United States Court of Appeals 

for the Federal Circuit ______________________ 

NATIONAL FEDERATION OF FEDERAL 

EMPLOYEES, LOCAL 1442,

Petitioner

v.

DEPARTMENT OF THE ARMY,

Respondent

______________________ 

2014-3175

______________________ 

Petition for review of an arbitrator’s decision in FMCS 

Case No. 14-00370-1 by Arbitrator Roger P. Kaplan.

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

NATIONAL FEDERATION OF FEDERAL 

EMPLOYEES, LOCAL 2109,

Petitioner

v.

WATERVLIET ARSENAL,

Respondent. 

______________________ 

2014-3189

______________________ 

Petition for review of an arbitrator’s decision in FMCS 

Case No. A14-50680-6 by Arbitrator James A. Gross.
2 NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA

______________________ 

Decided: October 20, 2015

______________________ 

STEFAN P. SUTICH, National Federation of Federal 

Employees, Washington, DC, argued for petitioners. 

HILLARY A. STERN, Commercial Litigation Branch, 

Civil Division, United States Department of Justice, 

Washington, DC, argued for respondents. Also represented by BENJAMIN C. MIZER, ROBERT E. KIRSCHMAN, JR.,

MARTIN F. HOCKEY, JR.

______________________ 

Before MOORE, SCHALL, and O’MALLEY, Circuit Judges.

SCHALL, Circuit Judge. 

These related cases are appeals from arbitrators’ decisions denying grievances filed by locals of the National 

Federation of Federal Employees (“NFFE” or “Union”). In 

the first appeal, Nat’l Fed’n of Fed. Emps., Local 1442 v. 

Dep’t of the Army, No. 2014-3175 (“Appeal 3175”), NFFE 

Local 1442 filed a group grievance on behalf of 138 NFFE 

bargaining unit employees at Letterkenny Army Depot 

(“LEAD”) in Chambersburg, Pennsylvania. In the second 

appeal, Nat’l Fed’n of Fed. Emps., Local 2109 v. Watervliet 

Arsenal, No. 2014-3189 (“Appeal 3189”), NFFE Local 2109 

filed two grievances on behalf of all of NFFE’s bargaining 

unit employees at Watervliet Arsenal (“WVA”) in 

Watervliet, New York. In both the LEAD and WVA 

grievances, the Union challenged the furloughing of 

bargaining unit employees for six discontinuous days 

between July and September in Fiscal Year 2013. The 

furloughs were the result of an automatic process of 

federal agency spending reductions known as “sequestration.”
NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA 3

On June 13, 2014, Arbitrator Roger P. Kaplan ruled 

that the furloughs of the specified bargaining unit employees at LEAD were in accordance with law. He therefore denied the grievance filed by the Union on their 

behalf. Nat’l Fed’n of Fed. Emps., Local 1442 v. Dep’t of 

the Army, FMCS Case No. 14-00370-1 (June 13, 2014) 

(“LEAD Opinion”). On July 7, 2014, Arbitrator James A. 

Gross ruled that the furloughs of bargaining unit security 

employees at WVA were not in accordance with law. He 

therefore sustained the grievance filed by the Union on 

their behalf. Arbitrator Gross also ruled, however, that 

the furloughs of non-security bargaining unit employees 

at WVA were in accordance with law. He therefore denied the grievance filed by the Union on behalf of those 

employees. Nat’l Fed’n of Fed. Emps., Local 2109 v. 

Watervliet Arsenal, FMCS Case No. A14-50680-6 (July 7, 

2014) (“WVA Opinion”).

In Appeal 3175, the Union appeals Arbitrator 

Kaplan’s decision denying the group grievance it filed on 

behalf of 138 bargaining unit employees at LEAD. In 

Appeal 3189, the Union appeals Arbitrator Gross’s decision denying the grievance it filed on behalf of nonsecurity bargaining unit employees at WVA. In this 

opinion, we treat the arguments made in the two appeals 

conjointly. For the reasons set forth below, we affirm the 

decisions of the arbitrators in both appeals.

BACKGROUND

I.

LEAD serves as a maintenance depot, primarily performing maintenance on tactical missiles and ammunition. LEAD Joint Appendix (“J.A.”) 256. It is subordinate 

to the Army’s Aviation and Missile Command Life Cycle 

Management Command, which reports to the Army

Materiel Command. LEAD Op. at 5. WVA is subordinate 

to the Army’s Tank Automotive Command (“TACOM”) 

Life Cycle Management Command, which also reports to 
4 NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA

the Army Materiel Command. WVA supports the Life 

Cycle Management Command’s responsibility for the 

development, acquisition, logistical support, and materiel 

readiness of the Army’s tank automotive and armament 

systems. WVA Op. at 11; WVA J.A. 456, 462. 

