American Postal Workers Union, AFL-CIO v. U.S. Postal Service, AFL-CI

• Decision Date: 06 May 1983
• Docket Number: No. 81-2174,A,AFL-CI,81-2174
• Citation: 707 F.2d 548,227 U.S. App. D.C. 351
• Parties: AMERICAN POSTAL WORKERS UNION,ppellants, Wilma M. Carter, et al. v. UNITED STATES POSTAL SERVICE, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 548

707 F.2d 548

227 U.S.App.D.C. 351

AMERICAN POSTAL WORKERS UNION, AFL-CIO, Appellants, Wilma M. Carter, et al. v. UNITED STATES POSTAL SERVICE, et al.

No. 81-2174.

United States Court of Appeals, District of Columbia Circuit.

Argued Oct. 1, 1982.

Decided May 6, 1983.

Darryl J. Anderson, with whom Anton G. Hajjar, Washington, D.C., was on the brief, for appellants. Thomas F. Bianco, Rockville, Md., also entered an appearance for appellants.

Rebecca L. Ross, Asst. U.S. Atty., with whom Stanley S. Harris, U.S. Atty., and Royce C. Lamberth and R. Craig Lawrence, Asst. U.S. Attys., Washington, D.C., were on the brief, for appellees. Kenneth M. Raisler, Asst. U.S. Atty., Washington, D.C., also entered an appearance for appellees.

Before TAMM and SCALIA, Circuit Judges, and OLIVER GASCH, ^* U.S. Senior District Judge for the District of Columbia.

Opinion for the court filed by Circuit Judge TAMM.

TAMM, Circuit Judge:

In late 1978 the American Postal Workers Union (APWU) learned that the Office of Personnel Management (OPM), at the behest of the United States Postal Service (USPS), had changed the method by which it calculates the civil service retirement benefits of certain postal workers retiring after February 11, 1978. This change substantially reduced the expected annuities of some 113,000 future retirees. APWU and several individual union members affected by the change filed suit against OPM ¹ and USPS in the United States District Court for the District of Columbia, alleging that the defendants' actions violated the due process clause of the fifth amendment to the United States Constitution, the Postal Reorganization Act, the Civil Service Retirement Act, and the Administrative Procedure Act. Judge John Garrett Penn granted the defendants' motion for summary judgment, and plaintiffs appealed to this court. Because we agree that there were no disputed issues of material fact and that appellees were entitled to judgment as a matter of law, we affirm.

I. BACKGROUND

A. Origin of the Method of Computation

The past truly is prologue to this controversy. In 1920 Congress passed the first civil service retirement act, which provided that any eligible employee in the classified civil service could receive an annuity based upon his or her years of federal service and average annual salary. Act of May 22, 1920, ch. 195, 41 Stat. 614. To help finance the retirement system, the Act authorized the withholding of a percentage of each covered employee's "basic salary, pay, or compensation" and contribution of the amount withheld to the civil service retirement and disability fund. Id. Sec. 8, 41 Stat. at 618. The Commissioner of Pensions, under the direction of the Secretary of the Interior, was charged with administration of the statute. Id. Sec. 4, 41 Stat. at 616.

When the federal retirement system was instituted, postal workers were employed by a department of the United States Government, the United States Post Office Department, Act of June 8, 1872, ch. 335, Secs. 1-2, 17 Stat. 283, 283-84, and were members of the classified civil service, Act of Jan. 16, 1883, ch. 27, Sec. 6, 22 Stat. 403, 406. Like other federal civil servants, they were eligible for retirement benefits. Indeed, postal employees were instrumental in securing passage of the 1920 act. 59 Cong.Rec. 6287 (1920) (remarks of Rep. Nelson). Computation of a regular full-time postal worker's annuity posed no problem; like that of any other federal worker, a postal worker's annuity depended on two components: the worker's years of federal service and the average of the employee's annual pay over a statutorily prescribed number of years. ² Not all postal workers, however, were regular full-time employees. Because processing and delivering mail had to be done on a daily basis, a full complement of postal workers was required at all times, and the Post Office employed "substitutes" to do the work of absent employees. See generally Act of Mar. 3, 1905, ch. 1480, 33 Stat. 1082, 1085-86; Act of June 27, 1884, ch. 126, 23 Stat. 60; Act of Aug. 2, 1882, ch. 373, Sec. 2, 22 Stat. 185, 185-86.

