Homeland Security and Labor-Management Relations: NTEU v. Chertoff

^Pr^ep^ar^{ed f}^o^r^M^e^m^b^ers^an^d^Com^mⁱ^t^t^ees^of^C^ong^r^e^ss

The Homeland Security Act of 2002 grants the Secretary of Homeland Security and the Director
of the Office of Personnel Management (“OPM”) authority to develop a separate human
resources management system for the employees of the Department of Homeland Security
(“DHS”). On February 1, 2005, final regulations to define and implement the new system were
published in the Federal Register. Shortly after the regulations were issued, the National Treasury
Employees Union (“NTEU”) and several other labor organizations filed a lawsuit alleging that
DHS and OPM exceeded the authority granted to them under the Homeland Security Act. On
August 12, 2005, a U.S. District Court for the District of Columbia enjoined parts of the new
regulations involving labor-management relations and the Merit Systems Protection Board in
NTEU v. Chertoff. The district court on October 7, 2005, denied a motion by DHS and OPM to
modify its injunction of labor-management relations regulations. On June 27, 2006, the U.S.
Court of Appeals for the District of Columbia Circuit affirmed some holdings of the district court,
reversed others, and remanded the case to the district court for further proceedings consistent with
its opinion. This decision was not appealed to the U. S. Supreme Court. On October 17, 2006, the
district court modified the August 12, 2005 injunction to comport with the decision of the court of
appeals, remanded the case to DHS and OPM, and ordered them to inform the court by mid-2007
whether they plan to revise or abandon the enjoined final labor-management regulations. In
March of 2007 DHS announced its intent to implement adverse action and appeal procedures that
were not enjoined. The Merit Systems Protection Board in October of that year issued interim
regulations with a request for comments to accommodate appeals from DHS. In a status report
regarding the enjoined labor-management regulations, the agencies reported to the district court
that they had not determined whether to revise or abandon them, but noted that a provision of the
Consolidated Appropriations Act, 2008 enacted in December of 2007 denied funds to revise them
This report provides a summary of the opinions of the district court and court of appeals and
subsequent developments.

Collective Bargaining................................................................................................................2
Homeland Security Labor Relations Board..............................................................................4
Role of the Federal Labor Relations Authority.........................................................................5
Merit Systems Protection Board Mitigation of Penalties..........................................................6
Merit Systems Protection Board Procedures.............................................................................7
Scope of the Injunction.............................................................................................................8
Author Contact Information..........................................................................................................10

he Homeland Security Act of 2002¹ provides the Secretary of Homeland Security and the
Director of the Office of Personnel Management (“OPM”) with the authority to develop a
separate human resources management system for the employees of the Department of T

Homeland Security (“DHS”). On February 1, 2005, final regulations to define and implement the ²
new system were published in the Federal Register. Shortly after the regulations were issued, the
National Treasury Employees Union (“NTEU”) and several other labor organizations filed a
lawsuit, alleging that DHS and OPM exceeded the authority granted to the agencies under the
Homeland Security Act. On August 12, 2005, a U.S. District Court for the District of Columbia ³
enjoined parts of the new regulations in NTEU v. Chertoff.
At issue in NTEU were those sections of the new regulations that involve labor-management
relations and the role of the Merit Systems Protection Board (“MSPB”), the agency that hears and
adjudicates appeals by federal employees who have been subject to adverse personnel actions.
Other sections of the new regulations, including those concerned with pay administration and
performance management, were not challenged.
The district court concluded that subpart E of the new regulations, which includes all of the labor-
management sections, and section 9701.706(k)(6), which restricts the MSPB’s ability to modify
penalties imposed by DHS, must be enjoined. The court maintained:
^A^s^cu^rren^t^l^y^propos^{ed, t}^h^os^{e prov}ⁱ^sⁱ^oⁿ^s^w^o^u^l^{d v}ⁱ^ol^at^e^cert^aⁱⁿ^s^p^eci^fⁱ^{c requ}ⁱ^r^e^m^ent^s
^es^tablis^h^e^{d b}^y^C^oⁿ^g^r^e^s^sⁱⁿ^t^h^e^[Hom^e^l^an^{d Sec}^u^rit^y^A^c^{t]. T}^h^ey^w^o^u^l^dⁿ^o^{t ‘}^e^ns^u^r^{e collecti}^v^e
^b^a^r^g^ainⁱⁿ^g^,^’^w^o^u^l^d^f^uⁿ^d^a^m^eⁿ^t^a^ll^y^alter^[^F^ed^er^{al L}^a^b^o^r^Relatioⁿ^s^A^u^t^h^o^r^it^y^]^j^u^rⁱ^sd^ictioⁿ^{. . .}⁴
^an^d^w^o^u^l^{d create an}^{appeal pr}^oce^{ss at MSP}^B^th^{at is n}^o^t^‘^f^air^.^’
On October 7, 2005, the district court denied a motion from DHS and OPM to modify its ⁵
injunction relating to labor-management relations. The U.S. Court of Appeals for the District of
Columbia Circuit on June 27, 2006, affirmed some holdings of the district court and reversed ⁶⁷
others. The decision of the court of appeals was not appealed to the U.S. Supreme Court. On
October 17, 2006, the district court modified its injunction of August 12, 2005 to conform to the ⁸
decision of the court of appeals.
This report examines the opinions of the district court and court of appeals and discusses
subsequent developments.

