Gingery v. Department of Defense

United States Court of Appeals for the Federal Circuit

2007-3292

STEPHEN W. GINGERY,

Petitioner,

v.

DEPARTMENT OF DEFENSE,

Respondent.

Andrew J. Dhuey of Berkeley, California 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.

Appealed from: Merit Systems Protection Board
 United States Court of Appeals for the Federal Circuit
2007-3292

STEPHEN W. GINGERY,

Petitioner,

v.

DEPARTMENT OF DEFENSE,

Respondent.

Petition for review of the Merit Systems Protection Board in CH3443060582-I-1.
___________________________

DECIDED: December 24, 2008
___________________________

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.

2007-3292 2
 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:

2007-3292 3
 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

2007-3292 4
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

2007-3292 5
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, capricious, an abuse of discretion, or otherwise not in

accordance with law; (2) obtained without procedures required by law, rule, or

1
We note that the decision of the MSPB on appeal did not address Mr.
Gingery’s argument regarding whether the FCIP or the decisions to place the auditor
positions into the excepted service via the FCIP was lawful. Should it become
necessary to resolve this issue, the MSPB should do so in the first instance. See
Horner, 854 F.2d at 490. If this remand does not resolve Mr. Gingery’s case, we note
that he is not precluded from renewing his FCIP challenges before the MSPB.

2007-3292 6
regulation having been followed; or (3) unsupported by substantial evidence.” 5 U.S.C.

§ 7703(c). We review questions of law including the interpretation of statutes and

regulations de novo. Augustine v. Dep’t of Veterans Affairs, 503 F.3d 1362, 1365 (Fed.

Cir. 2007).

We review the validity of an agency’s interpretation of a statute under Chevron,

U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). A

Chevron analysis entails first asking “whether Congress has directly spoken to the

precise question at issue.” Id. at 842. If so, we “must give effect to the unambiguously

expressed intent of Congress.” Id. at 843. If, however, “the statute is silent or

ambiguous with respect to the specific issue,” we ask “whether the agency’s answer is

based on a permissible construction of the statute.” Id.

II

The precise question at issue in this case is what procedures an agency should

follow when it passes over a preference eligible having a compensable service-

connected disability of 30% or more and selects a nonpreference eligible for a position

in the excepted service. For the competitive service, 5 U.S.C. § 3318(b) requires that

an appointing authority obtain OPM’s permission and, when a preference eligible has a

compensable service-connected disability of 30% or more, notify the preference eligible

of the proposed passover, of the reasons for the passover, and of his right to respond.

OPM’s regulation, which applies to the excepted service, requires only that an

appointing authority record its reasons for the passover and provide a copy of these

reasons to the preference eligible or her representative upon request. We conclude,

however, that Congress has already addressed this question in applying the competitive

2007-3292 7
service passover procedures of 5 U.S.C. § 3318(b) to the excepted service via 5 U.S.C.

§ 3320.

Selection into the excepted service in the executive branch shall be conducted

“in the same manner and under the same conditions required for the competitive service

by [5 U.S.C. §§] 3308–3318.” 5 U.S.C. § 3320 (2006). The 1966 codification of Title 5,

Pub. L. No. 89-554, 80 Stat. 378, combined former §§ 858 and 869 to create the current

§ 3320. 5 U.S.C. § 3320 (Historical and Revision Notes); see also S. Rep. No. 89-1380,

at 64 (1966). Section 858 referred to selection in the unclassified civil service and

directed an official to make any such selection “in accordance with provisions of this

chapter.” The corresponding chapter—Chapter 17—was titled “Preference of Veterans

in Government Employment (New).” Section 869 essentially excluded the legislative

and judicial branches from Chapter 17, which the current § 3320 accomplishes by

specifying that it applies only to the executive branch and the government of the District

of Columbia. The Historical and Revision Notes further explain that former §§ 858 and

869 were restated in § 3320 “to conform to section 3318(a).” 5 U.S.C. § 3320

(Historical and Revision Notes).

Section 3318 is titled “Competitive service; selection from certificates.”

Subsection (a) refers to certificates furnished under § 3317(a). 2 Under subsection (b),

when “an appointing authority proposes to pass over a preference eligible on a

certificate,” the authority must file written reasons for the passover with OPM and get

OPM’s permission for the passover. Id. § 3318(b)(1). When a preference eligible has a

2
The Historical and Revision Notes following § 3317 in the United States
Code explain that “[a]pplication of the section to the excepted service in the executive
branch . . . , as provided in former section 858, is carried into section 3320.” 5 U.S.C.
§ 3317 (2006) (Historical and Revision Notes).

2007-3292 8
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). The statute prohibits the delegation of OPM’s functions in these cases.

Id. § 3318(b)(4). By contrast, when a preference eligible has a compensable service-

connected disability of less than 30%, the authority need only provide the reasons for

passover and the OPM findings upon request. Id. § 3318(b)(3).

Taken together, §§ 3320 and 3318 resolve the first step of our Chevron analysis.

