Armstrong v. Personnel Appeals

2020 MT 301N

Opinion

12/01/2020

DA 19-0590 Case Number: DA 19-0590

IN THE SUPREME COURT OF THE STATE OF MONTANA 2020 MT 301N

APRIL ARMSTRONG, DAVID R. BARNHILL, K. AMY PFEIFER, PEGGY PROBASCO, and PATRICK QUINN,

Petitioners and Appellees,

v.

BOARD OF PERSONNEL APPEALS, MONTANA DEPARTMENT OF ADMINISTRATION, MONTANA DEPARTMENT OF PUBLIC HEALTH AND HUMAN SERVICES,

Respondents and Appellants.

APPEAL FROM: District Court of the First Judicial District, In and For the County of Lewis and Clark, Cause No. DDV-2017-732 Honorable James P. Reynolds, Presiding Judge

COUNSEL OF RECORD:

For Appellants:

Timothy C. Fox, Montana Attorney General, Jeffrey M. Doud, Assistant Attorney General, Department of Justice Agency Legal Services Bureau, Helena, Montana

Matthew R. Mitchell, Special Assistant Attorney General, Montana Department of Administration, Helena, Montana

For Appellees:

Linda M. Deola, Morrison Sherwood Wilson & Deola, PLLP, Helena, Montana Submitted on Briefs: October 28, 2020

Decided: December 1, 2020

Filed:

cir-641.—if __________________________________________ Clerk

2 Justice Jim Rice delivered the Opinion of the Court.

¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating

Rules, this case is decided by memorandum opinion and shall not be cited and does not

serve as precedent. Its case title, cause number, and disposition shall be included in this

Court’s quarterly list of non-citable cases published in the Pacific Reporter and Montana

Reports.

¶2 The Montana Department of Administration, State Human Resource Division and

the Department of Public Health and Human Services (Department), appeal from the order

entered by the First Judicial District Court, Lewis and Clark County, reversing the Board

of Personnel Appeals (Board) and remanding the case to the Board with instructions to

remand to a hearing officer for proper application of the factors within § 2-18-301(4), MCA

(2015). We affirm, restating the issues as follows:

1. Did the District Court have jurisdiction to undertake review of the decision of the Board?

2. Did the Board’s adoption of the Hearing Officer’s Second Recommended Order, which was predicated on a perceived directive from the Board, violate the due process rights of Appellees?

¶3 April Armstrong, David R. Barnhill, K. Amy Pfeifer, Peggy Probasco, and Patrick

Quinn (Appellees) are attorneys within the Child Support Enforcement Division (CSED)

of the Department. The Department employed other attorneys in its Office of Legal Affairs

(OLA). The CSED and OLA attorneys, other than those with managerial duties, were

classified at Band 7 in the Broadband Classification and Pay Plan System, and shared an

identical job code. 3 ¶4 While the attorney positions in both offices shared a job code, they were assertedly

differentiable. OLA attorneys worked in the director’s office and had certain Band 8 level

non-predominant duties. OLA attorneys were tasked with responding to requests from the

director and aiding multiple Department divisions. These responsibilities required an

ostensibly broader array of expertise for OLA attorneys.

¶5 Beginning in April 2011, Appellees individually made written and verbal requests

of the Department of Public Health and Human Services seeking an explanation of the pay

disparity, and sought pay parity among the attorneys in the two offices. The requests

largely went unanswered. In January 2012, Appellees filed a complaint in District Court.

However, because Appellees had failed to exhaust all available administrative remedies,

the District Court dismissed and remanded the cause to the Board in July 2012. During the

time the complaint was pending before the District Court, both Appellees and OLA

attorneys received market pay adjustments pursuant to a directive from the Governor. Two

of the individual Appellees, Barnhill and Quinn, received additional market pay increases

that brought their salary up to 80% of the Department’s adopted pay range. During the

market adjustment process, the assistant human resource director for the Department of

Public Health and Human Services recommended that the pay for OLA attorneys be

approximately 5% higher than the rate of pay for CSED attorneys.

¶6 Appellees filed a Step I grievance in June 2014, ultimately requesting a hearing.

The Board assigned a Hearing Officer, who conducted a three-day contested evidentiary

4 hearing from March 31 to April 2, 2015, after which the parties submitted proposed

decisions and briefing.

