                                                   NO. 87-412
                                   IN THE SUPREME COURT OF THE STATE OF MONTANA
                                                       1988

IN THE MATTER OF THE CLASSIFICATION
APPEAL OF WARREN C. MEAD, et al.
STATE PERSONNEL DIVISION OF THE
DEPARTMENT OF ADMINISTRATION, STATE
OF MONTANA,
                   Petitioner and Respondent,
              -vs-
BOARD OF PERSONNEL APPEALS, DIVISION
OF THE DEPARTMENT OF LABOR & INDUSTRY
OF THE STATE OF MONTANA; and WARREN C.
MEAD, SERGEANT; JACK D. WESTROPE, LIEU-
TENANT; and HARVEY E. OLSON, CAPTAIN, as
Representatives of classes of similarly
situated individuals in the Montana Highway
Patrol,
                   Respondents and Appellants.


APPEAL FROM:                        District Court of the First Judicial District,
                                    In and for the County of Lewis & Clark,
                                    The Honorable Gordon Bennett, Judge presiding.
COUNSEL OF RECORD:
             For Appellant:
                    Elizabeth L. Griffing argued, Dept of Labor & Industry,
                    Helena, Montana
                    Barry L. Hjort argued for Mead, et al., Helena, Montana
        For Respondent:
           +   Kathleen F. Holden argued, Dept. of Administration,
      m    <
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           ,   Helena, Montana
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                                                       Submitted:   October 18, 1988
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                           -                            Decided:    December 2 2 ,   1988
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                                                      Clerk
Mr. Justice L. C. Gulbrandson delivered the Opinion of the
Court.

      This is an appeal from a reversal of a   final order of
the Board of Personnel Appeals and remand       by the First
Judicial District, Lewis and Clark County.     We affirm the
District Court's reversal and remand to        the Board of
Personnel Appeals for further findings.
      This case arose as an appeal of the classification
process utilized by the Personnel Division (Division) of the
Department of Administration in reallocating certain Montana
Highway Patrol Officers' positions to classes under the State
pay classification system. Prior to 1979, the classification
series for Highway Patrol Officers consisted of the followinq
positions and assigned grades:
          Officer I                Grade 12
          Officer I1               Grade 13
          Sergeant                 Grade 14
          Lieutenant               Gracle 15
          Captain                  Grade 16
      In 1979, Officers within the Officer I class appealed
to have their grade raised from grade 12 to grade 13,
pursuant to S. 2-18-203, MCA. Such an appeal was permissible
under the statute as it existed at that time.     Officers I1
were automatically upgraded one grade when the Officers I
were successful in their appeal, pursuant to a previous stip-
ulation between the Personnel Division, the Highway Patrol
and the union representing the Officer I1 class. No other
officers in the classification series were affected by that
appeal.   The Highway Patrol Officer classification series
thus consisted of the following classes and grades following
this successful reclassification of Officers L and IT:
          Officer I               Grade   13
          Officer I1              Grade   14
          Sergeant                Grade   14
          Lieutenant              Grade   15
          Captain                 Grade   16
      Consequently, on June 27, 1983, three Montana Highway
Patrol Officers    (Officers), representing the ranks of
Sergeant, Lieutenant and Captain, initiated this group
grievance action before the Board of Personnel Appeals
(Board) to achieve a reclassification of their positions and
assigned grades pursuant to 5 2-18-1011, MCA, and 24.26.513,
ARM. The Officers sought to compel the Personnel Division to
adopt   new  position   descriptions, develop    new   class
specifications and reclassify their respective positions.
      The Highway Patrol submitted new position descriptions
for the affected officers in the initial stages of this group
grievance action.     The Personnel Division audited those
position descriptions and found them to be accurate.      The
Personnel Division then classified the positions using a
"five factor" formula to assign the positions to proper
classes. Neither party objects to the position descriptions
or the class specifications as developed.
      The same "five factors'' were then applied to assign a
grade to the class.    The application of the "five factors"
resulted in an assignment of the same grad.es as previously
assigned to Sergeant, Lieutenant and Captain. The Officers
appealed this reassignment to the Board of Personnel Appeals.
      A subsequent hearing was conducted before a Board
Hearings Examiner.     After hearing     testimony from the
Officers and the Division and reading briefs submitted by
both parties, the Examiner issued proposed findings of fact,
a conclusion of law and a recommended order on May 17, 1985.
The Hearing Examiner, after finding that the Officers "were
aggrieved,"   recommended   that    the   Personnel   Division
reclassify the upper three classes of Officers by raising
their respective grade levels one pay grade. The Personnel
Division filed a timely exception to these findings and oral
argument took place before the full Board on October 11,
1985.
      On January 7, 1986, the Board issued its order
affirming the Hearing Examiner's findings of fact and
conclusion of law.        However, the Board amended the
recommended order to require, within thirty days, 'I a
recommendation   for   reclassifying    those   positions   in
accordance with Section 2-18-20:! (c), [sic] MCA, taking into
consideration the various levels and grade hierarchies
contained in the classification series     ...   "      Section
2-18-202 (1)(c), MCA, requires that:
           (1) In providing for the classification
           plan, the department shall group all
           positions in the state service into
           defined classes based on similarity of
           duties    performed,      responsibilities
           assumed, and compl-exity of work so that:


