Richard Lubow v. Department of State

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 12, 2014 Decided April 17, 2015
No. 13-5057
RICHARD E. LUBOW, ET AL.,
APPELLANTS
v.
UNITED STATES DEPARTMENT OF STATE, ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:10-cv-00510)
Elliot H. Scherker argued the cause for appellants. With
him on the briefs were Brigid F. Cech Samole, Rachel A.
Canfield, and Joe R. Reeder.
Alan Burch, Assistant U.S. Attorney, argued the cause for
appellees. With him on the brief were Ronald C. Machen Jr.,
U.S. Attorney, and R. Craig Lawrence, Assistant U.S.
Attorney. Mercedeh Momeni, Assistant U.S. Attorney,
entered an appearance.
Before: GARLAND, Chief Judge, SRINIVASAN, Circuit
Judge, and SENTELLE, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge SRINIVASAN.
2
Concurring opinion filed by Senior Circuit Judge
SENTELLE.
SRINIVASAN, Circuit Judge: A statute limits the amount
of “premium pay,” including overtime pay, federal
government employees may earn each year. A group of State
Department employees challenges the Department’s decision
requiring them to repay excess overtime pay they received for
work on assignment in Iraq in 2004. We conclude that the
Department permissibly construed the statute capping
premium pay when determining that the employees’ overtime
pay exceeded the statutory limit. We also find that the
Department did not act arbitrarily in denying the employees a
discretionary waiver of their obligation to repay the excess
compensation.
I.
At the time of the events in this case, the five
plaintiffs—Frank Benevento, David Bennett, Joseph Bopp,
James Landis, and Richard Lubow—worked in the State
Department as Diplomatic Security Special Agents. In late
2003 or early 2004, each of them responded to a call for
volunteers to serve one-year assignments in Iraq under the
Coalition Provisional Authority. They arrived in Iraq in
February 2004.
Initially, the plaintiffs were assigned to Iraq on temporary
duty status; their permanent duty station was in Washington,
D.C. Consequently, the plaintiffs received “locality
pay”—pay in addition to base salary intended to equalize
federal employees’ compensation with that of non-federal
workers in the same geographic area—as if they were working
in Washington, D.C. See 5 U.S.C. §§ 5301, 5304. In June or
July of 2004, the plaintiffs’ permanent duty station changed
from Washington, D.C., to the United States Embassy in
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Baghdad. Because the plaintiffs were now stationed in a
foreign location, they no longer received locality pay. See 5
C.F.R. § 531.603.
While in Iraq, the plaintiffs worked, and received
compensation for, a significant number of overtime hours. In
early 2005, the plaintiffs completed their assignments in Iraq
and returned to the United States.
A.
Federal law limits the amount of “premium pay” a federal
employee may receive. See 5 U.S.C. § 5547. Premium pay
(as opposed to “basic pay”) includes types of remuneration
such as overtime pay, holiday pay, Sunday pay, night pay
differential, and availability pay. See id. § 5547(a). As a
general matter, the statutory cap applies to each pay period
(i.e., biweekly). The cap operates as a limit on the
combination of an employee’s basic and premium pay in a
two-week period. See id.
When an employee performs “work in connection with an
emergency,” however, the biweekly cap in § 5547(a) does not
apply. Id. § 5547(b)(1). Instead, the statute calls for
calculating the cap on an annual basis. See id. § 5547(b)(2).
The State Department determined that the military operations
in Iraq and the aftermath qualified as an emergency. As a
result, the plaintiffs were subject to the annual cap, which
provides:
[N]o employee referred to in [§ 5547(b)(1)]
may be paid premium pay . . . if, or to the
extent that, the aggregate of the basic pay and
premium pay . . . for such employee would, in
any calendar year, exceed the greater of—
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(A) the maximum rate of basic pay payable
for GS-15 in effect at the end of such
calendar year (including any applicable
locality-based comparability payment . . . );
or
(B) the rate payable for level V of the
Executive Schedule in effect at the end of
such calendar year.
Id. § 5547(b)(2).
The statute therefore caps compensation for work in
connection with an emergency based on the annual maximum
basic pay rate for GS-15 or the annual pay rate for Executive
Schedule level V, whichever is greater. At the end of 2004,
the annual maximum GS-15 pay rate for employees receiving
no locality pay was $113,674. For employees assigned to
work in Washington, D.C., the annual maximum GS-15 pay
rate, including the applicable locality-pay adjustment, was
$130,305. At that time, the annual Executive Schedule level
V rate was $128,200.