¹^P^.^L^.¹⁰^7-²⁹⁶^,¹¹⁶^Sta^t^.²¹³⁵⁽²⁰⁰²⁾⁽^c^o^d^if^ie^{d in}^r^e^le^v^a^{nt pa}^r^t^a^t⁵^U^.^S.C^.^§§⁹⁷⁰¹^et^seq^.^).
²^D^e^pa^r^t^m^e^{nt of}^H^o^m^e^la^{nd Se}^c^u^rⁱ^t^y^H^u^m^a^{n R}^e^s^our^c^e^s^Ma^na^g^e^m^e^{nt Sy}^s^t^em^{, 70 Fe}^{d. R}^e^g^.⁵²⁷²⁽^F^e^b^.^{1, 2}⁰⁰⁵⁾⁽^t^o^be
^c^odifⁱ^e^d^a^t^{5 C}^.^F.R^.^pt.⁹⁷⁰¹⁾^.
³³⁸^{5 F}^.^Su^pp^.2^{d 1}⁽^D^.D^.C^.²⁰⁰⁵⁾^.
⁴^N^T^EU^{, 385}^F.S^u^p^p^.^{2d a}^t³⁸^.
⁵^N^T^EU^v^.^Che^r^toff^{, 394}^F.S^u^p^p^.²^{d 1}³⁷^(D^.D^.C.²⁰^{05) (“}^N^T^EU^II”^).
⁶^N^T^EU^v^.^C^h^e^r^tof^f^{, 452}^F.^3d⁸³⁹⁽^D^.C^{. C}ⁱ^r^.²⁰⁰⁶⁾^.
⁷^Bure^a^u^of^Na^tio^na^{l A}^ffa^{irs, “}^D^H^S^De^cⁱ^de^{s It W}^{ill Not A}^ppe^a^l^Ma^x^[^H^R^]^Rulⁱ^ng^{: De}^cⁱ^si^on^A^g^aⁱ^{nst L}^a^{bor Re}^la^tions
^Sy^s^t^e^m^{to Sta}ⁿ^d^,⁴⁴^Go^vern^m^en^t^R^e^l^a^tⁱ^oⁿ^s^R^e^po^rt¹⁰²⁸⁽^O^c^t^{. 3, 20}⁰⁶⁾^.
⁸^O^r^de^r^,^N^T^EU^v^.^C^h^e^r^tof^f^,^Cⁱ^v^.^A^c^{tion N}^o^.^05-²⁰^{1 (}^R^MC⁾⁽^O^c^t^.¹⁷^,²⁰⁰⁶⁾^.

Although the Homeland Security Act grants the Secretary of Homeland Security and the Director
of OPM broad authority to develop a new personnel system, it indicates that the system must
meet certain conditions. For example, the new system has to be “flexible,” “contemporary,” and ⁹
may “not waive, modify, or otherwise affect” various provisions of law. The act identifies ¹⁰
specific chapters of title 5, U.S. Code, that may not be waived by the new system. While chapter
71 of such title, which governs collective bargaining and labor-management relations for most
federal employees, is not identified and thus can be waived by the new system, the act includes
other language that preserves some form of collective bargaining for DHS employees:
^[T^h^eⁿ^e^w^s^y^s^t^e^m^{] s}^h^{all . . . e}ⁿ^s^u^{re t}^h^{at e}^m^p^l^o^y^ees^m^a^y^org^aⁿⁱ^{ze, barg}^aiⁿ^collecti^v^el^y^,^aⁿ^d
^p^a^r^tⁱ^cⁱ^p^a^t^e^t^h^r^o^ug^{h l}^a^b^o^r^or^gaⁿⁱ^z^a^tⁱ^o^{ns o}^f^t^h^eⁱ^r^o^wⁿ^ch^oosⁱⁿ^gⁱⁿ^deci^sⁱ^ons^w^hⁱ^c^h^aff^ect^t^h^e^m^,¹¹
^su^b^j^{ect to}^an^y^ex^cl^u^s^ioⁿ^f^r^o^m^co^v^e^r^a^g^e^o^r^li^m^itatⁱ^oⁿ^oⁿⁿ^e^g^o^tiab^ilit^y^es^tab^lis^h^e^d^b^y^la^w^.
Congress did not define the term “collective bargaining” for purposes of the act, and the unions
maintained that the personnel system established by the agencies lacked the core elements of ¹²
collective bargaining.
The new regulations recognize that “each employee has the right to form, join, or assist any labor ¹³
organization.” At the same time, however, the regulations limit the subjects that may be
negotiated by the parties, restrict the powers and duties of the Federal Labor Relations Authority
(“FLRA”), and create a Homeland Security Labor Relations Board (“HSLRB”) that will assume ¹⁴
many of the FLRA’s functions. In addition, the regulations allow DHS to issue binding agency-
wide opinions without regard to the terms of a collective bargaining agreement, and permit DHS
managers to “take whatever other actions may be necessary to carry out the Department’s ¹⁵
mission.” In their complaint, the unions argued: “[U]nder the new regime, management
possesses an unlimited unilateral right to issue agency-wide directives to take what few matters
remain negotiable off the bargaining table, and/or to invalidate provisions of existing collective ¹⁶
bargaining agreements.” Nevertheless, in response to the unions’ concerns, DHS and OPM ¹⁷
insisted that the regulations are necessary to ensure “maximum flexibility and accountability.”