           (c) similar pay may be provided under
           the same conditions with equity to each
           position within the class.
      The   Division   submitted   its   recommendation   for
classification on February 21, 1986. The Division found that
the onl-y difference between Officers I and I1 was that
Officers I1 were required to have served six years, therefore
the Division found only four distinguishable classes in the
series really existed. It recommended that Officer I and I1
he lumped ?nto the same class at qrade 13, with the retention
of the original grades for the remaining classes of Officers.
After oral argument before the full Board on May 23, 1986,
the Board issued its final order rejecting the Division's
recommendations for classification and adopting the Hearing
Examiner's findings of      fact, conclusion of      law and
recommended order.
      On June 27, 1986, the Division filed for judicial
review before the District Court. The District Court heard
the matter on February 6, 1987, took the matter under
advisement, and issued its opinion and order on June 5, 1987.
The District Court found: (1) That the Board's final order
did not comply with 5 2-4-623, MCA; (2) that both the appeal
and the final order of the Board violated   2-18-203(2), MCA,
which prohibits appeal of the grade assigned to a class; and
(3) that the Board abused its discretion hv not addressing
each of the five factors in relation to the classification
decision.    Consequently, the District Court reversed the
final order of the Board and remanded the case for further
proceedings.
      The Board appealed from the District Court's opinion
and order on August 19, 1987. The Officers filed a similar
appeal on August 20, 1987.

Issues
      1. Did the District Court exceed its scope of review?
      2. Did the District Court err in its conclusion that
the Board of Personnel Appeals failed to complv with
  2-4-623, MCA?
      3. Did the District Court err in holding that the
Board of Personnel Appeals lacked the authority to order
resolution of the grievance filed in this matter?
      Did the District Court exceed its scope of review?
      This Court has recently held upon review of an agency
decision that:
           [Flindings of fact will be upheld unless
           they are    "clearly erroneous,"     ...
           conclusions of law will be upheld unless
           they are an "abuse of discretion" [and]
           [aln abuse of discretion results if an
           agency's interpretation of a statute is
           clearly contrary to the legislative
           intent behind that statute.    (Citations
           omitted. )
Swan Corp. v. Montana Dept. of Revenue (~ont.1988), 7 5 5 P.2d
1388, 1390, 45 St.Rep. 998, 1000. The Court in Swan noted.
that review of the district court's holding in such matters
will be governed by the same standards.       This Court h a s
further stated that:
           [A] finding is "clearly erroneous" when,
           although there is evidence to support it,
           a review of the record leaves the court
           with the definite and firm conviction
           that a mistake has been committed.
           (Citations omitted.)
Wage Appeal of Montana State Highway Patrol Officers v. Board
of Personnel Appeals (1984), 208 Mont. 33, 40, 6 7 6 P.2d 194,
198.    Having examined the record, this Court finds the
District Court is correct in its conviction that a mistake
has been committed.
      The Division's application of the five factors required
by the rules and regulations governing the Division initially
resulted in retention of the same classes and reassignment of
the existing grades.      The Board, however, ignored the
Division's grade assignment, instead upholding the "practice"
of maintaining one grade difference between supervisors and
those they supervise. This ruling of the Board ignores the
rules and regulations governing the classification process.
      Appellants cite this Court to Wilson v. Nord (Wash.App.
1979), 597 P.2d 914. In Wilson, an employee was denied an
opportunity to compete for a position which had been
reclassified and upgraded, although existing administrative
regulations required the state to allow eligible persons to
compete against incumbents for those upgraded positions. The
trial court upheld this denial of the right to compete
although the incumbent had served only twenty-six months in
the position, contrary to the general rule of thumb of only
allowing incumbents with three years tenure in a reallocated
position to automatically retain their positions.        Upon
appeal from the trial court's decision, the Washington Court
of Appeals stated that "[flailure to follow the rule of thumb
is not an abuse of discretion."     Wilson, 597 P.2d at 918.
      The instant case also involves a failure to follow a
"practice" or "rule of thumb."       The Division's original
classification failed to follow the practice of maintaining
one grade level between each class of officer. We hold that,
as in the Wilson case, the failure to follow that practice
was not an abuse of discretion on the part of the Division,
because it properly applied the "five factors" provided in
its rules and regulations and provided legitimate reasons for
deviating from the "practice."     We further note that the
Board's findings of fact, conclusion of law and recommended
order did not examine the Division's use of the "five
factors."   Yet, the purpose of the Board is to review the
actions of the Division and to ensure that the Division
properly adheres to its rules, regulations and practices.
Such   a   review   necessitates   an   examination  of   the
classification process utilized by the Division.         We hold
that the District Court did not exceed its scope of review
and correctly remanded the case to the Board given the lack
of findings addressing the "five factors."

