                         UNITED STATES OF AMERICA
                      MERIT SYSTEMS PROTECTION BOARD
                                      2015 MSPB 37

                            Docket No. NY-3443-14-0380-I-1

                                       Ilan Fouks,
                                       Appellant,
                                            v.
                           Department of Veterans Affairs,
                                         Agency.
                                      May 22, 2015

           Ilan Fouks, Montclair, New Jersey, pro se.

           Christopher P. Richins, Esquire, Brooklyn, New York, for the agency.

                                        BEFORE

                            Susan Tsui Grundmann, Chairman
                               Mark A. Robbins, Member



                                OPINION AND ORDER

¶1         The appellant has filed a petition for review of the initial decision, which
     dismissed the appeal of his reduction in pay and grade for lack of jurisdiction.
     For the reasons set forth below, we GRANT the petition for review and
     REMAND the appeal to the field office for further adjudication in accordance
     with this Opinion and Order.

                                     BACKGROUND
¶2         The agency selected the appellant for a Supervisory General Engineer
     position with the Hudson Valley Healthcare System. Initial Appeal File (IAF),
     Tab 6, Subtab 6 at 1. The appellant was a Supervisory General Engineer with the
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     New York Harbor Healthcare System when he applied for this position. IAF, Tab
     9 at 10. The agency states that the appellant was a General Schedule (GS) 13,
     step 6 at the time of his selection. Id. The appellant disagrees and states that he
     actually was a GS-14, step 2 at the time of his selection. IAF, Tab 1 at 5. The
     vacancy announcement stated that the position was at the GS-12 grade level with
     pay ranging from $77,585 to $100,859. IAF, Tab 6, Subtab 4.
¶3           The agency appointed the appellant, effective September 22, 2013, at the
     GS-13, step 8 level. Id., Subtab 8 at 1. On May 13, 2014, the agency notified the
     appellant that an error had been made in setting his grade and pay and that he had
     only been entitled to be paid at the GS-12, step 10 level beginning September 22,
     2013.    Id.   The agency stated that it would make corrections effecting all
     personnel actions retroactive to September 22, 2013, to reflect his proper grade
     and step. Id. The appellant submitted a letter of resignation on May 14, 2014.
     Id., Subtabs 9-10. The appellant transferred to the New York Harbor Healthcare
     System effective May 17, 2014, at the GS-12, step 10 level. Id., Subtab 10. On
     May 31, 2014, the Defense Finance and Accounting Service notified the appellant
     that it would collect overpayments made to him between December 28, 2013, and
     May 3, 2014.      Id., Subtab 11.    The appellant filed a petition for hearing,
     challenging the validity of this debt collection.   Id., Subtab 13.   There is no
     evidence in the record regarding the outcome of this proceeding.
¶4           On September 11, 2014, the appellant filed a Board appeal and requested a
     hearing concerning the reduction in his pay and grade. IAF, Tab 1. After giving
     both parties an opportunity to file evidence and arguments regarding jurisdiction,
     the administrative judge issued an initial decision, without holding a hearing,
     finding that the Board lacks jurisdiction over this appeal because the reduction in
     the appellant’s grade and pay was to correct a rate of pay that was set contrary to
     law or regulation. IAF, Tab 11, Initial Decision (ID) at 5-6.
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¶5         The appellant has filed a petition for review. Petition for Review (PFR)
     File, Tab 1. The agency has filed a response in opposition to the petition, to
     which the appellant has replied. PFR File, Tabs 3-4.