With regard to the plaintiffs in this case, if § 5547(b)(2)’s
cap were calculated as if the plaintiffs received locality pay for
Washington, D.C.—as they did when assigned to D.C. for the
first half of 2004—the applicable cap would be $130,305.
But if the cap were calculated as if the plaintiffs received no
locality-pay adjustment—as was the case for the second half of
2004 after their permanent assignment shifted to the U.S.
Embassy in Baghdad—the applicable cap would be $128,200.
B.
In September 2004, the Office of Personnel Management
issued final regulations implementing § 5547. See Premium
Pay Limitations, 69 Fed. Reg. 55,941 (Sept. 17, 2004). In
5
pertinent part, the regulation implementing § 5547(b)(2)
largely tracks the statute’s language:
In any calendar year during which an
employee has been determined to be
performing emergency or mission-critical
work . . . , the employee may receive premium
pay under this subpart . . . only to the extent
that the payment does not cause the total of his
or her basic pay and premium pay for the
calendar year to exceed the greater of—
(1) The maximum annual rate of basic pay
payable for GS-15 (including any applicable
locality-based comparability payment . . . )
in effect on the last day of the calendar year;
or
(2) The annual rate payable for level V of the
Executive Schedule in effect on the last day
of the calendar year.
5 C.F.R. § 550.106(c).
OPM also published a statement in the Federal Register
elaborating on the operation of the annual cap. See Premium
Pay Limitations, 69 Fed. Reg. at 55,941. The statement
responded to an agency’s question about the application of the
cap in the circumstances of this case: when an employee is
stationed in multiple locality-pay areas during the course of a
year. OPM explained that the statute “expressly provides that
the annual premium pay cap must be applied to an entire
calendar year and that it is based on the applicable rates in
effect at the end of the calendar year.” Id. As a result, “[a]
geographic move to an area with different pay rates can raise or
lower an employee’s aggregate basic pay and the end-of-year
6
annual cap on premium pay. In turn, a change in aggregate
basic pay or the end-of-year cap can change retroactively the
date on which an employee reached the annual premium pay
cap.” Id. In that situation, OPM recognized, “an agency
may have to recompute retroactively the amount of premium
pay owed for one or more pay periods.” Id.
C.
On November 24, 2004, shortly after OPM’s new
regulations took effect, the five plaintiffs received email
messages from the State Department notifying them that the
Department was “conducting a review of premium pay
earnings involving employees supporting the effort in Iraq.”
J.A. 179. “Because you are assigned overseas,” the message
explained, “the rate of the annual premium pay cap that applies
to you is $128,200 (the rate for Level V of the Executive
Schedule).” Id. The message told each plaintiff that his
earnings to date “have already or will shortly put you above the
cap for the current pay year,” and that the Department would be
“obligated to seek collection of [any] overpayments.” Id.
As the email message forewarned, each plaintiff received
a letter from the Department in April 2005 requiring repayment
of premium pay received in excess of § 5547(b)(2)’s cap. The
amount owed by each plaintiff was: $7,765.83 (Benevento),
$6,308.07 (Bennett), $5,702.69 (Bopp), $435.94 (Landis), and
$10,514.98 (Lubow).
The Department gave the plaintiffs the option to dispute
their debts through either internal or external administrative
review. Benevento chose internal review, and his case was
examined by Deputy Assistant Secretary for Global Financial
Services James Millette. DAS Millette, relying on the text of
the statute and OPM’s regulations, determined that
Benevento’s aggregate basic and premium pay was subject to
7
the $128,200 cap because, at the end of calendar year 2004,
Benevento was assigned to a site with no locality-pay
adjustment. The other plaintiffs opted for an outside hearing
before an administrative law judge of the General Services
Administration Board of Contract Appeals. That judge
similarly determined that the Department properly applied
§ 5547(b)(2) to the plaintiffs’ situation.
Each plaintiff also requested that the Department forgive
the entirety of his debt pursuant to 5 U.S.C. § 5584. That
provision allows an employing agency to waive any claim
against an employee “arising out of an erroneous payment of
pay” if collection “would be against equity and good
conscience and not in the best interests of the United States.”
5 U.S.C. § 5584(a). The plaintiffs argued that equitable
considerations supported waiver because they had volunteered
for a dangerous overseas assignment in a war zone, because
there was confusion about how the annual cap would apply,
and because the nature of their security assignments required
significant overtime hours. DAS Millette denied the waiver
requests for all five plaintiffs, reasoning that the plaintiffs bore
partial responsibility for the overpayments because they
possessed records that would have alerted them that they had
received or might receive (and thus would need to repay)
compensation in excess of the cap. See id. § 5584(b)(1) (an
agency official may not exercise his discretion to waive a claim
against an employee “if, in his opinion, there exists, in
connection with the claim, an indication of fraud,
misrepresentation, fault, or lack of good faith on the part of the
employee”).
