NO. 91-403 IN THE SUPREME COURT OF THE STATE OF MONTANA 1992

STATE PERSONNEL DIVISION OF THE DEPARTMENT OF ADMINISTRATION, STATE OF MONTANA, Petitioner and Appellant,

-vsBOARD OF PERSONNEL APPEALS, Division of the Department of Labor and Industry of the State of Montana; and COMMUNITY CORRECTIONS SPECIALISTS 11, Department of Institutions, Respondents and Respondents.

APPEAL FROM: District Court of the First Judicial District, In and for the County of Lewis & Clark, The Honorable Dorothy McCarter, Judge presiding.

COUNSEL OF RECORD: For Appellant: David L. Ohler argued, Legal Counsel, Dept. of Administration, State Personnel Division, Helena, Montana For Respondents: Melanie Symonsargued, Legal Counsel,Dept. of Labor and Industry, Board of Personnel Appeals, Helena, Montana J. C. Weingartner argued,Attorney at Law,Community Corrections Specialists 11, Helena, Montana

Submitted: January 8, 1992

Filed:Justice Karla 

### M. Gray delivered the Opinion of the Court.

The State Personnel Division (Division) of the Department of Administration appeals from a decision and order of the District Court of the First Judicial District, Lewis and Clark County. The District Court affirmed a final order of the co-respondentBoard of Personnel Appeals (Board)which granted retroactivepay to the corespondentsCommunity Corrections Specialists 11, employees of the Department of Institutions (employees). We reverse and remand. The issue we address on appeal is whether the District Court erred in affirming the Board's order granting retroactive pay to the employees. The employees initiated a classification appeal by filing a petition with the Board on April 24, 1987. They sought a classification review of their Community Corrections Specialist I1

(CCS 11), grade 12, classification. The Board designated the classification appeal a group classification appeal pursuant to 24.26.513, 

### ARM. The Division submitted a Step I11 response to the group classification appeal on August 31, 1987. The response included theDivision's findings that theemployees'positionswereproperly classified asCCS 11,grade 12. TheDivision also found thatwhile the appeal investigationdid notyield amore appropriate class for the employees,comparisonsto other positions, includingCommunity Corrections Specialist I11 (CCS III), grade 13, indicated a need for a series review; complicating the classification appeal was areassignmentof someemployeestothe thennewly-created Department of Family Services. The Division further found: The State Personnel Division shall conduct a review of the Community Corrections Specialist Seriesto determine whether 1) the reassignmentof some [oftheemployees] to the Department of Family Services will affect their position classifications; 2) a grade level distinction exists between the [CCS I1 and CCS 1111 classes; and 3) the appropriate grade levels have been assigned to Community Corrections Specialists Series. On September 15, 1987, the parties stipulated that, pending the series review, the employees' classification appeal would remain in full force and effect; the stipulation specifically preserved the established date of filing. The stipulation also waived the time requirement for appealing the Step I11 decision until the series review was completed. The Division completed its series review on June 3, 1988. It developed a new classification for positions assigned adult case supervision under theDepartment of Institutions. All positions at grades 11and 12were reclassified to Probationand ParoleOfficer, grade 13. Positions assigned juvenile case loads, under the Department of FamilyServices, were reclassified as Family Services Specialists 11, grade 13. The reclassification and resultant upgrade became effective on July 1, 1988. The Division determined that the employees were not entitled to retroactive pay because theywere properly classified when they filed their classification appeal, based on the standards then in place. On June 10, 1988, the employeesadvanced their classification appeal to Step IV of the grievance procedure. The parties stipulatedto the issues tobe presented to thehearing examiner at

### a hearing which was held on January 13, 1989. 

### The issues were whether the CCS I11 

### class specificationwas abetter descriptionof the employees1 position duties than CCS I1 

### and whether the employees1position duties were more similar to those positions assigned to CCS 111. 

### Thehearing examiner issuedhis findingsof fact, conclusions of law and recommended order on April 7, 1989. 

### He found that the CCS I11 

### classwas distinguished from the employees' class only by the addition of special assignments. However, he denied the employees1request to be reclassified on thegrounds that they did not demonstrate that theyperformed the additional duties assigned to the higher class, that they were improperly classified,or that the Division failed to comply with the established methods or standards when considering their classification appeal. The hearing examiner also found that the Division's investigation resulting from the employees' classification appeal indicateda need fora classificationseriesreview and that I1[a]ny upgrade resultantfromthat series review must be retroactive." 

