National Association of Postal Supervisors v. USPS

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 21, 2021 Decided February 22, 2022

No. 20-5280

NATIONAL ASSOCIATION OF POSTAL SUPERVISORS,

APPELLANT

v.

UNITED STATES POSTAL SERVICE AND UNITED POSTMASTERS

AND MANAGERS OF AMERICA,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 1:19-cv-02236)

Abigail A. Graber argued the cause for appellant. With

her on the briefs were Jean M. Zachariasiewicz and Andrew D.

Freeman.

Sean Janda, Attorney, U.S. Department of Justice, argued

the cause for United States Postal Service. With him on the

brief were Brian M. Boynton, Acting Assistant Attorney

General, Mark B. Stern, Attorney, and Morgan E. Rehrig and

Michelle A. Windmueller, Attorneys, U.S. Postal Service.

Jonathan Greenbaum was on the brief for appellee United

Postmasters and Managers of America in support of appellees.

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Before: PILLARD and WILKINS, Circuit Judges, and EDWARDS,

Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge

EDWARDS.

EDWARDS, Senior Circuit Judge: The Postal

Reorganization Act of 1970 (“Act” or “Postal Act”) delegates

authority to the United States Postal Service (“Postal Service”

or “USPS”) to, inter alia, “classify and fix the compensation

and benefits of all officers and employees.” 39 U.S.C.

§ 1003(a). In setting compensation, the Act requires the Postal

Service to “provide adequate and reasonable differentials in

rates of pay between employees in the clerk and carrier grades

. . . and supervisory and other managerial personnel.” Id.

§ 1004(a). In addition, the Postal Service must “achieve and

maintain compensation for its . . . employees comparable to the

rates and types of compensation paid in the private sector of the

economy.” Id. § 101(c); see also id. § 1003(a). The Act also

directs the Postal Service to allow organizations representing

supervisory and other managerial employees “to participate

directly in the planning and development of pay policies and

schedules, fringe benefit programs, and other programs relating

to supervisory and other managerial employees.” Id. § 1004(b).

The principal dispute in this case concerns the Postal

Service’s proposed 2016–2019 pay package for its “Field”

Executive and Administrative Schedule (“EAS”) personnel

(“Field Pay Package”). The National Association of Postal

Supervisors (“Association”), a recognized organization of

supervisory personnel, filed a complaint in the District Court

challenging the Postal Service’s adoption of the Field Pay

Package. The Association alleged that the Postal Service

violated the Postal Act by failing to provide a pay differential

between clerks and carriers and the supervisors that manage

3

them, and also failing to consider private sector compensation

and benefits. The Association also challenged the Postal

Service’s refusal to consult with the Association regarding pay

policies for Association members who are postmasters or

whom the Postal Service categorizes as “Headquarters” and

“Area” employees.

In response to the Association’s complaint, the Postal

Service argued that the matters in dispute regarding the Field

Pay Package are not subject to judicial review. The Postal

Service maintained that provisions in the Act authorizing the

adoption of pay packages merely state “policy goals” that the

agency “should attempt to achieve,” not mandatory and

enforceable directives. Br. for Appellee 4, 30. The District

Court agreed and granted the Postal Service’s motion to

dismiss the Association’s complaint for failure to state a claim.

Nat’l Ass’n of Postal Supervisors v. USPS, No. 1:19-CV-2236,

2020 WL 4039177, at *3-7 (D.D.C. July 17, 2020), reprinted

in Joint Appendix (“J.A.”) 39-52. The Association then filed a

timely appeal claiming that the District Court erred in

dismissing its complaint. We agree.

It is well established that judicial review of Postal Service

actions “is available . . . to determine whether the agency has

acted ‘ultra vires’—that is, whether it has ‘exceeded its

statutory authority.’” Mittleman v. Postal Regul. Comm’n, 757

F.3d 300, 307 (D.C. Cir. 2014) (quoting Aid Ass’n for

Lutherans v. USPS, 321 F.3d 1166, 1173 (D.C. Cir. 2003))

(citations omitted). In National Association of Postal

Supervisors v. USPS, 602 F.2d 420, 435, 439, 440 (D.C. Cir.

