The Civil Rights Division of the Bureau of Labor (Division) demoted Williams, an employee, with a commensurate reduction in salary, The basis was five charges of either inefficiency, insubordination, or misconduct. Williams appealed to the Employment Relations Board (ERB) which found only two of the five charges to be proved and accordingly modified the permanent demotion to a temporary one. Both the Division and Williams petitioned the Court of Appeals for review. The Court of Appeals sustained ERB’s decision that only two of the charges could be used as a basis for discipline. However, it set aside ERB’s modification of the sanctions and directed that the matter be remanded by ERB to the Division for a new imposition of sanctions since the facts found by ERB were different from those on which was based the imposition of the Division’s original sanctions of permanent demotion and resultant reduction in salary. 28 Or App 651, 560 P2d 673 (1977).
This court took review for the sole purpose of determining the propriety of the Court of Appeals’ ruling setting aside ERB’s modification of the sanctions and requiring ERB to remand the matter to the Division for the imposition of new sanctions.
ORS 240.555(1) provides for the imposition of sanctions, as follows:
"Suspension, reduction, demotion or dismissal. (1) The division shall establish by rule a procedure in accordance with this chapter whereby the appointing authority in any division of the service may suspend, reduce, demote or dismiss an employe thereof for misconduct, inefficiency, incompetence, insubordination, indolence, malfeasance or other unfitness to render effective service.
"* * * * (Emphasis added.)
The general duties of ERB are set forth in ORS 240.086. Insofar as it is here pertinent, the statute provides:
*598"Duties of board. The primary responsibility of the board shall be to foster and protect a merit system of personnel administration in state government. In carrying out this function it shall:
"(2) Review any personnel action that is allegedly an affected party, or an organization certified by the rules of the board as representing an affected party, to be arbitrary or contrary to law or rule, or taken for political reason, and set aside such action if it finds these allegations to be correct. The board on its own motion may act with like effect under this subsection.
"* * * * * ” (Emphasis added.)
ORS 240.560(1) provides for the appeal by the employee to ERB. The statute further provides that
"(2) [t]he hearing shall be conducted as provided for a contested case in ORS 183.310 to 183.500.
"(3) If the board finds that the action complained of was taken by the appointing authority for any political, religious or racial reasons, or because of sex or marital status, or was an unlawful employment practice as described in subsection (1) of ORS 659.026, the employe shall be reinstated in his position and shall not suffer any loss in pay.
"(4) In all other cases, if the board finds that the action was not taken in good faith for cause, it shall order the immediate reinstatement and the reemployment of the employe in his position without the loss of pay. The board in lieu of affirming the action, may modify it by directing a suspension without pay for a given period, and a subsequent restoration to duty, or a demotion in classification, grade or pay. The findings and order of the board shall be certified in writing to the appointing authority and shall be forthwith put into effect by the appointing authority.” (Emphasis added.)
There is no contention that the demotion of Williams was due to any political, religious or racial reasons, or that the action was taken because of sex or marital status or was an unlawful employment practice. Neither is there any contention that the action was taken in bad faith.
*599The Court of Appeals has, in a number of cases, construed these statutes to provide that where there is cause for discipline ERB may only modify disciplinary action taken by the agency if it, ERB, finds that no reasonable employer would have regarded the facts as presenting sufficient cause for the disciplinary action taken. Fairview Hospital v. Stanton, 28 Or App 643, 647, 560 P2d 667 (1977); James v. Employment Division, 20 Or App 309, 311, 531 P2d 710, S Ct rev. denied (1975); Thompson v. Secretary of State, 19 Or App 74, 80, 526 P2d 621, S Ct rev. denied (1974); and Phillips v. State Bd. of Higher Ed., 7 Or App 588, 592, 490 P2d 1005 (1971), S Ct rev. denied(1972)1 The court arrived at this result by construing the language of ORS 240.560(4) in the light of ORS 240.086(2) and concluding that ERB could not modify the imposed sanctions in the absence of a finding that the enploying agency had acted arbitrarily, i.e., no reasonable employer would have regarded the facts as sufficient grounds for the sanctions imposed. The court said:
"As modified by ORS 240.086(2), the 'cause’ required by ORS 240.560(4) must necessarily be 'cause not constituting arbitrariness * * *.’ [Phillips v. State Bd. of Higher Ed.,] 7 Or App at 592.” Thompson v. Secretary of State, supra at 80.
The court concluded that the statute was so intended because to construe. the language otherwise would result in vesting the disciplinary power over the employes of various state agencies in ERB and not in the agencies which appoint and supervise them, with the resultant undermining of the authority of the agencies and attendant inefficiency in administration. The court said, citing Phillips v. State Bd. of Higher Ed., supra at 592:
" '* * * To construe ORS 240.560 as employe urges would result in vesting disciplinary power of the various *600state agencies over their employes in the Board and not the agencies which appoint them. Such a result would undermine their authority and hamper efficient agency administration * * ” Thompson v. Secretary of State, supra at 81.
However, in each of the cases the facts were ultimately found to be the same as those upon which the agency based its discipline. In the present case ERB did not find the facts to be the same as did the agency, but found instead that two of the five charges were not proven and one was not actionable. The Court of Appeals affirmed that there was an adequate basis for ERB’s determination. As a result, the Court of Appeals refined its interpretation of the statutes to meet the new situation where there is a basis for discipline but such basis is different from the one upon which the original sanctions are imposed, and required that the matter be remanded to the Division for the imposition of new sanctions in the light of the facts as found by ERB. The employe, may, of course, under the rule laid down by the Court of Appeals, petition ERB, after the imposition of the new sanctions by the employing agency, if such employe feels that no reasonable employer would consider the facts, as found by ERB, to be sufficient cause for such imposition, i.e., arbitrary action.
This holding of the Court of Appeals is in conformance with its prior construction of the statutes to the effect that it was intended that the primary authority to impose sanctions upon employes should be in the hiring and supervising agencies, as long as the sanctions are reasonable and not arbitrary. The Court of Appeals divined the policy of the legislature, as demonstrated by the statutes, to be that primary responsibility for the discipline of employes should be in the employing and supervising agency, and not in ERB. Though this construction of ORS 240.560 first manifested itself in January 1972 with the Phillips decision, and three legislative sessions have since elapsed, one of which saw the reenactment of this very *601section,2 the legislature has not chosen to change the portion here in question.
An argument can be made that the construction by the Court of Appeals effectively erases the power of modification plainly given to ERB by the statute. Such is not the case, however, because any arbitrary or unreasonable sanction may, under the court’s construction, be modified by ERB.
Williams argues that the court misconceived the legislative intention and that it is unreasonable to assume that the agency would act fairly in any event after its original penalty was set aside because of a diminution in the proved charges. The division between the employing agency and ERB of the authority to impose sanctions upon an employe is a matter of policy for the legislature: Either construction of the present statutes is arguable. The Court of Appeals has adopted one construction, and the legislature has, seemingly, acquiesced.
The decision of the Court of Appeals is affirmed.
Fairview Hospital v. Stanton, 28 Or App 643, 560 P2d 667 (1977), overruled Thompson v. Secretary of State, 19 Or App 74, 526 P2d 621 (1974), and Phillips v. State Bd. of Higher Ed., 7 Or App 588, 490 P2d 1005 (1971), as to the scope of EKB’s factfinding authority. That issue is not involved here.
Oregon Laws 1975, ch 427, § 12,