¶7 In October 2015, the Hearing Officer held a telephone conference with the parties

to discuss the relevance of Mashek v. DPHHS, Grievance No. 1-2013, Case No. 289-2013,

which at that time was pending on appeal to this Court. At issue in Mashek was the

interpretation of § 2-18-301(4), MCA, as related to compensation of union employees of

the State. See Mashek v. DPHHS, 2016 MT 86, ¶ 3, 383 Mont. 168, 369 P.3d 348. The

Mashek hearing officer had issued a recommended order holding that the claimants therein

had been aggrieved by receiving pay that was not internally equitable. Mashek, ¶ 6. Upon

review, the Board had rejected the recommended order, reasoning the claimants had no

independent right to internally equitable pay, but, rather, internal equity was merely one

factor to be considered, along with competitiveness and competency, during the collective

bargaining process. Mashek, ¶ 6. Upon judicial review, the District Court had reversed

the Board’s order, agreeing with the hearing officer’s initial conclusion that claimants were

entitled to pay that was internally equitable with other employees of the same title and pay

band. Mashek, ¶ 7.

¶8 The Hearing Officer in this case apparently relied on the district court’s

interpretation of the statute in Mashek in issuing his first Findings of Fact, Conclusions of

Law, and Recommended Order (First Recommended Order) in February 2016. The First

Recommended Order held the Appellees were aggrieved solely by receiving pay that was

not internally equitable as compared to the other Band 7 attorneys within the Department,

5 and required that the average base pay for OLA attorneys could not exceed 105% of that

of CSED attorneys, ostensibly in reliance of the 2012 recommendation of the Department’s

assistant human resource director. The order proposed a retroactive effective date of June

25, 2014, the date Appellees filed their Step I grievance.

¶9 Both parties submitted objections to the First Recommended Order and oral

arguments were heard by the Board on September 16, 2016. However, in April 2016, this

Court reversed the district court’s decision in Mashek, on which the Hearing Officer had

based his First Recommended Order. Mashek v. DPHHS, 2016 MT 86, 383 Mont. 168,

369 P.3d 348. We determined the pay factors in § 2-18-301(4), MCA—competency,

internal equity, and competitiveness—did not constitute stand-alone rights but were instead

factors to be considered and weighed equally against one another. Mashek, ¶¶ 12, 15. In

response, the Board remanded the matter to the Hearing Officer to reconsider the issue in

light of the Mashek holding (Order of Remand). In its deliberations, the Board noted that

“it could play out that the hearing officer that applies [the three statutory factors] could

send a recommended order back that” reached the same conclusion as the First

Recommended Order. In the Order of Remand, the Board instructed the Hearing Officer

to consider the “totality of circumstances in weighing all three factors” articulated in

§ 2-18-301(4), MCA, and to give “[p]roper regard . . . to the employer’s decisions

concerning pay disparities unless such decisions appear to be factually unsupported.” The

Appellees did not appeal the Board’s Order of Remand.

6 ¶10 In May 2017, the Hearing Officer issued a second Findings of Fact, Conclusions of

Law, and Recommended Order (Second Recommended Order), reaching a determination

that Appellees had not been aggrieved and were entitled to no backpay. The Hearing

Officer expressed hostility toward the Board’s Order of Remand, indicating he felt directed

to credit evidence from the Department and produce an outcome favorable to the

Department. Approximately one-half of the Second Recommended Order dealt with the

Hearing Officer’s concerns about the perceived directive from the Board.

¶11 Undertaking review of the Second Recommended Order upon objections, the Board

expressed dismay regarding the Hearing Officer’s perceptions of the remand order, but

elected to proceed by adopting the Second Recommended Order’s factual findings, legal

conclusions, and ultimate recommendation, while deleting the disparaging discussion. The

Board’s Final Agency Decision was entered on August 25, 2017. On September 20, 2017,

the Appellees timely petitioned for judicial review of the Board’s Final Agency Decision,

and the District Court received briefing and oral argument.

¶12 On August 12, 2019, the District Court reversed the Board’s adoption of the Second

Recommended Order and remanded to the Board with instructions to remand the matter

back to a hearing officer to correctly apply all three § 2-18-301(4), MCA, factors in light

of our decision in Mashek, and to consider whether “intervening administrative changes

within DPHHS” impact the decision. The District Court reasoned the Board’s action on

the Hearing Officer’s orders “substantially affected the rights of the [Appellees] to a fair

and impartial hearing.” The Department appeals.

7 ¶13 A district court’s review of an agency’s findings is limited to a review of the record.

Section 2-4-704(1), MCA. A district court may not substitute its judgment for that of the

agency for determining weight of the evidence for questions of fact, but it may reverse or

modify the agency decision if substantial rights have been prejudiced. Section 2-4-704(2),

MCA. This standard of review applies not only to a district court’s review of the agency’s

decision, but to our subsequent review of the district court’s decision on appeal. Blaine

Cnty. v. Stricker, 2017 MT 80, ¶ 16, 387 Mont. 202, 394 P.3d 159 (citing In re Transfer of

Ownership & Location of Mont. All-Alcoholic Bevs. License No. 02-401-1287-001, 2007

MT 192, ¶ 6, 338 Mont. 363, 168 P.3d 68). “We review an order from a district court

acting in an appellate capacity to determine whether the district court reached the correct

conclusions under the appropriate standards of review.” Mashek, ¶ 8 (citation omitted).