The plaintiffs filed grievances with the State Department’s
Foreign Service Grievance Board. The FSGB agreed with
DAS Millette and the Board of Contract Appeals that the
$128,200 cap applied to govern the whole year. But the
8
FSGB determined that DAS Millette erred in holding the
plaintiffs partially responsible for the overpayments, agreeing
with the plaintiffs that it was unlikely that an employee could
have anticipated how the annual cap would apply. “Nor is it
clear,” the FSGB’s opinion continued, “what [the plaintiffs]
could have done to avoid overpayments once [they were]
notified on November 24 that [they were] nearing the pay cap.”
J.A. 839. The FSGB sent the plaintiffs’ waiver requests back
to DAS Millette for a determination of whether collection of
the overpayments “would be against equity and good
conscience and not in the best interests of the United States.”
5 U.S.C. § 5584(a).
DAS Millette invited the plaintiffs to submit additional
information. He asked them to address in particular the
factors that agency officials are instructed to consider under
§ 5584’s corresponding regulation:
(A) Whether collection of the claim would
cause serious financial hardship to the
employee from whom collection is sought.
(B) Whether, because of the erroneous
payment, the employee either has relinquished
a valuable right or changed positions for the
worse, regardless of the employee’s financial
circumstances.
(C) The time elapsed between the erroneous
payment and discovery of the error and
notification of the employee;
(D) Whether failure to make restitution would
result in unfair gain to the employee;
9
(E) Whether recovery of the claim would be
unconscionable under the circumstances.
22 C.F.R. § 34.18(b)(1)(iv). In response, the plaintiffs’
representative submitted a single letter for all five employees
stating that they wished to “rely upon the record already
developed in this matter.” J.A. 885.
DAS Millette again denied the waiver requests. He
emphasized the plaintiffs’ refusal specifically to address any of
the 22 C.F.R. § 34.18(b)(1)(iv) factors, including their failure
to put forth a showing of financial hardship. He grounded his
decision in the fourth factor: whether waiver of the debts
would result in “an unfair gain” to the plaintiffs. He explained
that it would: “I have had to make this determination for over
thirty other employees in the exact same situation and they
have paid their debts in full.” J.A. 847.
The plaintiffs appealed to the FSGB again, and this time, it
upheld the waiver denials. The FSGB stressed the plaintiffs’
failure to address any of the 22 C.F.R. § 34.18(b)(1)(iv) factors
except the fifth (whether “recovery of the claim would be
unconscionable under the circumstances”). And the FSGB
found “no basis” to overturn DAS Millette’s judgment that
granting a waiver to the plaintiffs “would create an unfair gain
for them vis-a-vis all those similarly situated employees who
repaid their excess premium pay for 2004.” J.A. 900. The
FSGB further noted that DAS Millette’s decision was “in line”
with precedent “discourag[ing] the approval of waivers when
the employee had reasonably prompt notice that the payments
were or may have been erroneous, even if the employee was
not ‘at fault.’  ” Id.
10
D.
The plaintiffs sought judicial review in federal district
court. The district court initially remanded the case to the
Department based on an “intervening event.” Lubow v. U.S.
Dep’t of State (Lubow I), 730 F. Supp. 2d. 73, 76 (D.D.C.
2010). The court noted that, in 2005, Congress enacted the
Emergency Supplemental Appropriations Act for Defense, the
Global War on Terror, and Tsunami Relief, 2005 (Emergency
Supplemental Appropriations Act), Pub. L. No. 109-13, 119
Stat. 231 (2005). The Act allowed heads of executive
agencies to “waive” 5 U.S.C. § 5547(b)(2)’s limit on the
aggregate of basic and premium pay up to $200,000 during
2005. Emergency Supplemental Appropriations Act § 1008,
119 Stat. at 243. The State Department had taken advantage
of that authorization in August 2005 by waiving § 5547(b)(2)’s
limit on compensation “payable in calendar year 2005” for
employees in Iraq and Afghanistan. J.A. 281. The district
court observed that the Department’s waiver applied to
compensation earned in the last pay period of December
2004—because that compensation would have been “payable”
in January 2005—and the court questioned why none of the
administrative decisions had explained the effect of the 2005
waiver on the amount of the plaintiffs’ debts. On remand, the
Department found that the 2005 waiver had no effect on the
amount of the plaintiffs’ 2004 debts because any pay received
by the plaintiffs in 2005 had been excluded from the
Department’s overpayment calculations for 2004.