### He concluded that the employees were aggrieved when their reclassificationwas not made retroactive. Herecommended anorder that those employees reclassified as a result of the series review be paid the difference between what they had been paid and what theywould have been paid had the results of the series reviewbeen made retroactive to thirty days prior to the date of their classification appeal. The Division filed exceptions to the findings of fact,conclusions of law and recommended order. The Division asserted that because the hearing examiner found against the employees on the two issues stipulated to by the parties prior to the hearing, thehearing examiner's recommendationthat the employees be awarded retroactive pay was improper. After oral argument, the Board remanded the case to the hearing examiner for further proceedings pursuant to the stipulations in effect at the time of the previous hearing, together with the issue of retroactive pay. The Board's order did not address the question of retroactivity other than setting the cause for rehearing. Another hearing was set for September 26, 1989. At a prehearing conferenceon September 5, 1989, theparties agreed that the hearing examiner would not hear additional evidence on the two previously stipulated issues. The sole issue presented to the hearing examiner was whether there was lllinkage"between the employees1classification appeal and the series review and, if so, whether that linkageprovided a basis for retroactive pay. The hearing examiner issued his second findings of fact, conclusions of law and recommended order on March 14, 1990. He reaffirmed his earlier findings on the original two issues and further found that there was linkage between the employees1 classification appeal and the series review. He found that the Division recognized the need for a series review prior to the employees1 classification appeal and, while the classification appeal may not have been 

### the motivating factor for the series review, it was g factor which, together with others, acceleratedthat review to correct a recognized need. The hearing examiner again recommended retroactivepay based on his conclusion that the linkage between the employees1classification appealand the series review 'I

### [m]eans that the [employees] were aggrieved when their resultant reclassificationand upgradewas notmade retroactive to thirty (30)daysprior to thedate of their Wage and Classification Appeal.I' The Division again filed exceptions to the findings of fact, conclusions of lawand recommended order. Thematter was argued to the Board on June 6, 1990. The Division argued that the hearing examiner's recommendation of retroactivepay was improper because the employees were not found to be aggrieved on the two original stipulated issues. It further argued that,because the employees were properly classified at the time they brought their appeal, any linkbetween the employees' appeal and theDivision's seriesreview was not sufficient to provide a basis for retroactive pay. The Board adopted thehearing examiner's findings of fact,conclusions of law and recommended order on June 28, 1990. The Division's petition for rehearing was denied. The Division filed a petition for judicial review of the Board's decision and order in the District Court on October 5, 1990. The court determined that the Board's decisions were substantially supported by the record. It further determined that the award of retroactive pay to the employees was proper and affirmed the Board's decision and order. This appeal followed. Did the District Court err in affirming the Board's ordergranting retroactive pay to the employees? Inreviewinganadministrativeagency's findingsof fact,the standard of judicial review used is whether the findings are clearly erroneous in view of the reliable, probative and substantial evidence in the whole record. Section 2-4-704, MCA; Dept. of Revenue v. UPS, Inc. (Mont. 19921, 830 P.2d 1259, 49 St.Rep. 20. An agency's conclusions of law will be upheld if the agency's interpretation of the law is correct. Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603. The Division contends that the District Court erred in affirming the Board's order granting retroactive pay because the order was contrary to this Court's decision in Matter of the Classification Appeal of Warren C. Mead v. Board of Personnel Appeals (1988), 235 Mont. 208, 766 P.2d 1300. A review of Matter of Mead is necessary for resolution of the present case. Matter of Mead involved a classification appeal by Highway Patrol Officers. Employees in the positions of Sergeant, Lieutenant and Captain initiated a grievance before the Board seeking to compel the Division to adopt newposition descriptions, develop new class specifications and reclassify their respective positions. New position descriptions were submitted to, and adopted by, the Division. The Division then reclassified the positions. The new classificationresulted in an assignment of the same grades to the officers. The officers appealed the assignment of grades to the Board. A hearing examiner found that the officerswere aggrievedand recommendedthattheybe reclassifiedby raising their grade levels one pay grade. The Board amended the recommended order by requiring the Division to conduct a classification series review. The Division conducted 