Both LEAD and WVA are Army Working Capital 

Fund (“AWCF”) entities. Working capital funds (“WCF”) 

were established by Congress under 10 U.S.C. § 2208 to 

help control and account for the cost of programs and 

work performed within the Department of Defense 

(“DOD”). See 10 U.S.C. § 2208(a); WVA J.A. 410. WCFs 

are created and controlled by the Office of the Secretary of 

Defense. 10 U.S.C. § 2208(a), (b), (e). The AWCF is

shared by two activity groups: Industrial Operations and 

Supply Management. WVA J.A. 411. Both LEAD and 

WVA are Industrial Operations activities under the 

AWCF. 

The primary customers of WCF entities are other 

DOD entities that transfer their own congressionallyappropriated funds to make “purchases” from WCFs. See

id. 409–10. Thus, DOD entities are both the customer 

and the service-provider, with appropriated funds from 

the ordering entity’s account being transferred to the 

WCF’s account. In that way, after receiving initial working capital through appropriation, WCF entities are selfsupporting and function from the fees charged for the 

services they provide. 

Appropriated funds flow from a DOD customer to a 

WCF entity as work is performed by the WCF entity. Id.

410. When work is ordered from WCF entities and the 

work is funded (i.e., funds have been “obligated” for the 

work), but the work is not completed by the end of the

fiscal year, the obligated funds are kept by the WCF 

entity as “carryover.” Id. 466–467; DOD Financial Management Regulation, Vol. 2B, Chapter 9, 090207 (defining 

“carryover” as the “dollar value of work that has been 
NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA 5

ordered and funded (obligated) by customers . . . , but not 

yet completed by [Defense Working Capital Fund] activities . . . at the end of the fiscal year”). Obligated funds 

can be de-obligated by a customer, even in the middle of a 

WCF entity’s performance of ordered work. E.g., WVA 

J.A. 107–08 at 86:15–87:25; LEAD J.A. 74 at 152:2–10. 

Finally, DOD may transfer money in and out of WCF 

accounts to meet other needs. See 10 U.S.C. § 2208(r). 

Pursuant to § 2208(r)(1), however, a transfer of funds 

from a WCF, including a transfer of funds to another 

WCF, requires the Secretary of Defense to submit to the 

appropriate congressional committees, in advance, notification of the proposed transfer. 

II.

The sequestration of federal funds in Fiscal Year 2013 

forms the backdrop for these appeals. On March 1, 2013, 

as a result of the Budget Control Act of 2011 (“Budget 

Control Act”), Pub. L. No. 112–25, §§ 101–103, 125 Stat. 

240, 241–46 (2011), and the American Taxpayer Relief 

Act of 2012 (“Taxpayer Relief Act”), Pub. L. No. 112–240, 

§ 901, 126 Stat. 2313, 2370 (2012), DOD’s yearly budget 

was cut by $37 billion at a point roughly halfway through 

Fiscal Year 2013.1

1 The Budget Control Act and the Taxpayer Relief 

Act made amendments to the Balanced Budget and 

Emergency Deficit Control Act of 1985, Pub. L. No. 99–

177, 99 Stat. 1038, which is codified in pertinent part at 2 

U.S.C. § 901 et seq. The amendments established spending limits for agencies of the federal government and 

required automatic “sequestration” under certain statutory conditions. See generally 2 U.S.C. §§ 901–903. The

Taxpayer Relief Act required the President to issue a 

sequestration order on March 1, 2013, in the middle of 

Fiscal Year 2013. 126 Stat. at 2370. On that date, Presi-

 
6 NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA

Operating under the specter of sequestration, on February 20, 2013, Secretary of Defense Leon Panetta issued 

an anticipatory memorandum titled “Preparations for 

Potential Sequestration on March 1 and Furlough Notifications.” WVA J.A. 324–25. The purpose of the memorandum was to advise the DOD workforce of the 

possibility of furloughs as a result of reductions in spending and budgetary shortfalls.2 Following President 

Obama’s March 1 order implementing budget reductions, 

incoming Secretary of Defense Chuck Hagel issued a 

memorandum on May 14, 2013, directing DOD managers 

to furlough most of the Department’s civilian employees. 

Id. 296–98. The memorandum provided that “[f]urloughs 

will be imposed in every military department as well as 

almost every agency and in our working capital funds.” 