⁹^Se^e⁵^U.^S.C.^§⁹⁷⁰¹^(b⁾⁽¹^)-(³⁾^.
¹⁰^Se^e⁵^U.^S.C.^§⁹⁷⁰¹^(c)(2⁾^.
¹¹^{5 U}^.^S^.^C^.^{§ 9}⁷⁰¹⁽^b⁾⁽⁴⁾^.
¹²^Se^e^NT^E^U^,³⁸⁵^F^.^S^u^pp^.²^d^at²⁵^(“T^h^{e P}^l^aiⁿ^tⁱ^f^f^Unⁱ^oⁿ^s^argu^{e t}^h^at^ever^y^s^y^st^e^m^o^f^co^l^l^ectⁱ^v^{e b}^a^rgaiⁿⁱⁿ^g^ever
^e^s^ta^blis^he^{d by}^C^ong^r^e^s^s^ha^s^ha^d^t^h^r^e^e^c^r^itic^a^l^c^o^m^pone^nts^:⁽¹⁾^a^r^e^quir^e^m^e^{nt tha}^t^la^b^o^r^aⁿ^{d m}^a^na^g^e^m^e^{nt ba}^r^g^aⁱ^{n in}
^g^{ood f}^a^ith^ov^e^r^c^ondi^tio^ns^of^e^m^p^l^oy^m^e^nt^f^o^r^pur^pos^e^s^of^r^eachⁱⁿ^g^an^agree^m^en^t^;⁽²^{) a}^p^r^o^vⁱ^sⁱ^oⁿ^t^h^at^t^h^{e agree}^m^en^t^s
^reach^ed^{as a resu}^l^t^o^f^b^a^rgaiⁿⁱⁿ^g^{are b}ⁱⁿ^dⁱⁿ^{g on}^bo^t^h^p^a^rtⁱ^e^{s equ}^a^l^l^y^;^an^d⁽³^{) t}^h^{e est}^a^b^lⁱ^s^h^m^en^t^o^f^{a n}^e^u^t^ral^f^o^ru^m^f^o^r
^re^solv^ing^disp^ute^s^.”^).
¹³⁵^C^.^F.^R^.^§⁹⁷⁰¹^.5⁰⁷^.
¹⁴^S^ee^{CRS Rep}^o^{rt RL}³²²⁵⁵^,^Hom^e^land^Se^c^u^rity^{: Fi}^na^{l Re}^g^u^la^tio^ns^{for t}^h^{e Dep}^a^r^tmen^t^o^f^H^o^mela^nd^S^ecu^{rity Hu}^man
^Re^s^our^c^e^s^M^anage^m^e^nt^Sy^s^t^e^m⁽^Sub^par^t^E)^C^o^m^par^e^d^W^{ith C}^u^r^r^e^{nt L}^a^w^,^by^J^{on O}^.^S^h^im^a^buk^ur^o.
¹⁵⁵^C^.^F^.^R^.^{§§ 97}⁰¹^.5⁰⁹⁽^b)^{, 97}^01.⁵¹¹⁽^a⁾⁽²⁾^.
¹⁶^C^o^m^p^la^{int f}^o^r^D^e^c^l^a^r^a^t^or^y^a^{nd I}ⁿ^junc^tiv^e^R^e^lie^f^a^t^{3, N}^T^EU^v^.^C^h^e^r^tof^f^{, C}ⁱ^v^.^A^c^{tion N}^o^{. 0}⁵^-²⁰¹⁽^R^MC⁾⁽^J^aⁿ^.^27,
²⁰⁰⁵⁾^.
¹⁷⁷⁰^Fe^{d. R}^e^g^.^a^t⁵²⁷³^.