### a series review and recommended that the officers retain the original grade assigned to their class. The Board rejected the recommendation and adopted the hearing examiner's original findings of fact, conclusions of law and recommended order. The district court reversed the Board's order

on the basis that it violated 5 2-18-203(2), MCA, which prohibits

an appeal of the grade assigned to a class. On appeal, the Board argued that under 5 2-18-1012, MCA, and

our decision in Hutchin v. State (1984), 213 Mont. 15, 688 P.2d 1257, ithad authority to resolve any grievance even if resolution of the classification appeal resulted in reallocation of the grade assigned to a class. Section 2-18-1012, MCA, provides in part: If upon the preponderance of the evidence taken at the hearing the board is of the opinion that the employee is aggrieved, it may issue an order to the appropriate agency or agencies of state government requiring such action aswill resolve the employee's grievance. Hutchin involved a wrongful discharge grievance--rather than a classification appeal under 5 2-18-203--by a former employee of the Department of Fish, Wildlife and Parks. Under 

### 5 87-1-205, MCA, grievances against that Department are governed by 

### $5 2-18-1011 through 2-18-1013, MCA. The Board found the employee aggrieved, ordered reinstatement and denied an award of back pay. In affirming the Board's decision, we stated that ''[ilt is apparentfrom section2-18-1012,MCA, that if the Board of Personnel Appeals determines that the employee is aggrieved, it has full discretion to resolve the employee's grievance." Hutchin, 213 Mont. at 19,

We rejected the Board's contention in Matter of Mead that, based on our holding in Hutchin, it had the authority to resolve any grievance. We affirmed the district court's reversal of the Board's decision, stating: Contrary to [the Board's] contention, the District Court foundthat the Board is limited in a classification appeal by 

### 5 2-18-203(2), MCA, to determining whether a position has been properly classified by the Division. The court held that the Board was without authority to create new classifications or to assign grades to classifications,and itdistinguishedHutchinby stating: "Hutchin involved thedischarge of a state employee forpersonal use of stateownedproperty. InHutchin the board directed that the discharged employee 'be reinstated as of the date of this final order to the position heheld with the department' at the time of his termination. That is the type of remedy that isuniquely within thediscretionof theboard. However,theboard's order here usurps a function that has been delegated exclusively to the division." We agree with the District Court's holding that the board is limited to determining whether a position is properly classified. If a position is improperly classified, the Board may then order the Division to reclassify the position in accordance with its existing policy. Matter of Mead, 235 Mont. at 215-16, 766 P.2d at 1304-05. Thus,under 5 2-18-203(2), MCA, and Matter of Mead, the Board in a classification appeal is limited to determining whether a position isproperly classified. 

### If the Board determinesthat the position is improperly classified,and the employee is, therefore, aggrieved, the Board can resolve the grievance under 5 2-18-1012,

### MCA,by ordering theDivisiontoreclassifytheemployee'sposition and, as appropriate, ordering other remedies such as retroactive pay. Incontrast,because no classificationappeal was involved in Hutchin, the Board was not limitedby 5 

### 2-18-203,MCA,and was free to fashion an appropriate remedy under 5 

### 2-18-1012, MCA, upon finding that an employee was aggrieved. We conclude that, under the circumstances presented in the present case, the Board exceeded its legal authority when it granted retroactive pay to the employees. Prior to the first hearing before the hearing examiner, the parties stipulated that the issueswerewhether theemployeeswere improperly classifiedas CCS I1 and whether they should have been classified as CCS 111. 

### The employees were not found to be aggrieved on either issue. The hearing examiner, and ultimately the Board, found that the employees were properly classified as CCS I1 based on the class specificationsthat were inplace at the time the employeesbrought their classification appeal. These findings remained unchanged throughout the subsequent history of the case. Even though the Board found that the employeeswere properly classifiedatthe timethey brought their classification appeal, it awardedtheemployees the increase inpay which resulted from their reclassification,retroactive to thirty days before they brought theirappeal. Thisgrant of retroactivepay was based on a finding of "linkaget1 between the employees1classification appeal and the Division's seriesreview. While linkage between the classification appeal and the seriesreview existed, we conclude that that linkagewas not legally sufficient to provide a basis for retroactivepay. Under 5 2-18-203, MCA, and Matter of Mead, a determination by the Board that the employees were improperly classified was a prerequisite to granting a remedy to the employees. Having found the employees to be properly classified, the Board exceeded its statutory authority in granting retroactivepay. In addition, because the employeeswere found to be properly classified as CCS 11, grade 12, at the time they brought their appeal, the effect of the award of retroactive pay was to upgrade the employees'positions to ahigher pay gradeduring thevery time period that they were found to be properly classified. As such, the Board's orderwas tantamount to an assignment of a new grade to the employees' class inviolation of § 2-18-203 (2)

## ,MCA. Matter of 

### Mead, 235 Mont. at 217-18, 766 P.2d at 1306. Based on the foregoing, it is clear that the Board incorrectly concluded that the employees were entitled to retroactive pay and exceeded its authority in granting such pay. Accordingly, we hold that the District Court erred in affirming the Board's order. The Division raises additional arguments in support of its position that the District Court erred in affirming the Board's order granting retroactivepay to the employees. In light of our holding in this case, these arguments need not be addressed. Reversed and remanded for proceedings consistent with this opinion.