1979) (“National Association”), we held that the statutory

provisions at issue in this case are mandatory directives

enforceable pursuant to ultra vires review. The scope of review

articulated in National Association plainly controls the

disposition of this case.

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After carefully reviewing the record in this case, and

applying controlling principles from National Association and

its progeny, we hold that the Association has plausibly alleged

that the Postal Service exceeded its statutory authority and

failed to act in conformance with the commands of the Act in

the following respects: First, the Postal Service acted ultra

vires by failing to institute “some differential” in pay for

supervisors and by failing to demonstrate that it “set its

compensation levels by reference, inter alia, to the

compensation paid” in the private sector. Id. at 435, 440; see

also 39 U.S.C. §§ 101(c), 1003(a), 1004(a). Second, the Postal

Service failed to follow the commands of the Act by refusing

to consult with the Association on compensation for “Area”

and “Headquarters” employees; by refusing to consult

regarding postmasters; and by failing to provide the

Association with reasons for rejecting its recommendations.

See 39 U.S.C. § 1004(b); National Association, 602 F.2d at

439. Accordingly, we reverse the judgment of the District

Court and remand for further proceedings consistent with this

opinion.

I. BACKGROUND

A. Legal Framework

Congress established the Postal Service as an independent

agency under the Executive Branch in the Postal

Reorganization Act of 1970, Pub. L. No. 91-375, 84 Stat. 719.

See also 39 U.S.C. § 201. As noted above, the Act instructs the

Postal Service to classify and fix the compensation and benefits

of all officers and employees; provide adequate and reasonable

differentials in rates of pay between employees in the clerk and

carrier grades and supervisory and other managerial personnel;

and to achieve and maintain compensation for its employees

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comparable to the rates and types of compensation paid in the

private sector of the economy. See id. §§ 101(c), 1003(a),

1004(a), (b).

Under the Postal Act, the salaries of rank-and-file

employees – like clerks and carriers – are determined through

a process of collective bargaining with recognized labor

unions. Id. §§ 1202–1209. Collective bargaining for rank-and-

file employees is covered by the National Labor Relations Act

and subject to the jurisdiction of the National Labor Relations

Board. Id. § 1209(a). By contrast, supervisory and managerial

personnel are expressly excluded from representation in any

collective bargaining unit. Id. § 1202(1).

Instead, the Act directs the Postal Service to “provide a

program for consultation with recognized organizations of

supervisory and other managerial personnel who are not

subject to collective-bargaining agreements under chapter 12

of this title.” Id. § 1004(b). An organization is “recognized”

under the Act if it is “a supervisory organization [that]

represents a majority of supervisors,” “an organization (other

than an organization representing supervisors) [that] represents

at least 20 percent of postmasters,” or “a managerial

organization (other than an organization representing

supervisors or postmasters) [that] represents a substantial

percentage of managerial employees.” Id.

Once recognized, an organization is “entitled to participate

directly in the planning and development of pay policies and

schedules . . . relating to supervisory and other managerial

employees.” Id. The Act requires the Postal Service to meet “at

least once a month” with any recognized organization, share

details of proposed compensation programs, and allow the

organizations time to make recommendations in response. Id.

§ 1004(c)–(d). The Postal Service must give recommendations

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made by recognized organizations “full and fair consideration,”

and, “if any of such recommendations are rejected,” must

provide reasons to the organization explaining why. Id.

§ 1004(d)(1)(C), (2)(C).

In the event that a recognized organization “believes that

the decision of the Postal Service is not in accordance with the

provisions of [the Postal Act],” the statute includes a dispute

resolution process. Id. § 1004(f)(1). Upon request by a

recognized organization, the Federal Mediation and

Conciliation Service must convene a factfinding panel to

review the Postal Service’s decision. Id. The panel hears from

the parties and makes recommendations concerning

supervisory pay programs. Id. § 1004(f)(3), (4). The Postal

Service must then “give full and fair consideration to the

panel’s recommendation and shall explain in writing any

differences between its final decision and the panel’s

recommendation.” Id. § 1004(f)(5).

