Court Opinion

ID: 4119375
Source: CourtListenerOpinion
Date Created: 2017-01-27 22:39:23.299553+00
Date Added: 2024-06-11T14:46:46.774229
License: Public Domain

Authority of the Environmental Protection Agency to
       Hold Employees Liable for Negligent Loss, Damage, or
          Destruction of Government Personal Property
The Environmental Protection Agency may hold its employees liable for the negligent loss, damage, or
  destruction of government personal property or for the unauthorized personal use of agency-issued
  cell phones.

                                                                                    May 28, 2008

            MEMORANDUM OPINION FOR THE ACTING GENERAL COUNSEL
                   ENVIRONMENTAL PROTECTION AGENCY

   You have asked whether the Environmental Protection Agency (“EPA”) may
hold its employees liable for the negligent loss, damage, or destruction of govern-
ment personal property or for the unauthorized personal use of agency-issued cell
phones. We conclude that it may.

                                                 I.

    EPA’s policy on the treatment of government personal property is contained in
the agency’s Personal Property Policy & Procedures Manual (“Property Manual”),
available to employees on the agency Intranet. The Property Manual constitutes
the “authoritative reference for EPA’s management of personal property.” Id. at
ES-1. Describing itself as a “supplement” to existing federal law and regulations,
the Property Manual “provid[es] basic policy and procedures governing the
personal property management of EPA.” Id. at ES-1 to ES-2. Pursuant to the
Property Manual, EPA employees are responsible for “properly caring for,
handling, utilizing, and being accountable for EPA personal property assigned for
their use within or away from an EPA facility,” as well as for “ensuring that
personal property in their possession, custody or control is used only for official
authorized duties (except as allowed per EPA Order 2100.3, ‘Policy on Limited
Personal Use of Government Office Equipment.’).” Id. § 1.3.4.
    EPA’s Property Manual expressly provides that employees may be held liable
for any government property in their care that is lost, damaged, or destroyed
through their negligence. The Property Manual both notifies employees of their
duty of care and requires them to acknowledge that responsibility by completing
certain forms before taking custody of EPA property. One form requires employ-
ees receiving personal property, like laptops and cell phones, to “accept responsi-
bility for the equipment,” to agree to “exercise reasonable care in protecting it,”
and to accept that they “may be required to reimburse EPA for part or all of the
acquisition cost” in case the property is lost, damaged, or destroyed due to
negligence. EPA Form 1740-22 (“Personal Property Custody Card”); see also

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Property Manual § 2.1.3 (describing the purpose of EPA Form 1740-22). Another
form requires employees transporting property outside EPA facilities to sign a
notice that they will be “personally responsible” for the property and “if the
property has been lost, damaged, or destroyed because of [their] negligence, a
Board of Survey may find [them] at fault.” EPA Form 1700-9 (“Property Pass”);
see also Property Manual § 2.2.1 (discussing the use of short- and long-term
property passes for taking EPA personal property offsite). A third form requires
employees transferring EPA personal property to other areas to accept that they are
“personally responsible for [its] return in the condition in which received, normal
wear and tear excepted . . . [and if] because of [their] negligence, the property has
been lost, damaged or destroyed, EPA is hereby authorized to withhold any salary
due [the employees] until full restitution is made.” EPA Form 1740-10 (“Property
Action Request and Memorandum Receipt”); see also Property Manual § 2.4.1
(describing the purpose of EPA Form 1740-10).
    EPA provides its policy governing the appropriate use of cell phones in an
administrative order entitled “Policy on Limited Personal Use of Government
Office Equipment,” which is available to employees on the agency Intranet. EPA
Order 2100.3 A1 (2004). The order sets the parameters of authorized use (allowing
limited personal use during non-work time where such use causes “minimal
additional expense to the Government” and does not “reduce . . . productivity”)
and states that “[u]nauthorized or inappropriate use of Government office equip-
ment may result in [adverse consequences, including] . . . financial liability,
depending on the severity and nature of the misuse.” Id.
    EPA’s Property Manual sets forth specific administrative procedures for re-
viewing claims that employees should be held liable for the loss, damage, or
destruction of agency property (referred to in the Manual as “LDD”). Under these
procedures, a Board of Survey, composed of three to five EPA employees
appointed for three-year terms, “serves as a fact-finding body charged with
determining the circumstances and conditions of each case in which EPA property
is declared LDD.” Property Manual § 1.3.2. The Board “must ensure that facts are
fully disclosed, government interests are fully served, and the rights of the
employee(s) involved are fully protected.” Id. § 3.8.4. The Board must consider
the available evidence, including a custodial report “describing the circumstances
of the LDD,” id. § 3.8.2, and must interview the “employee(s) assigned responsi-
bility for the property and/or their supervisor,” id. § 3.8.4. Following such
consideration, the Board must issue “comprehensive” written findings and
recommendations, including a determination of whether the employees were “at
fault” for the loss, damage, or destruction. Id. § 3.8.6. The Board’s findings and
recommendations then must be reviewed by a senior-level EPA official (“Pro-
gram/Regional leadership”), id. § 3.8.7, and if the senior official disagrees, a
specified agency property officer must act as an advisor to “facilitate resolution of
the case between all parties,” id.