The Administrative Procedure Act permits a reviewing court to set aside formal agency action if it ¹⁸
is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” In
general, a court will review such action in accordance with a two-part test established by the U.S. ¹⁹
Supreme Court in Chevron U.S.A. v. N.R.D.C. First, the court will consider whether Congress
has spoken directly to the precise question at issue. If Congress has spoken directly to the
question at issue, the court “must give effect to the unambiguously expressed intent of ²⁰
Congress.” Second, the court will analyze the reasonableness of the agency’s interpretation.
If Congress has failed to speak directly to the question at issue, and the statute is silent or
ambiguous, the court will attempt to determine if the agency’s actions are based on a permissible ²¹
construction of the statute. If the agency’s interpretation is reasonable, the court may not
substitute its own construction of the statutory provision. However, deference is not owed to the
agency’s actions if they construe a statute in a way that is contrary to congressional intent or that ²²
frustrates congressional policy.
Citing congressional understanding of what constitutes “collective bargaining,” as evidenced by ²³
the Federal Sector Labor Management Relations Act, and general contract principles, the district
court determined that the absence of an unmistakably enforceable contract rendered the
regulations impermissible:
^Th^e^sⁱ^{ne q}^ua^non^of^g^ood-^f^a^{ith barg}^ainⁱ^ng^is^an^eⁿ^f^o^{rceable con}^t^{ract on}^{ce th}^{e parties}^reach
^ag^ree^m^eⁿ^{t. T}^h^{e H}^R^S^y^s^t^e^m^do^esⁿ^o^{t lead to e}ⁿ^f^o^{rceable con}^t^racts^an^d^thu^s^f^a^ils^{to co}^m^p^l^y
^wⁱ^t^h^t^h^{e direction}^s^o^f^C^ong^res^s^{to en}^s^u^{re e}^m^plo^y^{ee collecti}^v^e-^barg^aiⁿⁱ^ng^ri^g^h^t^s^.
^T^h^{e R}^e^g^u^l^at^ion^s^f^a^{il becau}^s^e^aⁿ^y^collecti^v^{e barg}^ainingⁿ^e^g^o^ti^ation^s^pu^rs^u^aⁿ^t^toⁱ^t^s^t^e^rm^s^a^r^e
^illu^so^r^y^{: t}^h^{e Secr}^etar^y^r^e^taiⁿ^sⁿ^u^m^e^r^o^u^s^av^eⁿ^u^e^{s b}^y^w^h^ic^h^s/h^e^caⁿ^uⁿ^ila^ter^a^ll^y^d^eclar^e
^coⁿ^t^r^{act ter}^m^sⁿ^u^{ll a}ⁿ^d^v^o^id^{, w}ⁱ^t^h^o^u^{t p}^r^io^rⁿ^o^tice^to^th^e^Uⁿⁱ^oⁿ^s^o^r^e^m^p^l^o^y^ees^an^d^wⁱ^t^h^o^u^t²⁴
^b^a^r^g^aⁱⁿⁱ^{ng o}^r^r^e^c^o^ur^se^.
The district court concluded that a system of “collective bargaining” that permits the unilateral ²⁵
repudiation of agreements by one party is not collective bargaining at all. Consequently, the
district court maintained that no Chevron deference was due to DHS and OPM because Congress
spoke directly to the issue of collective bargaining and directed the agencies to ensure collective
bargaining for DHS employees.
The D.C. Circuit, citing the definition of “collective bargaining” in the Federal Sector Labor
Management Relations Act, affirmed the district court’s holding that the regulations failed to
comply with the mandate in the Homeland Security Act, codified at 5 U.S.C. § 9701(b)(4), that