                               11.
      Did the District Court err in its conclusion that the
Roard of Personnel Appeals failed to comply with S 2-4-623,
MCA?
      The District Court remanded the action because of the
Board's failure to issue findings of fact addressing the
Personnel Division's recommendation.       Section 2-4-623 ( 4 ) ,
MCA, requires a ruling upon each proposed finding submitted
by   a party.      The court held        that the Division's
recommendation amounted to proposed findings of fact and thus
the Roard erred in issuing findings of fact and conclusions
of law addressing the issues raised in the parties' briefs,
but not the Division's recommendation for classification. As
stated by the District Court:
           [O]nce     the      recommendation      for
           classification was submitted, the hearing
           examiner's original findings of fact were
           no longer relevant because they were
           based on the original briefs. The board
           became obliged to issue findings of fact
           which   addressed    the   recommendation.
           Therefore, its summary adoption of the
           hearing examiner's original findings,
           conclusions   and    proposed    order   is
           insufficient.    Furthermore, to simply
           ignore        the         reclassification
           recommendation     of     the     division,
           particularly when it was invited, is
           arbitrary and capricious in the extreme.
      Appellants    contend  the  court  erred  in   this
determination as    an express ruling on each finding is
unnecessary, "[als long as the agency's decision and order on
such party's proposed findings are clear." Montana Consumer
Counsel v. Public Service Commission (1975), 168 Mont. 177,
192-193, 541 P.2d 770, 7'77.      They allege that, as in
Consumer Counsel, the Board clearly rejected the Division's
proposed findings and the Board therefore did not need to
respond to the Division's recommendation with specific
findings.
      We hold, however,   that the District Court correctly
remanded the case for further findings expressly addressing
the    Division's   recommendation.       The   ruling    in
Consumer Counsel is inapposite to this case. In this case,
unlike in Consumer Counsel, the Board specifically requested
the Division to develop this recommendation, and therefore
the Division is entitled to express findings of fact and
conclusions of law.



      Did the District Court err in holding that the Board of
Personnel Appeals lacked the authority to order resolution of
the grievance filed in this matter?
      This issue will he broken into two parts: (1) Whether
S 2-18-203 ( 2 ) , MCA, gives the Roard the authority to order
the change of the Officers' grades; and (2) whether or not
5 2-18-203 ( 2 ) , MCA, as amended in 1981, is unconstitutional.
      Section 2-18-203(2), MCA, states:
            (2) Employees and employee organizations
            will be given the opportunity to appeal
            the allocation or reallocation of a
            position to a class. - grade assigned
                                   The
            to - class - - - appealable subiect
            -  a        is not an
            under   2-18-1011   thr&gh    2-18-1013.
            (Emphasis added. )
Once an employee appeals a classification of his or her
position, the Board may then rule upon the appeal.   As stated
in S 2-18-1012, MCA:
           If upon the preponderance of the evidence
           taken at the hearing the board is of the
           opinion that the employee is aggrieved,
           it may issue an order to the appropriate
           agency or agencies of state government
           requiring such action as will resolve the
           employee's grievance. ..
      Appellants contend that S 2-18-1012, MCA, gives the
Board full authority to resolve - grievance brought by an
                                 any
employee, even if resolution of the classification appeal
results in reallocation of the grade assigned to a class. In
support of this contention, appellants cite to Hutchin v.
State, Dept. of Fish, Wildlife & Parks (19841, 213 Mont. 15,
688 P.2d. 1257, wherein this Court stated:
           It is apparent from Section 2-18-1012,
           MCA, that if the Board of Personnel
           Appeals determines that the employee is
           aggrieved, it has full discretion to
           resolve the employee's grievance.
Hutchin, 688 P.2d at 1260.
      Contrary to appellants' contention, the District Court
found that the Board is limited in a classification appeal by
5 2-18-203(2), MCA, to determining whether a position has
been properly classified by the Division.      The court held
that the Board was without authority to create new
classifications or to assign grades to classifications, and
it distinguished Hutchin by stating:
           Hutchin involved the discharge of a state
           employee for personal use of state owned
           property. In Hutchin the board directed
           that   the   discharqed    employee    "be
           reinstated as of the-date of this final
           order to the position he held with the
           department"   at    the   time   of   his
           termination. That is the type of remedy
           that is uniquely within the discretion of
           the board.   However, the board's order
           here usurps a function that has been
           delegated exclusively to the division.
      We agree with the District Court's holding that the
board is limited to determining whether a position is
properly classified.        position is improperly classified,
the Board may then order the Division to reclassify the
position in accordance with its existing policy.
      Appellants also contend a conflict exists as both
§§ 2-18-203 (2) and 2-18-1011 (1), MCA, authorize employees to