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       Authority of EPA to Hold Employees Liable for Loss or Damage of Property

                                         II.

    Federal departments and agencies may appeal to several sources of authority to
promulgate rules concerning their employees’ care for government property. Most
directly, 5 U.S.C. § 301 provides the heads of “Executive departments” with a
general “housekeeping” authority to prescribe rules for the conduct of their
department’s employees and “the custody, use, and preservation of its records,
papers, and property.” Although EPA is not an “Executive department” within the
meaning of section 301, see 5 U.S.C. § 101 (2006) (defining “Executive depart-
ments”), we conclude that the Administrator of the EPA has the same “housekeep-
ing” authority under EPA’s organic statute.
    Under 5 U.S.C. § 301, “[t]he head of an Executive department or military
department may prescribe regulations for the government of his department, the
conduct of its employees, the distribution and performance of its business, and the
custody, use, and preservation of its records, papers, and property.” 5 U.S.C. § 301
(2006). Commonly referred to as a “housekeeping statute,” section 301 gives
“authority to [an] agency to regulate its own affairs.” Chrysler Corp. v. Brown,
441 U.S. 281, 310 (1979). “[T]he antecedents of 5 U.S.C. § 301 go back to the
beginning of the Republic, when statutes were enacted to give heads of early
Government departments authority to govern internal departmental affairs.” Id. at
301. This Office has interpreted section 301 to allow agencies not only to set rules
for employee conduct while on the job, but also to regulate employee conduct
outside the workplace that “may undermine the efficient operation of the Depart-
ment or the effectiveness of employees in the performance of their duties.”
Authority to Prescribe Regulations Limiting the Partisan Political Activities of the
Commissioned Officer Corps in the National Oceanic and Atmospheric Admin-
istration, 28 Op. O.L.C. 102, 104 (2004) (“Authority to Prescribe Regulations”).
    If section 301 applied to the EPA, we would have no difficulty concluding that
it would confer authority to “prescribe regulations” setting standards of care for
employee use of government property and to impose liability for breaches of those
standards. The Property Manual and EPA Order 2100.3 regulate both the “custo-
dy, use, and preservation of . . . [EPA] property” and “the conduct of its employ-
ees.” 5 U.S.C. § 301. These rules thus concern “internal departmental affairs,”
Chrysler, 441 U.S. at 301, and would constitute a proper exercise of “administra-
tive power” pursuant to the statute, United States v. George, 228 U.S. 14, 20
(1913), which includes the authority to establish penalties for violations of agency
regulations, see Mourning v. Family Publ’ns Serv., Inc., 411 U.S. 356, 372, 376
(1973) (holding that an agency’s authority to regulate certain conduct included the
authority to impose penalties, such as a civil fine, for violating agency regula-
tions). For this reason, several departments and agencies have cited section 301