¹⁸^{5 U}^.^S^.^C^.^{§ 7}⁰⁶⁽²⁾⁽^A⁾^.
¹⁹⁴⁶^{7 U}^.^S^.⁸³⁷⁽¹⁹⁸⁴⁾^.
²⁰^Id^{. a}^t⁸⁴^3.
²¹^C^h^e^v^r^on,⁴⁶^{7 U}^.^{S. a}^t⁸⁴^2-⁴³^.
²²^S^{ee i}^d^.^a^t⁸⁴³^n.^{9 (}^“^T^h^e^judⁱ^cⁱ^a^r^y^is^the^fⁱ^na^{l a}^u^t^horⁱ^t^y^{on is}^s^u^e^s^of^s^t^a^t^utor^y^c^ons^tr^uc^tio^{n a}ⁿ^{d m}^u^s^t^r^e^je^c^t
^a^d^mⁱ^nistra^tiv^e^c^onstruc^{tions w}^h^ic^{h a}^r^e^c^ontra^ry^{to c}^l^e^a^r^c^ong^re^ssiona^{l inte}^{nt .}^{. .}^If^a^c^{ourt, e}^m^ploy^ing^tra^d^itio^na^{l to}^ols
^of^s^t^a^t^utor^y^c^ons^tr^uc^tio^{n, a}^s^c^e^r^ta^ins^tha^t^C^ong^r^e^s^s^ha^{d a}ⁿⁱⁿ^te^nti^on^{on t}^h^e^pr^e^cⁱ^s^e^q^u^e^s^tio^{n a}^t^is^s^u^e^,^t^h^a^t^inte^ntio^{n is}^the
^la^w^a^{nd m}^u^s^t^be^gⁱ^v^e^{n ef}^f^e^c^t^.”⁾^.
²³^{5 U}^.^S^.^C^.^§§⁷¹⁰¹^et^seq^.
²⁴^N^T^EU^{, 385}^F.S^u^p^p^.^{2d a}^t²⁵^.
²⁵^Id^.^a^t³⁰^.

the new personnel system must “ensure that employees may . . . bargain collectively.”²⁶ It agreed
with the district court that the Department’s attempt to reserve to itself the right unilaterally to
abrogate lawfully negotiated and executed agreements was plainly unlawful because abrogating ²⁷
them would nullify the act’s specific guarantee of collective bargaining rights. The D.C. Circuit
emphasized that its holding related only to the power of DHS to abrogate collectively bargained
contracts that were executed pursuant to the human resources management system; its holding did
“nothing to undercut the Department’s authority to . . . supersede labor contracts inherited from ²⁸
the previously independent agencies that now constitute DHS.”
Although the district court found that the new regulations failed adequately to allow collective
bargaining, it nevertheless maintained that limitations on the subjects that could be bargained
were permissible. Acknowledging the broad authority granted to DHS and OPM by the Homeland
Security Act, the court reasoned that the agencies were entitled to Chevron deference for their ²⁹
decisions that identified subjects for collective bargaining.
The D.C. Circuit reversed this holding insofar as it limited the scope of bargaining to employee-³⁰
specific personnel matters such as those that affect discipline, discharge, and promotion. The
district court erred, the D.C. Circuit maintained, by giving precedence to the Department’s
authority granted in the Homeland Security Act to modify the provisions of chapter 71 of title 5
of the U.S. Code, which relates to labor-management relations, over the command in another
provision of the act codified in 5 U.S.C. § 9701(b)(4), which ensures the right of employees to ³¹
bargain collectively. Because the final regulations render meaningless “collective bargaining,”
which the Homeland Security Act mandates that the Department must observe, the appeals court ³²
held that they are not entitled to deference.
The new regulations provide for the creation of a new entity, the HSLRB, that will adjudicate
disputes concerning the scope of bargaining and the duty to bargain in good faith; conduct
hearings and resolve complaints of specified unfair labor practices; resolve exceptions to ³³
arbitration awards; and resolve negotiation impasses. The unions argued that the HSLRB was ³⁴
“inconsistent with the traditional concept of ‘collective bargaining.’” In particular, the unions
questioned the independence of the HSLRB, whose members are to be selected by the Secretary
of Homeland Security.
The district court concluded that the unions’ concerns with the HSLRB were based on policy
choices made by DHS and OPM, rather than the agencies’ failure to appropriately implement the

²⁶^N^T^EU^{, 452}^F.^{3d a}^t⁸⁴^4.
²⁷^Id^.^S^{ee a}^l^so⁴⁵²^F.3^d^a^t⁸⁵^8-⁶⁰^.
²⁸^N^T^EU^{, 452}^F.^{3d a}^t⁸⁶^0.
²⁹^N^T^EU^{, 385}^F.S^u^p^p^.^{2d a}^t²⁹^.
³⁰^N^T^EU^{, 452}^F.^{3d a}^t⁸⁴^4,⁸⁶^1.
³¹^Id^.^a^t⁸⁶^1.
³²^Id^.^a^t⁸⁶^4-⁶⁵^.
³³^Se^e^{5 C}^.^F.R^.^§⁹⁷^01.⁵⁰^9.
³⁴^N^T^EU^{, 385}^F.S^u^p^p^.^{2d a}^t²⁹^.