B. Factual Background

The Postal Service employs approximately 625,000

workers, about 49,000 of whom are supervisors, managers,

postmasters, and other professional and administrative

workers. These workers, known as “Executive and

Administrative Schedule” employees, operate under the

direction of approximately 500 executives, and in turn manage

hundreds of thousands of rank-and-file employees, like clerks

and carriers. The Postal Service designates its EAS employees

as either “Headquarters,” “Area,” or “Field” employees, based

on “where employees work or to whom they report.” Reply Br.

for Appellant 19. EAS employees are distributed across more

than 1,000 job titles and levels.

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The National Association of Postal Supervisors is a

“recognized organization[] of supervisory and other

managerial personnel” employed by the Postal Service. 39

U.S.C. § 1004(b). It has approximately 27,000 members

comprising active and retired Postal Service managers,

supervisors, postmasters, and other professionals. Association

members include employees whom the Postal Service

categorizes as “Field,” “Area,” and “Headquarters” employees,

as well as postmasters.

1. Field Employees

In September 2017, the Postal Service sent a proposed pay

package to the Association for its “Field” EAS employees for

fiscal years 2016 to 2019 (“Field Pay Package”). In the months

following, the Postal Service consulted with the Association on

the package via meetings, letters, and emails. The Postal

Service rejected most of the Association’s recommendations

and issued a final decision in summer 2018. It did not provide

any reasons for rejecting the Association’s recommendations.

The Association requested that the Federal Mediation and

Conciliation Service convene a factfinding panel to review the

Field Pay Package. It contended the Field Pay Package violated

the Act’s requirements for setting adequate and reasonable pay

differentials between supervisory and rank-and-file employees,

id. § 1004(a), and for maintaining compensation and benefits

comparable to those in the private sector, id. §§ 101(c),

1003(a).

The Association alleged the five percent “Supervisory

Differential Adjustment” included in the package resulted in

thousands of supervisors earning less than persons who they

supervised because the Postal Service used a lower paid clerk

position as the benchmark for this differential instead of a

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higher paid (and more populous) carrier position. In addition,

the Association claimed that many clerks and carriers received

more total compensation than supervisors because they earned

overtime at higher rates and after fewer hours than their

supervisors, and they also received larger and more regular pay

increases.

Regarding comparability, the Association alleged that the

Postal Service took no steps to compare compensation or

benefits to the private sector before issuing the initial Field Pay

Package. Only after the factfinding panel was convened did the

Postal Service hire a consultant to evaluate pay (but not

benefits or other compensation) for eight out of 1,000

positions. The Association further alleged that the Postal

Service did not consider high-wage locations or provide

locality pay, refused to offer bonuses, and did not adjust pay in

line with inflation or market increases as is done in the private

sector.

The factfinding panel held a two-day hearing in December

2018 and issued its unanimous findings in a report in April

2019. It found that the Supervisory Differential Adjustment

method used by the Postal Service had, in many instances,

resulted in unreasonable and inadequate pay differentials.

Regarding comparability, the panel concluded that the Postal

Service had violated the Act’s comparability requirement by

issuing a final decision on the Field Pay Package without

conducting any market survey into private compensation. It

further concluded that the Postal Service method for

determining pay increases, “as constructed and implemented

by the [Postal] Service, does not satisfy the statutory criteri[on]

of comparability.” Compl. ¶ 26, J.A. 11.

The factfinding panel made recommendations for bringing

compensation for supervisors into conformance with the Act.

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See id. ¶ 68, J.A. 20. Approximately two weeks after the

factfinding report was issued, the Postal Service rejected most

of the recommendations and issued a final decision adhering to

the differential and comparability conclusions in the original

Field Pay Package.

