                           IN THE SUPREME COURT OF MISSISSIPPI
                                    NO. 92-CC-00708-SCT
JAMES TRUITT PHILLIPS
v.
MISSISSIPPI VETERANS' HOME PURCHASE BOARD

DATE OF JUDGMENT:                                6/3/92
TRIAL JUDGE:                                     HON. WILLIAM F. COLEMAN
COURT FROM WHICH APPEALED:                       HINDS COUNTY CIRCUIT COURT
ATTORNEY FOR APPELLANT:                          ROBERT N. BROOKS
ATTORNEYS FOR APPELLEE:                          OFFICE OF THE ATTORNEY GENERAL
                                                 BY: MARY MARGARET BOWERS
NATURE OF THE CASE:                              CIVIL - STATE BOARDS AND AGENCIES
DISPOSITION:                                     AFFIRMED - 4/4/96
MOTION FOR REHEARING FILED:                      4/18/96
MANDATE ISSUED:                                  6/27/96




     EN BANC.


     PITTMAN, JUSTICE, FOR THE COURT:


¶1. This appeal requires us to look at the breadth of the Mississippi Employee Appeals Board's jurisdiction.
The case arises from the State Personnel Board's approval of the abolition of the position of real estate
appraiser at the Mississippi Veterans' Home Purchase Board. The appellant, James Truitt Phillips, contends
that the Veterans' Home Purchase Board misled the State Personnel Board in an attempt to rid itself of
Phillips for personal and political reasons. Phillips specifically cites his personal differences with the
executive director of the Veterans' Home Purchase Board as to how the agency should have been run. The
Veterans' Home Purchase Board maintains it had legitimate reasons for terminating Phillips' position. The
State Personnel Board abolished the position of real estate appraiser on request of the director of the
Veterans' Home Purchase Board. The reasons offered for the abolishment were a material change in the
duties of the position and a shortage of work to justify the position. The Mississippi Employee Appeals
Board (hereinafter EAB) ruled that the abolishment of the position was a mere pretext to terminate Phillips
and ordered him reinstated with back pay. The circuit court reversed the EAB and restored the action of
the State Personnel Board. We are called on to determine whether the circuit court erred in holding that the
EAB acted beyond the scope of its authority by reinstating Phillips, and, assuming the EAB did have such
authority, whether the EAB's decision was supported by substantial evidence. We find that the EAB had no
such authority in this case, and even if it did, its decision was not supported by substantial evidence.
¶2. Phillips argues that the circuit court erred in finding that the EAB acted beyond the scope of its authority.
Specifically, Phillips contends that Miss. Code Ann. §§ 25-9-127 and 25-7-131 (1972) and our holding in
Gill v. Dept. of Wildlife Conservation, 574 So. 2d 586 (Miss. 1990), give the EAB authority to hear
an employee's side on any action adversely affecting his employment status.

¶3. Miss. Code Ann. §25-9-127 (1972) states the following:

      No employee of any department, agency or institution who is included under this chapter or hereafter
      included under its authority, and who is subject to the rules and regulations prescribed by the state
      personnel system may be dismissed or otherwise adversely affected as to compensation or
      employment status except for inefficiency or other good cause, and after written notice and hearing
      within the department, agency or institution as shall be specified in the rules and regulations of the state
      personnel board complying with due process of law; and any employee who has by written notice of
      dismissal or action adversely affecting his compensation or employment status shall, on hearing and on
      any appeal of any decision made in such action, be required to furnish evidence that the reasons
      stated in the notice of dismissal or action adversely affecting his compensation or employment status
      are not true or are not sufficient grounds for the action; provided, however, that this provision shall not
      apply (a) to persons separated from any department, agency or institution due to curtailment of funds
      or reduction in staff when such separation is in accordance with rules and regulations of the state
      personnel system; (b) during the probationary period of state service of twelve (12) months; and (c)to
      an executive officer of any state agency who serves at the will and pleasure of the governor, board,
      commission or other appointing authority.

