United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 12, 2014 Decided April 17, 2015

No. 13-5057

RICHARD E. LUBOW, ET AL.,

APPELLANTS

v.

UNITED STATES DEPARTMENT OF STATE, ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 1:10-cv-00510)

Elliot H. Scherker argued the cause for appellants. With 

him on the briefs were Brigid F. Cech Samole, Rachel A. 

Canfield, and Joe R. Reeder.

Alan Burch, Assistant U.S. Attorney, argued the cause for 

appellees. With him on the brief were Ronald C. Machen Jr., 

U.S. Attorney, and R. Craig Lawrence, Assistant U.S. 

Attorney. Mercedeh Momeni, Assistant U.S. Attorney, 

entered an appearance.

Before: GARLAND, Chief Judge, SRINIVASAN, Circuit 

Judge, and SENTELLE, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge SRINIVASAN.
2

Concurring opinion filed by Senior Circuit Judge 

SENTELLE.

SRINIVASAN, Circuit Judge: A statute limits the amount 

of “premium pay,” including overtime pay, federal 

government employees may earn each year. A group of State 

Department employees challenges the Department’s decision 

requiring them to repay excess overtime pay they received for

work on assignment in Iraq in 2004. We conclude that the 

Department permissibly construed the statute capping 

premium pay when determining that the employees’ overtime 

pay exceeded the statutory limit. We also find that the 

Department did not act arbitrarily in denying the employees a 

discretionary waiver of their obligation to repay the excess 

compensation.

I.

At the time of the events in this case, the five 

plaintiffs—Frank Benevento, David Bennett, Joseph Bopp, 

James Landis, and Richard Lubow—worked in the State 

Department as Diplomatic Security Special Agents. In late 

2003 or early 2004, each of them responded to a call for 

volunteers to serve one-year assignments in Iraq under the 

Coalition Provisional Authority. They arrived in Iraq in 

February 2004.

Initially, the plaintiffs were assigned to Iraq on temporary 

duty status; their permanent duty station was in Washington, 

D.C. Consequently, the plaintiffs received “locality 

pay”—pay in addition to base salary intended to equalize 

federal employees’ compensation with that of non-federal 

workers in the same geographic area—as if they were working 

in Washington, D.C. See 5 U.S.C. §§ 5301, 5304. In June or 

July of 2004, the plaintiffs’ permanent duty station changed 

from Washington, D.C., to the United States Embassy in 
3

Baghdad. Because the plaintiffs were now stationed in a 

foreign location, they no longer received locality pay. See 5 

C.F.R. § 531.603.

While in Iraq, the plaintiffs worked, and received 

compensation for, a significant number of overtime hours. In 

early 2005, the plaintiffs completed their assignments in Iraq 

and returned to the United States.

A.

Federal law limits the amount of “premium pay” a federal 

employee may receive. See 5 U.S.C. § 5547. Premium pay 

(as opposed to “basic pay”) includes types of remuneration

such as overtime pay, holiday pay, Sunday pay, night pay 

differential, and availability pay. See id. § 5547(a). As a 

general matter, the statutory cap applies to each pay period 

(i.e., biweekly). The cap operates as a limit on the 

combination of an employee’s basic and premium pay in a 

two-week period. See id.

When an employee performs “work in connection with an 

emergency,” however, the biweekly cap in § 5547(a) does not 

apply. Id. § 5547(b)(1). Instead, the statute calls for 

calculating the cap on an annual basis. See id. § 5547(b)(2). 

The State Department determined that the military operations

in Iraq and the aftermath qualified as an emergency. As a 

result, the plaintiffs were subject to the annual cap, which 

provides: 

[N]o employee referred to in [§ 5547(b)(1)] 

may be paid premium pay . . . if, or to the 

extent that, the aggregate of the basic pay and 

premium pay . . . for such employee would, in 

any calendar year, exceed the greater of—
4

(A) the maximum rate of basic pay payable 

for GS-15 in effect at the end of such 

calendar year (including any applicable 

locality-based comparability payment . . . ); 

or 

(B) the rate payable for level V of the 

Executive Schedule in effect at the end of 

such calendar year. 

Id. § 5547(b)(2). 

The statute therefore caps compensation for work in 

connection with an emergency based on the annual maximum 

basic pay rate for GS-15 or the annual pay rate for Executive 

Schedule level V, whichever is greater. At the end of 2004, 

the annual maximum GS-15 pay rate for employees receiving 

no locality pay was $113,674. For employees assigned to 

work in Washington, D.C., the annual maximum GS-15 pay 

rate, including the applicable locality-pay adjustment, was 

$130,305. At that time, the annual Executive Schedule level 

V rate was $128,200.