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                       Opinions of the Office of Legal Counsel in Volume 32

expressly as a source of authority for rules subjecting employees to liability for
losses due to violations of internal personnel and property rules. 1
    The difficulty here, however, is that section 301 confers regulatory authority
only on the “heads of Executive departments and military departments,” and not
the heads of other executive agencies, such as EPA. 5 U.S.C. § 301; see also
5 U.S.C. § 101; Authority of the Office of Government Ethics to Issue Touhy
Regulations, 25 Op. O.L.C. 13, 15 (2001) (recognizing that section 301 authority
is limited to the listed departments). In considering whether the EPA Administra-
tor may exercise housekeeping authority equivalent to that under section 301, we
must consider whether such authority has been conferred under EPA’s organic
statute.
    The Reorganization Plan establishing the EPA vests the Administrator with
authority equivalent in many respects to that enjoyed by the head of an executive
department. Reorganization Plan No. 3 of 1970, § 1(b), 84 Stat. 2086, 2086
(July 9, 1970) (codified at 5 U.S.C. app. 189 (2006)). 2 The Reorganization Plan,
which names the Administrator the “head of the agency,” id., transfers to the
Administrator functions previously vested by law in the heads of other executive
departments, including functions of the Secretary of the Interior and the Secretary
of Health, Education, and Welfare. Id. § 2(a)(1)–(4). The Administrator’s authority
is not limited to those designated functions but also includes “[s]o much of the
functions of the transferor officers and agencies” that are “incidental to or

    1
      See, e.g., Dep’t of Justice, Order 2400.3 (Aug. 6, 1998) (citing section 301 as legal authority for its
policy providing that “[a]ll employees . . . [s]hall be liable for violation of their [property management]
responsibilities when they result in losses to the Government through gross negligence”); Bureau of Land
Management Manual § 1520 (providing that “[e]mployees may be held financially liable for loss, damage,
destruction, or theft of property items” and citing 5 U.S.C. § 301 for authority) (available at www.blm.gov/
pgdata/etc/medialib/blm/wo/Information_Resources_Management/policy/blm_manual.Par.53408.File.dat/
1520.pdf, last visited ca. 2008); National Aeronautics and Space Administration, Policy Directive 2540.1F,
§ 1.g (May 25, 2005) (“Unauthorized or improper use of Government office equipment could result in . . .
criminal penalties, and/or employees/contractors being held financially liable for the cost of improper
use.”) (invoking 5 U.S.C. § 301) (available at http://code210.gsfc.nasa.gov/NPD2540001F.pdf, last visit-
ed Aug. 12, 2014). Other agencies have adopted similar rules without expressly citing 5 U.S.C. § 301. See
U.S. Agency for International Development (“USAID”), ADS Chapter 518—Personal Property
Management (Domestic) (revised May 5, 2007) (available at www.usaid.gov/policy/ads/500/518.pdf, last
visited ca. 2008); Dep’t of the Interior, Interior Property Management Directive 114-60.808-1 (available at
www.doi.gov/pam/114-60-8.html, last visited ca. 2008) (stating that “employees will be held financially
liable when a thorough investigation determines . . . [t]hat the property loss was a result of [misuse] . . . or
ordinary neglect or negligence”) (emphasis in original); U.S. Forest Service Manual § 6500.2 (clarifying
that “[i]ndividuals are liable to the Government . . . [if] [t]he Government suffers a pecuniary loss due to
their willful or unauthorized acts”); U.S. Fish & Wildlife Service Manual, 310 FW 1 (June 13, 1996)
(available at www.fws.gov/policy/310fw1.html, last visited ca. 2008) (“Employees who have been
determined by a Board of Survey to be negligent in the use of such property may be held personally liable
to make financial restitution to the Government for any incurred loss”).
    2
      Reorganization Plan No. 3 was transmitted to Congress on July 9, 1970, and became effective on
December 2, 1970, pursuant to chapter 9 of title 5, 5 U.S.C. §§ 901 et seq.