Id. 297 (emphasis added). In a July 2013 statement to 

Congress, Robert Hale, Under Secretary of Defense

(Comptroller), officially estimated that “furloughs of all 

DOD civilians will save about $2 billion in [Fiscal Year]

2013, including more than $500 million associated with 

reduced personnel costs in working capital fund activities.” Id. 398. Under Secretary Hale stated that “working 

capital fund personnel savings provide [DOD] the flexibility to adjust maintenance funding downward to meet 

higher-priority needs.” Id.

dent Obama issued a sequestration order requiring reductions in spending from most federal budget accounts for 

Fiscal Year 2013. Sequestration Order, 78 Fed. Reg. 

14,633 (Mar. 1, 2013). 

2 “‘Furlough’ means the placing of an employee in a 

temporary status without duties and pay because of lack 

of work or funds or other nondisciplinary reasons.” 5 

U.S.C. § 7511(a)(5).

 
NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA 7

III. 

The facts pertinent to Appeal 3175 are not in dispute. 

In accordance with Defense Secretary Hagel’s directives, 

LEAD notified its bargaining unit employees that it 

proposed to furlough them for not more than eleven days 

during July, August, and September 2013. LEAD J.A. 

327–29.3 The affected employees were provided with an 

opportunity to respond to the proposed furloughs. After 

consideration of their responses, LEAD issued final decisions rejecting requests for exceptions, thereby implementing the furloughs. Id. 66–67. 

In due course, NFFE filed a group grievance on behalf 

of 138 bargaining unit employees at LEAD who received 

adverse final decisions. Id. 104–07. NFFE argued that, 

as a self-supporting WCF entity, LEAD was not faced 

with a funding shortfall and that, therefore, the furloughs 

did not promote the efficiency of the service by saving any 

costs. In support of its position, the Union argued that 

there were no reductions in customer orders from LEAD 

related to the sequestration. It pointed out that, going 

into Fiscal Year 2013, LEAD had carryover funds, with an 

estimated $400 million in orders. The Union further 

pointed out that LEAD, in fact, ended Fiscal Year 2013 

with $778 million in orders—well over projections—

despite the ongoing federal sequestration.

Pursuant to the Union’s Collective Bargaining 

Agreement (“CBA”), the grievance proceeded to a hearing 

before Arbitrator Roger P. Kaplan. After the hearing, 

Arbitrator Kaplan found that the financial circumstances 

of DOD, rather than those specific to LEAD, were the 

proper focus for determining the validity of the furloughs. 

3 On August 6, 2013, Defense Secretary Hagel reduced the number of furlough days for most DOD civilians 

from eleven to six. WVA J.A. 383. 

 
8 NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA

In that regard, he concluded that LEAD could not be 

viewed as a separate entity from the rest of DOD. LEAD

Op. at 27, 29. Arbitrator Kaplan stated that “NFFE[’s]

position and argument is . . . based largely on the notion 

that [LEAD] is self contained,” which he believed failed to 

recognize that “[LEAD] is part of [DOD].” Id. at 27. 

Arbitrator Kaplan thus “rejected” NFFE’s arguments 

regarding LEAD’s budgetary surplus. He instead focused 

on DOD’s decision to “save half a billion dollars by furloughing WCF employees,” $5 million of which were saved 

by furloughing the LEAD bargaining unit employees. Id.

at 29. Arbitrator Kaplan determined that WCF savings 

provided DOD potential “flexibility” to adjust maintenance funding downward to meet higher priority needs. 

In his view, the “furloughs were a reasonable solution to 

the Sequestration budget problems and therefore were 

taken for the efficiency of the service.” Id. at 30. The 

Union’s grievance was therefore denied.

IV.

The facts pertinent to Appeal 3189 also are not in dispute. Abiding by Defense Secretary Hagel’s directives, 

WVA notified its bargaining unit employees that it proposed to furlough them between July and September 

2013. Like the LEAD employees, the WVA employees 

were provided with an opportunity to respond to the 

proposed furloughs. In due course, the Deputy to the 

Commander of the TACOM Life Cycle Management 

Command denied all of the employees’ requests for exceptions, thereby implementing the furloughs. WVA J.A.

136–39. 

On July 8, 2013, NFFE filed two grievances in connection with the WVA furloughs. One grievance was filed on 

behalf of bargaining unit employees in security positions, 

while the other grievance was filed on behalf of all other 

bargaining unit employees. Id. 17–18, 246–47. Both 

grievances proceeded to a hearing before Arbitrator 
NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA 9

James A. Gross in accordance with the Union’s CBA. 

Arbitrator Gross sustained the grievance as to the security personnel. That decision is not at issue on appeal. 