With regard to the plaintiffs in this case, if § 5547(b)(2)’s 

cap were calculated as if the plaintiffs received locality pay for 

Washington, D.C.—as they did when assigned to D.C. for the 

first half of 2004—the applicable cap would be $130,305. 

But if the cap were calculated as if the plaintiffs received no 

locality-pay adjustment—as was the case for the second half of 

2004 after their permanent assignment shifted to the U.S. 

Embassy in Baghdad—the applicable cap would be $128,200.

B.

In September 2004, the Office of Personnel Management 

issued final regulations implementing § 5547. See Premium 

Pay Limitations, 69 Fed. Reg. 55,941 (Sept. 17, 2004). In 
5

pertinent part, the regulation implementing § 5547(b)(2) 

largely tracks the statute’s language:

In any calendar year during which an 

employee has been determined to be 

performing emergency or mission-critical 

work . . . , the employee may receive premium 

pay under this subpart . . . only to the extent 

that the payment does not cause the total of his 

or her basic pay and premium pay for the 

calendar year to exceed the greater of—

(1) The maximum annual rate of basic pay 

payable for GS-15 (including any applicable 

locality-based comparability payment . . . ) 

in effect on the last day of the calendar year; 

or

(2) The annual rate payable for level V of the 

Executive Schedule in effect on the last day 

of the calendar year.

5 C.F.R. § 550.106(c). 

OPM also published a statement in the Federal Register 

elaborating on the operation of the annual cap. See Premium 

Pay Limitations, 69 Fed. Reg. at 55,941. The statement 

responded to an agency’s question about the application of the 

cap in the circumstances of this case: when an employee is

stationed in multiple locality-pay areas during the course of a 

year. OPM explained that the statute “expressly provides that 

the annual premium pay cap must be applied to an entire 

calendar year and that it is based on the applicable rates in 

effect at the end of the calendar year.” Id. As a result, “[a] 

geographic move to an area with different pay rates can raise or 

lower an employee’s aggregate basic pay and the end-of-year 
6

annual cap on premium pay. In turn, a change in aggregate 

basic pay or the end-of-year cap can change retroactively the 

date on which an employee reached the annual premium pay 

cap.” Id. In that situation, OPM recognized, “an agency 

may have to recompute retroactively the amount of premium

pay owed for one or more pay periods.” Id.

C.

On November 24, 2004, shortly after OPM’s new 

regulations took effect, the five plaintiffs received email 

messages from the State Department notifying them that the 

Department was “conducting a review of premium pay 

earnings involving employees supporting the effort in Iraq.” 

J.A. 179. “Because you are assigned overseas,” the message

explained, “the rate of the annual premium pay cap that applies 

to you is $128,200 (the rate for Level V of the Executive 

Schedule).” Id. The message told each plaintiff that his 

earnings to date “have already or will shortly put you above the 

cap for the current pay year,” and that the Department would be 

“obligated to seek collection of [any] overpayments.” Id. 

As the email message forewarned, each plaintiff received 

a letter from the Department in April 2005 requiring repayment 

of premium pay received in excess of § 5547(b)(2)’s cap. The 

amount owed by each plaintiff was: $7,765.83 (Benevento), 

$6,308.07 (Bennett), $5,702.69 (Bopp), $435.94 (Landis), and 

$10,514.98 (Lubow). 

The Department gave the plaintiffs the option to dispute 

their debts through either internal or external administrative 

review. Benevento chose internal review, and his case was 

examined by Deputy Assistant Secretary for Global Financial 

Services James Millette. DAS Millette, relying on the text of 

the statute and OPM’s regulations, determined that 

Benevento’s aggregate basic and premium pay was subject to 
7

the $128,200 cap because, at the end of calendar year 2004,

Benevento was assigned to a site with no locality-pay 

adjustment. The other plaintiffs opted for an outside hearing 

before an administrative law judge of the General Services 

Administration Board of Contract Appeals. That judge 

similarly determined that the Department properly applied 

§ 5547(b)(2) to the plaintiffs’ situation.

Each plaintiff also requested that the Department forgive 

the entirety of his debt pursuant to 5 U.S.C. § 5584. That 

provision allows an employing agency to waive any claim 

against an employee “arising out of an erroneous payment of 

pay” if collection “would be against equity and good 

conscience and not in the best interests of the United States.” 

5 U.S.C. § 5584(a). The plaintiffs argued that equitable 

considerations supported waiver because they had volunteered 

for a dangerous overseas assignment in a war zone, because 

there was confusion about how the annual cap would apply, 

and because the nature of their security assignments required 

significant overtime hours. DAS Millette denied the waiver 

requests for all five plaintiffs, reasoning that the plaintiffs bore 

partial responsibility for the overpayments because they 

possessed records that would have alerted them that they had 

received or might receive (and thus would need to repay) 

compensation in excess of the cap. See id. § 5584(b)(1) (an 

agency official may not exercise his discretion to waive a claim 

against an employee “if, in his opinion, there exists, in 

connection with the claim, an indication of fraud, 

misrepresentation, fault, or lack of good faith on the part of the 

employee”).