The district court then granted summary judgment to the
defendants. Lubow v. U.S. Dep’t of State (Lubow II), 923 F.
Supp. 2d 28, 30 (D.D.C. 2013). First, the court addressed
whether the Department properly determined that the $128,200
cap governed the whole year. Because the issue turned on the
validity of OPM’s interpretation of 5 U.S.C. § 5547(b)(2), the
11
court applied the two-step framework set forth in Chevron,
U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467
U.S. 837 (1984). The court resolved the case at step one,
concluding that OPM’s interpretation was required by “the
statute’s plain language.” Lubow II, 923 F. Supp. 2d at 35.
“Because plaintiffs were assigned overseas at the end of 2004,”
the court reasoned, “plaintiffs’ locality-adjusted GS–15 rate in
effect at that time was $113,674,” making the Executive
Schedule V rate the higher amount. Id. at 36 (emphasis
added). The court also upheld the Department’s
determination that its August 2005 waiver pursuant to the
Emergency Supplemental Appropriations Act had no effect on
the plaintiffs’ debts, and further ruled that the FSGB had not
acted arbitrarily in upholding DAS Millette’s decision to deny
the plaintiffs’ requests for discretionary waivers under 5
U.S.C. § 5584.
II.
The plaintiffs seek review of four final agency actions
under the Administrative Procedure Act: (i) the FSGB’s
determination that the Department properly applied 5 U.S.C.
§ 5547(b)(2)’s cap on premium pay; (ii) the Board of Contract
Appeals’ decision to the same effect; (iii) the Department’s
decision that the August 2005 waiver had no bearing on the
plaintiffs’ repayment obligations; and (iv) the FSGB’s
decision upholding the denial of discretionary waivers under 5
U.S.C. § 5584. See 22 U.S.C. § 4140(a); 5 U.S.C. § 704.
The APA “requires us to set aside agency action that is
‘arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law.’ ” Jicarilla Apache Nation v. U.S.
Dep’t of Interior, 613 F.3d 1112, 1118 (D.C. Cir.
2010) (quoting 5 U.S.C. § 706(2)(A)). We evaluate the
district court’s grant of summary judgment de novo, id., and
we affirm.
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A.
We first address the plaintiffs’ challenge to the FSGB’s
and Board of Contract Appeals’ decisions that their
compensation for overtime work performed in Iraq exceeded 5
U.S.C. § 5547(b)(2)’s cap on annual premium pay.
Subsection 5547(b)(2) instructs agencies to set their
employees’ annual cap at the higher of two figures: (i) “the
maximum rate of basic pay payable for GS-15 in effect at the
end of such calendar year,” including “any applicable
locality-based comparability payment”; and (ii) “the rate
payable for level V of the Executive Schedule in effect at the
end of such calendar year.” OPM interprets
§ 5547(b)(2)(A)’s direction to use the GS-15 rate “in effect at
the end of such calendar year” to require the use of the GS-15
rate applicable to the specific employee in question. In other
words, OPM construes “in effect” to reference the
circumstances applicable to that employee as of December
31—including, as relevant here, the location of the employee’s
designated duty station on that date. See 69 Fed. Reg. at
55,941.
The plaintiffs dispute OPM’s understanding of the statute.
They maintain that the statutory references to the GS-15 and
Executive Schedule rates “in effect at the end of such calendar
year” intend only to reference the rates generally in force at the
end of the year. Under that view, the statutory phrase aims
merely to address a situation in which those rates change
during the course of the year. For instance, if Congress had
raised the base GS rates by 2% and made that increase effective
on September 1, 2004, § 5547(b)(2)(A) would tell the agency
to use the post-September GS-15 rate in calculating the annual
cap. Similarly, if Congress increased the amount of locality
pay for the location “applicable” to the plaintiff’s duty station
and made that change effective mid-year, the statute would
13
instruct the agency to use the higher amount. Under that
reading, “in effect” would mean only the rate that is legally “in
effect.” And the statute would remain silent concerning the
specific question at issue here: which GS-15 rate to use for a
particular employee whose assigned location changes during
the year.
The district court assumed, in accordance with the parties’
presentations, that Chevron’s two-step framework governed
the court’s review of OPM’s interpretation of § 5547(b)(2).