However, he denied NFFE’s grievance on behalf of all 

other bargaining unit employees. Arbitrator Gross rejected NFFE’s argument that, because WVA had ample funds 

for Fiscal Year 2013 and ultimately suffered no deobligation of funds, the furloughs did not promote the 

efficiency of the service. WVA Op. at 7–8, 11–13. Arbitrator Gross reasoned that “WVA is not an independent 

entity,” but a “part of [DOD].” Id. at 11. In the “extraordinary financial situation” presented by sequestration, 

Arbitrator Gross found DOD’s actions to be “reasonable 

management solutions.” Id. at 12. He thus found the 

furloughs to be in accordance with law. 

V.

As noted above, in Appeal 3175, NFFE Local 1442 appeals Arbitrator Kaplan’s decision denying the group 

grievance it filed on behalf of 138 bargaining unit employees at LEAD. In Appeal 3189, NFFE Local 2109 appeals 

Arbitrator Gross’s decision denying the grievance it filed 

on behalf of non-security bargaining unit employees at 

WVA. We have jurisdiction over both appeals pursuant to 

5 U.S.C. §§ 7121(f), 7703(b), and 28 U.S.C. § 1295(a)(9). 

DISCUSSION

I.

When adverse actions which otherwise are appealable 

to the Merit Systems Protection Board (“Board”) are 

submitted to arbitration under a CBA, we review the 

arbitrator’s decision under the standard that we use when 

we review a decision of the Board. 5 U.S.C. §§ 7121(f), 

7703(b); see also Johnson v. Dep’t of Veterans Affairs, 625 

F.3d 1373, 1376 (Fed. Cir. 2010). Our review is thus 

limited. We set aside an arbitrator’s decision only if we 

find it to be: (1) arbitrary, capricious, an abuse of discre-
10 NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA

tion, or otherwise not in accordance with law; (2) obtained 

without procedures required by law, rule, or regulation 

having been followed; or (3) unsupported by substantial 

evidence. 5 U.S.C. § 7703(c); see also McCollum v. Nat’l 

Credit Union Admin., 417 F.3d 1332, 1337 (Fed. Cir. 

2005).

Furloughs of thirty days or less constitute an adverse 

action by an agency. 5 U.S.C. § 7512; see also Chandler v. 

Dep’t of the Treasury, 120 M.S.P.R. 163, 169–70 (2013). 

An agency may furlough an employee for lack of work or 

funds or other non-disciplinary reasons. 5 U.S.C. 

§§ 7511(a)(5), 7512(5). The agency, however, may only 

take such action if it “will promote the efficiency of the 

service.” Id. § 7513(a). The “efficiency of the service” 

standard in a furlough case is satisfied by the agency 

demonstrating “that the furlough was a reasonable management solution to the financial restrictions placed on it 

and that the agency applied its determination as to which 

employees to furlough in a ‘fair and even manner.’” 

Chandler, 120 M.S.P.R. at 171 (quoting Clark v. Office of 

Pers. Mgmt., 24 M.S.P.R. 224, 225 (1984)); see also Berlin 

v. Dep’t of Labor, 772 F.3d 890, 895 (Fed. Cir. 2014) 

(citing Clark and Chandler as establishing the standard 

for “non-ALJ furloughs under 5 U.S.C. § 7513”).

II.

On appeal, NFFE does not challenge the arbitrators’ 

findings that DOD experienced financial restrictions as a 

result of sequestration. Neither does the Union contend 

that the furloughs were not applied in a fair and even 

manner. Instead, the Union contests the arbitrators’ 

determinations that the relevant financial circumstances 

for purposes of assessing the propriety of the furloughs 

were those of DOD rather than the local AWCF entities. 

NFFE argues that, pursuant to 5 U.S.C., Chapter 75, 

LEAD and WVA, not DOD, were the proper “agencies” for 

purposes of assessing the validity of the furloughs. This 
NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA 11

is so, the Union urges, because 5 U.S.C. § 7512(a) applies 

to a host of adverse actions, in addition to furloughs, that 

are taken at the local agency level, and not by the Secretary of Defense. Because adverse actions such as removals are effectuated by local agencies, the Union contends

that furloughs must also be effectuated and analyzed 

from the perspective of the local level. The Union thus 

takes issue with the arbitrators’ views that LEAD or 

WVA could not be considered separately from the rest of 

DOD. NFFE argues that the furloughs were not reasonable because LEAD and WVA each had no shortage of 

funds and, thus, could pay the salaries of the furloughed 

employees for the period of the furloughs. In addition, it 

contends that the fact that both LEAD and WVA employees continued to work during the budget crises in Fiscal 

Year 2014, when there was a government shutdown,

proves that the furloughs during Fiscal Year 2013 were 

unnecessary.