The plaintiffs filed grievances with the State Department’s 

Foreign Service Grievance Board. The FSGB agreed with 

DAS Millette and the Board of Contract Appeals that the 

$128,200 cap applied to govern the whole year. But the 
8

FSGB determined that DAS Millette erred in holding the 

plaintiffs partially responsible for the overpayments, agreeing 

with the plaintiffs that it was unlikely that an employee could 

have anticipated how the annual cap would apply. “Nor is it 

clear,” the FSGB’s opinion continued, “what [the plaintiffs] 

could have done to avoid overpayments once [they were] 

notified on November 24 that [they were] nearing the pay cap.” 

J.A. 839. The FSGB sent the plaintiffs’ waiver requests back 

to DAS Millette for a determination of whether collection of 

the overpayments “would be against equity and good 

conscience and not in the best interests of the United States.” 

5 U.S.C. § 5584(a).

DAS Millette invited the plaintiffs to submit additional 

information. He asked them to address in particular the 

factors that agency officials are instructed to consider under 

§ 5584’s corresponding regulation:

(A) Whether collection of the claim would 

cause serious financial hardship to the 

employee from whom collection is sought.

(B) Whether, because of the erroneous 

payment, the employee either has relinquished 

a valuable right or changed positions for the 

worse, regardless of the employee’s financial 

circumstances.

(C) The time elapsed between the erroneous 

payment and discovery of the error and 

notification of the employee;

(D) Whether failure to make restitution would 

result in unfair gain to the employee;
9

(E) Whether recovery of the claim would be 

unconscionable under the circumstances.

22 C.F.R. § 34.18(b)(1)(iv). In response, the plaintiffs’ 

representative submitted a single letter for all five employees 

stating that they wished to “rely upon the record already 

developed in this matter.” J.A. 885.

DAS Millette again denied the waiver requests. He 

emphasized the plaintiffs’ refusal specifically to address any of 

the 22 C.F.R. § 34.18(b)(1)(iv) factors, including their failure 

to put forth a showing of financial hardship. He grounded his 

decision in the fourth factor: whether waiver of the debts 

would result in “an unfair gain” to the plaintiffs. He explained 

that it would: “I have had to make this determination for over 

thirty other employees in the exact same situation and they 

have paid their debts in full.” J.A. 847. 

The plaintiffs appealed to the FSGB again, and this time, it 

upheld the waiver denials. The FSGB stressed the plaintiffs’ 

failure to address any of the 22 C.F.R. § 34.18(b)(1)(iv) factors 

except the fifth (whether “recovery of the claim would be 

unconscionable under the circumstances”). And the FSGB 

found “no basis” to overturn DAS Millette’s judgment that 

granting a waiver to the plaintiffs “would create an unfair gain 

for them vis-a-vis all those similarly situated employees who 

repaid their excess premium pay for 2004.” J.A. 900. The 

FSGB further noted that DAS Millette’s decision was “in line” 

with precedent “discourag[ing] the approval of waivers when 

the employee had reasonably prompt notice that the payments 

were or may have been erroneous, even if the employee was 

not ‘at fault.’  ” Id.
10

D.

The plaintiffs sought judicial review in federal district 

court. The district court initially remanded the case to the 

Department based on an “intervening event.” Lubow v. U.S. 

Dep’t of State (Lubow I), 730 F. Supp. 2d. 73, 76 (D.D.C. 

2010). The court noted that, in 2005, Congress enacted the 

Emergency Supplemental Appropriations Act for Defense, the 

Global War on Terror, and Tsunami Relief, 2005 (Emergency 

Supplemental Appropriations Act), Pub. L. No. 109-13, 119 

Stat. 231 (2005). The Act allowed heads of executive 

agencies to “waive” 5 U.S.C. § 5547(b)(2)’s limit on the 

aggregate of basic and premium pay up to $200,000 during 

2005. Emergency Supplemental Appropriations Act § 1008, 

119 Stat. at 243. The State Department had taken advantage 

of that authorization in August 2005 by waiving § 5547(b)(2)’s 

limit on compensation “payable in calendar year 2005” for 

employees in Iraq and Afghanistan. J.A. 281. The district 

court observed that the Department’s waiver applied to 

compensation earned in the last pay period of December 

2004—because that compensation would have been “payable” 

in January 2005—and the court questioned why none of the 

administrative decisions had explained the effect of the 2005 

waiver on the amount of the plaintiffs’ debts. On remand, the 

Department found that the 2005 waiver had no effect on the 

amount of the plaintiffs’ 2004 debts because any pay received 

by the plaintiffs in 2005 had been excluded from the 

Department’s overpayment calculations for 2004.

