Schramm v. Department of Health and Human Services, 81-2144

• Decision Date: 28 June 1982
• Docket Number: No. 81-2144,81-2144
• Parties: Wilson C. SCHRAMM, Appellant, v. DEPARTMENT OF HEALTH AND HUMAN SERVICES, Respondent, Merit Systems Protection Board, Intervenor.
• Court: U.S. Court of Appeals — Third Circuit

Page 85

682 F.2d 85

Wilson C. SCHRAMM, Appellant, v. DEPARTMENT OF HEALTH AND HUMAN SERVICES, Respondent, Merit Systems Protection Board, Intervenor.

No. 81-2144.

United States Court of Appeals, Third Circuit.

Argued June 14, 1982.

Decided June 28, 1982.

Charles A. Hobbie, (argued), Staff Counsel, James R. Rosa, Gen. Counsel, American Federation of Government Employees, AFL-CIO, Washington, D. C., for petitioner.

W. Hunt Dumont, U. S. Atty., Anne C. Singer, Asst. U. S. Atty., Kathleen D. Koch (argued), Asst. U. S. Atty., Trial Atty., Merit Systems Protection Board, Newark, N. J., Connie A. Raffa, Asst. Regional Atty., Dept. of Health & Human Services, for respondent.

Evangeline W. Swift, Mary M. Jennings, Merit Systems Protection Bd., Washington, D. C., for intervenor.

Before ALDISERT, GIBBONS and HIGGINBOTHAM, Circuit Judges.

OPINION OF THE COURT

GIBBONS, Circuit Judge.

Wilson C. Schramm, an employee of the Social Security Administration, petitions the Court of Appeals for review of a final order of the Merit Systems Protection Board (MSPB), entered on June 19, 1981, which affirmed a decision of the Social Security Administration, Department of Health and Human Services (SSA), denying Schramm his within grade pay increase as of July 19, 1979. ¹ Schramm contends that the MSPB applied the wrong standard of review by holding that the SSA decision that Schramm failed to perform the essential requirements of his position at an acceptable level of competence need only be supported by substantial evidence. We reverse the MSPB order and hold that an agency must justify its decision to deny a within grade pay increase by a preponderance of the evidence.

I.

Schramm is employed with the SSA as a claims representative at its District Office in Paterson, New Jersey. He was first appointed to the position as a trainee, GS-5, in May 1977. After leaving the training pool, Schramm was assigned to the Paterson Office and in June 1978, he received a career-ladder promotion to GS-7.

Late in 1978, SSA reorganized the claims representative position into specialties and Schramm became a claims representative specialist for Title XVI claims. Under 5 U.S.C. § 5335(a), Schramm was entitled to receive a within grade step increase to GS-7, Step 2 on June 2, 1979, provided his performance was of an acceptable level of competence. ²

On April 5 and April 25, 1979 Schramm's first line supervisor, Ms. Vera Porter, sent him memorandums criticizing certain aspects of his job performance, including demeanor while interviewing claimants, difficulty with technical aspects of development of claims folders and lack of desk organization, and proposing to withhold his within grade salary increase effective June 2, 1979, at the end of his 12 month waiting period. On May 21, 1979, Ms. Porter sent Schramm another memo informing him that she had decided to withhold his salary increase for the deficiencies in his work performance.

Because Schramm was not given 60 days notice of the deficiencies in his performance, as required by 5 C.F.R. § 531.407(b)(2)(1978) (superceded), ³ Ms. Porter, in a memo dated June 4, 1979, gave Schramm until August 2, 1979 to meet an acceptable level of competence. Pursuant to § 531.407(d)(1978) (superceded), Schramm sought reconsideration of SSA's decision, and Ms. Porter in a memo dated July 19, 1979, citing "procedural error," again gave Schramm until August 2, 1979 to improve his work performance.

Schramm again sought reconsideration, and on March 18, 1980, the SSA sustained the negative determination of his performance. Thereupon, Schramm appealed to the MSPB, ⁴ which vacated the agency's reconsideration decision on the grounds of procedural error and remanded the case to the SSA for a new decision. ⁵ The SSA issued a second reconsideration decision on November 20, 1980, sustaining the negative determination. Schramm again appealed to the MSPB, a hearing was held, and on June 19, 1981, the MSPB affirmed the agency's reconsideration decision. On July 17, 1981, Schramm filed this petition for review.

II.

The sole issue presented in this petition is the standard by which agency decisions to deny within grade pay increases because of an employee's substandard performance must be reviewed. The resolution of this issue, because of an ambiguity in the Civil Service Reform Act of 1978, 5 U.S.C. § 1101 et seq., presents a novel and difficult question of statutory construction.

A.