Addressing the Union’s contention that the language 

of 5 U.S.C., Chapter 75 dictates that LEAD and WVA are 

the relevant “agencies” for purposes of analyzing the

furlough decisions, the Army (in Appeal 3175) and WVA

(in Appeal 3189) argue that DOD is the only relevant 

“agency” specified by the statute. They argue that 5 

U.S.C., Chapter 1, titled “Organization,” divides federal

“agencies” into five different groups. They point out that 

DOD is included in the first group of agencies, the Executive Departments, under 5 U.S.C. § 101, and that neither 

LEAD nor WVA are named in any of the five groups or in 

any other provision of Title 5. They thus argue that the 

statutory text supports the arbitrators’ decisions to look to 

the financial circumstances of DOD rather than those of 

LEAD or WVA.

Beyond their statutory argument, the Army and WVA 

point out that AWCF entities are paid by DOD customers 

that obligate funds to WCF entities based on the cost of 

the orders placed. WCF entities, however, do not own the 
12 NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA

funds until the ordered work is completed. See WVA J.A. 

410. The Army and WVA further point out that obligated 

funds can be de-obligated by DOD customers at any time 

before the ordered work is completed. Thus, if ordered 

work is not in fact performed by a WCF entity, and consequently not then charged to obligated funds, DOD has 

greater flexibility to de-obligate funds and spend them 

elsewhere. In that way, the Army and WVA argue, WCF

entities and DOD are financially interdependent. The 

nature of the relationship between WCF entities and 

DOD, they contend, provides substantial evidence demonstrating that a WCF entity cannot be treated separately 

from the rest of DOD. 

III.

In Appeal 3175 and Appeal 3189, we are faced with 

the same two questions: (1) whether the arbitrator erred 

in analyzing the efficiency of the service issue by focusing 

on DOD as a whole rather than on the local AWCF entity

(LEAD or WVA); and (2) whether the arbitrator erred in 

ruling that the employer carried its burden of demonstrating that the furlough promoted the efficiency of the service. We conclude that, in both appeals, the arbitrators 

correctly focused on DOD as the relevant agency rather 

than on the local WCF entity. We also conclude that, in 

both appeals, substantial evidence supports the arbitrators’ findings that the efficiency of the service standard 

was met. We consider first the arbitrators’ focus on DOD 

rather than on LEAD and WVA. 

Our analysis begins with the language of the statutory provisions authorizing furloughs of federal employees. 

Section 7513(a) states that “an agency may take an action 

covered by this subchapter [i.e. those listed in 

§ 7512] . . . only for such cause as will promote the efficiency of the service.” 5 U.S.C. § 7513(a) (emphasis 

added). Section 7512 provides that the subchapter “applies to . . . a furlough of 30 days or less.” The term 
NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA 13

“agency” is not defined in Chapter 75 of Title 5, under 

which §§ 7512 and 7513 are organized. Chapter 1 of Title 

5, however, divides “Agencies Generally” into five different groups: (1) Executive departments (§ 101); (2) Military 

departments (§ 102); (3) Government corporations (§ 103); 

(4) Independent establishments (§ 104); and (5) Executive 

agencies (§ 105). DOD is included in the first group of 

agencies, “Executive departments.” Specifically, § 105

provides that, “[f]or purposes of [Title 5], ‘Executive 

agency’ means an Executive department.” Section 101, in 

turn, explains that “Executive departments” includes, 

among others, DOD. In contrast, Title 5 nowhere defines 

“agency” as specifically including WCF entities, such as 

LEAD and WVA, or any other agency subdivision or local 

employing office. Indeed, virtually every time the term 

“agency” is defined elsewhere in Title 5, the definition 

includes DOD, but never LEAD, WVA, or any other 

agency subdivision or local employing office. See, e.g., 5 

U.S.C. §§ 3132, 3701, 3581, 4701, 5351, 5381, 5402, 5521, 

7103. The statutory language supports the arbitrators’ 

decisions.4

4 In our recent decision in Vassallo v. Department of 

Defense, 797 F.3d 1327 (Fed. Cir. 2015), we addressed 

whether the word “agency” in 5 U.S.C. § 3304(f)(1), a 

provision of the Veterans Employment Opportunities Act 

of 1998, Pub. L. No. 105–339, 112 Stat. 3182 (“VEOA”), 

means “Executive Agency.” In Vassallo, the government 

argued that “agency” in § 3304(f)(1) refers to DOD, and 

not a subcomponent or sub-agency of DOD. We found the 

statutory scheme of the VEOA ambiguous on the question. We resolved the issue by deferring to the Office of 

