Comptroller of the Treasury v. Nelson

ELDRIDGE, Judge. The issue in this case is whether, under the applicable statutory and regulatory scheme, a state agency is entitled to deny its employees reclassifications solely because of present fiscal difficulties. I. Vicki George, Margaret Glidden and Helen Nelson were previously employed as Revenue Examiners III at the Motor Fuel Tax Division of the Office of the Comptroller of the Treasury. During 1991, all three employees met the qualifications for Revenue Specialist I, a position with a higher rate of pay and greater responsibilities than required for Revenue ⁷⁰⁸ Examiner III.

Upon meeting these qualifications, the Division Director submitted to the Comptroller’s personnel office applications for reclassification and back pay on behalf of the three employees. The applications were filed on April 4, 1991, July 18,1991, and March 4,1992, respectively. Although each application was initially marked with a statement of approval by the personnel office, no action was taken on any of the applications. 1 In response to a September 1990 directive issued by Governor Schaefer, the Comptroller had frozen all reclassification requests as of November 1990. 2 The Comptroller’s decision to freeze reclassification requests was consistent with two policies promulgated by the Comptroller, both of which are applicable to the employees in this case. The first, “Personnel Policy # 8,” provides in pertinent part as follows: “G. Availability of Funds The classification of a position may not be changed unless funds are available in the department’s and/or agency’s ⁷⁰⁹ current budget to cover the cost of such a change.” 3 Under a second policy of the Comptroller’s Office, the effective date of reclassifications and, therefore, salary upgrades, was deferred until the next pay period following approval of the reclassification requests. 4 Accordingly, it was unnecessary under this policy to award back pay to the three employees for the period before their reclassifications had been approved.

The three employees did not learn of the freeze on reclassifications until April 1993, when employees George and Glidden met with the Deputy Comptroller of the Treasury to discuss the status of their applications. 5 At that time, the Deputy Comptroller informed the employees that they would not be reclassified as Revenue Specialists I until October 1,1993, and would not receive any back pay. As a result, on April 10, 19 and 28, 1993, respectively, employees George, Glidden and ⁷¹⁰ Nelson filed grievances with respect to the reclassifications and back pay. The Office of the Comptroller in August 1993 began to process Personnel Policy # 8 reclassification applications, and on September 29, 1993, all three employees were reclassified as Revenue Specialists I. None of the employees, however, received back pay. In accordance with Maryland Code (1994, 1996 Supp.), §§ 12-201 through 12-205 of the State Personnel and Pensions Article, the three employees pursued unsuccessfully their grievances through the steps of the State Employees’ Grievance Procedure. 6 Thereafter, they requested a hearing before the Office of Administrative Hearings.

On November 10, 1993, a hearing was held before Administrative Law Judge (ALJ) Geraldine A. Klauber. In her opinion and decision issued on December 6, 1993, the ALJ ⁷¹¹ first rejected the Comptroller’s argument that the grievance applications were not timely filed in accordance with Code (1993, 1994), § 10-206 of the State Personnel and Pensions Article. 7 The ALJ accepted the employees’ position that they did not learn that their back pay requests were denied until the April 1993 meeting with the Deputy Comptroller. 8 The ALJ noted that all three grievance applications were properly filed within two weeks of that time. The ALJ, however, determined that the Comptroller’s policy deferring the effective date of reclassifications until after approval of the reclassifications conformed with C.O.M.A.R. 06.01.01.13-1A, which provides in pertinent part as follows: “.13-1 Effective Date of Position Reclassification. A. The effective date of a position reclassification shall be the date on which the duties and responsibilities warranting the reclassification were assigned to the position.

However, the effective date may not be earlier than 1 year before the date on which the reclassification is authorized.” ⁷¹² According to the ALJ, this regulation “caps management’s discretion regarding how far back an agency may go in making reclass[ification] retroactive,” but it “does not state that the effective date may [not] be less than one year before the reclassification is authorized, or at the time of authorization.” Thus, the ALJ determined that the Comptroller’s policy did not conflict with the regulation. Finally, the ALJ held that “the Grievants’ applications for reclassification came at a time when the Office of the Comptroller, along with the rest of the State, was in the throes of a fiscal crisis. The Office of the Comptroller, in accordance with Policy # 8, froze the Grievants’ reclasses due to lack of funds.” Thus, the ALJ concluded that “[t]he agency acted in conformance with Personnel Policy # 8 in not making the reclasses effective until there was money in the budget to fund the positions.” The employees sought judicial review in the Circuit Court for Anne Arundel County. Thereafter, the circuit court affirmed the agency decision, stating: “1.

