Gingery v. Department of Defense

• Decision Date: 24 December 2008
• Docket Number: No. 2007-3292.,2007-3292.
• Citation: 550 F.3d 1347
• Parties: Stephen W. GINGERY, Petitioner, v. DEPARTMENT OF DEFENSE, Respondent.
• Court: U.S. Court of Appeals — Federal Circuit

550 F.3d 1347

Stephen W. GINGERY, Petitioner, v. DEPARTMENT OF DEFENSE, Respondent.

No. 2007-3292.

United States Court of Appeals, Federal Circuit.

December 24, 2008.

Andrew J. Dhuey of Berkeley, CA argued for petitioner.

Hillary A. Stern, Senior Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for respondent. With her on the brief were Gregory G. Katsas, Assistant Attorney General, Jeanne E. Davidson, Director, and Todd M. Hughes, Deputy Director. Of counsel was Brian T. Edmunds, Trial Attorney. Of counsel on the brief were Kerry B. Mctigue, General Counsel, and Steven Abow, Assistant Counsel, Office of Personnel Management, of Washington, DC.

Elaine D. Kaplan, Senior Deputy General Counsel, National Treasury Employees Union, of Washington, DC, argued for amicus curiae. With her on the brief were Gregory O'Duden, General Counsel, and Timothy B. Hannapel, Assistant Counsel.

Before NEWMAN, PROST, and MOORE, Circuit Judges.

Opinion for the court filed by Circuit Judge MOORE; Concurring opinion filed by Circuit Judge NEWMAN.

MOORE, Circuit Judge.

Petitioner Stephen Gingery appeals a final decision of the Merit Systems Protection Board (MSPB) holding that the Department of Defense (DoD) did not violate his rights under the Veterans Employment Opportunities Act (VEOA) of 1998 when it hired two non-preference eligible individuals under the Federal Career Intern Program (FCIP) and did not hire Mr. Gingery. For the reasons set forth below, we reverse and remand.

BACKGROUND

I

Most federal civil service employees are employed by way of either the "competitive service" or the "excepted service." 5 U.S.C. §§ 2102(a)(1), 2103(a) (2006). Agencies tend to have more flexible hiring for excepted service positions as opposed to competitive service positions. Competitive service hiring often entails an examination administered by the Office of Personnel Management (OPM). See Nat'l Treasury Employees Union v. Horner, 854 F.2d 490, 492 (D.C.Cir.1988). Excepted service hiring, by contrast, does not require an examination and includes "a variety of more flexible and informal procedures—some established by OPM and others developed by individual agencies." Id.; see also 5 C.F.R. pt. 213 (Excepted service). The President possesses the authority to "prescribe rules governing the competitive service," which themselves "shall provide, as nearly as conditions of good administration warrant, for . . . necessary exceptions of positions from the competitive service." 5 U.S.C. § 3302(1) (emphasis added).

President Clinton created the FCIP under an executive order and pursuant to § 3302(1) "in order to provide for the recruitment and selection of exceptional employees for careers in the public sector." Exec. Order No. 13,162, 65 Fed.Reg. 43,211 (July 6, 2000). Section 4(a) of the Executive Order explained that "[a] successful candidate shall be appointed to a position in Schedule B of the excepted service ... unless otherwise approved by the OPM." The President delegated to OPM responsibility for "prescrib[ing] such regulations as it determines necessary to carry out the purpose of this Order." Id. § 6.

Pursuant to the Executive Order, OPM promulgated 5 C.F.R. § 213.3202(o). See 70 Fed.Reg. 44,219 (Aug. 2, 2005); 65 Fed. Reg. 78,077 (Dec. 14, 2000). Subsection (1) of this regulation requires agencies to follow the procedures set forth in 5 C.F.R. pt. 302, Employment in the Excepted Service, when making appointments under the FCIP. Accordingly, agencies may evaluate candidates under a "category rating" system instead of the traditional "numerical rating" system. 5 C.F.R. § 302.401(a). When using a category rating system, "an agency must make its selection from the highest available preference category, as long as at least three candidates remain in that category. When fewer than three candidates remain in the highest category, consideration may be expanded to include the next category." Id.