Personnel Management’s definition of “agency” in 5 

C.F.R. § 315.611(b) for purposes of § 3304(f)(1). That 

regulation defines “agency” to mean “executive agency as 

defined in 5 U.S.C. [§] 105.” Vassallo, 797 F.3d at 1331

 
14 NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA

We are not persuaded by NFFE’s argument that the 

word “agency” in 5 U.S.C. § 7513(a) refers to the “local 

agency level” because the adverse actions listed in Chapter 75 include removals and suspensions, as well as 

furloughs, and those adverse actions (removals and suspensions) regularly are taken at the local level or duty 

station. Even assuming NFFE’s proposition to be true, we 

see no basis for concluding that, because some adverse 

actions are implemented at the local level or at an affected employee’s duty station, it necessarily follows that the 

determination of the validity of furloughs at a particular 

location arising from an agency-wide sequestration must 

be assessed from the standpoint of the local level or local 

duty station. In our view, such an approach ignores the 

fact that entirely different considerations are involved 

when assessing an adverse action, such as a removal or a 

suspension, as opposed to a furlough. In the former, the 

pertinent facts—the conduct of the employee and the 

resulting actions of his or her supervisors—are purely 

“local” in that they typically arise at the particular employee’s duty station. In the case of the furloughs here, 

however, the actions at issue (the furloughs at the local 

level) were the result of financial restraints imposed on 

the entire agency, not just on particular subcomponents of 

the agency.

We find instructive the Board’s decision in Yee v. Deparement of the Navy, 121 M.S.P.R. 686 (2014). The issue 

in Yee was whether the furloughing of a Navy attorney in 

response to the sequester and resulting DOD directives 

promoted the efficiency of the service, where the Navy 

had sufficient funding to avoid the furlough. In Yee, the 

Board reasoned that, “[a]lthough the Navy may ordinarily 

(quoting 5 U.S.C. § 315.611(b)). We have no interpretation of “agency” in § 7513(a) to defer to here. Our decision 

is nonetheless consistent with the result in Vassallo. 

 
NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA 15

show that an action promotes the efficiency of the service 

by establishing a connection or nexus that relates solely 

to the operations of the Navy, . . . section 7513(a) is not so 

limiting under the facts of this case.” Id. at 692. The 

Board found that the requirements of § 7513(a) “can be 

met by showing a connection or nexus between the action 

in question and the efficiency of the civil service more 

generally.” Id. (emphasis added). In Yee, the Board noted 

that, “although the Navy is separately organized under 

the Secretary of the Navy, it operates under the authority, direction, and control of the Secretary of Defense.” Id.

at 693. The Board pointed out that “the Secretary of the 

Navy is responsible to the Secretary of Defense for, among 

other things, ‘the effective and timely implementation of 

policy, program, and budget decisions and instructions of 

the President or the Secretary of Defense relating to the 

functions’ of the Navy.” Id. (quoting 10 U.S.C. 

§ 5013(c)(3)). The Board concluded: “[W]e agree with the 

administrative judge that, although the appellants asserted that the Navy had adequate funding to avoid the 

furloughs, it was reasonable for DOD to consider its 

budget situation holistically, rather than isolating each

individual military department’s situation.”5 Id. 

5 In resolving cases involving employees furloughed 

during sequestration, the Board has issued a series of 

precedential and non-precedential opinions following the 

same rationale as in Yee. See, e.g., Einboden v. Dep’t of 

the Navy, 122 M.S.P.R. 302 (2015), aff’d, No. 2015-3117, 

2015 WL 5730370 (Fed. Cir. Oct. 1, 2015); Furtek v. Dep’t 

of the Navy, No. SF-0752-13-2167-I-1, 2015 WL 3830294 

(M.S.P.B. June 22, 2015) (unpublished); AR Fort Leavenworth, KS v. Dep’t of Army, No. DE-0752-13-1962-I-1, 

2015 WL 3794440 (M.S.P.B. June 18, 2015) (unpublished); Office of the Sec’y v. Dep’t of Def., No. DC0752-14-0624-I-1, 2015 WL 1655544 (M.S.P.B. Apr. 14, 

 
16 NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA

As noted above in Part I of the Background section, 

LEAD and WVA are WCF subcomponents of the Army

Materiel Command. The Department of the Army “is 

separately organized under the Secretary of the Army.” 