Lubow II, 923 F. Supp. 2d at 35. Both parties maintain that
position on appeal. We accordingly adhere to the parties’
framing and examine OPM’s interpretation of the statute under
Chevron. Cf. Humane Soc’y of U.S. v. Locke, 626 F.3d 1040,
1054 n.8 (9th Cir. 2010) (assuming, without deciding, the
applicability of Chevron based on the parties’ agreement that
Chevron governed their dispute). Because the plaintiffs
affirm the applicability of the Chevron framework, we need not
consider potential arguments they might have made (but did
not make) against our deferring to the agency under
Chevron—including the argument contemplated by our
concurring colleague to the effect that OPM failed to recognize
its discretion under the statute when issuing its guidance. See
Peter Pan Bus Lines, Inc. v. Fed. Motor Carrier Safety Admin.,
471 F.3d 1350, 1354 (D.C. Cir. 2006). The applicability of
the Chevron framework does not go to our court’s jurisdiction,
and a party therefore can forfeit an argument against deference
by failing to raise it. See Intercollegiate Broad. Sys., Inc. v.
Copyright Royalty Bd., 574 F.3d 748, 756 (D.C. Cir. 2009) (per
curiam).
Under the Chevron framework, if “Congress has directly
spoken to the precise question at issue,” then “the court, as well
the agency, must give effect to the unambiguously expressed
intent of Congress.” 467 U.S. at 842-43. But “if the statute
14
is silent or ambiguous with respect to the specific issue,” we
examine “whether the agency’s answer is based on a
permissible construction of the statute.” Id. at 843. Here, the
district court resolved the issue in favor of OPM’s
interpretation at the first step. The court reasoned that
§ 5547(b)(2) establishes a rule that the “the rates at the end of
the year determine the cap,” which, in the court’s view,
unambiguously “dictates the outcome in exactly the situation
where the applicable rate changes during the course of the year,
regardless of the reason for that change.” Lubow II, 923 F.
Supp. 2d at 36.
We find it unnecessary to decide the question of
§ 5547(b)(2)’s ambiguity at Chevron step one: because the
plaintiffs make no argument that the statute unambiguously
compels their interpretation, we need not resolve the step-one
question one way or the other. See Babbitt v. Sweet Home
Chapter of Cmtys. for a Great Or., 515 U.S. 687, 703 (1995).
Even assuming that the plaintiffs could make out a case for the
statute’s ambiguity or silence at step one, we find that OPM’s
reading of the text is reasonable and deserving of our deference
at Chevron step two.
As explained, OPM reads § 5547(b)(2)(A) to mean that
the employing agency must apply the GS-15 rate “in effect”
with respect to the specific employee in question as of
December 31, taking into account the employee’s locality pay
as of that date. The phrase “in effect” surely is amenable to
that reading. Indeed, the district court thought it impossible to
read the language any other way, because “the text provides no
basis for separating rates that are in effect at the end of the year
for a certain reason (e.g., a statutory increase in the GS-15 rate)
from rates that are in effect at the end of the year for a different
reason (e.g., a change in location and hence to the
15
locality-based comparability payment).” Lubow II, 923 F.
Supp. 2d at 36.
Moreover, it is eminently sensible for OPM to apply
§ 5547(b)(2)(A) such that an agency would need to take
account of an employee’s location only at a single, identifiable
point during the year for purposes of determining the
“applicable” locality-based adjustment. As the district court
noted, selecting some particular date for assigning the amount
to plug into the premium-pay cap calculation might seem
unfairly to disadvantage certain employees (who, like the
plaintiffs, might become subject to a lower cap than would
otherwise apply) while working to the advantage of other
employees (who might gain the advantage of a higher cap).
For instance, an employee transferred at the end of the calendar
year to a site with a higher locality-based adjustment would
gain a benefit even though she earned less locality pay for most
of the year (and vice versa for an employee relocated to a site
with a lower locality-based adjustment). But “[v]irtually
every legal (or other) rule has imperfect applications in
particular circumstances.” Barnhart v. Thomas, 540 U.S. 20,
29 (2003). And here, any such imperfection is substantially
offset by the significant gains in efficiency attending the
agency’s having to take account of an employee’s duty station
only as of a single date.