utilize the grievance procedure contained in S S 2-18-1011
through -1013, MCA, but that these statutes do not contain
any limitation on appealing the grade assigned to a class.
Appellants thus       contend   the   limitation contained    in
§ 2-18-203 (2), MCA, cannot be extended to the grievance
procedure    in   § § 2-18-1011   through    -1013,  since   the
Legislature did not expressly limit these statutes.
      Section 2-18-1011(1), MCA, does not provide an
additional cause of action, rather, it sets forth the
procedure whereby an aggrieved employee may file an appeal as
allowed in S 2-18-203 (2), MCA.      Section 2-18-1011 (1), MCA,
states:
            (1) An employee or his representative
            affected by the operation of parts 1
            through 3 of this chapter is entitled to
            file a complaint with the board of
            personnel     appeals   provided    for in
            2-15-1705 and to be heard under the
            provisions of a grievance procedure to be
            prescribed by the board.
Therefore, we hold that the specific limitation upon grade
appeals as found in 5 2-18-203(2), MCA, would control, and an
employee may not put the grade assigned to their class before
the Board as an issue.     Additionally, although appellants
properly phrased their appeal as a classification appeal,
thus properly placing the appeal before the Board, the
Board' s decision was based upon the grades assigned to the
classes. The Board improperly found the Officers were
aggrieved due to the grade assigned to their class and
because the Division did not follow its practice of
maintaining a one grade difference between supervisors and
those they supervise.
      As   the   District   Court   stated,   the   function   of
developing guidelines for classification is assigned to the
Department of Administration. Section 2-18-202, MCA. "[Tlhe
Board's Function is limited to determining whether a position
is properly classified, it has no power to create
classifications and assign them to grades." The Board's
action in directing the Division to change the grades
assigned is outside the scope of the Board's authority.
      We now turn to the question of whether S; 2-18-203 (21,
MCA, deprives the Officers of equal protection under the law
and of their fundamental right to due process.     Appellant
Officers contend that the statute, as upheld by the District
Court, takes awav their right to full legal redress as
guaranteed under Article 11, sec. 16 of the 1972 Montana
Constitution.  They contend 5 S 2-18-1011 through 2-18-1.013,
MCA, gives state employees a property right that demands an
administrative review of all. Division actions which seek to
take that right away.
      When the constitutionality of a statute is questioned,
the presumption is in favor of the constitutionality of the
statute. McClanathan l r . Smith (1980), 186 Mont. 56, 65, 606
P.2d 507, 512.   This Court has previously stated that when
the Legislature sets terms and conditions of public
employment, contractual rights are not created by statute,
rather the Legislature merely declares "a policy to be
pursued until the Legislature declares otherwise."       Wage
Appeal of Montana State Highway Patrol 0ffi.cers v. Board of
Personnel Appeals (1984), 208 Mont. 33, 41, 676 P.2d 194,
199.   In the instant case, the Legislature had set forth a
policy controlling a public employee's right to appeal
actions taken by the Personnel Division in performing the
classification process.   Under the pre-1981 statute, public
employees had a right to appeal the grade assigned to their
class, however, that right was not absolute.       While the
Legislature may not alter or eliminate an accrued or vested
right, the Legislature may alter the terms and conditions of
employment prospectively, where those rights have not accrued
or vested. Wage Appeal, at 199-200.
      We also note state employees are not a suspect class
which come within the protections accorded by the Equal
Protection Clause.    Having determined that the challenged
statute does not affect a fundamental interest or affect a
suspect class, the question then becomes whether the statute
rationally relates to a legitimate state interest. Pfost v.
State (Mont. 1985), 713 P.2d 495, 501, 42 St.Rep. 1957, 1964.
      The amendment of 5 2-18-203(2), MCA, involved the
regulation of an economic policy of this State, i.e. the
setting of public employment salary levels.    The appeal of
the assignment of a grade to a class would allow employees to
have the grade of their class changed without an accompanying
change in the position classification. The end result would
be classes having similar specifications being assigned a
wide range of grades, making the comparison process utilized
in classification unworkable.    We hold the State has a
legitimate   interest    in   preserving    the   state   pay
classification system and that the amended statute rationally
relates toward effectuating that objective.
      The decision of the District Court reversing the
Board's ruling and remanding the case for further findings in
regards to the Division's classification recommendations is
affirmed.


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We concur:      A




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