2. Area and Headquarters Employees

The Association has 7,500 members in the “Area” and

“Headquarters” categories. It claims that these members

include “employees who perform supervisory and managerial

responsibilities associated with a range of functions” such as

those in “vehicle maintenance, shared services, financial, sales,

and marketing.” Compl. ¶ 57, J.A. 18. On December 18, 2018,

without having engaged in any consultation with the

Association, the Postal Service issued a separate and “final”

pay package for Area and Headquarters EAS employees

through fiscal year 2019 (“Area and Headquarters Pay

Package”).

The package listed a small number of Headquarters and

Area positions that the Postal Service does recognize as

represented by the Association, but stated that the package

“will not apply to those Headquarters and Area positions who

are represented by the [Association].” Id. ¶ 62, J.A. 18-19. No

pay package has been issued, nor has any consultation with the

Association been undertaken, for those few Headquarters and

Area employees the Postal Service recognizes as properly

represented by the Association for the time period at issue.

3. Postmaster Employees

Finally, during this same period, the Association attempted

to represent its postmaster members in negotiations regarding

compensation. The Association has 4,100 postmaster

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members. This is the second largest postmaster membership

group in the country after the United Postmasters and

Managers of America (“United Postmasters”), a recognized

organization that also represents postmasters. The Postal

Service rejected the Association’s request for recognition,

saying that it “cannot lawfully recognize [the Association] as a

representative of postmasters in addition to supervisors.”

Compl. ¶ 79, J.A. 23. The Postal Service has steadfastly refused

to consult with the Association on compensation for

postmasters.

4. Procedural History

On July 26, 2019, the Association filed a complaint in the

District Court. The complaint alleges that the Postal Service

has violated section 1004(b) of the Postal Act by refusing to

recognize or consult with the Association regarding

postmasters and supervisors or other managerial personnel

categorized as Area or Headquarters employees. It further

claims that the Postal Service has violated the Act by failing to

maintain any differential between many supervisors and the

employees they oversee, and by failing to achieve and maintain

compensation comparable to the private sector. Finally, it

claims that the Postal Service failed to meet its obligation to

“provide compensation . . . that will assure the attraction and

retention of qualified and capable supervisory and other

managerial personnel.” 39 U.S.C. § 1004(a). In response to the

complaint, the Postal Service filed a motion to dismiss for

failure to state a claim. United Postmasters intervened in

support of the Postal Service’s position that the Association

cannot lawfully represent postmasters and filed its own motion

to dismiss.

The District Court granted the motions to dismiss, finding

that the Association failed to state a claim because it had not

11

shown that the Postal Service had violated a “clear and

mandatory” statutory directive. See Nat’l Ass’n of Postal

Supervisors, 2020 WL 4039177, at *7, J.A. 50. The

Association now appeals.

The Association raised no challenge in this appeal to the

District Court’s dismissal of Count III of its complaint, related

to the Postal Service’s obligation to ensure compensation that

will attract and retain qualified supervisory personnel. See

Compl. ¶¶ 93-99, J.A. 24-25; 39 U.S.C. § 1004(a). We

therefore uphold the dismissal of Count III, any further

challenge to which has been forfeited by the Association.

II. ANALYSIS

A. Standard of Review

This court reviews de novo a District Court’s grant of a

motion to dismiss for failure to state a claim. VoteVets Action

Fund v. U.S. Dep’t of Veterans Affs., 992 F.3d 1097, 1104

(D.C. Cir. 2021). We must “assume the truth of the plaintiff’s

well-pleaded factual allegations in the complaint” and “draw[]

all reasonable inferences in plaintiff’s favor.” Statewide

Bonding, Inc. v. U.S. Dep’t of Homeland Sec., 980 F.3d 109,

114 (D.C. Cir. 2020); Capitol Servs. Mgmt., Inc. v. Vesta Corp.,

933 F.3d 784, 788 (D.C. Cir. 2019).

B. Availability of Judicial Review

The actions of the Postal Service are expressly “exempt

from review under the Administrative Procedure Act”

(“APA”). N. Air Cargo v. USPS, 674 F.3d 852, 858 (D.C. Cir.