The district court then granted summary judgment to the 

defendants. Lubow v. U.S. Dep’t of State (Lubow II), 923 F. 

Supp. 2d 28, 30 (D.D.C. 2013). First, the court addressed 

whether the Department properly determined that the $128,200 

cap governed the whole year. Because the issue turned on the 

validity of OPM’s interpretation of 5 U.S.C. § 5547(b)(2), the 
11

court applied the two-step framework set forth in Chevron, 

U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 

U.S. 837 (1984). The court resolved the case at step one, 

concluding that OPM’s interpretation was required by “the 

statute’s plain language.” Lubow II, 923 F. Supp. 2d at 35. 

“Because plaintiffs were assigned overseas at the end of 2004,” 

the court reasoned, “plaintiffs’ locality-adjusted GS–15 rate in 

effect at that time was $113,674,” making the Executive 

Schedule V rate the higher amount. Id. at 36 (emphasis 

added). The court also upheld the Department’s 

determination that its August 2005 waiver pursuant to the 

Emergency Supplemental Appropriations Act had no effect on 

the plaintiffs’ debts, and further ruled that the FSGB had not 

acted arbitrarily in upholding DAS Millette’s decision to deny 

the plaintiffs’ requests for discretionary waivers under 5 

U.S.C. § 5584.

II.

The plaintiffs seek review of four final agency actions 

under the Administrative Procedure Act: (i) the FSGB’s 

determination that the Department properly applied 5 U.S.C. 

§ 5547(b)(2)’s cap on premium pay; (ii) the Board of Contract 

Appeals’ decision to the same effect; (iii) the Department’s 

decision that the August 2005 waiver had no bearing on the 

plaintiffs’ repayment obligations; and (iv) the FSGB’s

decision upholding the denial of discretionary waivers under 5 

U.S.C. § 5584. See 22 U.S.C. § 4140(a); 5 U.S.C. § 704. 

The APA “requires us to set aside agency action that is 

‘arbitrary, capricious, an abuse of discretion, or otherwise not 

in accordance with law.’ ” Jicarilla Apache Nation v. U.S. 

Dep’t of Interior, 613 F.3d 1112, 1118 (D.C. Cir. 

2010) (quoting 5 U.S.C. § 706(2)(A)). We evaluate the 

district court’s grant of summary judgment de novo, id., and 

we affirm.
12

A.

We first address the plaintiffs’ challenge to the FSGB’s 

and Board of Contract Appeals’ decisions that their 

compensation for overtime work performed in Iraq exceeded 5 

U.S.C. § 5547(b)(2)’s cap on annual premium pay. 

Subsection 5547(b)(2) instructs agencies to set their 

employees’ annual cap at the higher of two figures: (i) “the 

maximum rate of basic pay payable for GS-15 in effect at the 

end of such calendar year,” including “any applicable 

locality-based comparability payment”; and (ii) “the rate 

payable for level V of the Executive Schedule in effect at the 

end of such calendar year.” OPM interprets 

§ 5547(b)(2)(A)’s direction to use the GS-15 rate “in effect at 

the end of such calendar year” to require the use of the GS-15 

rate applicable to the specific employee in question. In other 

words, OPM construes “in effect” to reference the 

circumstances applicable to that employee as of December 

31—including, as relevant here, the location of the employee’s 

designated duty station on that date. See 69 Fed. Reg. at 

55,941.

The plaintiffs dispute OPM’s understanding of the statute. 

They maintain that the statutory references to the GS-15 and 

Executive Schedule rates “in effect at the end of such calendar 

year” intend only to reference the rates generally in force at the 

end of the year. Under that view, the statutory phrase aims 

merely to address a situation in which those rates change 

during the course of the year. For instance, if Congress had 

raised the base GS rates by 2% and made that increase effective 

on September 1, 2004, § 5547(b)(2)(A) would tell the agency 

to use the post-September GS-15 rate in calculating the annual 

cap. Similarly, if Congress increased the amount of locality 

pay for the location “applicable” to the plaintiff’s duty station 

and made that change effective mid-year, the statute would 
13

instruct the agency to use the higher amount. Under that 

reading, “in effect” would mean only the rate that is legally “in 

effect.” And the statute would remain silent concerning the 

specific question at issue here: which GS-15 rate to use for a 

particular employee whose assigned location changes during 

the year.

The district court assumed, in accordance with the parties’ 

presentations, that Chevron’s two-step framework governed 

the court’s review of OPM’s interpretation of § 5547(b)(2). 