### We concur:

Justices

### Justice Terry N. Trieweiler dissenting. I

### dissent from themajority opinion. Themajority is correct thatpursuant to our decision inMatter ofMead 

### (l988), 235Mont. 208, 766 

### P.2d 1300,the Board of Personnel Appeals cannot review and correct the grade assigned to a particular class. However, themajority opinion is incorrectwhen it concludes that our decision in Mead 

### and 5 

### 2-18-203, MCA, requires a determination by the Board that employees were improperly classified before retroactivepay can be awarded. Our decision inMead 

### did not deal with the circumstances under which retroactivepay canbe awarded,and there isnothing in § 

### 2-18-203, MCA, which specifically links an award of retroactive pay to 

### the Board's decision on the issue of classification. Furthermore, I 

### disagree that the employees were found to be properly classified at the time they brought their appeal. The State PersonnelDivision's investigation found that based upon the classes then available, Community Corrections Specialist 11, Grade 12, was as good as any. However, the Departmentwent on to acknowledge that its investigation indicatedthat a completereview of the classificationswas necessary. That review resulted in the employees' reclassification. Itwas in that reclassified posture that this case camebefore the Board. The Board simplydetermined whether the Department's reclassification of the employees was a result of their appeal. No one has challenged the Board's finding

### that there was in fact linkage between the appeal and the reclassificationby the Department. The facts in this case are not similar to the facts inMead.



### In that case, the hearing examiner for the Board of Personnel Appeals recommended raising the employees*grade level by one pay grade. The Board issued findings and conclusions adopting that recommendation and we held that the Board waswithout authority to entertain an appeal of a pay grade. In this case, the Board did not issue an order changing the employees*pay grade. No action of the Board resulted in a change in the employees* pay grade. The employees appealed their classifications to the State Personnel Division. As a result of that appeal, the Division concluded that the classifications in question should be reviewed. As a result of that review, the employees were reclassified by the Department and assigned a different grade. All the Board did in this case was determine that based upon the employees' reclassification, theywere entitled to retroactive pay for 30 

### days prior to the date their appealwas filed. This is the exact relief authorized by T, 2-18-203(3), 

### MCA. The majority opinion has placed qualifications on the award that are not found in the statute. Our specificholding inMead 

### was that the Board of Personnel Appeals could not create classifications,nor assigngradeswithin classifications. In this case, the Board's decision to award

### retroactive pay was not based on its creation of any new classification. Nor was itbased on the Board's assignment of any new grade to the employees. It was based on the Board's determination that the Divisionvs review of the employeesv classifications,and the Department's subsequent reclassification of the employees, was linked to the employees' original classification appeal to the Division. On appeal, the Division argues, and the majority concludes, that the only issue before the Board was whether the employees should have been classified CCS 111, rather than CCS 11. 

### The majority concludes that sincetheemployeesdid notprevail on this issue, they were not aggrieved. However, limiting the issue presented to the Board in thatmanner is incorrect. At the second hearing before theBoard's hearing examiner,theparties stipulated that the issue to be decided by the hearing examinerwould be: Whether there is linkage between the wage and classification appeal of the Community Corrections SpecialistI1classand theclass reviewof theCommunity Corrections Specialist series, and if so, does that linkageprovide a basis for awarding retroactivepay. After considering the evidence, the hearing examiner found that therewas linkage. Therewas substantial evidence to support that finding on appeal, and no one contends that it was clearly

erroneous. Therefore, I conclude that itwas not the Board which changed the employeesvgrade. That gradewas changedby the Department in response to the employees' appeal. The Division, however, refused to award the retroactivepay towhich the employeeswere entitled,based upon that reclassification. Therefore, the Board was within its authority when it considered the issue of retroactive pay on appeal. For these reasons, Iwould affirm thedecision of theDistrict Court.

JusticeWilliam E. Hunt, Sr., concurs inthe foregoing dissent of Justice Trieweiler.

Justice