¶4. Miss. Code Ann. §25-9-131 (1972) provides in pertinent part that:

      (1) Any employee in the state service may appeal his dismissal or other action adversely affecting his
      employment status to the employee appeals board created herein. The proceedings before the
      employee appeals board shall be de novo, and the employee shall be afforded all applicable
      safeguards of procedural due process. . . . The employee appeals board may modify the action of the
      department, agency or institution but may not increase the severity of such action on the employee.
      Such appointing authority shall promptly comply with the order issued as a result of the appeal to the
      employee appeals board.

¶5. On the other hand, the Veterans' Home Purchase Board argues that Miss. Code Ann. §25-9-127 does
not give the EAB authority over a reduction in staff which was accomplished in compliance with the state
personnel system. They contend that subsection (a) of §25-9-127 precludes any action by Phillips before
the EAB. The Veterans' Home Purchase Board also asserts that the administrative rules of the EAB provide
that only "grievable" issues may be appealed and that termination or layoff from duties because of shortage
of funds or work is a "non-grievable" issue.

¶6. Miss. Code Ann. §25-9-127 dictates the prerequisites for dismissal of a state employee. A state
agency, department or institution included under this may dismiss an employee only for inefficiency or other
good cause and must provide notice and a hearing within the agency at which the employee must show the
reasons given are insufficient or untrue. Section 25-9-127 excepts from these requirements persons such as
Phillips, who are separated due to a reduction in staff when the dismissal is in accordance with the rules of
the State Personnel Board. There is nothing in this statute indicating an intent to deny those excepted from
appealing their dismissal to the EAB. Moreover, §25-9-131 grants any employee in state service the right
to appeal to the employee appeals board his dismissal or other action adversely affecting his employment
status. Section 25-9-131 does not make the same exceptions for appeals as §25-9-127 does for
prerequisites to dismissal.

¶7. We have addressed §25-9-127 in the context of whether a probationary employee enjoyed rights in his
employment such that he could complain of his dismissal. In Gill, we affirmed the circuit court's
interpretation of §25-9-127(b), holding that it does not purport to deny probationary employees the right to
appeal to the EAB. It merely denies these employees the protection of good cause or inefficiency for
adverse action. This is equally true for employees excepted under subsection (a). Therefore, this section
does not bar the EAB from hearing Phillips' claim.

¶8. As we noted in Gill, the legislature has vested in the State Personnel Board the authority to promulgate
rules and regulations to enforce the statutory mandates of §§ 25-9-115, 25-9-129, and 25-9-131 (which
allow the State Personnel Board to create the EAB and state employees the right to appeal their dismissal).
Id. at 592. We noted that the Employee Appeals Board Administrative Rules contained a section granting
probationary employees the right to appeal alleged acts of discrimination to the EAB. We upheld Gill's right
to appeal to the EAB based on this. Justice Robertson, speaking for the Court, stated, "[t]hese regulations
enjoy legal validity via SPB's appropriate exercise of its statutory authority." Id. at 592.

¶9. The EAB Administrative Rule germane to the case sub judice state:

                                                  APPEALS


      The purpose of the Employee Appeals Board is to provide a fair and impartial forum beyond the
      agency level for a full hearing on a grievable action.

      2. WHO MAY APPEAL. ACTIONS WHICH MAY BE APPEALED.

      C. No person may appeal a non-grievable action.

Appendix B to the EAB Rules defines as non-grievable a "termination or layoff from duties because of
shortage of funds or work, material change in duties or organization, or a merger of agencies." The record
indicates there were material changes in the position of real estate appraiser. Phillips was not entitled to an
appeal of the agency's decision based on the foregoing rules and their recognized legal validity.

¶10. Since we have found that Phillips did not have the right to appeal this particular matter to the EAB, it is
not necessary to address the merits of that decision. However, we would stress for the record that "any
decision of any administrative board or agency must be based upon substantial evidence appearing in the
record." Department of Wildlife Conservation v. Browning, 578 So. 2d 667, 668 (Miss. 1991),
quoting Eidt v. City of Natchez, 421 So. 2d 1225 (Miss. 1982). This is applicable to the Mississippi
Employee Appeals Board. Browning, 578 So. 2d at 668.

¶11. Substantial evidence exists in the case sub judice to support the decision of the circuit court, the
Personnel Board and the Veterans' Home Purchase Board.