The plaintiffs object to what they see as the statute’s
“retroactive” operation under OPM’s interpretation. They
argue that it is unreasonable—even absurd—to imagine that
Congress wrote a statute under which it could turn out that, at
the end of the year, certain employees become subject to a
different cap on premium pay than they had anticipated. But
the statute would be “retroactive” even under the plaintiffs’
reading of § 5547(b)(2)(A): an agency could not definitively
calculate its employees’ annual cap until the end of the year
16
because the agency would not necessarily know ex ante
whether the statutory rates might change. Moreover, as OPM
pointed out when responding to concerns about the burdens
associated with recalculating the cap for an employee who
switches locations mid-year, its regulations allow agencies to
defer payment of premium pay until the end of the year. See 5
C.F.R. § 550.106(e). If agencies took advantage of that
authorization, there would be no need to recoup excess
premium pay from employees after-the-fact. See 69 Fed. Reg.
at 55,941.
The merits of OPM’s interpretation become all the more
apparent when compared with the uncertainty of the alternative
approach offered by the plaintiffs. Because the plaintiffs
believe that § 5547(b)(2) does not speak directly to the
circumstances of this case, they propose that the agency elect
to implement different premium-pay caps to govern different
parts of the year. They would apply the statute “as requiring
that the period that Plaintiffs spent on [temporary duty
assignment] in Iraq from February 2004 to June 2004 be
assessed under a cap of $130,305 and that the period from
when they were assigned to the Embassy in June 2004 to the
end of the year be assessed under the $128,200 cap.”
Appellants’ Br. 37 (brackets in original and ellipses omitted).
But there is no clear understanding of how that prorating
scheme would work in practice.
For instance, during oral argument, the plaintiffs
suggested that, as long as an employee does not exceed the
applicable cap during the time period that the cap applies—i.e.,
resetting the aggregate of the employee’s basic and premium
pay to zero each time the employee becomes subject to a new
cap—the employee could keep everything he had earned.
Oral Argument at 14:37–15:30, 52:53–56:10. But that
approach is of questionable soundness. It would allow an
17
employee in the plaintiffs’ situation to earn up to
$258,505—nearly double the otherwise-applicable annual
cap—merely by virtue of having undergone a mid-year
transfer. To the extent the plaintiffs argue that the solution
would entail applying a prorated cap on a monthly or biweekly
basis during the relevant parts of the year (a position they also
seemingly advanced during argument, Oral Argument at
14:26–14:37, 17:21–18:06), such an approach would stand at
odds with Congress’s decision not to apply § 5547(a)—the
subsection utilizing biweekly caps—during emergencies.
The evident difficulty in understanding the mechanics of the
plaintiffs’ preferred interpretation contrasts with OPM’s
straightforward alternative.
Because OPM’s resolution of the disputed question “is
based on a permissible construction of the statute,” Chevron,
467 U.S. at 843, we defer to OPM’s interpretation of
§ 5547(b)(2). Consequently, we find that it was not arbitrary
or capricious for the Department to apply OPM’s guidance in
determining the cap that applied to the plaintiffs’ premium pay
in 2004.
B.
The plaintiffs argue in the alternative that the Department
acted arbitrarily and capriciously in concluding that the August
2005 waiver had no bearing on the amount of overpayments
they received in 2004. The plaintiffs are incorrect.
In May 2005, Congress, in the Emergency Supplemental
Appropriations Act, gave executive agencies the authority to
“waive” § 5547(b)(2)’s limit on the aggregate of basic and
premium pay so that certain employees could earn up to
$200,000 without hitting the cap. The State Department
exercised that authority in August 2005. But the
Department’s waiver applied only to compensation “payable in
18
calendar year 2005.” That allowance technically extended to
pay for work performed during the last two weeks of December
2004 because the corresponding pay date for that period was
“in calendar year 2005,” i.e., on January 6, 2005. But the
Department nonetheless determined that the waiver had no
effect on the amount of the plaintiffs’ 2004 debt because the
earnings the plaintiffs received on January 6, 2005, were
excluded from the Department’s 2004 overpayment
calculations.
The plaintiffs do not dispute that compensation paid on
January 6, 2005, was excluded from their respective repayment
obligations. They nonetheless argue that the “higher pay cap
was indisputably ‘in effect’ on the last day of the calendar
year, . . . a fact that should be dispositive, even under the
Department’s construction of Section 5547.” Appellants’ Br.
40. But that argument is a non sequitur. The plaintiffs
apparently seek to invoke the language from § 5547(b)(2), but
that provision refers only to “the maximum rate of basic pay
payable for GS-15 in effect at the end of such calendar year”
and “the rate payable for level V of the Executive Schedule in
effect at the end of such calendar year.” 5 U.S.C.