Lubow II, 923 F. Supp. 2d at 35. Both parties maintain that 

position on appeal. We accordingly adhere to the parties’ 

framing and examine OPM’s interpretation of the statute under 

Chevron. Cf. Humane Soc’y of U.S. v. Locke, 626 F.3d 1040, 

1054 n.8 (9th Cir. 2010) (assuming, without deciding, the 

applicability of Chevron based on the parties’ agreement that 

Chevron governed their dispute). Because the plaintiffs 

affirm the applicability of the Chevron framework, we need not 

consider potential arguments they might have made (but did 

not make) against our deferring to the agency under 

Chevron—including the argument contemplated by our 

concurring colleague to the effect that OPM failed to recognize 

its discretion under the statute when issuing its guidance. See 

Peter Pan Bus Lines, Inc. v. Fed. Motor Carrier Safety Admin., 

471 F.3d 1350, 1354 (D.C. Cir. 2006). The applicability of 

the Chevron framework does not go to our court’s jurisdiction, 

and a party therefore can forfeit an argument against deference 

by failing to raise it. See Intercollegiate Broad. Sys., Inc. v. 

Copyright Royalty Bd., 574 F.3d 748, 756 (D.C. Cir. 2009) (per 

curiam). 

Under the Chevron framework, if “Congress has directly 

spoken to the precise question at issue,” then “the court, as well 

the agency, must give effect to the unambiguously expressed 

intent of Congress.” 467 U.S. at 842-43. But “if the statute 
14

is silent or ambiguous with respect to the specific issue,” we 

examine “whether the agency’s answer is based on a 

permissible construction of the statute.” Id. at 843. Here, the 

district court resolved the issue in favor of OPM’s 

interpretation at the first step. The court reasoned that 

§ 5547(b)(2) establishes a rule that the “the rates at the end of 

the year determine the cap,” which, in the court’s view, 

unambiguously “dictates the outcome in exactly the situation 

where the applicable rate changes during the course of the year, 

regardless of the reason for that change.” Lubow II, 923 F. 

Supp. 2d at 36.

We find it unnecessary to decide the question of 

§ 5547(b)(2)’s ambiguity at Chevron step one: because the 

plaintiffs make no argument that the statute unambiguously 

compels their interpretation, we need not resolve the step-one 

question one way or the other. See Babbitt v. Sweet Home 

Chapter of Cmtys. for a Great Or., 515 U.S. 687, 703 (1995). 

Even assuming that the plaintiffs could make out a case for the 

statute’s ambiguity or silence at step one, we find that OPM’s 

reading of the text is reasonable and deserving of our deference

at Chevron step two.

As explained, OPM reads § 5547(b)(2)(A) to mean that 

the employing agency must apply the GS-15 rate “in effect” 

with respect to the specific employee in question as of 

December 31, taking into account the employee’s locality pay 

as of that date. The phrase “in effect” surely is amenable to 

that reading. Indeed, the district court thought it impossible to 

read the language any other way, because “the text provides no 

basis for separating rates that are in effect at the end of the year 

for a certain reason (e.g., a statutory increase in the GS-15 rate) 

from rates that are in effect at the end of the year for a different 

reason (e.g., a change in location and hence to the 
15

locality-based comparability payment).” Lubow II, 923 F. 

Supp. 2d at 36. 

Moreover, it is eminently sensible for OPM to apply 

§ 5547(b)(2)(A) such that an agency would need to take 

account of an employee’s location only at a single, identifiable 

point during the year for purposes of determining the 

“applicable” locality-based adjustment. As the district court 

noted, selecting some particular date for assigning the amount 

to plug into the premium-pay cap calculation might seem 

unfairly to disadvantage certain employees (who, like the 

plaintiffs, might become subject to a lower cap than would

otherwise apply) while working to the advantage of other 

employees (who might gain the advantage of a higher cap). 

For instance, an employee transferred at the end of the calendar 

year to a site with a higher locality-based adjustment would 

gain a benefit even though she earned less locality pay for most 

of the year (and vice versa for an employee relocated to a site 

with a lower locality-based adjustment). But “[v]irtually 

every legal (or other) rule has imperfect applications in 

particular circumstances.” Barnhart v. Thomas, 540 U.S. 20, 

29 (2003). And here, any such imperfection is substantially 

offset by the significant gains in efficiency attending the 

agency’s having to take account of an employee’s duty station 

only as of a single date.