¶12. The director of the Veterans' Home Purchase Board stated in his letter to the State Personnel Board
the reasons for the abolishment of the real estate appraiser position --material changes in the duties of the
position and a shortage of work to justify the position. One of the former functions of the appraiser, to
check the tax roles to determine if the taxes had been paid on mortgaged property, was no longer
performed by the appraiser. Also, the decision of the Board to escrow taxes eliminated the necessity of an
appraiser going out into the field to check these tax records.

¶13. Another factor supporting the elimination of the appraiser position was that the Board decided to use
non-guaranty loans as opposed to loans guaranteed by the Veterans Administration (VA) only as an
exception to the rule when justified by particular circumstances. Regulations contained in the Veteran's
Administration Lending Handbook do not allow the Veterans' Home Purchase Board to utilize in-house
appraisers on VA- guaranteed loans. Phillips was an in-house appraiser. In 1990, the year preceding
dismissal, there were 198 loans reviewed by the Board for approval or disapproval. Of that 198, 167 were
presented for VA-guaranty, thirty-one were non-guaranty, and there were an additional twelve which were
presented as VA-guaranty; however, depending on the purchase price, these could have gone non-
guaranty. Assuming Phillips performed all forty-three appraisals, and taking his salary and benefits into
consideration, the cost per appraisal averaged $1,033.84. When the veteran fills out an application,
$250.00 is collected. $200.00 is for the appraisal, whether done in-house or not, and $50.00 for a credit
report. Veterans' Home Purchase Board paid $44,000.00 to Phillips as real estate appraiser, the actual
revenue offsetting that cost was $8600.00. This certainly justifies eliminating the position of appraiser,
especially in light of the fact that the deputy director is also an appraiser.

¶14. The deputy director has already assumed a few duties of the appraiser requiring little time, such as
insurance inspections.

¶15. The record contains substantial evidence in favor of the conclusion reached by the State Personnel
Board and the circuit court, and far less evidence in support of the decision of the EAB. A reduction in
force by the Veterans' Home Purchase Board evidences a sound management decision, not a vendetta
against James Truitt Phillips.

¶16. AFFIRMED.

LEE, C.J., SULLIVAN, P.J., ROBERTS AND MILLS, JJ., CONCUR. PRATHER, P.J.,
DISSENTS WITH SEPARATE WRITTEN OPINION JOINED BY BANKS, McRAE AND
SMITH, JJ.




     PRATHER, PRESIDING JUSTICE, DISSENTING:


¶17. Because I believe that the decision of the Employee Appeals Board (EAB) was in compliance with the
law, I respectfully dissent. Phillips was a Vietnam veteran with over twenty-two years service to the
Mississippi Veterans' Home Purchase Board (MVHPB); at the time his position was abolished, he was
three years from retirement. Phillips raises two issues on appeal: (a) whether the EAB acted within the
scope of its authority and (b) whether the decision of the EAB was supported by substantial evidence. I
disagree with the majority on both points. That is, in my opinion, the EAB acted within its authority in this
case, and the decision of the EAB was supported by substantial evidence.
                            I. The EAB had authority to hear Phillips' claim.

¶18. The majority holds that the administrative rules of the EAB provide that only "grievable" issues may
come before it and that "termination or layoff from duties because of shortage of funds or work" is a "non-
grievable" issue. Indeed, Rule 2(C) of the EAB's administrative rules provides that "[n]o person may appeal
a non-grievable action."

¶19. Appendix B to the EAB rules states that:

     The following issues are non-grievable issues under the state service grievance procedure:

     ....

     G. termination or layoff from duties because of shortage of funds or work, material change in duties or
     organization or a merger of agencies;

¶20. However, whether the EAB has jurisdiction "turns on a fair reading of the employee's claims which
must be taken as true." Gill v. Mississippi Dept. of Wildlife Conservation, 574 So. 2d 586, 592 (Miss.
1990). Phillips' grievance statement to the EAB alleged specific ways in which the Mississippi State
Employee Handbook was not followed during the implementation of the "reduction in work force" which
led to the abolition of his position. He also alleged that his position was abolished in part because of "his
political involvement and particularly his involvement with [a Representative in the State Legislature] and
discussions that he had with the Representative regarding the manner in which the Veterans' Home
Purchase Board was being operated." In addition, Phillips claimed that the policies of the MVHPB were
weakening the "fiscal stability" of the MVHPB. Moreover, Phillips alleged that the reason for the abolition
of his position was "a combination of political, personal and disciplinary reasons disguised as a reduction in
force."