Postal substitutes were unique in that the time they actually worked was far less than the time during which they had to be available for work. Obviously, the Post Office could not efficiently hire a new worker each time a regular employee was absent on short notice. Thus, the Post Office maintained a pool of acceptable substitute employees, who actually worked only when needed to replace absent regular employees. Congress demonstrated its awareness of this unique feature of postal substitute employment by providing in the 1920 retirement act that in giving a substitute credit for service, the Secretary of the Interior could include only the amount of time actually worked. Act of May 22, 1920, ch. 195, Sec. 3, 41 Stat. 614, 616.

In 1926 a joint committee of Congress heard testimony about the predicament of postal substitutes. They were paid a small hourly wage only when they actually worked, which was infrequent and unpredictable. A substitute's income, therefore, was generally not enough to provide a decent living, yet substitutes were unable to secure any additional employment because they had to be available for postal work at all times. It was suggested that substitutes be recompensed for these onerous employment conditions. The Civil Service Retirement Act: Joint Hearings Before the Senate and House Committees on Civil Service, 69th Cong., 1st Sess. 63, 66, 68 (1926) (testimony of M.T. Finnan, Secretary, National Association of Letter Carriers). The bill reported by the committee and passed by Congress amended the retirement law to require that a substitute's credited service include the entire period of employment as a substitute, regardless of the actual time worked. Act of July 3, 1926, ch. 801, Sec. 5, 44 Stat. 904, 907. Thus, by 1926 it was established that for the purpose of annuity computation, postal substitutes would receive service credit for time during which they had not actually worked.

In 1928 a decision of the Comptroller General laid the foundation for substitutes to receive salary credit for pay that they had not actually earned. In that case a federal employee who held two positions, one with the Veteran's Administration and one as a postal substitute, was alleged to have violated a statute establishing a maximum annual federal salary. See Act of Aug. 29, 1916, ch. 417, 39 Stat. 556, 582. The Comptroller General ruled that for the purpose of determining whether a postal substitute had earned more than the statutory maximum annual salary, the substitute's salary "per annum" was not the pay actually earned but rather the worker's annual salary rate, calculated by multiplying the substitute's hourly wage by the number of possible work hours in a year. Compensation--Double, 8 Comp.Gen. 261, 263 (1928). On the basis of this ruling, the Secretary of the Interior likewise began computing substitutes' annuities on the basis of the employee's average annual salary rate rather than the pay actually earned. See Brief for Appellees at 5. Because the retirement system was partially financed by money withheld from employees' actual pay, the effect of using this hypothetical full-time salary in the computation formula was that substitutes' benefits were disproportionate to the substitutes' contributions to the retirement fund.

In the 1956 civil service retirement act, Congress reaffirmed its approval of giving substitutes service credit for the entire period of their employment, regardless of the time actually worked. Civil Service Retirement Act Amendments of 1956, ch. 804, sec. 401, Sec. 3(a), 70 Stat. 736, 743, 745 (codified as amended at 5 U.S.C. Sec. 8332(b)(1) (1976 & Supp. V 1981)). However, Congress never explicitly approved the practice of giving substitutes salary credit on the basis of a hypothetical full-time salary. Thus, substitutes' receipt of annuities based on a hypothetical full-time salary derived solely from administrative practice.

In 1970 Congress passed the Postal Reorganization Act (PRA), Pub.L. No. 91-375, 84 Stat. 719 (1970) (codified at 39 U.S.C. Secs. 101-5605 (1976 & Supp. V 1981)), which created USPS as an independent executive agency, id. sec. 2, Sec. 201. Although the PRA removed postal employees from the competitive civil service, id. Sec. 1001, it expressly provided that postal workers would continue to be covered by the civil service retirement system, id. Sec. 1005(d).

The Civil Service Commission and OPM ³ continued to compute substitutes' annuities using the hypothetical full-time salary until 1978. In January of that year, with no notice to the APWU or to individual postal workers, OPM decided that, effective February 11, 1978, only actual pay would be included in the computation of the substitutes' average annual salary. The change in the annuity computation formula was made after USPS, in a series of communications to OPM in 1977, expressed its view that substitutes were no longer entitled to receive annuities computed using the hypothetical full-time salary. See Brief for Appellants at 12-14 (summarizing USPS's contacts with OPM). Appellants allege that USPS was motivated to seek the change in the annuity computation method by the threat of having to pay some $150 million in unfunded liabilities of the civil service retirement fund. ⁴ See Brief for Appellants at 12. It is appellees' actions in changing the calculation of the annuity formula's second component--the average annual salary--that appellants now challenge.

B. Justification for the Change in the Method of Computation

Although it is clear that the hypothetical full-time salary was originally adopted for use in the annuity computation formula as a result of the Comptroller General's ruling under the double compensation statute, it is not clear how its use was originally rationalized. The parties agree, however, that OPM subsequently justified...