                                        ANALYSIS
     The appellant’s reduction in grade claim is not excluded from the Board’s
     jurisdiction under 5 C.F.R. § 752.401(b)(15).
¶6        The agency claims that it demoted the appellant from GS-13, step 8 to
     GS-12, step 10 after it concluded that it had erred in setting his grade when he
     began working in a new position effective September 22, 2013, following a
     competitive selection process for a position that was advertised and graded at the
     GS-12 level.    IAF, Tab 6, Subtab 8.      As relevant here, 5 U.S.C. chapter 75
     establishes a process, including Board appeal rights, that generally applies when
     qualified federal employees are subjected to certain actions, including a
     “reduction in grade” or a “reduction in pay.” 5 U.S.C. §§ 7512, 7513(d). The
     agency argues, and the administrative judge found, that the appellant’s demotion
     cannot be reviewed by the Board based on 5 C.F.R. § 752.401(b)(15), which
     provides that the adverse action appeal process under 5 U.S.C. chapter 75 does
     not apply to the “[r]eduction of an employee’s rate of basic pay from a rate that is
     contrary to law or regulation.” PFR File, Tab 3 at 8-9; ID at 5. For the following
     reasons, we find that the agency’s action was more than just a correction to the
     appellant’s rate of basic pay within the meanin g of 5 C.F.R. § 752.401(b)(15).
     See Simmons v. Department of Housing & Urban Development, 120 M.S.P.R.
     489, ¶ 5 (2014).
¶7        The agency argues that the appellant was “demoted” within the meaning of
     5 C.F.R. § 531.203 when he accepted the GS-12 position. IAF, Tab 9 at 5; PFR
     File, Tab 3 at 5. That regulation, contained in the part of the Office of Personnel
     Management’s (OPM’s) regulations concerning pay under the GS scale, defines a
     demotion as a change from one GS grade to a lower GS grade, while continuously
     employed, with or without a reduction in pay. 5 C.F.R. § 531.203. Thus, that
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     definition notes a distinction between “grade” and “pay” and recognizes that a
     change in one does not necessarily require a change in the other. The adverse
     action procedures established in 5 U.S.C. chapter 75 similarly differentiate
     between a “reduction in pay” and a “reduction in grade.” 1 5 U.S.C. § 7512.
     Under chapter 75, “grade” is defined as “a level of classification under a position
     classification system.”     5 U.S.C. § 7511(a)(3).         It is noteworthy that this
     definition does not include any explicit reference to pay. The statute separately
     defines “pay” as “the rate of basic pay fixed by law or administrative action for
     the position held by an employee.” 5 U.S.C. § 7511(a)(4).              We find that the
     statutory language clearly provides that chapter 75 may apply when there has
     been either a reduction in grade or a reduction in pay.
¶8         Here, the agency’s action was undeniably a reduction in grade for the
     appellant.    He was reduced from a GS-13 to a GS-12 because the agency
     determined he could not retain the higher grade while appointed to the new GS-12
     position.    IAF, Tab 6, Subtab 8, Tab 9 at 10.          Although he also received a
     corresponding reduction in his pay, that reduction was consequential to the
     reduction in grade. There is no general statutory or regulatory exclusion from the
     chapter 75 process for reductions in grade intended to correct an “administrative
     error,” as the agency characterizes its error in this case. See IAF, Tab 9 at 7; PFR
     File, Tab 3 at 9. The exclusion contained in 5 C.F.R. § 752.401(b)(15) is specific
     to a reduction in an employee’s “rate of basic pay” only, and we do not find a
     valid basis for extending it to the circumstances of the appellant’s reduction in
     grade, particularly given the statutory and regulatory distinctions between
     “grade” and “pay” discussed above. 2 The Board has recognized an exception


     1
       The more general term, “demotion,” does not appear in 5 U.S.C. chapter 75,
     subchapter II.
     2
      The exclusion might have applied had the agency reduced the appellant’s rate of basic
     pay to a rate equivalent to the GS-12, step 10 level, without a reduction in grade, and it
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     from chapter 75 for a reduction in grade resulting from the merits of a
     classification decision. See, e.g., Quinlan v. Department of Homeland Security,
     118 M.S.P.R. 362, ¶ 9 (2012). But, in this appeal, it appears that the appellant’s
     position was at all times correctly classified at a GS-12 grade, and thus that
     exception would not apply. See IAF, Tab 6, Subtab 5. Therefore, we conclude
     that 5 C.F.R. § 752.401(b)(15) does not preclude the application of chapter 75 to
     the appellant’s reduction in grade. 3 4

     The appellant has made a nonfrivolous allegation that his demotion was
     involuntary based on agency-supplied misinformation.
¶9         The facts of this appeal present another issue regarding whether the
     appellant has been subjected to an appealable reduction in grade. Specifically,
     the appellant applied for a position that was advertised as only a GS-12 position,
     and there is evidence in the record suggesting that he may have voluntarily