¶21. If Phillips' claims before the EAB were taken as true, then the EAB was entitled to go forward with the
appeals process. That is, Phillips' claims did indeed raise grievable issues, according to the EAB
administrative rules. Rule 2, subsections (A) and (B) of the EAB administrative rules provide that:

     2. WHO MAY APPEAL. ACTIONS WHICH MAY BE APPEALED.

     A. A permanent state service employee may appeal any action adversely affecting his or her
     compensation or employment status.

     B. A permanent state service employee may appeal a grievable action.

¶22. Appendix A to the EAB rules states that:

     The following issues are grievable under the state service grievance procedure:

     A. disciplinary actions, including reprimands, dismissals, demotions, and suspensions;

     B. application of personnel policies, procedures, rules, regulations, ordinances and statutes;

     ....

     D. complaints of discrimination on the basis of race, color, sex religion, national origin, age, disability,
      or political affiliation;

      E. any matter of concern or dissatisfaction to an employee if the matter is subject to the control of
      agency management (except as provided in Appendix B);

¶23. Phillips' claim that the motive for the abolition of his position was disciplinary would fall under EAB
Rule 2(A). The contention that the MVHPB did not follow the procedures of the State Personnel Board
when the MVHPB abolished his position would be governed by EAB Rule 2(B). EAB Rule 2(C) would
relate to Phillips' claim that the agency's management implemented fiscally unsound policies. Rule 2(D)
would be applicable to Phillips' claim that his position was abolished due to his age and his political
affiliations.

¶24. As stated earlier, for purposes of determining EAB jurisdiction, the claims of the aggrieved employee
must be taken as true. Gill, 574 So. 2d at 592. If Phillips' claims were true, then they presented "grievable"
issues under the administrative rules of the EAB. Therefore, the EAB acted within its scope of authority
when it considered Phillips' claims.

     II. There was sufficient evidence to support the EAB's decision that Phillips' position was
                                       pretextually abolished.

¶25. The standard of review in this case is whether the agency's decision was arbitrary and capricious, or
unsupported by substantial evidence, or contrary to law. See Young v. Mississippi State Tax Com'n,
635 So. 2d 869, 874-75 (Miss. 1994); Gill, 574 So. 2d at 590.

¶26. In the case at hand, there is ample evidence to support the decision of the hearing officer and the EAB
that Phillips' position was pretextually abolished. Moreover, much of this testimony was not only credible, it
was given by the MVHPB's witnesses. There is evidence that the director of the MVHPB and Phillips had
disagreements, at least one of which got their "tempers up." Shortly before the director requested the
abolition of Phillips' position, he offered to get Phillips a raise if Phillips would "work with him." Phillips
responded by stating that he could not promise to work with the director, but that he would continue to
work for the Mississippi veteran and for the betterment of the agency. When Phillips did not agree to "work
with" the director, his position was abolished.

¶27. Furthermore, the director represented to the State Personnel Board that the abrogation was necessary
for financial efficiency due to a shortage of work and a material change in the duties of the position of
appraiser. The director testified that he thought that those were the only two reasons for which the
Personnel Board could abolish a position. The representation to the Personnel Board was actually
deceptive, to the extent that it could be construed to mean that the MVHPB was undergoing or expected to
undergo financial difficulties. Indeed, both the Director and an MVHPB Board Member testified that the
MVHPB had "plenty of money." Thus, there is substantial evidence that the director's abolishment of
Phillips' position was a pretext for getting rid of someone who vocally disagreed with him -- without
affording that person due process of law.

¶28. The EAB had statutory and regulatory authority to hear Phillips' grievance. The decision of the EAB
was in compliance with the law, was supported by substantial evidence, and was neither arbitrary nor
capricious. Therefore, the ruling of the circuit court should be reversed and judgment should be rendered in
Phillips' favor. The EAB's decision ordering reinstatement and back pay should be upheld.
BANKS, McRAE AND SMITH, JJ., JOIN THIS OPINION.