§ 5547(b)(2)(A), (B). Neither the Emergency Supplemental
Appropriations Act nor the Department’s August 2005 waiver
affected the statutory GS-15 rate or the Executive Schedule V
rate. The Department’s waiver therefore had nothing to do
with § 5547(b)(2)’s operation. In fact, the waiver effectively
supplanted § 5547(b)(2)’s limit with respect to pay received
during calendar year 2005. And because the plaintiffs
challenge only the Department’s attempt to recoup
overpayments they received in 2004, the Department correctly
found the 2005 waiver to be irrelevant.
19
C.
The plaintiffs’ final challenge concerns the Department’s
denial of their requests for discretionary waivers pursuant to 5
U.S.C. § 5584. That provision enables an agency to waive
collection of an erroneous payment made to an employee when
collection “would be against equity and good conscience and
not in the best interests of the United States.” 5 U.S.C.
§ 5584(a). DAS Millette first ruled that the plaintiffs were
statutorily barred from seeking a waiver because they bore
partial responsibility for the overpayments. After the FSGB
reversed that finding on appeal, DAS Millette determined that
the factors listed in 22 C.F.R. § 34.18(b)(1)(iv) nonetheless
favored denial. The FSGB upheld that decision.
We are mindful that the plaintiffs volunteered for what
was presumably a considerably difficult and dangerous
assignment to assist the United States’ operations in Iraq in
2004. And as the FSGB itself acknowledged, “it seems
unfair” for the government to require the plaintiffs “to refund
payments for overtime work they actually performed, when
they had no real option but to perform such work, and when
those in similar positions in 2005 and subsequent years were
paid” in full for their overtime work. J.A. 898. But under the
APA’s standard of review, “a court is not to substitute its
judgment for that of the agency.” Motor Vehicle Mfrs. Ass’n
of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43
(1983). Instead, we ask whether the agency’s decision “was
based on a consideration of the relevant factors” and whether
“there has been a clear error of judgment.” Id. We conclude
that the FSGB adequately grounded its decision in the relevant
factors.
First, the plaintiffs’ failure to submit evidence addressing
any but the last of the 22 C.F.R. § 34.18(b)(1)(iv) factors
20
weighs substantially against our disturbing the agency’s
exercise of its discretion. Despite DAS Millette’s explicit
request for additional information, the plaintiffs chose not to
supplement the record with evidence about whether “collection
of the claim would cause serious financial hardship,” or
whether, “because of the erroneous payment, the employee
either has relinquished a valuable right or changed positions
for the worse.” 22 C.F.R. § 34.18(b)(1)(iv)(A), (B). We
agree with the district court that, “[g]iven the dearth of
information, the [FSGB] had no choice but to conclude that
[the] financial hardship and detrimental reliance factors
weighed against waiver.” Lubow II, 923 F. Supp. 2d at 42.
In the context of the record before it, the FSGB’s primary
rationale—that DAS Millette had already denied waivers to
other employees in “the exact same situation”—suffices to
justify its decision. The plaintiffs argue that DAS Millette’s
and the FSGB’s consideration of other employees was itself
arbitrary. To the contrary, the regulation instructs the
deciding agency official to consider whether “failure to make
restitution would result in unfair gain to the employee.” 22
C.F.R. § 34.18(b)(1)(iv)(D). That factor is not aimed to
address circumstances in which the employee obtained an
overpayment through bad faith, deliberate omission, or some
other underhanded tactic. In those situations, the statute bars
the employee from obtaining a waiver, and the agency official
would not reach the stage where 22 C.F.R. § 34.18(b)(1)(iv)’s
factors come into play. See 5 U.S.C. § 5584(b)(1); 22 C.F.R.
§ 34.18(b)(1)(i). Thus, in the absence of a contrary
explanation (which the plaintiffs do not provide), the “unfair
gain” factor seems to address precisely the assessment made by
DAS Millette and the FSGB: whether it would be inequitable
to give one employee a waiver when similarly situated
employees received no waiver. Because the FSGB based its
decision on a factor the regulation apparently requires it to
21
consider—and because the plaintiffs do not challenge the
factors themselves—we cannot say that the Department’s
determination lacked “reasoned decisionmaking.” State
Farm, 463 U.S. at 52.
The plaintiffs also object to the FSGB’s consideration of
the notice they received in November 2004 advising them that
they had already received, or might soon receive, pay
exceeding the statutory cap. The FSGB’s decision, however,
stated only that DAS Millette’s decision was “in line with
Comptroller General Decisions which have discouraged the
approval of waivers when the employee had reasonably prompt
notice that payments were or may have been erroneous, even if
the employee was not ‘at fault.’  ” J.A. 900 (emphasis added).