Through § 3318, Congress spoke on the question of what procedures an agency should

follow when it passes over a preference eligible and selects a nonpreference eligible for

a position in the competitive service. And through § 3320, Congress makes clear that

§ 3318 applies in the same manner to the excepted service.

The government argues that in Patterson v. Department of the Interior, 424 F.3d

1151 (Fed. Cir. 2005), we held that OPM had responsibility for implementing all

veterans’ preference rights in the excepted service. The government argues that it

continues to give veterans’ preferences, but that it is not required to follow the exact

statutory protections enacted by Congress. The government misinterprets our decision

in Patterson. In Patterson, the veteran challenged an OPM regulation that did not

require the addition of points based on veterans’ preference to a qualifying rating or

ranking, which the agency used to evaluate applicants. Id. at 1157. He argued that this

regulation was invalid as contrary to the plain language of §§ 3320 and 3309, which

required the addition of points to a rating when appointment was made through

examination. At issue was how an agency should “apply the principles of veterans’

2007-3292 9
preference to positions within the excepted service that are not subject to examination.”

Id. at 1158–59. We reasoned as follows:

§ 3309 is silent on the issue of how agencies should apply veterans’
preference rights to a preference eligible in the competitive service who is
not required to pass an examination. . . . It therefore necessarily follows
that Congress has not spoken on the issue of how to apply the principles
of veterans’ preference to positions within the excepted service that are
not subject to examination. . . . [T]he regulations issued by OPM to fill this
gap are therefore entitled to deference under Chevron.

Id. at 1158–59 (emphasis added). Although § 3320 clearly requires §§ 3308–3318 to

apply to the excepted service in the same manner as the competitive service, it was

impossible for § 3309 to be applied in the Patterson case. Section 3309 applied only to

those who take exams. Because the excepted service applicants at issue in Patterson

were not subject to an exam, § 3309 was inapplicable to them—in fact, it would have

been impossible to apply. We concluded therefore that OPM’s regulation was

reasonable and consistent with the Veterans’ Preference Act (VPA) of 1944, Pub. L. No.

78–359, 59 Stat. 387 (codified at 5 U.S.C. §§ 2108, 3309–3320), which provides

preference eligible veterans with additional benefits in seeking civil service employment.

Patterson, 424 F.3d at 1159.

The present case is distinguishable from Patterson because there is no

examination requirement in § 3318 and no analogous requirement that would preclude

application of § 3318 to the excepted service under § 3320. Section 3309 applied to

examinations, which are specific to the competitive service, whereas § 3318 applies to

selection from certificates, which are used in both the competitive and excepted

services. Because Congress clearly and unambiguously stated in § 3320 that § 3318

should apply to the excepted service in the same manner it applies to the excepted

2007-3292 10
service, OPM is not entitled to Chevron deference, and we “must give effect to the

unambiguously expressed intent of Congress.” Chevron, 467 U.S. at 843.

III

OPM’s regulation—5 C.F.R. § 302.401(b)—is invalid because it provides 30% or

more disabled Veterans with less protection than Congress guaranteed them in § 3318.

The regulation demands only that an agency (1) record its reasons for passing over the

preference eligible and (2) upon request, provide a copy of those reasons to the

preference eligible or her representative. Title 5, however, requires that an agency’s

appointing authority obtain OPM permission to pass over the preference eligible. 5

U.S.C. § 3318(b)(1) (2006). Moreover, § 3318(b) provides additional protections for

preference eligibles having a compensable service-connected disability of 30% or more.

For these individuals, the appointing authority must—at the time it solicits OPM’s

permission for the intended passover and regardless of any request—“notify the

preference eligible of the proposed passover, of the reasons thereof, and of his right to

respond.” Id. § 3318(b)(2). The statute even requires “a demonstration by the

appointing authority that the passover notification was timely sent to the preference

eligible’s last known address.” Id. Lastly, OPM’s functions cannot be delegated. Id.

§ 3318(b)(4).

Therefore, OPM’s promulgated regulation, 5 C.F.R. § 302.401(b), which

establishes lesser protections for veterans who are 30% or more disabled, is at odds

with the statutory protections Congress guaranteed these veterans. Because Congress

has already addressed precisely this issue and OPM’s regulation conflicts with the

statute itself, we hold this OPM passover regulation invalid.

2007-3292 11
 CONCLUSION

We conclude that 5 C.F.R. § 302.401(b) is invalid because it does not give effect

to the unambiguously expressed intent of Congress in enacting 5 U.S.C. §§ 3320 and

3318. There is no question that the requirements of § 3318 (as applied to the excepted

service via § 3320) were not met in this case. The final decision of the MSPB is

therefore

REVERSED and REMANDED.

2007-3292 12
 United States Court of Appeals for the Federal Circuit

2007-3292

STEPHEN W. GINGERY,

Petitioner,

v.

DEPARTMENT OF DEFENSE,

Respondent.

Petition for review of the Merit Systems Protection Board in CH3443060582-I-1.

NEWMAN, Circuit Judge, concurring.