Homeland Security Act. The district court deferred to the agencies and their ability to establish a
new personnel system that includes a new labor relations entity:
^[B^]y^deliberatel^y^an^{d clearl}^y^gⁱ^vⁱ^ng^t^h^{e Ag}^eⁿ^cies^t^h^{e au}^t^h^orit^y^{to es}^tabli^s^h^an^H^R^s^y^s^t^em^f^o^r
^DHS^wⁱ^t^h^ou^{t ref}^e^reⁿ^{ce to th}^{e FL}^R^A^{or any}^ot^h^e^{r adj}^u^dicativ^{e s}^y^s^t^e^m^f^o^r^l^a^b^o^r^-^m^aⁿ^ag^em^en^t³⁵
^dⁱ^sp^u^t^{es, Co}ⁿ^g^r^e^{ss le}^f^t^{it to}^th^{e Ex}^ecu^ti^v^e^B^r^an^c^h^to^f^o^r^m^u^l^a^t^{e th}^{at s}^y^ste^m^.
Unlike the district court, the D.C. Circuit did not defer to the judgment of DHS and OPM, but
ruled that adjudicating the matter of the HSLRB at this time would be premature. It said that a
decision on the Board’s role would have to wait until DHS revises its Board regulation in light of ³⁶
the decisions of the district court and the court of appeals relating to the role of the FLRA.
The new regulations provide that the FLRA may conduct hearings and resolve complaints of ³⁷
specified unfair labor practices. In addition, the regulations require the FLRA to review HSLRB ³⁸
decisions and issue final decisions. Under the regulations, the FLRA must defer to the findings
of fact and interpretations made by the HSLRB and sustain the HSLRB’s decision unless the
party requesting review shows that the decision was either (1) arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law; (2) based on error in applying the HSLRB’s ³⁹
procedures; or (3) unsupported by substantial evidence.
The unions argued that DHS and OPM exceeded their statutory authority by dictating to the
FLRA, an independent agency, the “kinds of disputes it will or will not adjudicate and how it will ⁴⁰
do so.” The unions emphasized that the FLRA’s jurisdiction is established by statute, and that its
role and functions are not subject to the control of other executive branch agencies. Moreover,
Congress did not confer additional jurisdiction upon the FLRA in the Homeland Security Act.
Although the district court acknowledged that DHS and OPM could have waived the application
of chapter 71 of title 5, U.S. Code, and were not required to use the FLRA, it concluded that the
agencies could not “commandeer the resources of an independent agency” and “fundamentally” ⁴¹
transform its functions absent a clearer indication of congressional intent. The district court
found that the regulations impose an appellate role that is foreign to the FLRA, and require a ⁴²
deferential standard of review that is at odds with the FLRA’s status as an independent agency.
The district court noted that an agency’s interpretation of a statute is not entitled to deference ⁴³
when it goes beyond the meaning that the statute can bear. Here, the district court maintained

³⁵^Id^.
³⁶^N^T^EU^{, 452}^F.^{3d a}^t⁸⁶^5.
³⁷⁷⁰^Fe^{d. R}^e^g^.^a^t⁵³³⁵⁽^§⁹⁷⁰¹^.5¹⁰⁾^.^T^h^e^FL^R^A^m^a^y^c^onduc^t^he^a^r^ing^s^a^{nd r}^e^s^o^lv^e^c^o^m^p^la^ints^of^uⁿ^f^a^ir^la^bor^pr^a^c^tic^e^s
^unde^r⁵^C^.^F.R^.^{§ 97}^01.⁵¹⁷⁽^a⁾⁽¹⁾^-⁽⁴⁾^,⁽^b⁾⁽¹⁾^-⁽⁴⁾^.
³⁸^Id^.
³⁹⁵^C^.^F.^R^.^§⁹⁷⁰¹^.5⁰⁸⁽^h⁾⁽¹⁾^.
⁴⁰^Com^p^la^int,^sup^r^a^no^te¹⁶^a^t¹⁴^.
⁴¹^N^T^EU^{, 385}^F.S^u^p^p^.^{2d a}^t³²^.
⁴²^Id^.
⁴³^Id^.