When an agency chooses to select a candidate from one of these next categories, it must comply with certain passover procedures. For the competitive service, 5 U.S.C. § 3318(b) requires that "[i]f an appointing authority proposes to pass over a preference eligible on a certificate in order to select an individual who is not a preference eligible, such authority shall file written reasons with [OPM] for passing over the preference eligible" and obtain OPM's permission for the passover. 5 U.S.C. § 3318(b)(1). When a preference eligible has a compensable service-connected disability of 30% or more, "the authority shall at the same time it notifies [OPM] under paragraph (1) of this subsection, notify the preference eligible of the proposed passover, of the reasons thereof, and of his right to respond." Id. § 3318(b)(2). Also in the case of such a preference eligible, OPM's functions cannot be delegated. Id. § 3318(b)(4). For the excepted service, on the other hand, OPM enacted a passover regulation, 5 C.F.R. § 302.401(b), that provides less procedural protections:

When an agency, in making an appointment as provided in paragraph (a) of this section, passes over the name of a preference eligible who is entitled to priority consideration under § 302.304 and selects a non-preference eligible, it shall record its reasons for so doing, and shall furnish a copy of those reasons to the preference eligible or his/her representative on request.

II

The parties do not dispute the facts as they pertain to Mr. Gingery's employment. The Defense Contract Audit Agency (DCAA) solicited applications for three auditor positions under the FCIP, though it subsequently withdrew an offer for one of the positions for unrelated reasons. Mr. Gingery, a preference-eligible veteran with service-connected disability rated at 30% or more, applied for these auditor positions. DCAA considered OPM certificates of eligibles and used a category rating system to fill the auditor positions. Mr. Gingery's veterans' preference placed him in Category 1; there were no other applicants in Category 1 or in Categories 2 or 3. There were six candidates in Category 4. Because there were fewer than three candidates in Category 1, DCAA considered the applicants in Category 4 under section 302.401(a), in addition to considering Mr. Gingery. Of the applicants ultimately referred to the selecting official for consideration and interviews, only Mr. Gingery had veterans' preference. Nevertheless, a panel of supervisory auditors did not recommend Mr. Gingery for a second interview. Instead, DCAA hired two auditors under the FCIP. DCAA ultimately selected two non-preference eligibles (i.e., applicants not eligible for preference) from Category 4 and, in accordance with section 302.401(b), recorded its reasons for not selecting Mr. Gingery. The DCAA selecting official did not request OPM permission to pass over Mr. Gingery but rather requested and received permission from a human resources manager. The official also did not notify Mr. Gingery of the proposed passover, of the reasons for the proposed passover, or of his right to respond.

III

Mr. Gingery filed a complaint with the Department of Labor under the VEOA. When that Department failed to resolve his complaint, Mr. Gingery appealed to the MSPB. Mr. Gingery alleged that "DCAA willfully violated his veterans' preference rights under the VEOA when it failed to select him for any of the auditor-trainee positions, failed to request permission from [OPM] to pass him over and failed to notify him of its intent to pass him over in accordance with the procedures set forth under 5 U.S.C. § 3318(b)." In an initial decision, the administrative judge (AJ) explained that § 3318 applies only to the competitive service and that the auditor positions were filled as excepted service positions under the FCIP. The AJ noted that nothing in the record indicated that Mr. Gingery requested the reasons for being passed over and that DCAA therefore complied with 5 C.F.R. § 302.401(b) when it provided a written statement of its reasons for not selecting Mr. Gingery. The AJ concluded that DCAA did not violate Mr. Gingery's veterans' preference rights.

Mr. Gingery petitioned the MSPB for review of the AJ's initial decision on the basis that "[DoD's] hiring under the FCIP constitutes improper circumvention of his preference rights." The MSPB granted review and concluded that the FCIP constituted a valid exception to hiring in the competitive service because the FCIP "was expressly authorized by an Executive order promulgated under 5 U.S.C. § 3302." It further explained that OPM promulgated regulations pursuant to the Executive Order and that DoD complied with those regulations and the corresponding excepted service regulations to which they referred. Thus the MSPB affirmed the AJ's initial decision.

DISCUSSION

Mr. Gingery appeals the MSPB's final decision on two grounds. He argues that OPM's passover regulation (5 C.F.R. § 302.401(b)) is invalid because it is inconsistent with the passover procedures of 5 U.S.C. § 3318(b) when applied to the excepted service via 5 U.S.C. § 3320. Mr. Gingery also argues that "the FCIP is unlawful in its entirety" because it violates § 3302(1)'s requirement that exceptions to the competitive service be "necessary" for "conditions of good administration." DoD responds that 5 C.F.R. § 302.401 is valid and was properly applied by OPM and that Executive Order 13,162 represents the President's unfettered discretion to place civil service positions in the excepted service. Because we conclude that OPM's passover regulation is invalid and that Mr. Gingery's veterans' preference rights were violated, we need not reach the broader questions of the FCIP's validity.¹

I

Under 28 U.S.C. § 1295(a)(9), we have jurisdiction over Mr. Gingery's appeal of the MSPB's final decision. We must set aside findings or conclusions of the MSPB that we find to be "(1) arbitrary,...