I agree that 5 C.F.R. §302.401(b) is inconsistent with statutory requirements

regarding pass-over procedures, and that reversal and remand for application of the

proper procedures are appropriate. I join the court’s holding on this issue. I write

separately because the court has not treated the central issue of this appeal, an issue

that can have a larger effect on Mr. Gingery’s legal rights than the correct application of

the pass-over provisions.

Mr. Gingery’s central argument relates to the placement into the excepted

service of the auditor position for which he applied. This deprived him of important

veterans’ preference rights that apply to competitive service positions. He argues that

the Federal Career Internship Program (“FCIP”) was improperly implemented for this

position, and that the GS-0511 auditor position for which he applied would normally be
filled through competitive examination and associated hiring rules, which he states

would have granted him ten preference points as a veteran with at least 30% disability.

This aspect is squarely presented on this appeal. It was not a secondary or alternative

argument, as the court now suggests, maj. op. at 6, nor was it an issue that “the

decision of the MSPB on appeal did not address,” id. at 6 n.1. On the contrary, the full

Board, on review of the AJ’s initial decision, discussed the validity of the FCIP at some

length. Gingery v. Dep’t of Defense, 105 M.S.P.R. 671, 674-75 (2007). As the majority

states: “The MSPB granted review and concluded that the FCIP constituted a valid

exception to hiring in the competitive service . . . .” Maj. op. at 5.

On this appeal Mr. Gingery again points to the cases in which the Board had

previously found that appointments made pursuant to alternative hiring programs were

not valid exceptions from the competitive service, and violated veterans preference

rights. See Dean v. Dep’t of Agriculture, 104 M.S.P.R. 1 (2006) (discussing

Outstanding Scholar Program appointments); Deems v. Dep’t of Treasury, 100

M.S.P.R. 161 (2005) (discussing Clerical and Administrative Support Positions

appointments). Responding to Mr. Gingery’s argument that the issues are analogous,

the Board stated: “The FCIP authority used here, however, differs from those used in

the cases on which the appellant relies because it represents a valid exception to the

competitive examination requirement.” Gingery, 105 M.S.P.R. at 675. It is this holding

to which Mr. Gingery directed most of his briefing on this appeal, and which attracted

the participation of the National Treasury Employees Union (“NTEU”) as amicus curiae.

The NTEU stresses the growth of excepted hiring pursuant to the FCIP, as compared

with competitive hiring, as the predominant hiring mechanism for entry-level positions in

2007-3292 2
the executive branch. Mr. Gingery argues that the auditor position for which he applied

was improperly placed within the internship program and thereby removed from the

competitive service. This issue of this appeal is separate from the issue of validity of

OPM’s regulation on the pass-over procedures.

Pursuant to 5 U.S.C. §2102(a)(1), the competitive service includes “all civil

service positions in the executive branch” except those “positions which are specifically

excepted from the competitive service by or under statute,” or other limited exceptions

that do not apply to the auditor position at issue. The statutory authorization for the

exception of positions from the competitive service appears at 5 U.S.C. §3302:

The President may prescribe rules governing the competitive service. The
rules shall provide, as nearly as conditions of good administration warrant,
for—
(1) necessary exceptions of positions from the competitive
service; . . . .

The FCIP was implemented by Executive Order No. 13,162, which assigned its

administration to OPM. Mr. Gingery and the NTEU state that exceptions from

competitive hiring procedures for executive branch civil service positions require, under

5 U.S.C. §3302, a showing of necessity.

Mr. Gingery and the NTEU point out that hiring pursuant to the FCIP, as it

pertains to the auditor position for which Mr. Gingery applied, does not meet the

statutory necessity requirement. The government conceded that no showing of

necessity was made for the auditor position at issue here, and argued instead that the

President and OPM and all of the executive branch agencies have “unfettered

discretion” to except positions from the competitive service. This argument was

rejected in National Treasury Employees Union v. Horner, 854 F.2d 490 (D.C. Cir.

2007-3292 3
1988), where the court held to be arbitrary and capricious OPM’s movement of

competitive positions into the excepted service, with no reasonable showing of

necessity under 5 U.S.C. §3302. The court stated: “In this case, as the district court

found, several provisions of title 5 of the U.S. Code, viewed together, provide a

meaningful—not a rigorous, but neither a meaningless—standard against which to

judge OPM’s decision to convert the PAC positions from competitive to excepted

status.” Id. at 495.

Mr. Gingery states that the auditor position for which he applied was not listed in

the OPM’s annual report of excepted positions, citing 70 Fed. Reg. 2284 (Jan. 12, 2005)

and 71 Fed. Reg. 58,680 (Oct. 4, 2006). The auditor position was not shown to be a

“necessary exception” to the standard procedures of the competitive service. I

recognize that the considerations are complex; however, the issue was fully and fairly

raised on this appeal, and has a direct impact on this petitioner, for the veteran states

that he is deprived of his statutory additional points of rating. See 5.U.S.C. §3309(1);

see also 5 U.S.C. §3318(b)(1), (2).

This was a primary issue addressed in the briefing and at oral argument of Mr.

Gingery’s appeal. The issue is before this court, and it should be discussed and

resolved.

2007-3292 4