that the regulations imposed changes to the FLRA that exceeded the agencies’ statutory authority
under the Homeland Security Act to “modify” or “affect” chapter 71 of title 5, U.S. Code.
The D.C. Circuit affirmed this holding, saying that nothing in the Homeland Security Act ⁴⁴
authorizes the Department to regulate the jurisdiction and activities of an independent agency.
The unions challenged the authority of DHS and OPM in jointly issuing final DHS regulations to
change the standard by which the MSPB might mitigate the penalty for employee misconduct.
One of those regulations, codified at 5 C.F.R. § 9701.706(k)(6), provides that the Board may not
modify a penalty imposed by DHS unless it is “so disproportionate to the basis for the action as to
be wholly without justification” and that when a penalty is mitigated “the maximum justifiable
penalty must be applied.”
The unions asserted that this regulation violates 5 U.S.C. § 9701(f)(2)(C), a provision of the
Homeland Security Act, which provides that any regulations issued pursuant to section 9701
“shall modify procedures under chapter 77 [of title 5 of the U.S. Code entitled “Appeals”] only
insofar as such modifications are designed to further the fair, efficient, and expeditious resolution ⁴⁵
of matters involving the employees of the Department.”
DHS and OPM countered that they were not constrained by the requirement in section 9701(f)(2)
because, they alleged, the mitigation standard is not derived from chapter 77 of title 5, U.S. Code,
which relates to appeals, but instead from chapter 75 “Adverse Actions,” which states that “an
agency may take an adverse action against an employee ‘only for such cause as will promote the ⁴⁶
efficiency of the [civil] service.’” They argued in the alternative that modifying the mitigation
authority of the Board fully comports with statutory requirements as interpreted by the court that ⁴⁷
reviews MSPB decisions, the Court of Appeals for the Federal Circuit.
The district court rejected both contentions. The district court found that the mitigation standard
is derived from chapter 77, the appeals chapter of title 5, not chapter 75, the adverse actions
chapter, and, consequently, that any modification of chapter 77 procedures, to comply with
section 9701(f)(2)(C) of title 5, had to be “fair, efficient, and expeditious.” The district court also
observed that the contention by DHS and OPM that the modification of the Board’s mitigation
authority fully meets statutory requirements as interpreted by the Court of Appeals for the Federal
Circuit was seriously flawed and that the cases cited by these agencies did not support this
contention.
The district court said that the mitigation standard in the final regulation violates the
congressional requirement in 5 U.S.C. § 9701(f)(2)(C) because that standard modifies chapter 77
procedures in a manner that is not fair. The district court indicated that when Congress insisted on
fairness, it did not intend that DHS could discipline or discharge employees without effective
recourse. The mitigation standard in the DHS-OPM regulation that limits the ability of MSPB to

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mitigate a penalty only found to be “so disproportionate” as to be “wholly without justification” ⁴⁸
would render MSPB review “almost a nullity.” Because the decision of the MSPB rather than
the decision of the employing agency is subject to judicial review, the court maintained that this ⁴⁹
mitigation standard “could effectively insulate DHS adverse actions from review.”
The district court stated that this standard “fails to measure up to the sense of Congress that
‘employees of the Department are entitled to fair treatment in any appeals,’ 5 U.S.C. §

9701(f)(1)(A), or Congress’s express requirement that any [modifications to chapter 77]

procedures ‘further the fair . . . resolution of matters involving the employees of the ⁵⁰
Department.’” The district court concluded that because the agencies failed to apply the plain
meaning of section 9701(f) of title 5, U.S. Code, section 9701.706 of their regulations was not ⁵¹
entitled to Chevron deference and enjoined it.
This holding was reversed by the D.C. Circuit. Adjudicating the fairness of the Board’s penalty
mitigation procedures would be premature at this time, i.e., the matter was not ripe for review. A
better time to review the fairness of these procedures would be after the DHS has disciplined an ⁵²
employee and the penalty has been appealed.
The unions alleged that DHS and OPM exceeded authority granted by the Homeland Security Act
at section 9701(f)(2) of title 5, U.S. Code, when they modified the Board’s procedural regulations
for DHS employees. They challenged, specifically, the following regulations: section
9701.706(k)(1), which shortens the time for appeal to the Board; section 9701(k)(3), which limits
discovery in MSPB appeals; and section 9701.706(k)(5), which authorizes a summary judgment
procedure when there are no facts in dispute.
The district court found that Congress in section 9701(f)(2) of title 5, U.S. Code, clearly
authorized DHS and OPM to waive or modify provisions “within the purview of chapter 77”of
title 5 “Appeals,” and that there could be no doubt that the agencies acted within their authority
when they adopted these procedural regulations. Their interpretation of the section was found to
be reasonable and consistent with the statutory purpose and, consequently, was entitled to
deference under step two of the Chevron case.
The unions also asserted that DHS and OPM exceeded authority granted in the Homeland
Security Act when they assigned an appellate role to MSPB to review decisions of the Mandatory
Review Panel in 5 C.F.R. § 9701.707(c). This regulation provides that an employee who is
discharged for a Mandatory Removal Offense will receive advance notice, an opportunity to ⁵³
respond, and a written decision from DHS. The DHS decision would be subject to review by the
Mandatory Review Panel, which would conduct a hearing and issue a written decision binding on
DHS.