2012); see also 39 U.S.C § 410(a) (“[T]he provisions of

chapter[] . . . 7 of title 5 [the APA], shall [not] apply to the

exercise of the powers of the Postal Service.”). However, “the

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case law in this circuit is clear that judicial review is available

when an agency acts ultra vires,” or outside of the authority

Congress granted. Aid Ass’n for Lutherans, 321 F.3d at 1173.

Review for ultra vires acts rests on the longstanding principle

that if an agency action is “unauthorized by the statute under

which [the agency] assumes to act,” the agency has “violate[d]

the law” and “the courts generally have jurisdiction to grant

relief.” Am. Sch. of Magnetic Healing v. McAnnulty, 187 U.S.

94, 108 (1902); see also Chamber of Com. v. Reich, 74 F.3d

1322, 1327-28 (D.C. Cir. 1996).

In line with this precedent, we have repeatedly held that

Postal Service “actions are reviewable to determine whether it

has acted in excess of its statutory authority.” N. Air Cargo,

674 F.3d at 858; see also National Association, 602 F.2d at

432; Aid Ass’n for Lutherans, 321 F.3d at 1173; Sears, Roebuck

& Co. v. USPS, 844 F.3d 260, 265 (D.C. Cir. 2016). While a

court “can defer to the exercise of administrative discretion on

internal management matters, . . . [we] cannot abdicate [our]

responsibility to insure compliance with congressional

directives setting the limits on that discretion.” National

Association, 602 F.2d at 432. In evaluating decisions by the

Postal Service, “[t]he judicial role is to determine the extent of

the agency’s delegated authority and then determine whether

the agency has acted within that authority.” Id. Similarly, “[a]n

agency construction of a statute cannot survive judicial review

if [it] reflects an action that exceeds the agency’s authority.”

Aid Ass’n for Lutherans, 321 F.3d at 1174.

The Postal Service does not contest that ultra vires review

of its decisions is available. Br. for Appellee 17, 27. Rather, it

argues that the narrow scope of non-APA review precludes the

Association’s claims in this case because the statutory

provisions at issue are not “clear and mandatory” limitations

on the Postal Service’s authority enforceable through ultra

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vires review. Id. at 24-25 (citing Leedom v. Kyne, 358 U.S. 184,

188 (1958)), 30-31. The Postal Service contends that because

the statutory language states that “[i]t shall be the policy of the

Postal Service” to provide pay differentials and comparable

compensation, Congress intended these provisions to be

“simply [some] of many (often conflicting) ‘policy’ goals

noted in the statute.” 39 U.S.C. §§ 1003(a), 1004(a) (emphasis

added); Br. for Appellee 18, 30-31. The Postal Service suggests

that Congress’s use of the word “policy” indicates that these

provisions are merely “advisory goals” that cannot be enforced.

Br. for Appellee 31. We disagree because the Postal Service’s

position is directly at odds with our precedent.

Many years ago, in our decision in National Association,

we made it absolutely clear that the pay differential,

comparability requirements, and requirement to consult in the

Postal Act place clear limits on the agency’s authority and are

subject to non-APA review. 602 F.2d at 432, 435, 439, 440.

National Association remains good law and controls in this

case. See Aid Ass’n for Lutherans, 321 F.3d at 1173-74

(reaffirming central holdings in National Association).

The statutory provisions at issue in this case contain

explicit language stating what the Postal Service “shall” do. 39

U.S.C. §§ 101(c), 1003(a), 1004(a), 1004(b). That language is

undoubtably mandatory. See Kingdomware Techs., Inc. v.

United States, 579 U.S. 162, 172 (2016) (“‘shall’ is

‘mandatory’ and ‘normally creates an obligation impervious to

judicial discretion’” (quoting Lexecon Inc. v. Milberg Weiss

Bershad Hynes & Lerach, 523 U.S. 26, 35 (1998))). Congress’s

inclusion of a factfinding panel tasked with reviewing Postal

Service compensation policies to ensure they are “consistent

with the policies of this title, including sections 1003(a) and

1004(a)” is further evidence that Congress intended its stated

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directives to be observed by the Postal Service. 39 U.S.C.