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        Authority of EPA to Hold Employees Liable for Loss or Damage of Property

necessary for . . . the performance of,” or “primarily related to,” such functions. Id.
§ 2(a)(9). This ancillary authority includes “authority, provided by law, to
prescribe regulations relating primarily to the transferred functions.” Id. At the
time of the Reorganization Plan, such ancillary authority included the housekeep-
ing authority conferred by 5 U.S.C. § 301 on the heads of those departments to
enable their subordinates to carry out efficiently the statutory functions transferred
to the Administrator of EPA. See 5 U.S.C. § 301 (Supp. II 1966). To perform those
transferred functions, the Reorganization Plan further provides that the Director of
OMB shall transfer to EPA “personnel, property, records, and unexpended
balances of appropriations . . . used, held, available, or to be made available in
connection with the functions transferred to the Administrator or the Agency.”
Reorganization Plan No. 3 of 1970, § 4(a).
    Taken together, these provisions convey to the Administrator all of the house-
keeping authority available to other department heads under section 301, including
authority to adopt property management regulations. Congress has vested the
Administrator with the authority to run EPA, to exercise its functions, and to issue
regulations incidental to the performance of those functions. This grant includes
the authority to assign responsibility to others within the agency and to issue
regulations prescribing the standards by which those functions are to be per-
formed. The effective and efficient management of the agency’s personnel and
property is plainly “incidental to” and “necessary for” the performance of the
functions that the Administrator is charged with performing. Indeed, the Reorgani-
zation Plan specifically recognizes this authority by providing the Administrator
not only with transferred functions but with the personnel and equipment neces-
sary for the effective performance of those functions. The Administrator’s
authority to prescribe standards for the care and use of agency property also
includes the authority to enforce those standards by holding employees liable for
losses that occur due to the breach of those standards. See Mourning, 411 U.S. at
372. Accordingly, we conclude that the Administrator has the regulatory authority
to issue property management regulations. 3

     3
       In view of this conclusion, we need not discuss at length EPA’s authority under the two other
sources identified in your letter: (1) 5 U.S.C. § 7301 (2006), which recognizes the President’s authority
to “prescribe regulations for the conduct of employees in the executive branch,” and (2) the common
law principle of bailment. See EPA Letter at 3. Both sources remain potential avenues under which
EPA could seek to impose liability on its employees, albeit subject to certain procedural hurdles.
Pursuant to 5 U.S.C. § 7301, the President has delegated to the Office of Government Ethics (“OGE”)
the authority to ensure that federal employees “protect and conserve Federal property” and do “not use
it for other than authorized activities.” Exec. Order No. 12731, §§ 101(i), 201 (Oct. 17, 1990), 3 C.F.R.
306 (1990 Comp.). OGE in turn has issued a series of regulations authorizing agencies to issue
supplementary property regulations, 5 C.F.R. § 2635.105(a), with which employees must comply or
face “corrective action,” which can include restitution, id. § 2635.103. To rely on these OGE
regulations to support its existing property regulations, EPA would have to submit those regulations for
OGE’s approval and have them published alongside OGE regulations in the Federal Register. See

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    We also conclude that the rules contained within the Property Manual and EPA
Order 2100.3 constitute binding and enforceable regulations. If EPA had submit-
ted these rules for notice and comment and published them in the Federal
Register, there would likely be little ambiguity about whether they constituted
regulations binding within the agency. EPA has not done so in this case, however,
because the Administrative Procedure Act (“APA”) expressly exempts rules
related to internal agency governance from those procedural requirements. 4 See
5 U.S.C. § 552(b) (2006) (exempting from disclosure requirements “matters that
are . . . related solely to the internal personnel rules and practices of an agency”);
id. § 553(a) (2006) (providing that formal rulemaking requirements, such as notice
and comment procedures, are not required “to the extent that there is involved . . .
a matter relating to agency management or personnel or to public property”); see
also Authority to Prescribe Regulations, 28 Op. O.L.C. at 105–07 (concluding that
a regulation concerning government employees’ political activities was not a
“substantive rule” subject to APA procedural requirements because it “would
govern only the conduct of government employees and would not directly affect
the rights and obligations of private parties pursuant to the regulatory jurisdiction
of the Department”). Accordingly, the fact that EPA’s rules were not promulgated
in a notice and comment rulemaking process does not deprive them of legal effect;
rather, as courts have held in analogous circumstances, an agency personnel
manual may constitute a “regulation” that is binding within an agency even if “it
was not promulgated and published in accordance with the requirements of the
APA.” Hamlet v. United States, 63 F.3d 1097, 1103 (Fed. Cir. 1995).