The plaintiffs object to what they see as the statute’s 

“retroactive” operation under OPM’s interpretation. They 

argue that it is unreasonable—even absurd—to imagine that 

Congress wrote a statute under which it could turn out that, at 

the end of the year, certain employees become subject to a 

different cap on premium pay than they had anticipated. But 

the statute would be “retroactive” even under the plaintiffs’ 

reading of § 5547(b)(2)(A): an agency could not definitively 

calculate its employees’ annual cap until the end of the year 
16

because the agency would not necessarily know ex ante

whether the statutory rates might change. Moreover, as OPM 

pointed out when responding to concerns about the burdens 

associated with recalculating the cap for an employee who 

switches locations mid-year, its regulations allow agencies to 

defer payment of premium pay until the end of the year. See 5 

C.F.R. § 550.106(e). If agencies took advantage of that 

authorization, there would be no need to recoup excess 

premium pay from employees after-the-fact. See 69 Fed. Reg. 

at 55,941.

The merits of OPM’s interpretation become all the more 

apparent when compared with the uncertainty of the alternative 

approach offered by the plaintiffs. Because the plaintiffs 

believe that § 5547(b)(2) does not speak directly to the 

circumstances of this case, they propose that the agency elect 

to implement different premium-pay caps to govern different 

parts of the year. They would apply the statute “as requiring 

that the period that Plaintiffs spent on [temporary duty 

assignment] in Iraq from February 2004 to June 2004 be 

assessed under a cap of $130,305 and that the period from 

when they were assigned to the Embassy in June 2004 to the 

end of the year be assessed under the $128,200 cap.” 

Appellants’ Br. 37 (brackets in original and ellipses omitted). 

But there is no clear understanding of how that prorating 

scheme would work in practice.

For instance, during oral argument, the plaintiffs

suggested that, as long as an employee does not exceed the 

applicable cap during the time period that the cap applies—i.e., 

resetting the aggregate of the employee’s basic and premium 

pay to zero each time the employee becomes subject to a new 

cap—the employee could keep everything he had earned. 

Oral Argument at 14:37–15:30, 52:53–56:10. But that 

approach is of questionable soundness. It would allow an 
17

employee in the plaintiffs’ situation to earn up to 

$258,505—nearly double the otherwise-applicable annual 

cap—merely by virtue of having undergone a mid-year 

transfer. To the extent the plaintiffs argue that the solution 

would entail applying a prorated cap on a monthly or biweekly 

basis during the relevant parts of the year (a position they also 

seemingly advanced during argument, Oral Argument at 

14:26–14:37, 17:21–18:06), such an approach would stand at 

odds with Congress’s decision not to apply § 5547(a)—the 

subsection utilizing biweekly caps—during emergencies. 

The evident difficulty in understanding the mechanics of the 

plaintiffs’ preferred interpretation contrasts with OPM’s 

straightforward alternative.

Because OPM’s resolution of the disputed question “is 

based on a permissible construction of the statute,” Chevron, 

467 U.S. at 843, we defer to OPM’s interpretation of 

§ 5547(b)(2). Consequently, we find that it was not arbitrary 

or capricious for the Department to apply OPM’s guidance in 

determining the cap that applied to the plaintiffs’ premium pay 

in 2004.

B.

The plaintiffs argue in the alternative that the Department 

acted arbitrarily and capriciously in concluding that the August 

2005 waiver had no bearing on the amount of overpayments 

they received in 2004. The plaintiffs are incorrect.

In May 2005, Congress, in the Emergency Supplemental

Appropriations Act, gave executive agencies the authority to 

“waive” § 5547(b)(2)’s limit on the aggregate of basic and 

premium pay so that certain employees could earn up to 

$200,000 without hitting the cap. The State Department 

exercised that authority in August 2005. But the 

Department’s waiver applied only to compensation “payable in 
18

calendar year 2005.” That allowance technically extended to 

pay for work performed during the last two weeks of December 

2004 because the corresponding pay date for that period was 

“in calendar year 2005,” i.e., on January 6, 2005. But the 

Department nonetheless determined that the waiver had no 

effect on the amount of the plaintiffs’ 2004 debt because the 

earnings the plaintiffs received on January 6, 2005, were 

excluded from the Department’s 2004 overpayment 

calculations.

The plaintiffs do not dispute that compensation paid on 

January 6, 2005, was excluded from their respective repayment 

obligations. They nonetheless argue that the “higher pay cap 

was indisputably ‘in effect’ on the last day of the calendar 

year, . . . a fact that should be dispositive, even under the 

Department’s construction of Section 5547.” Appellants’ Br. 

40. But that argument is a non sequitur. The plaintiffs 

apparently seek to invoke the language from § 5547(b)(2), but 

that provision refers only to “the maximum rate of basic pay 

payable for GS-15 in effect at the end of such calendar year” 

and “the rate payable for level V of the Executive Schedule in 

effect at the end of such calendar year.” 5 U.S.C. 

