions such as removals and suspensions are taken at the local level, it follows that the determination of the validity of furloughs at a particular location arising from an agency-wide sequestration must be assessed from the standpoint of the local level. Such a view ignores the fact that the pertinent facts in a removal or suspension are purely local, while the furloughs involved in this case were the result of financial restraints imposed on the entire agency.  

d. The court found instructive the Board's decision in Yee v. Department of the Navy, 121 M.S.P.R. 686 (2014), in which the Board judged the validity of furlough in the Navy based on the efficiency of the service "more generally," noting that the Secretary of the Navy operates under the authority, direction, and control of the Secretary of Defense, concluding that, although the appellants asserted that the Navy had adequate funding to avoid the furloughs, it was reasonable for DOD to consider its budget situation holistically, rather than isolating each individual military department's situation.

e. In view of the fact that WCF entities are created and controlled by the Office of the Secretary of Defense, logic and common sense compel the conclusion that, when faced with sequestration, "it was reasonable for DOD to consider its budget situation holistically, rather than isolating [LEAD's and WVA's] situation."  

2. Substantial evidence supports the arbitrators' findings that the efficiency of the service standard was met.

a. In the wake of sequestration, in addition to the desire to reduce payroll expenses, it was the potential diversion or de-obligation of funds by DOD customers -- which would result in a reduced scope in work orders or the transfer of funds away from WCFs -- that formed the basis for DOD's decision to furlough employees at LEAD and WVA.  

b. In the period immediately after March 1, 2013, it was reasonable for DOD to determine that savings from furloughing WCF employees would be part of an overall effort to reduce expenditures in the face of decreased funding resulting from budget reductions.  




The U.S. Court of Appeals for the Federal Circuit issued nonprecedential decisions in the following cases:

Scott v. Merit Systems Protection Board, No. 2015-3048 (Oct. 9, 2015) (MSPB No. AT-0831-13-7351-I-1) (affirming the Board's decision, which dismissed Scott's appeal for lack of jurisdiction)

Jackson v. Merit Systems Protection Board, No. 2015-3121 (Oct. 9, 2015) (MSPB No. AT-0831-14-0699-I-1) (affirming the Board's decision, which dismissed Jackson's appeal as withdrawn)

Maye v. Office of Personnel Management, No. 2015-3052 (Oct. 9, 2015) (MSPB No. DC-0845-14-0616-I-1) (affirming the Board's decision, which affirmed OPM's calculation of an annuity overpayment and denial of Maye's request of a waiver of collection of the overpayment)

Dean v. Department of the Air Force, No. 2015-3151 (Oct. 9, 2015) (MSPB No. AT-3330-14-0020-I-1) (affirming the Board's decision, which denied Dean's request for corrective action in this VEOA appeal)

Hansen v. Department of the Army, No. 2015-3119 (Oct. 9, 2015) (MSPB No. PH-0752-14-0008-I-2) (affirming the Board's decision, which affirmed the agency's action terminating Hansen's employment)

Jones v. Department of Veterans Affairs, No. 2015-3123 (Oct. 13, 2015) (MSPB No. DE-3330-14-0364-I-1) (affirming the Board's decision, which denied Jones' requests for corrective action in these VEOA appeals)

Young v. U.S. Postal Service, No. 2015-3095 (Oct. 13, 2015) (MSPB No. AT-0752-09-0177-C-2) (affirming the Board's decision, which found the agency in compliance with a settlement agreement and that the appellant was in breach)

Hyde v. Merit Systems Protection Board, No. 2015-3118 (Oct. 13, 2015) (MSPB No. DA-0845-14-0491-I-1) (affirming the Board's decision, which dismissed Hyde's appeal for lack of jurisdiction)

Luchay v. Merit Systems Protection Board, No. 2015-3010 (Oct. 13, 2015) (MSPB No. PH-3443-13-2901-I-1) (affirming the Board's decision, which dismissed Luchay's appeal of his non-selection for a position with the Department of the Navy)

Baseden v. Merit Systems Protection Board, No. 2015-3069 (Oct. 14, 2015) (MSPB No. DC-3443-14-0468-I-1) (affirming the Board's decision, which dismissed Baseden's appeal for lack of jurisdiction)

Mucha v. Office of Personnel Management, No. 2015-3113 (Oct. 14, 2015) (MSPB No. DE-0831-14-0392-I-1) (affirming the Board's decision, which affirmed OPM’s decision to
dismiss Mucha’s untimely filed request for reconsideration)
    

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