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Appeals from Panel decisions could be reviewed by the Board, whose decision would be based on
the record without a second hearing, and would be appealable to the Court of Appeals for the ⁵⁴
Federal Circuit pursuant to section 7703 of title 5, U.S. Code. Under 5 C.F.R. §
9701.707(c)(1)(I), the Board would sustain a Panel decision unless the Board finds it to be
“arbitrary and capricious.” The Board is more likely to sustain a Panel decision under the
arbitrary and capricious standard than under the one that the Board uses in a typical removal case ⁵⁵
in which an agency must establish its case by a “preponderance of evidence.” The district court
concluded that DHS and OPM were entitled to Chevron deference in their interpretation of the
broad authority granted by the Homeland Security Act to issue this regulation. The district court
granted the motion by the agencies to dismiss the count relating to MSPB procedures and denied ⁵⁶
the plaintiff’s motion for summary judgment on it.
The D.C. Circuit affirmed this holding; it found that the Homeland Security Act clearly authorizes ⁵⁷
DHS to modify procedures of the MSPB.
In March of 2007 a DHS official announced that the Department intended to implement the
provisions of its personnel system including the adverse action and appeals procedures that were ⁵⁸
not enjoined. Merit System Protection Board interim regulations to accommodate appeals ⁵⁹
procedures of this system with a request for comments were published on October 5, 2007.
The district court on August 12, 2005 enjoined in its entirety subpart E of the final regulations
relating to labor-management relations. The court found that they failed to ensure that employees
may bargain collectively and improperly assigned an intermediate role of administrative appellate ⁶⁰
review to the Federal Labor Relations Authority. The district court also enjoined a regulation in
subpart G, relating to appeals procedures, section 706(k)(6) of title 5 of the Code of Federal
Regulations, which limited the authority of the MSPB to mitigate penalties imposed by DHS on
the ground that this limitation did not comply with a provision of the Homeland Security Act ⁶¹
which required that procedures must be fair. The district court invited DHS and OPM, the
agencies that issued the regulations, to propose a revised order that would enjoin some portions of ⁶²
subpart E without enjoining the entire subpart.
Responding to this invitation, the agencies subsequently filed a motion in the district court to alter
or amend the court’s judgment and asked the court to limit its injunction of subpart E of the
regulations to five discrete sections of the subpart. They did not request modification of the

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injunction relating to the appeals procedures in subpart G. The district court declined to alter or
amend its injunction of all of subpart E, finding that the provisions that the agencies proposed to ⁶³
separate were too closely intertwined with those that were not.
DHS and OPM appealed the district court’s denial of their motion to modify the injunction; they
asserted that enjoining subpart E in its entirety swept too broadly. The D.C. Circuit rejected this
assertion because its decision invalidated more of subpart E than did the district court’s decision.
The district court had upheld limitations on the subjects of collective bargaining, but the D.C.
Circuit reversed that holding on the ground that the Homeland Security Act does not authorize
limiting them. The appeals court said that fashioning the scope of the injunction should be left to ⁶⁴
the parties and the district court when the case is remanded.
On October 17, 2006, after DHS and OPM declined to appeal the D.C. Circuit’s decision to the
Supreme Court, the district court modified its order of August 12, 2005 to conform to the ruling
of the court of appeals. The portion of the August 12 order that enjoined in its entirety subpart E
of the regulations was not modified. The portion that granted judgment to NTEU and enjoined
implementing 5 C.F.R. § 9701.706(k)(6), which limited MSPB’s authority to mitigate penalties
imposed by DHS, was vacated, dissolved, and dismissed without prejudice because the D.C.
Circuit reversed this district court’s holding. In its October 17 order, the district court also
remanded the case to DHS and OPM and directed them to file a status report with the court no
later than July 17, 2007, addressing whether they plan to revise or abandon the enjoined labor-
management regulations in subpart E.
On July 16, 2007, counsel for the agencies filed a defendants’ status report which stated that, “As
of this time, the agencies have made no decision as to whether to revise or abandon ...” the
enjoined labor-management regulations in subpart E of part 9701 of title 5 of the Code of Federal
Regulations. This status report also said that with the court’s permission the agencies proposed to ⁶⁵
submit another status report in six months. In the subsequent status report, dated January 16,
2008, the agencies indicated that they had made no decision as to whether to revise or abandon
the regulations in subpart E, but noted that a provision of the Consolidated Appropriations Act, ⁶⁶

2008 currently barred using appropriated funds to revise them.

This provision, section 533 of Division E of P.L. 110-161 (2007),⁶⁷ provides that, “None of the
funds provided by this or any other act may be obligated for the development, testing,
deployment, or operation of any system related to the MAX-HR project, or any subsequent but
related human resources management project, until any pending litigation concerning such
activities is resolved, and any legal claim or appeal by either party has been fully resolved.”

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