Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-15-03164/USCOURTS-ca13-15-03164-0/pdf.json

Parties Involved:
Department of Defense
Respondent
Curtis A. Khol
Petitioner

Document Text:

NOTE: This disposition is nonprecedential.

United States Court of Appeals 

for the Federal Circuit ______________________ 

CURTIS A. KHOL,

Petitioner

v.

DEPARTMENT OF DEFENSE,

Respondent

______________________ 

2015-3164

______________________ 

Petition for review of the Merit Systems Protection 

Board in No. DC-0752-14-0624-I-1.

-------------------------------------------------------------------------

JEROME E. PANNULLO,

Petitioner

v.

DEPARTMENT OF DEFENSE,

Respondent

______________________ 

2015-3168

______________________ 

Case: 15-3164 Document: 22-2 Page: 1 Filed: 06/02/2016
2 KHOL v. DEFENSE

Petition for review of the Merit Systems Protection 

Board in Nos. DC-0752-13-5863-I-1, DC-0752-14-0624-I-1.

______________________ 

Decided: June 2, 2016

______________________ 

CURTIS A. KHOL, Vienna, VA, pro se.

JEROME E. PANNULLO, Kensington, MD, pro se.

AMELIA LISTER-SOBOTKIN, Commercial Litigation 

Branch, Civil Division, United States Department of 

Justice, Washington, DC, for respondent. Also represented by BENJAMIN C. MIZER, ROBERT E. KIRSCHMAN, JR.,

ALLISON KIDD-MILLER; STEVEN J. WEISS, Office of General 

Counsel, United States Department of Defense, Washington, DC.

______________________ 

Before NEWMAN, O’MALLEY, and TARANTO, Circuit Judges.

NEWMAN, Circuit Judge.

Curtis A. Kohl and Jerome E. Pannullo each appeals 

the decision of the Merit Systems Protection Board 

(“Board”) sustaining the action of the Department of 

Defense (DOD) imposing a six day furlough in July and 

August of 2013 in response to sequestration legislation.1 

The appeals to this court are combined. We discern no 

reversible error in the Board’s decision. 

1 Office of the Secretary v. Dep’t of Defense, DC0752-14-0624-I-1, 2015 WL 1655544 (MSPB Apr. 14, 

2015) (Final Order).

 

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KHOL v. DEFENSE 3

BACKGROUND

The Budget Control Act of 2011 established spending 

limits for federal agencies and required automatic spending cuts if certain deficit reduction legislation was not 

enacted. Pub. L. No. 112-25, §§ 101-103; 125 Stat. 240, 

241-46 (2011). On March 1, 2013 the automatic budget 

cuts were triggered. 2 U.S.C. §§ 901a(8), 906(k)(2). As a 

result, the DOD’s yearly budget was cut by approximately 

$37 billion dollars, to be absorbed in the remaining six 

months of the fiscal year. The DOD took a number of 

steps to address the budgetary shortfall, including reprogramming funds, reducing facility maintenance, and 

eliminating some military training exercises. In a May 

2013 memorandum, the Secretary of Defense explained 

that furloughs of civilian workers would be imposed to 

address the “historic shortfall in our budget” resulting 

from sequester.

Mr. Kohl is a civilian program analyst with Cost Assessment and Program Evaluation (CAPE), a department 

with the agency’s Office of the Secretary of Defense. Mr. 

Kohl was provided notice of the furloughs on May 30, 

2013. Mr. Pannullo is a member of the Senior Executive 

Service (SES) with CAPE, and was provided notice of the 

furloughs on May 29, 2013. The Appellants were furloughed for six days in July and August of 2013. Appellants filed notices of appeal with the Board, alleging they 

were improperly furloughed because the agency was not 

facing an actual lack of funds as the result of sequestration. The administrative judge (AJ) consolidated the 

cases with several others, and found that the DOD had 

shown the furloughs were a reasonable management 

solution to the shortage of funds caused by sequestration 

and that the furloughs promoted the efficiency of the 

service. Office of the Secretary v. Dep’t of Defense, 2014 

WL 5326077 (MSPB Oct. 14, 2014). On appeal to the full 

Board, the Appellants argued that the DOD operated with 

a surplus at all relevant times, and thus could not furCase: 15-3164 Document: 22-2 Page: 3 Filed: 06/02/2016
4 KHOL v. DEFENSE

lough employees for a “lack of funds.” The Board affirmed 

the AJ’s decision, holding that “irrespective of any alleged 

budgetary surplus, the agency established that it had 

financial restrictions placed upon its FY 2013 budget.” 