5 C.F.R. § 2635.105(b). The common law doctrine of bailment also may allow an agency to hold
employees liable for damage to property caused by their misuse or neglect. See United States v.
Thomas, 82 U.S. (15 Wall.) 337, 344 (1872); see also 3 General Accounting Office, Principles of
Federal Appropriations Law 13-160 (2d ed. 1994) (“Redbook”) (recognizing that “the concept of
bailment” provides “the legal basis” for employee liability for damage to government personal
property). There is some question, however, whether recovery on a theory of bailment would be
available in the context of an employment relationship. See, e.g., Elwood v. Bolte, 403 A.2d 869 (N.H.
1979) (explaining that “because [the employer] retained elements of control [over his property], a
master-servant relationship was created rather than a bailment”); see also Am. Jur. 2d, Bailments § 17
(2d ed. 2007) (citing cases). Even if recoupment were appropriate, agencies likely would have to seek
recovery through administrative procedures, either through informal agency adjudications or through
the assistance of the Office of Personnel Management.
    4
      As a general matter, regulations that “directly affect the rights and obligations of private parties”
or regulate the “citizenry at large” constitute “substantive rules” under the APA and usually must be
promulgated in accordance with notice and comment procedures. Authority to Prescribe Regulations,
28 Op. O.L.C. at 107. In contrast, agency rules “govern[ing] only the conduct of government
employees” are not substantive rules within the meaning of the APA and are specifically excluded from
publication and notice and comment requirements. Id. The EPA policies at issue here pertain solely to
the conduct of EPA employees and have no application to the “citizenry at large.” Those policies are
therefore not “substantive rules” that must be published under the APA.

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         Authority of EPA to Hold Employees Liable for Loss or Damage of Property

   Whether statements contained within agency policy manuals constitute binding
agency regulations is a question that has arisen in a variety of contexts. Although
not every agency statement constitutes a binding regulation, “the general consen-
sus is that an agency statement, not issued as a formal regulation, binds the
agency . . . if the agency intended the statement to be binding.” Farrell v. Dep’t of
Interior, 314 F.3d 584, 590 (Fed. Cir. 2002); see also Thorpe v. Housing Auth. of
Durham, 393 U.S. 268, 276 (1969) (holding that a circular issued by the Depart-
ment of Housing and Urban Development constituted an administrative regulation
where it “was intended to be mandatory”); Service v. Dulles, 354 U.S. 363, 376
(1957) (holding that removal of employee was invalid because it violated proce-
dures for removal set forth in a State Department manual that was binding on the
Department); Doe v. Hampton, 566 F.2d 265, 280–81 (D.C. Cir. 1977) (holding
that unpublished provisions within an agency personnel manual may be “binding if
so intended by the Commission” in question). Applying this standard here, we
believe that the EPA rules in question bind both the agency and its employees. The
Property Manual describes itself as constituting the “authoritative reference for
EPA’s management of personal property” and states that it “provid[es] basic
policy and procedures governing the personal property management of EPA.” Id.
at ES-1 (emphasis added). The Manual also expressly notes that it is a “supple-
ment to the portions of the Code of Federal Regulations (CFR) and the Federal
Management Regulations (FMR)” that provide the legal framework for the
treatment of federal property. Id. at ES-1 to ES-2. Similarly, EPA Order 2100.3
A1 states that it “provides the EPA policy permitting limited personal use of
Government office equipment during non-work time” and replaces “any previous
memoranda and policies regarding personal use of Government office equipment.”
(Emphasis added.) Like the Property Manual, EPA Order 2100.3 A1 describes its
status as on par with other binding legal authorities. Id. (stating that the order
“supplements but does not supersede any statutes, regulations, or collective
bargaining agreements on the authorized use of Government office equipment”).
Accordingly, the EPA policies at issue make clear “that they were designed to be
binding on the agency” and on employees alike. Farrell, 314 F.3d at 591. Those
policies therefore qualify as regulations enforceable by EPA when agency
property is damaged due to employee negligence or additional costs are incurred
due to unauthorized use. 5