The freeze on classifications ordered by the Office of the Comptroller was reasonably included within the directive from Governor William Donald Schaefer on September 4,1990. “2. The action taken with respect to the reclassification of Helen Nelson, Margaret Glidden, and Vicki George, as set forth in the record, was not arbitrary or capricious.” The employees appealed, and the Court of Special Appeals, in an unreported opinion, reversed and ordered that the case be remanded to the Office of Administrative Hearings for further proceedings. While the intermediate appellate court agreed that the grievances were timely filed, it held that the Comptroller’s policy was inconsistent with C.O.M.A.R. 06.01.01.13-1A. The appellate court reasoned that the regulation expressly provides that “[t]he effective date of a position reclassification shall be the date on which the duties and responsibilities warranting reclassification were assigned to the position.” Thus, according to the Court of Special Ap ⁷¹³ peals, the Comptroller’s policy of making a reclassification effective beginning the pay period following approval of the reclassification was clearly inconsistent with the regulation. 9 Furthermore, in rejecting the argument that the Comptroller’s Office would have exceeded its budget by conforming to the regulation, the intermediate appellate court stated that “[a] legislative or executive refusal to provide funds at a particular time is not a valid reason for denying reclassification to an otherwise deserving employee.” The Court of Special Appeals explained that a “determination that a reclassified employee is entitled to back pay does not constitute an order providing for the payment of those funds by a particular date.

It is the prerogative of ... the General Assembly to determine whether funds will be made available to satisfy any award.” The appellate court pointed out that Code (1994, 1996 Supp.), §§ 14-201 through 14-204 of the State Personnel and Pensions Article, set forth a procedure by which the General Assembly may, in the annual budget, appropriate funds for the satisfaction of reclassification and back pay awards rendered in administrative proceedings. The Comptroller filed a petition for a writ of certiorari which this Court granted. Comptroller v. Nelson, 340 Md. 268 , 666 A.2d 144 (1995).

II

The Comptroller’s primary argument is that agency employees have no right to seek reclassification and back pay when the agency freezes funds “during the pendency of a statewide recession” and pursuant to the directive of the Governor. The employees, on the other hand, maintain that neither the existence of a financial crisis nor the Governor’s directive provided sufficient justifications for the Comptroller’s denial of their requests. The employees rely primarily ⁷¹⁴ on Code (1994, 1996 Supp.), §§ 14-201 through 14-204 of the State Personnel and Pensions Article, which specifically provide for an alternative procedure when an agency lacks the funds to pay awards rendered in administrative or judicial proceedings involving employee grievances. 10 Sections 14-201 through 14-204 of the State Personnel and Pensions Article were originally enacted by Ch. 726 of the Acts of 1980. According to the Title of Ch. 726, the sections were for the purpose of “providing a funding mechanism for the payment of awards to employees.” Sections 14-201 through 14-204 state as follows: ⁷¹⁵ “§ 14-201. “Award” defined.

In this subtitle, “award” means a final monetary or benefit award or judgment in an administrative, arbitration, or judicial proceeding involving an employee grievance or hearing that is held under: (1) this Division I or a regulation adopted under it; or (2) a personnel policy or regulation that governs classified employees of the University of Maryland System or Morgan State University. “§ 14-202. Payments—In general. If this state has sufficient money available at the time, an award made against this State or an officer or unit of this State shall be paid as soon as practicable within 20 days after the award is final. “§ 14-203. Same—Money not immediately available.

(a) Report to Comptroller.—If sufficient money is not available at the time to satisfy an award made against this State or an officer or unit of this State, the affected unit or officer shall report the outstanding award to the State Comptroller. (b) Duties of Comptroller.—The Comptroller shall: (i) keep an accounting of all outstanding awards; and (ii) report that accounting annually to the Governor. “§ 14-204. Same—Budget; payment of outstanding awards. (a) Budget.—The Governor shall include in the State budget sufficient money to pay all awards made against this State or an officer or unit of this State.

(b) Payment of outstanding awards.—On appropriation of money by the General Assembly, the Comptroller shall authorize payment of all outstanding awards in the order of the date on which each award was made.” According to the Comptroller, the procedures set forth in §§ 14-201 through 14-204 of the State Personnel and Pensions Article are inapplicable to this case because the Comptroller’s Office had “no funds to pay for the reclassification of ⁷¹⁶ these or any other employee due to the State’s fiscal crisis.” The Comptroller argues that use of the statutory procedure is also inappropriate because the Comptroller froze reclassifications in accordance with a 1990 directive from the Governor. The Comptroller views §§ 14-201 through 14-204 as statutes merely waiving sovereign immunity in personnel matters by providing a funding mechanism for monetary awards, and not as affording state employees a right to be reclassified with back pay. We disagree. Contrary to the position taken by the Comptroller, §§ 14r-201 through 14-204 were specifically designed to provide an alternative in situations where an agency cannot afford to reclassify its employees with back pay.

Sections 14-201 through 14-204 expressly direct that if sufficient money is unavailable to satisfy an award, the affected agency shall report the award to the Comptroller and the Comptroller shall report the award to the Governor. Thereafter, payment of the award is dependent upon the money being appropriated by the General Assembly. If the General Assembly appropriates the necessary funds, “the Comptroller shall authorize payment of all outstanding awards____” The statutory procedure is couched in mandatory language. See, e.g., Prince George’s County v. Vieira, 340 Md. 651, 660 , 667 A.2d 898, 902 (1995) (“It is significant that the Legislature chose to use the word, ‘shall.’ [This is] ... a direct indication that the Legislature directed that certain conduct is required ”); Ward v. Dept. of Pub.