§ 5547(b)(2)(A), (B). Neither the Emergency Supplemental 

Appropriations Act nor the Department’s August 2005 waiver 

affected the statutory GS-15 rate or the Executive Schedule V 

rate. The Department’s waiver therefore had nothing to do 

with § 5547(b)(2)’s operation. In fact, the waiver effectively 

supplanted § 5547(b)(2)’s limit with respect to pay received 

during calendar year 2005. And because the plaintiffs 

challenge only the Department’s attempt to recoup 

overpayments they received in 2004, the Department correctly 

found the 2005 waiver to be irrelevant.
19

C.

The plaintiffs’ final challenge concerns the Department’s 

denial of their requests for discretionary waivers pursuant to 5 

U.S.C. § 5584. That provision enables an agency to waive 

collection of an erroneous payment made to an employee when 

collection “would be against equity and good conscience and 

not in the best interests of the United States.” 5 U.S.C. 

§ 5584(a). DAS Millette first ruled that the plaintiffs were 

statutorily barred from seeking a waiver because they bore 

partial responsibility for the overpayments. After the FSGB 

reversed that finding on appeal, DAS Millette determined that 

the factors listed in 22 C.F.R. § 34.18(b)(1)(iv) nonetheless 

favored denial. The FSGB upheld that decision.

We are mindful that the plaintiffs volunteered for what 

was presumably a considerably difficult and dangerous 

assignment to assist the United States’ operations in Iraq in 

2004. And as the FSGB itself acknowledged, “it seems 

unfair” for the government to require the plaintiffs “to refund 

payments for overtime work they actually performed, when 

they had no real option but to perform such work, and when 

those in similar positions in 2005 and subsequent years were 

paid” in full for their overtime work. J.A. 898. But under the 

APA’s standard of review, “a court is not to substitute its 

judgment for that of the agency.” Motor Vehicle Mfrs. Ass’n

of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 

(1983). Instead, we ask whether the agency’s decision “was 

based on a consideration of the relevant factors” and whether 

“there has been a clear error of judgment.” Id. We conclude 

that the FSGB adequately grounded its decision in the relevant 

factors.

First, the plaintiffs’ failure to submit evidence addressing 

any but the last of the 22 C.F.R. § 34.18(b)(1)(iv) factors 
20

weighs substantially against our disturbing the agency’s 

exercise of its discretion. Despite DAS Millette’s explicit 

request for additional information, the plaintiffs chose not to 

supplement the record with evidence about whether “collection 

of the claim would cause serious financial hardship,” or 

whether, “because of the erroneous payment, the employee 

either has relinquished a valuable right or changed positions 

for the worse.” 22 C.F.R. § 34.18(b)(1)(iv)(A), (B). We 

agree with the district court that, “[g]iven the dearth of 

information, the [FSGB] had no choice but to conclude that 

[the] financial hardship and detrimental reliance factors 

weighed against waiver.” Lubow II, 923 F. Supp. 2d at 42. 

In the context of the record before it, the FSGB’s primary 

rationale—that DAS Millette had already denied waivers to 

other employees in “the exact same situation”—suffices to 

justify its decision. The plaintiffs argue that DAS Millette’s 

and the FSGB’s consideration of other employees was itself 

arbitrary. To the contrary, the regulation instructs the

deciding agency official to consider whether “failure to make 

restitution would result in unfair gain to the employee.” 22 

C.F.R. § 34.18(b)(1)(iv)(D). That factor is not aimed to 

address circumstances in which the employee obtained an 

overpayment through bad faith, deliberate omission, or some 

other underhanded tactic. In those situations, the statute bars

the employee from obtaining a waiver, and the agency official 

would not reach the stage where 22 C.F.R. § 34.18(b)(1)(iv)’s 

factors come into play. See 5 U.S.C. § 5584(b)(1); 22 C.F.R. 

§ 34.18(b)(1)(i). Thus, in the absence of a contrary 

explanation (which the plaintiffs do not provide), the “unfair 

gain” factor seems to address precisely the assessment made by 

DAS Millette and the FSGB: whether it would be inequitable 

to give one employee a waiver when similarly situated 

employees received no waiver. Because the FSGB based its 

decision on a factor the regulation apparently requires it to 
21

consider—and because the plaintiffs do not challenge the 

factors themselves—we cannot say that the Department’s 

determination lacked “reasoned decisionmaking.” State 

Farm, 463 U.S. at 52.

The plaintiffs also object to the FSGB’s consideration of 

the notice they received in November 2004 advising them that 

they had already received, or might soon receive, pay 

exceeding the statutory cap. The FSGB’s decision, however, 

stated only that DAS Millette’s decision was “in line with 

Comptroller General Decisions which have discouraged the 

approval of waivers when the employee had reasonably prompt 

notice that payments were or may have been erroneous, even if 

the employee was not ‘at fault.’  ” J.A. 900 (emphasis added). 