And the FSGB further explained that, “[w]hile our earlier
decision found that [the plaintiffs] were not at fault in
accepting or failing to prevent excess premium payments in
2004, we note that [the plaintiffs] were put on notice in
November of the year that the overpayment took place that
they were approaching or had already exceeded the pay cap.”
Id. (emphasis added).
To the extent the plaintiffs mean to argue that the FSGB
arbitrarily reversed its earlier determination that the plaintiffs
were not to blame for the overpayments, the italicized language
refutes that characterization of the FSGB’s reasoning. To the
extent the plaintiffs instead dispute the FSGB’s premise—that
the Department’s November 2004 email constituted
“reasonably prompt notice” of the possibility of
overpayments—we fail to see how that would meaningfully
support their case for a waiver. The plaintiffs offered no
evidence of detrimental reliance on any belief that they would
be able to keep their overtime pay. And the plaintiffs have
consistently argued that they had no choice about working
significant overtime hours due to the nature of their security
22
positions and the realities of the United States’ mission in Iraq
in 2004. It therefore would seem that the issue of notice is
largely irrelevant to an assessment of the equities of their case.
Thus, even if the FSGB mistakenly assumed that the
November 2004 email messages gave adequate notice that the
plaintiffs were in danger of exceeding the cap—a
determination we do not reach—a contrary finding would do
little to advance the plaintiffs’ case for a waiver.
* * * * *
We affirm the district court’s grant of summary judgment
to the defendants.
So ordered.
SENTELLE, Senior Circuit Judge, concurring: I fully concur
with the court’s judgment and much of the explanation and
reasoning leading to the same. However, one critical step of the
analysis gives me pause. The court applies the reasoning of
Chevron step two, Chevron, U.S.A., Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837, 843 (1984), to the Office
of Personnel Management (“OPM”) interpretation of 5 U.S.C.
§ 5547(b)(2), based on the parties’ apparent assumption that
there was ambiguity in the statute to be resolved by the OPM.
See Maj. Op. at 13-14. That resolution by OPM would thus be
subjected to the deferential standard of Chevron step two and
upheld if reasonable. The court reviewed the OPM
interpretation, found it reasonable, and upheld it. Id. at 14.
While I do not disagree with the conclusion, I am not sure that
the approach is fully compliant with our precedent.
As we have previously stated: “[W]e recently affirmed a
line of circuit decisions which hold that ‘deference to an
agency’s interpretation of a statute is not appropriate when the
agency wrongly believes that interpretation is compelled by
Congress.’” Peter Pan Bus Lines, Inc. v. Federal Motor Carrier
Safety Admin., 471 F.3d 1350, 1354 (D. C. Cir. 2006) (quoting
PDK Laboratories, Inc. v. DEA, 362 F.3d 786, 798 (D.C. Cir.
2004) (other citations omitted)). In the matter before us, the
OPM has expressed its conclusion that Congress spoke clearly
to the matter at issue and therefore exercised no resolution of
ambiguity. Chevron step two deference is thus inappropriate.
Specifically, the OPM stated: “While we understand the
agency’s concerns about administrative burdens, the law
expressly provides that the annual premium pay cap must be
applied to an entire calendar year and that it is based on the
applicable rates in effect at the end of the calendar year.”
Premium Pay Limitations, 69 Fed. Reg. 55941, 55941 (Sept. 17,
2004). More explicitly, the OPM stated: “Agencies cannot
2
avoid certain administrative burdens based on the express
statutory language in 5 U.S.C. 5547(b)(2), and we cannot change
the regulations without a legislative amendment to reduce or
eliminate these administrative burdens.” Id. It appears to me
that under Peter Pan Bus Lines and the cases collected therein,
we must either rule up or down on the agency’s interpretation
and not affirm on the basis of deference to its exercise of
discretion it deemed itself not to have.
Nonetheless, I concur fully in the result, as it appears to me
that the agency followed the plain meaning of the statute as
required by Chevron step one. Chevron, 467 U.S. at 842-43.
As the majority rightly observes, courts have at times
assumed without deciding the applicability of the Chevron
framework. Maj. Op. at 13; see, e.g., Humane Soc’y of U.S. v.
Locke, 626 F.3d 1040, 1054 n.8 (9th Cir. 2010). Nonetheless, I
am not convinced that the majority’s reasoning today is
consistent with our own precedent in the Peter Pan Bus Lines
line of cases. In this case, however, because I believe the OPM
interpretation is consistent with the plain language of the statute
at Chevron step one, I concur in the judgment affirming the
district court’s grant of summary judgment to the defendants.