     was only the appellant’s rate of basic pay that was contrary to law or regulation.
     According to OPM’s pay tables, GS-13, steps 1, 2, and 3 had salary rates lower than
     GS-12, step 10 in the appellant’s locality pay area for fiscal year 2013. See IAF, Tab 9
     at 13.
     3
        The administrative judge relied on Gessert v. Department of the Treasury,
     113 M.S.P.R. 329 (2010), aff’d sub nom. Gessert v. Merit Systems Protection Board,
     No. 2010-3115, 2011 WL 463094 (Fed. Cir. Feb. 10, 2011), in concluding that the
     Board lacks jurisdiction over this appeal.          ID at 5-6.       Gessert, however, is
     distingu ishable, and we decline to follow it in this circumstance. The appellant in
     Gessert received notice and an opportunity to respond prior to the agency action.
     Gessert, 113 M.S.P.R. 329, ¶ 4. There was little discussion in Gessert of the
     jurisdictional aspects of the appeal. In contrast in this appeal, the agency did not afford
     the appellant notice and an opportunity to respond prior to his demotion, and thus the
     jurisdictional question is the central question. See Simmons, 120 M.S.P.R. 489, ¶ 7.
     4
       We have considered the appellant’s arguments on review that his appointment at the
     GS-13 level was not an administrative error because the Standard Form 50 documenting
     his demotion also documents his conversion to a career appointment, a number of
     agency officials approved his grade, and the error came to management’s attention via
     an equal employment opportunity complaint. PFR File, Tab 1 at 4-5. We have
     considered these arguments but find that they are immaterial to the issue of the Board’s
     jurisdiction.
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      sought and would have accepted the position even if it had been offered to him at
      the GS-12, step 10 level. IAF, Tab 6, Subtab 6. Generally, a reduction in grade
      that an employee accepts voluntarily is not within the Board’s jurisdiction.
      Harris v. Department of Veterans Affairs, 114 M.S.P.R. 239, ¶ 8 (2010); see
      Elmore v. Department of Transportation, 421 F.3d 1339, 1344 (Fed. Cir. 2005).
      However, a reduction in grade will be considered involuntary, and an appealable
      adverse   action,     if   the   employee    reasonably   and   materially    relied   on
      agency-supplied misinformation to his detriment, based on an objective
      evaluation of the surrounding circumstances. Herrin v. Department of the Air
      Force, 95 M.S.P.R. 536, ¶ 10 (2004). This is true even though the agency, in
      providing the misinformation, did not intend to mislead the employee. Id. Based
      on the current record, it is unclear whether the appellant voluntarily accepted a
      reduction in grade.
¶10        The agency admits that it supplied the appellant with misinformation
      regarding the grade of the position, appointed him as a GS-13, step 8, and
      subsequently reduced his grade to GS-12, step 10. See IAF, Tab 6, Subtab 8 at 1,
      Tab 9 at 10.    The appellant alleges that he was offered a higher grade after
      negotiating with the agency and that he accepted this offer in “good faith.” IAF,
      Tab 1 at 5.    The record also contains the appellant’s statement that “the sole
      reason [he] took the position was the offer of the grade 13-8.”              IAF, Tab 6,
      Subtab 13 at 7. We find that the appellant has made a nonfrivolous allegation
      that his reduction in grade was involuntary because he relied to his detriment on
      agency-supplied misinformation.             See Paszek v. Department of Defense,
      50 M.S.P.R. 534, 538-39 (1991) (finding that the appellant’s reduction in grade
      was covered by 5 U.S.C. chapter 75 based on misinformation about the
      corresponding rate of pay, even though the agency’s correction of the rate of pay
      was not itself a covered action); see also Garcia v. Department of Homeland
      Security, 437 F.3d 1322, 1344 (Fed. Cir. 2006) (once an appellant makes
      nonfrivolous allegations that, if proven, would establish the Board’s jurisdiction,
                                                                                        7

      then the appellant has the right to a jurisdictional hearing); Ferdon v. U.S. Postal
      Service, 60 M.S.P.R. 325, 329 (1994) (in determining whether the appellant has
      made a nonfrivolous allegation of jurisdiction, the Board may not weigh evidence
      and resolve conflicting assertions of the parties and the agency’s evidence may
      not be dispositive). On remand, the administrative judge should provide notice to
      the parties of the jurisdictional requirements for an involuntary reduction in grade
      claim and an opportunity to present evidence and arguments concerning whether
      the appellant reasonably relied on the misinformation provided by the agency to
      his detriment. See, e.g., Herrin, 95 M.S.P.R. 536, ¶ 10. The appellant requested
      a hearing, IAF, Tab 1 at 2, and is entitled to a jurisdictional hearing on remand
      given his nonfrivolous allegation that, if proven, would establish the Board’s
      jurisdiction.

      The issues of timeliness and jurisdiction are inextricably intertwined.
¶11         The agency has argued that this appeal should be dismissed as untimely.
      IAF, Tab 6, Subtab 1 at 2. Because of her finding regarding jurisdiction, the
      administrative judge did not address the timeliness issue. ID at 1 n.1. The issues
      of timeliness and jurisdiction are inextricably intertwined in this appeal; that is,
      resolution of the timeliness issue depends on whether the appellant was subjected
      to an appealable action.        See Wright v. Department of Transportation,
      99 M.S.P.R. 112, ¶ 13 (2005) (when the voluntariness of the personnel action is
      in question, jurisdiction and timeliness are inextricably intertwined, and the issue
      of timeliness cannot be resolved before deciding the jurisdictional issue); see also
      Lomax v. Department of Defense, 78 M.S.P.R. 553, 560-61 (1998) (stating that, if
      the agency subjected the appellant to an appealable reduction in pay then it
      should have advised her of her appeal rights, and its failure to do so could
      support a finding of good cause for filing her appeal late). If the administrative
      judge determines that the Board has jurisdiction over this appeal, then she should
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      adjudicate the timeliness issue, after providing the appellant with notice of his
      burden of proof.

                                          ORDER
¶12        For the reasons discusses above, we REMAND this appeal to the field
      office for further adjudication in accordance with this Opinion and Order.



      FOR THE BOARD:


      ______________________________
      William D. Spencer
      Clerk of the Board
      Washington, D.C.