Final Order at ¶6.

Mr. Kohl and Mr. Pannullo appeal.

DISCUSSION

We review the Board’s decision to ascertain whether it 

was (1) arbitrary, capricious, an abuse of discretion or 

otherwise not in accordance with law; (2) obtained without following the procedures required by law; or (3) unsupported by substantial evidence. 5 U.S.C. § 7703(c). 

By statute, an agency may furlough an employee “because of lack of work or funds or other nondisciplinary 

reasons.” 5 U.S.C. § 7511(a)(5); 5 C.F.R. § 752.402; see 

also 5 U.S.C. § 3595a (SES employees may be furloughed 

for “insufficient work or funds or for other nondisciplinary 

reasons”). Furloughs of thirty days or less are deemed 

adverse employment actions, and may only be taken “for 

such cause as will promote the efficiency of the service.” 5 

U.S.C. § 7513(a). An agency satisfies the “efficiency of the 

service” standard by demonstrating “that the furlough 

was a reasonable management solution to the financial 

restrictions placed on the agency and that the agency 

determined which employees to furlough in a fair and 

even manner.” Einboden v. Dep’t of Navy, 802 F.3d 1321, 

1325 (Fed. Cir. 2015).

Mr. Kohl and Mr. Pannullo argue that the DOD’s 

overall budget reflected the existence of a surplus, and 

thus the DOD could not furlough employees for a “lack of 

funds.” The Board found that sequestration resulted in a 

reduction of $37 billion across every budget account in the 

DOD’s budget, exacerbating budgetary misallocation 

under continuing resolution funding. The Board concluded that the DOD had to make significant budgetary cuts, 

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KHOL v. DEFENSE 5

for in the already underfunded operations and maintenance account from which civilian salaries were paid, the 

total budgetary shortfall was estimated at $30 billion 

dollars. The Board found that the furloughs were a 

reasonable management solution to the financial restrictions.

Agencies have broad discretion to take actions to control spending and preserve flexibility and priorities. See 

Einboden, 802 F.3d at 1325 (upholding furloughs when it 

preserved “flexibility” to “address other high-priority 

budgetary needs”). An agency is not required to operate 

at a deficit before implementing a furlough. Nondisciplinary furloughs are a statutorily-permitted management tool to address budgetary shortfalls.

In his declaration before the Board, Comptroller Hale 

stated that administrative furloughs “would result in a 

predictable, recurring amount of money being available 

for use. . . .” The court will “give wide berth to agency 

decisions as to what type of adverse action is necessary to 

‘promote the efficiency of the service,’ provided that the 

agency’s decision bears some nexus to the reason for the 

adverse action.” Einboden, 802 F.3d at 1325–26. Here, 

substantial evidence supports the DOD’s imposition of 

furloughs to address the combined impacts of sequestration, operating under a continuing resolution, and higher 

than anticipated wartime costs.

The Appellants argue that the furloughs did not meet 

the efficiency of the service standard because the DOD 

ended the year with a surplus in the operations and 

maintenance accounts. They argue that the evidence of 

various shortfalls and intra-agency transfer actions was 

not controlling. Precedent negates this argument. See, 

e.g., Smith v. Dep’t of Air Force, 2016 WL 145967, at *2 

(Fed. Cir. Jan. 13, 2016) (“[I]t was reasonable for the DOD 

to consider its budget holistically when faced with sequesCase: 15-3164 Document: 22-2 Page: 5 Filed: 06/02/2016
6 KHOL v. DEFENSE

tration, rather than isolating components—or, as here, 

accounts—of a military department.”).

The ability to structure spending decisions holistically 

does not mean that the DOD should or can ignore the 

sequester that Congress imposed on all accounts. 2 

U.S.C. § 906(2) (“[T]he same percentage sequestration 

shall apply to all programs, projects, and activities within 

a budget account.”). Addressing the historic budget 

shortfalls occasioned by sequestration required both 

holistic and detailed financial planning.

CONCLUSION

We discern no reversible error in the Board’s ruling 

that the furloughs were reasonable and in accordance 

with law.

AFFIRMED

No costs.

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