10 U.S.C. § 3011. “It operates,” however, “under the 

authority, direction, and control of the Secretary of Defense.” Id. The Secretary of the Army is therefore “responsible to the Secretary of Defense for . . . the effective 

and timely implementation of policy, program, and budget 

decisions and instructions of the President or the Secretary of Defense relating to the functions of the Department of the Army.” Id. § 3013(c)(3). Under these 

circumstances, and in view of the fact that WCF entities 

are created and controlled by the Office of the Secretary of 

Defense, we think logic and common sense compel the 

conclusion that, when faced with sequestration, “it was 

reasonable for DOD to consider its budget situation 

holistically, rather than isolating [LEAD’s and WVA’s]

situation.” Yee, 121 M.S.P.R. at 693. The arbitrators did 

not err in focusing their analyses on the financial circumstances of DOD rather than on those of LEAD and WVA.

IV.

We turn now to the question of whether substantial 

evidence supports the arbitrators’ decisions that the Army 

and WVA carried their burdens of demonstrating that the 

2013 furloughs promoted the efficiency of the service. In 

both Appeal 3175 and Appeal 3189, we hold that the 

arbitrators’ decisions are supported by substantial evidence.

2015) (unpublished); Will v. Dep’t of the Navy, No. DC0752-13-4673-I-1, 2015 WL 1284270 (M.S.P.B. Mar. 20, 

2015) (unpublished); Moser v. Dep’t of the Navy, No. DC0752-13-2643-I-1, 2015 WL 892796 (M.S.P.B. Mar. 3, 

2015) (unpublished).

 
NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA 17

As noted, the DOD components that are LEAD’s and 

WVA’s usual customers are funded by congressionallyappropriated funds. Those funds are used to pay for the 

work performed by LEAD and WVA. When work is

performed by LEAD or WVA, appropriated funds flow 

from the DOD customer to LEAD or WVA. See WVA J.A. 

410. However, funds obligated to AWCF entities can and 

have been de-obligated by customers for a number of

reasons—even in the middle of the performance of work. 

LEAD J.A. 74 at 152:2–10 (Colonel Victor Hagan, LEAD 

Deputy Commander, testifying that “[f]unds that are 

obligated can be deobligated anytime”); id. 70 at 133:14–

19 (Scott Molony, Director of Resource Management at 

LEAD, testifying that over $37.5 million in funds were deobligated in Fiscal Year 2013 at LEAD); WVA J.A. 107–08 

at 86:15–87:25 (John Genuit, Deputy Chief of Staff of 

Resource Management for TACOM, stating that WCF 

customers could “at any point” either cancel an order that 

had been placed or reduce its scope). In the wake of 

sequestration, in addition to the desire to reduce payroll 

expenses, it was the potential diversion or de-obligation of 

funds by DOD customers—which would result in a reduced scope in work orders or the transfer of funds away

from WCFs—that formed the basis for DOD’s decision to 

furlough employees at LEAD and WVA. See WVA J.A. 

389–95 (Declaration of Under Secretary of Defense Robert 

Hale); id. 397–98 (Letter of Under Secretary of Defense 

Hale to Congressman Derek Kilmer). 

The evidence in the record supports the arbitrators’ 

decisions to credit DOD’s rationale. The sequester placed 

extraordinary financial constraints on DOD during ongoing wartime conditions. At the same time, there is evidence indicating that DOD notified Congress of its 

intention to transfer money from WCFs, if such action 

became necessary. WVA J.A. 393–95 (Declaration of 

Under Secretary Hale). In addition, LEAD’s Deputy 

Commander, Colonel Victor Hagan, stated that, during 
18 NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA

the period after 2004, $6.9 billion was transferred out of 

the AWCF “to cover other Army higher priorities.” LEAD 

J.A. 74–75 at 152:18–153:10; see also WVA J.A. 420–21

(setting forth yearly charts showing that “[s]ince FY 2004 

approximately $6.9 billion [was] transferred from the 

AWCF”). Colonel Hagan also testified that delaying work 

to be performed by AWCF entities gave the Army spending flexibility because it meant that fewer dollars would 

be spent from congressionally-obligated funds. LEAD J.A. 

77 at 161:20–163:2. Similar testimony regarding the 

“flexibility” that the furloughs provided was presented in 

the arbitration hearing relating to the WVA furloughs. 

WVA J.A. 106, 108. Further, in a September 16, 2013, 

declaration, Under Secretary of Defense Hale explained 

that, during Fiscal Year 2013, DOD had sought permission from Congress to reprogram funds, and that it had 

exercised its own authority as well to reallocate funds to 

support priority activities. Id. 393–95. 

