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 Symons argued, 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-respondent Board of 

Personnel Appeals (Board) which granted retroactive pay to the corespondents Community 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 

the Division's findings that the employees' positions were properly 

classified as CCS 11, grade 12. The Division also found that while 

the appeal investigation did not yield a more appropriate class for 

the employees, comparisons to other positions, including Community 

Corrections Specialist I11 (CCS III), grade 13, indicated a need 

for a series review; complicating the classification appeal was a 
reassignment of some employees to the then newly-created Department 

of Family Services. The Division further found: 

The State Personnel Division shall conduct a review of 

the Community Corrections Specialist Series to determine 

whether 1) the reassignment of some [of the employees] 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 the Department of Institutions. All positions at 

grades 11 and 12 were reclassified to Probation and Parole Officer, 

grade 13. Positions assigned juvenile case loads, under the 

Department of Family Services, 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 

they were properly classified when they filed their classification 

appeal, based on the standards then in place. 

On June 10, 1988, the employees advanced their classification 

appeal to Step IV of the grievance procedure. The parties 

stipulated to the issues to be presented to the hearing examiner at 
a hearing which was held on January 13, 1989. The issues were 

whether the CCS I11 class specification was a better description of 

the employees1 position duties than CCS I1 and whether the 

employees1 position duties were more similar to those positions 

assigned to CCS 111. 

The hearing examiner issued his findings of fact, conclusions 

of law and recommended order on April 7, 1989. He found that the 

CCS I11 class was distinguished from the employees' class only by 

the addition of special assignments. However, he denied the 

employees1 request to be reclassified on the grounds that they did 

not demonstrate that they performed 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 

indicated a need for a classification series review and that I1[a]ny 

upgrade resultant from that series review must be retroactive." He 

concluded that the employees were aggrieved when their 

reclassification was not made retroactive. He recommended an order 

that those employees reclassified as a result of the series review 

be paid the difference between what they had been paid and what 

they would have been paid had the results of the series review been 

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, 

the hearing examiner's recommendation that 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 conference on September 5, 1989, the parties 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 

employees1 classification appeal and the series review and, if so, 

whether that linkage provided 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, accelerated 
that review to correct a recognized need. The hearing examiner 

again recommended retroactive pay based on his conclusion that the 

linkage between the employees1 classification appeal and the series 

review 'I [m] eans that the [employees] were aggrieved when their 

resultant reclassification and upgrade was not made retroactive to 

thirty (30) days prior to the date of their Wage and Classification 

Appeal. I' 

The Division again filed exceptions to the findings of fact, 

conclusions of law and recommended order. The matter was argued to 

the Board on June 6, 1990. The Division argued that the hearing 

examiner's recommendation of retroactive pay 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 

link between the employees' appeal and the Division's series review 

was not sufficient to provide a basis for retroactive pay. The 

Board adopted the hearing 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 order 
granting retroactive pay to the employees? 

In reviewing an administrative agency's findings of 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 new position 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 classification resulted 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 officers 
were aggrieved and recommendedthat they be reclassified by 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, it had 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 as will 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 apparent 
from section 2-18-1012, 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 found that 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 it distinguished Hutchin by stating: 

"Hutchin involved the discharge of a state employee 

for personal use of state owned property. In Hutchin the 

board directed that the discharged employee 'be 

reinstated as of the date of this final order to the 

position he held with the department' at the time of his 

termination. That is the type of remedy that is uniquely 

within the discretion of the board. However, the board'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 is properly classified. If the Board determines that 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 the Division to reclassify the employee's position 

and, as appropriate, ordering other remedies such as retroactive 

pay. In contrast, because no classification appeal was involved in 

Hutchin, the Board was not limited by 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 issues were whether the employees were improperly classified as 

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 

specifications that were in place at the time the employees brought 

their classification appeal. These findings remained unchanged 

throughout the subsequent history of the case. 

Even though the Board found that the employees were properly 

classified at the time they brought their classification appeal, it 

awarded the employees the increase in pay which resulted from their 

reclassification, retroactive to thirty days before they brought 

their appeal. This grant of retroactive pay was based on a finding 

of "linkaget1 between the employees1 classification appeal and the 

Division's series review. While linkage between the classification 

appeal and the series review existed, we conclude that that linkage 
was not legally sufficient to provide a basis for retroactive pay. 

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 retroactive pay. 

In addition, because the employees were 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 a higher pay grade during the very time 

period that they were found to be properly classified. As such, 

the Board's order was tantamount to an assignment of a new grade to 

the employees' class in violation 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 retroactive pay 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 the majority opinion. 

The majority is correct that pursuant to our decision in Matter 

ofMead (l988), 235 Mont. 208, 766 P.2d 1300, the Board of Personnel 

Appeals cannot review and correct the grade assigned to a 

particular class. However, the majority opinion is incorrect when 

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 retroactive pay can be awarded. Our 

decision in Mead did not deal with the circumstances under which 

retroactive pay can be awarded, and there is nothing 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 Personnel Division's investigation found that based upon the 

classes then available, Community Corrections Specialist 11, 

Grade 12, was as good as any. However, the Department went on to 

acknowledge that its investigation indicated that a complete review 

of the classifications was necessary. That review resulted in the 

employees' reclassification. It was in that reclassified posture 

that this case came before the Board. The Board simply determined 

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 

reclassification by the Department. 

The facts in this case are not similar to the facts in Mead. 

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 was without 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, they were entitled to retroactive 

pay for 30 days prior to the date their appeal was 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 specific holding in Mead was that the Board of Personnel 

Appeals could not create classifications, nor assign grades within 

classifications. In this case, the Board's decision to award 
retroactive pay was not based on its creation of any new 

classification. Nor was it based 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 since the employees did not prevail on this 

issue, they were not aggrieved. However, limiting the issue 

presented to the Board in that manner is incorrect. At the second 

hearing before the Board's hearing examiner, the parties stipulated 

that the issue to be decided by the hearing examiner would be: 

Whether there is linkage between the wage and 

classification appeal of the Community Corrections 

Specialist I1 class and the class review of the Community 

Corrections Specialist series, and if so, does that 

linkage provide a basis for awarding retroactive pay. 

After considering the evidence, the hearing examiner found 

that there was linkage. There was substantial evidence to support 

that finding on appeal, and no one contends that it was clearly 

erroneous. 

Therefore, I conclude that it was not the Board which changed 

the employeesv grade. That grade was changed by the Department in 

response to the employees' appeal. The Division, however, refused 

to award the retroactive pay to which the employees were 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, I would affirm the decision of the District 

Court. 

Justice William E. Hunt, Sr., concurs in the foregoing dissent 

of Justice Trieweiler. 

Justice