"(T)he starting point in every case involving construction of a statute is the language itself." Greyhound Corp. v. Mt. Hood Stages, Inc., 437 U.S. 322, 330, 98 S.Ct. 2370, 2375, 57 L.Ed.2d 239 (1978), quoting, Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 756, 95 S.Ct. 1917, 1935, 44 L.Ed.2d 539 (1975) (Powell, J., concurring). Under § 7701(c)(1) of the Civil Service Reform Act (the Act), two different standards are applied in MSPB review of agency personnel decisions:

(c)(1) ... the decision of the agency shall be sustained ... only if the agency's decision-

(A) in the case of an action based on unacceptable performance described in section 4303 of this title, is supported by substantial evidence, or

(B) in any other case, is supported by a preponderance of the evidence.

5 U.S.C. § 7701(c)(1). Section 4303, to which paragraph (A) refers, provides that an agency may "reduce in grade or remove an employee for unacceptable performance." ⁶ The plain language of § 7701(c)(1) suggests that Congress intended the MSPB to review adverse personnel decisions resulting in reductions in grade or demotion by the substantial evidence standard, since they are the only actions described in § 4303, and that every other case must be reviewed by the higher standard prescribed in § 7701(c)(1)(B).

In Schramm's appeal, however, the MSPB declined to follow the plain language of § 7701(c)(1) and decided that an agency decision to withhold a within grade pay increase due an employee pursuant to 5 U.S.C. § 5335 fell within the standard of review of § 7701(c)(1)(A) rather than (B). Schramm v. Department of Health and Human Services, MSPB No. NY531 D8110079 (June 19, 1981). Schramm contends that the MSPB erred in so deciding, and urges that since decisions to withhold pay increases are not "described by § 4303" the agency's burden of proof should have been a preponderance of the evidence. The SSA argues that Congress intended to apply the substantial evidence test to all appeals from adverse action based on an employee's performance, including denials of within grade pay increases.

The legislative history reveals a substantial ambiguity in the standard of review Congress meant to be applied in cases such as Schramm's. In the face of that ambiguity, we decline to rewrite the plain language of the Act, and hold that § 7701(c)(1) must be given its literal meaning.

B.

The Act, labeled this century's most comprehensive reform of the Federal work force, was enacted in part to make uniform and codify merit system principles and to streamline personnel processes within the Federal government. See S.Rep.No.95-969, 95th Cong. 2d Sess. 2, reprinted in (1978) U.S.Code Cong. & Admin.News 2723, 2724 (Senate Report). The legislative history reveals that Congress intended to overhaul the procedures governing review by the MSPB and the federal courts of negative employment actions, and to accord greater procedural protection to an employee's rights, while at the same time giving agencies greater ability to remove or otherwise discipline employees who engage in misconduct or whose work performance is unacceptable. Senate Report at 51.

Under the law prior to the 1978 reforms, the Civil Service Commission and the courts reversed an agency decision to withhold a pay increase only if the agency action was arbitrary or capricious or if the agency failed to follow the Commission's regulations. ⁷ By contrast, however, in the case of an employee's removal or reduction in grade prior to the Act, an agency had to prove by a preponderance of the evidence that the action would improve the efficiency of the service. See, Senate Report at 43, 54. Because of the difficulty inherent in such a standard, and particularly because of the "widely held impression ... that a government employee cannot be fired, regardless of unacceptable conduct or work performance," Senate Report at 9 U.S.Code Cong. & Admin.News 1978, p. 2731, Congress relieved the agencies of the difficulty of proving unacceptable work performance by a preponderance of the evidence.

As in the case of the standards governing appeals from actions based on unacceptable performance, the bill changes the applicable standards to avoid unnecessary reversal of agency actions because of technical procedural oversights, or because the judgment of the agency is not given sufficient weight. However, the (Senate) Committee (on Governmental Affairs) felt that the agency should have to meet a heavier burden of proof when it sought to take an adverse action against an employee for misconduct than when the action was based on unacceptable performance. In the case of misconduct, the case is more susceptible to the normal kind of evidentiary proof, and the nature of the proceeding is more disciplinary in nature.

Concurrently, when an agency takes adverse action against one of its employees, it must prove by a preponderance of the evidence that the action will promote the efficiency of the service ...

(I)t is intended that the overall effect of the new standards will be fewer reversals by the Board or the courts of adverse actions taken by the agencies.

Senate Report at 54, U.S.Code Cong. & Admin.News 1978, p. 2777. Thus, § 7701

prescribes a substantial evidence standard for unacceptable conduct removals or reductions in grade, and a higher standard for misconduct cases.

The legislative history is replete with similar references to the lesser standard to be applied in performance related cases. For example, the joint explanatory...