§ 1004(f)(3)(A).

Congress’s use of the word “policy” in a statute does not

presumptively make a directive voluntary. Rather, while

Congress may choose to commit certain policy decisions to an

agency’s discretion, see Chevron, U.S.A., Inc. v. Nat. Res. Def.

Council, Inc., 467 U.S. 837, 865-66 (1984), here Congress

expressly removed certain policy choices from the Postal

Service by directing that “[i]t shall be the policy” of the agency

to ensure a differential and comparability, see 39 U.S.C.

§§ 1003(a), 1004(a). Congress effectively mandated certain

policies to be followed by the Postal Service, leaving no

discretion for the agency to do otherwise.

Finally, as noted above, the Postal Service’s

characterization of what constitutes a “clear and mandatory”

statutory provision that is reviewable for ultra vires acts is

patently at odds with our governing precedent. The Postal

Service is correct that a challenged action must “contravene[]

a clear and specific statutory mandate” to be susceptible to

ultra vires review. Nat’l Air Traffic Controllers Ass’n AFL-

CIO v. Fed. Serv. Impasses Panel, 437 F.3d 1256, 1264 (D.C.

Cir. 2006). In Leedom v. Kyne, the seminal case affirming the

availability of ultra vires review, the Court held that a “clear

and mandatory” statutory provision is judicially enforceable.

358 U.S. at 188. And the case law following Leedom confirms

that the “clear and mandatory” standard subsumes review of

claims involving “positive statutory commands,” Nat’l Air

Traffic Controllers Ass’n AFL-CIO, 437 F.3d at 1263,

questions of statutory interpretation, Aid Ass’n for Lutherans,

321 F.3d at 1173, and questions regarding whether an agency

decision was supported by a contemporaneous justification, N.

Air Cargo, 674 F.3d at 859-60; see also Sears, Roebuck & Co.,

844 F.3d at 265 (describing claims subject to non-APA

15

review). So long as a statutory provision plainly delineates the

outer limits of agency authority and Congress has not expressly

precluded judicial review, the provision may be susceptible to

review for ultra vires acts that clearly violate its terms. See

Chamber of Com., 74 F.3d at 1327-28.

In contrast, we have held that vague statutory provisions,

such as one that requires an agency to use “appropriate data” to

calculate a payment amount, are not sufficiently clear and

mandatory to warrant non-APA review. DCH Reg’l Med. Ctr.

v. Azar, 925 F.3d 503, 509-10 (D.C. Cir. 2019); see also Nyunt

v. Broad. Bd. of Governors, 589 F.3d 445, 449 (D.C. Cir. 2009)

(holding that a statutory provision requiring an agency to hire

“suitably qualified” U.S. citizens was not subject to ultra vires

review). Unlike the statutory requirements in this case, those

ambiguous provisions lack discernible standards by which a

court can identify a limit to agency authority.

The Postal Service also argues that judicial review of

Postal Service compensation decisions should be foreclosed

because Congress included a provision for factfinding in the

Act. In other words, the Postal Service suggests that the

factfinding dispute resolution process supplants the need for

judicial review. Br. for Appellee 27-29; see § 1004(f)–(g). The

conclusion urged by the Postal Service does not follow from its

starting premise. “The history of the Postal Act indicates that

Congress contemplated a very restricted judicial role in the

Postal Service’s compensation decisions” but “[i]t does not

present the kind of evidence necessary to foreclose review

altogether.” National Association, 602 F.2d at 432; see also Bd.

of Governors of Fed. Rsrv. Sys. v. MCorp Fin., Inc., 502 U.S.

32, 44 (1991) (“only upon a showing of ‘clear and convincing

evidence’ of a contrary legislative intent should the courts

restrict access to judicial review” (quoting Abbott Labs. v.