This court exercises plenary review for constitutional questions. State v. Stock, 2011 MT

131, ¶ 16, 361 Mont. 1, 256 P.3d 899 (citing State v. Norquay, 2011 MT 34, ¶ 13, 359

Mont. 257, 248 P.3d 817). All other legal conclusions are questions of law subject to de

novo review. Dick Irvin Inc. v. State, 2013 MT 272, ¶ 18, 372 Mont. 58, 310 P.3d 524

(citing In re J.D.N., 2008 MT 420, ¶ 8, 347 Mont. 368, 199 P.3d 189).

¶14 As a threshold matter, the Department argues the District Court lacked jurisdiction

over the Board’s Order of Remand because the Appellees failed to timely appeal that order.

Section 2-4-702(2)(a), MCA, requires that an aggrieved party file a petition in district court

within 30 days of the final agency decision to preserve their right to appeal. The

Department cites Whitehall Wind, LLC v. Mont. PSC, 2010 MT 2, 355 Mont. 15, 223 P.3d

8 907. There, Whitehall Wind argued the Public Service Commission could not appeal from

a district court’s order of remand because it was not yet a final order. Whitehall Wind,

¶ 17. We held the appeal was permissible, reasoning a district court’s order of remand was

a final order for purposes of appeal. Whitehall Wind, ¶ 18. However, that rationale does

not apply equally to the remand order issued here by the Board. The language of the statute

requires appeals to be brought “within 30 days after [] the final written decision of the

agency[.]” Section 2-4-702(2)(a), MCA (emphasis added). When the Board remanded

this matter to the Hearing Officer, the matter was still pending within the agency. A final

agency decision was not rendered until the Board issued its “Final Agency Decision”

following the Hearing Officer’s Second Recommended Order. We conclude the District

Court had jurisdiction to hear the matters raised in the petition for judicial review.

¶15 The Department next argues that the District Court “erred in its interpretation and

conclusions about [the Board’s] Order of Remand because nothing therein directed the

hearing[] examiner how to weigh the evidence or to defer to DPHHS in any way.” While

there is merit to the Department’s argument about the contents of the Order of Remand,

which a disinterested reading of the Order confirms, our decision does not turn on whether

the Board actually directed a particular outcome; rather, of import is that the Hearing

Officer’s determinations within the Second Recommended Order appear in all probability

to be the result of a directive he perceived within the Board’s Order of Remand—an

inappropriate basis for decision. We must be mindful that “[n]o person shall . . . be

deprived of life liberty, or property, without due process of law[.]” U.S. Const. amend. V.

9 This applies doubly to the State. U.S. Const. amend. XIV, § 1; Mont. Const. art. II, § 17.

The protections of due process include the “opportunity to be heard ‘at a meaningful time

and in a meaningful manner.’” Connell v. Dep’t of Soc. & Rehab. Servs., Child Support

Enf’t Div., 280 Mont. 491, 496, 930 P.2d 88, 91 (1997) (citing Montana Power Co. v.

Public Service Comm., 206 Mont. 359, 368, 671 P.2d 604, 609 (1983)). Implicit in this is

the guarantee that the hearing proceed in a manner consistent with essential fairness, which

at a minimum requires that “an administrative hearing [] constitute a fair trial, conducted

in accordance with fundamental principles of fair play and applicable procedural standards

established by law.” Connell, 280 Mont. at 496, 930 P.2d at 91 (citation and internal

quotation omitted). See also Rippo v. Baker, 137 S. Ct. 905, 907 (2017) (holding the

appearance of bias and impropriety is sufficient to violate due process rights). We conclude

that the apparent infringement upon Appellee’s due process rights because of this

unfortunate procedural misunderstanding must be addressed by another remand to a

hearing officer.

¶16 We have determined to decide this case pursuant to Section I, Paragraph 3(c) of our

Internal Operating Rules, which provides for memorandum opinions. In the opinion of the

Court, the case presents a question controlled by settled law or by the clear application of

applicable standards of review.

¶17 The District Court’s remand order is affirmed.

/S/ JIM RICE

10 We concur:

/S/ INGRID GUSTAFSON /S/ BETH BAKER /S/ LAURIE McKINNON /S/ JAMES JEREMIAH SHEA