We, like the arbitrators, must base our review of the 

agency’s decision on the circumstances it faced when the 

furlough decisions were made, and not on events that did 

or did not occur at a later date. E.g., Clerman v. Interstate Commerce Comm’n, 35 M.S.P.R. 190, 194 (1987) (an 

agency’s decision to release employees by reduction in 

force is judged based on the agency’s ceilings when the 

actions were taken). From that perspective, in the period 

immediately after March 1, 2013, it was reasonable for 

DOD to determine that savings from furloughing WCF 

employees would be part of an overall effort to reduce 

expenditures in the face of decreased funding resulting 

from budget reductions. We therefore conclude that 

Arbitrators Kaplan and Gross had substantial evidence 

before them demonstrating that the furlough decisions 

were reasonable management solutions to the financial 

restrictions placed on DOD by the sequester, thus promoting the efficiency of the service.
NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA 19

We find unpersuasive NFFE’s argument that the fact 

that no LEAD or WVA employees were furloughed during

the government shutdown that occurred in October 2013, 

Fiscal Year 2014, demonstrates that the furloughs in 

Fiscal Year 2013 were unreasonable and unnecessary. 

The Union argues that, if, as the Army and WVA urge, 

LEAD and WVA are properly viewed as under the umbrella of DOD rather than as independent entities, then

they necessarily should have been adversely impacted and 

required to lay off employees when Congress did not enact

DOD’s annual appropriations bill for Fiscal Year 2014. 

NFFE reasons that, if appropriated money really could 

have been saved through furloughs in Fiscal Year 2013, 

then layoffs during the shutdown in Fiscal Year 2014

necessarily should have taken place also.

The fact that no LEAD or WVA employees were laid 

off in October 2013 does not undermine the arbitrators’ 

findings that the furloughs at LEAD and WVA, in Fiscal 

Year 2013, promoted the efficiency of the service. NFFE’s 

argument ignores that it was reasonable for DOD to base 

its furlough decisions at LEAD and WVA on the situation 

that existed on May 14, 2013, when, in the face of President Obama’s sequestration order, Defense Secretary 

Hagel ordered the furloughs that are at issue. See Cross 

v. Dep’t of Transp., 127 F.3d 1443, 1447–48 (Fed. Cir. 

1997) (finding that “[c]onducting a [reduction in force 

(“RIF”)] because of an anticipated shortage of funds does 

not require that the shortage exist at the time of the RIF”

and that whether an agency “reasonably anticipated a 

budgetary shortfall” is a question of fact based on credibility determinations). NFFE’s argument also ignores the 

fact that LEAD and WVA were able to continue operating

during the shutdown in Fiscal Year 2014 because they 

had sufficient funds due to the fact that, as explained 

above, they were authorized to carry over funds from 

Fiscal Year 2013. See WVA J.A. 466–67. NFFE’s argument thus fails. 
20 NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA

Finally, our holding today is consistent with this

court’s recent decision in Einboden v. Department of the 

Navy, No. 2015-3117, 2015 WL 5730370 (Fed. Cir. Oct. 1, 

2015). Einboden involved an appeal by a civilian employee of the Navy from a decision of the Board affirming the 

action of the Navy furloughing him for six days in July 

and August 2013 pursuant to the sequester. Mr. Einboden, who worked at a Navy WCF entity, argued that 

the government could not show that his furlough promoted the efficiency of the service because the WCF at which 

he worked never suffered a budgetary shortfall. In affirming the Board’s decision, we left undisturbed the 

Board’s finding that, “although [the WCF entity at which 

Mr. Einboden worked] may have had adequate funding to 

avoid a furlough . . . , it was reasonable for DOD to consider its budget situation holistically, rather than isolating the situation of each individual Navy organization or 

component.” Einboden, 122 M.S.P.R. at 309. In addition, 

we rejected the proposition that the Navy was “required 

to show actual re-programming of the funds saved by [the] 

furlough” in order to meet the efficiency of the service 

standard. Einboden, 2015 WL 5730370, at *3. We also 

rejected the notion that “subsequent,” “ameliorat[ing]”

events could undermine the reasonableness of a managerial decision based on a prospective budgetary shortfall. 

Id.

CONCLUSION

For the foregoing reasons, we hold that Arbitrator 

Kaplan, in Appeal 3175, and Arbitrator Gross, in Appeal 

3189, did not err in finding that the furloughs of bargaining unit employees at LEAD and WVA in Fiscal Year 

2013 due to sequestration promoted the efficiency of the 

service and were in accordance with law. We therefore 

affirm the arbitrator’s decision in Appeal 3175 and the 

arbitrator’s decision in Appeal 3189. 

AFFIRMED
NFFE, LOCAL 1442 v. ARMY; NFFE, LOCAL 2109 v. WVA 21

COSTS

Each party shall bear its own costs.