Gardner, 387 U.S. 136, 141 (1967))). Congress’s addition of

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the dispute resolution process in 1980, which it discussed as a

means to reduce litigation but not supplant judicial review,

does not alter that conclusion. See S. Rep. No. 96-856, at 4

(1980) (“It is the committee’s intention to develop a dispute

procedure which will make it more likely the parties can

resolve their differences through improved consultation, rather

than through the courts.”).

In sum, the Postal Act’s requirements that the Postal

Service “shall” consult with recognized organizations,

maintain “adequate and reasonable differentials in rates of pay”

between supervisors and clerks and carriers, and “achieve and

maintain compensation for its officers and employees

comparable to the rates and types of compensation paid in the

private sector” are clear and mandatory, enforceable provisions

subject to review for ultra vires acts. 39 U.S.C. §§ 101(c),

1003(a), 1004(a), (b).

C. Pay Differential Requirement per § 1004(a) and

Comparability Requirement per §§ 101(c), 1003(a)

We turn now to the Association’s claim that the Postal

Service violated the Act by failing to maintain a supervisory

pay differential or conduct a comparability analysis with

respect to the Field Pay Package. In considering the issues in

this case, we remain mindful that “[r]eviewability and the

scope of review are two separate questions.” National

Association, 602 F.2d at 432. “[T]he Postal Service has broad

discretion in setting compensation levels,” but this “does not

mean . . . that its decisions are entirely insulated from judicial

surveillance.” Id. As we have already explained, “[t]he judicial

role is to determine the extent of the agency’s delegated

authority and then determine whether the agency has acted

within that authority.” Id.

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1. The Postal Service Acted Ultra Vires by Failing to

Maintain “Some” Pay Differential

The Postal Act requires that the Postal Service “provide

adequate and reasonable differentials in rates of pay between

employees in the clerk and carrier grades in the line work force

and supervisory and other managerial personnel.” 39 U.S.C.

§ 1004(a). The Postal Service contends that it has satisfied the

pay differential requirement in section 1004(a) through its

Supervisory Differential Adjustment, which sets a five percent

differential between supervisors’ pay and the pay of clerks and

carriers. Br. for Appellee 32-33. However, the Association

argues that the method used to implement the differential is

flawed and, as a result, “thousands of EAS employees earn[]

less than the craft workers they supervise.” Compl. ¶ 37, J.A.

13.

As we determined in National Association, “[t]he Postal

Act does require some differential, and requires that that

differential be adequate and reasonable.” 602 F.2d at 435.

“[T]he differential guarantee” is not “a meaningless, empty

promise, one which the Postal Service can ignore at will.” Id.

Though a differential must be present, the Postal Service has

broad discretion to decide its size and how it is computed. Id.

at 433 (“Congress chose . . . to leave the precise differential to

the discretion of the agency.”). Accordingly, “a court can

compel the Postal Service to consider and fulfill the differential

requirement, but it cannot substitute its own judgment of what

is adequate and reasonable for that of the Postal Service.” Id.

at 435 (emphases added).

In alleging the Postal Service provided no differential in

pay for thousands of supervisory employees, the Association

thus states a claim that the Postal Service has exceeded its

statutory authority. It is the responsibility of the Postal Service

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to indicate that it has established “some differential.” Id. Here,

such a showing has not been made.

2. The Postal Service Acted Ultra Vires by Failing to

Consider Private Sector Pay and Achieve Comparability

Section 101(c) directs that, “[a]s an employer, the Postal

Service shall achieve and maintain compensation for its

officers and employees comparable to the rates and types of

compensation paid in the private sector of the economy.” 39

U.S.C. § 101(c). Again, in section 1003(a) Congress instructed

that “[i]t shall be the policy of the Postal Service to maintain

compensation and benefits for all officers and employees on a

standard of comparability to the compensation and benefits

paid for comparable levels of work in the private sector of the

economy.” Id. § 1003(a) (emphases added).

Appellant alleges the Postal Service did not study private

compensation or benefits before issuing its Field Pay Package.