   5
      You also have asked whether EPA’s authority to impose liability on its employees for the misuse or
neglect of government property would be consistent with the Comptroller General’s decision in Matter of
Department of Defense—Authority to Impose Pecuniary Liability by Regulation, B-280764, 2000 WL
812093 (May 4) (“Matter of DoD”). We believe that it is, because Matter of DoD addressed the specific
rules governing “accountable officers,” rather than the general standards for other federal employees. (The
decisions of the Comptroller General are not binding on the Executive Branch, although we do consider
them useful sources on appropriations matters. See Use of General Agency Appropriations to Purchase
Employee Business Cards, 21 Op. O.L.C. 150, 151 (1997).) The Comptroller General traditionally has

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                                                    III.

   For the foregoing reasons, we conclude that EPA’s rules regarding employee
liability for loss, damage, or destruction of government personal property and for
the unauthorized use of government personal property are supported by EPA’s
housekeeping authority. 6

                                                           STEVEN A. ENGEL
                                                     Deputy Assistant Attorney General
                                                         Office of Legal Counsel

recognized that agencies may adopt regulations holding their employees liable for damage to property
caused by employee negligence or misuse. See 3 Redbook at 13-159. At the same time, the Comptroller
General has recognized the existence of specialized liability standards governing so-called “accountable
officers,” those federal officers responsible for certifying and disbursing government funds. Id. at 13-157.
Insofar as accountable officers may be responsible for certifying and disbursing government funds and
traditionally have been held to the highest standards of care, GAO has recognized that the specific terms
governing that liability are set by statute.
    In Matter of DoD, the Comptroller General addressed whether an agency could hold employees who
are not accountable officers liable for contributing to the wrongful disbursement of government funds. The
Comptroller General explained that, while Congress had singled out certifying officers, 31 U.S.C. § 3528,
and disbursing officers, 31 U.S.C. § 3325, as officials who would be strictly liable for improper payments,
“significantly, [Congress had not] extended liability beyond these officers to governmental employees
whose work support[ed] these functions.” 2000 WL 812093, at *5. The Comptroller General thus reasoned
that because Congress had specifically considered which officers could be liable for erroneous disburse-
ments in this context, the omission of certain officers signaled Congress’s intent that those officers not be
held liable as accountable officers. In this regard, Matter of DoD expressly repudiated two prior decisions
of the Comptroller General, both of which involved liability for accountable officers, id. at *5, but gave no
indication that it intended to overrule the long line of Comptroller General decisions holding, as a general
matter, that employees may be held liable for property damage based upon agency regulations. Likewise,
GAO’s subsequent discussion of Matter of DoD provides no indication that Matter of DoD worked a sea
change in GAO’s understanding of agencies’ ability to assess liability against employees absent specific
statutory direction. See 2 Redbook at 9-11 (3d ed. 2006) (recognizing that Matter of DoD simply departed
from the view that the government could “impose accountable officer status and liability” by administra-
tive action). Accordingly, we believe that Matter of DoD is consistent with our conclusion that EPA may
enforce its regulations imposing liability on employees for misuse or neglect of government property.
    6
      Because EPA’s policy may result in a deprivation of an employee’s property, EPA’s procedures
for determining employee negligence or misuse of property and assessing liability also must satisfy the
constitutional requirement of due process. See Mathews v. Eldridge, 424 U.S. 319, 335 (1976) (holding
that due process requires balancing an individual’s property interests and the risk of an erroneous
deprivation against the government’s interests, “including the function involved and the fiscal and
administrative burdens that the additional or substitute procedural requirement would entail”). We note
that as detailed in the Property Manual, EPA’s procedures for assessing liability provide notice and an
administrative hearing before a Board of Survey prior to the imposition of any liability, see Property
Manual §§ 1.3.2, 3.8.3–3.8.4, two factors that the Supreme Court has identified as significant to the due
process analysis.

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