And the FSGB further explained that, “[w]hile our earlier 

decision found that [the plaintiffs] were not at fault in 

accepting or failing to prevent excess premium payments in 

2004, we note that [the plaintiffs] were put on notice in 

November of the year that the overpayment took place that 

they were approaching or had already exceeded the pay cap.” 

Id. (emphasis added). 

To the extent the plaintiffs mean to argue that the FSGB 

arbitrarily reversed its earlier determination that the plaintiffs 

were not to blame for the overpayments, the italicized language 

refutes that characterization of the FSGB’s reasoning. To the 

extent the plaintiffs instead dispute the FSGB’s premise—that 

the Department’s November 2004 email constituted 

“reasonably prompt notice” of the possibility of 

overpayments—we fail to see how that would meaningfully 

support their case for a waiver. The plaintiffs offered no 

evidence of detrimental reliance on any belief that they would 

be able to keep their overtime pay. And the plaintiffs have 

consistently argued that they had no choice about working 

significant overtime hours due to the nature of their security 
22

positions and the realities of the United States’ mission in Iraq 

in 2004. It therefore would seem that the issue of notice is 

largely irrelevant to an assessment of the equities of their case. 

Thus, even if the FSGB mistakenly assumed that the 

November 2004 email messages gave adequate notice that the 

plaintiffs were in danger of exceeding the cap—a 

determination we do not reach—a contrary finding would do 

little to advance the plaintiffs’ case for a waiver.

* * * * *

We affirm the district court’s grant of summary judgment 

to the defendants.

So ordered.
SENTELLE, Senior Circuit Judge, concurring: I fully concur

with the court’s judgment and much of the explanation and

reasoning leading to the same. However, one critical step of the

analysis gives me pause. The court applies the reasoning of

Chevron step two, Chevron, U.S.A., Inc. v. Natural Resources

Defense Council, Inc., 467 U.S. 837, 843 (1984), to the Office

of Personnel Management (“OPM”) interpretation of 5 U.S.C.

§ 5547(b)(2), based on the parties’ apparent assumption that

there was ambiguity in the statute to be resolved by the OPM. 

See Maj. Op. at 13-14. That resolution by OPM would thus be

subjected to the deferential standard of Chevron step two and

upheld if reasonable. The court reviewed the OPM

interpretation, found it reasonable, and upheld it. Id. at 14. 

While I do not disagree with the conclusion, I am not sure that

the approach is fully compliant with our precedent.

As we have previously stated: “[W]e recently affirmed a

line of circuit decisions which hold that ‘deference to an

agency’s interpretation of a statute is not appropriate when the

agency wrongly believes that interpretation is compelled by

Congress.’” Peter Pan Bus Lines, Inc. v. Federal Motor Carrier

Safety Admin., 471 F.3d 1350, 1354 (D. C. Cir. 2006) (quoting

PDK Laboratories, Inc. v. DEA, 362 F.3d 786, 798 (D.C. Cir.

2004) (other citations omitted)). In the matter before us, the

OPM has expressed its conclusion that Congress spoke clearly

to the matter at issue and therefore exercised no resolution of

ambiguity. Chevron step two deference is thus inappropriate.

Specifically, the OPM stated: “While we understand the

agency’s concerns about administrative burdens, the law

expressly provides that the annual premium pay cap must be

applied to an entire calendar year and that it is based on the

applicable rates in effect at the end of the calendar year.” 

Premium Pay Limitations, 69 Fed. Reg. 55941, 55941 (Sept. 17,

2004). More explicitly, the OPM stated: “Agencies cannot
2

avoid certain administrative burdens based on the express

statutory language in 5 U.S.C. 5547(b)(2), and we cannot change

the regulations without a legislative amendment to reduce or

eliminate these administrative burdens.” Id. It appears to me

that under Peter Pan Bus Lines and the cases collected therein,

we must either rule up or down on the agency’s interpretation

and not affirm on the basis of deference to its exercise of

discretion it deemed itself not to have.

Nonetheless, I concur fully in the result, as it appears to me

that the agency followed the plain meaning of the statute as

required by Chevron step one. Chevron, 467 U.S. at 842-43. 

As the majority rightly observes, courts have at times

assumed without deciding the applicability of the Chevron

framework. Maj. Op. at 13; see, e.g., Humane Soc’y of U.S. v.

Locke, 626 F.3d 1040, 1054 n.8 (9th Cir. 2010). Nonetheless, I

am not convinced that the majority’s reasoning today is

consistent with our own precedent in the Peter Pan Bus Lines

line of cases. In this case, however, because I believe the OPM

interpretation is consistent with the plain language of the statute

at Chevron step one, I concur in the judgment affirming the

district court’s grant of summary judgment to the defendants.