Only after the final package was issued and the factfinding

panel was convened did the Postal Service inquire into private

pay rates. Even then, it only looked at pay rates for eight out of

a thousand positions included in the Field Pay Package. It did

not study total compensation or benefits, as specified in the

Act, for any positions. Compl. ¶ 23, J.A. 10. The result is

compensation the Association alleges is not “comparable” to

the private sector. The Postal Service counters that it met its

statutory requirements with the pay study of eight positions in

addition to its “internal expertise.” Br. for Appellee 33-34.

In National Association, we determined that the Act’s

“provisions require that the Postal Service set its compensation

levels by reference, inter alia, to the compensation paid” in the

private sector. 602 F.2d at 440. We described the comparable

pay provision as one of several “requirements” and said that

19

the Postal Service must, at minimum, “consider[] all the factors

as directed by the Postal Act,” id. at 440-41, and “arrive[] at a

good faith judgment,” id. at 435. Thus, to meet its statutory

obligation, the Postal Service must (1) consider private sector

compensation and benefit rates in setting compensation for

“all” employees, and (2) show a good faith determination that

compensation and benefits are comparable. In order to set

compensation “by reference . . . to” private compensation and

benefit rates, id. at 440, the Postal Service must know what

those rates are. In addition, the statute’s directive that the Postal

Service “maintain” comparable compensation entails some

showing that it is keeping pace with rising private sector rates.

Within these bounds, the Postal Service has broad

discretion to “achieve and maintain” comparability to the

private sector using the means it sees fit. See id. at 432

(recognizing that the Postal Service “must have the freedom

. . . to control costs” in an efficient manner). The statute does

not specify how similar the rates must be, the manner in which

rates are compared, or the method of study of private sector

rates. However, the Postal Service cannot choose to ignore

private sector compensation rates altogether, and it must

demonstrate in good faith that it has “achieve[d] and

maintain[ed]” comparability in line with Congress’s directives.

39 U.S.C. § 101(c).

Here, the Postal Service has not shown that it considered

private sector compensation and benefits nor explained how it

has achieved comparability in its rates. It has not provided a

justification for its conclusion that comparability has been

achieved, nor explained its resolution of factors built into the

comparability requirement like locality pay and market rate

increases in pay. Absent a reasoned explanation showing

otherwise, the Postal Service’s belated and limited look at pay

– and not total compensation or benefits – for only eight of

20

1,000 positions plainly fails to meet its statutory obligation to

achieve comparability in good faith “for all officers and

employees.” Id. § 1003(a).

D. Requirement to Consult per § 1004(b)

Finally, we consider the Association’s claim that the Postal

Service acted ultra vires by refusing to consult with the

Association about pay policies relating to Association

members who (1) are categorized as “Area” or “Headquarters”

employees or (2) are postmasters. “Section 1004(b) provides

that representatives of supervisory and other managerial

personnel [who are not subject to collective-bargaining

agreements under the Act] are entitled to participate directly in

the development of Postal Service compensation programs and

policies.” National Association, 602 F.2d at 436; 39 U.S.C.

§ 1004(b). In National Association, we found that, to meet this

requirement, “the Postal Service must discuss its proposed

compensation policies with the Association[] before those

policies go into effect, and . . . that such discussions must be

conducted in a meaningful, good faith manner.” 602 F.2d at

436. Ultimately, “if the Postal Service gives the Association[]

an opportunity to analyze and criticize proposed compensation

decisions and the materials on which those decisions are based,

and then supplies the Association[] with reasons for rejecting

any criticisms in advance of a final decision, then the Postal

Service has met its statutory obligations under section 1004(b)

and the judicial function is at an end.” Id. at 439. It follows that

refusal by the Postal Service to consult at all on compensation

for eligible employees constitutes a violation of the mandatory

consultation provision.

The Postal Service has refused to consult with the

Association regarding compensation for most workers it deems

“Area” or “Headquarters” employees, as opposed to Field

21

employees. Additionally, it has refused to consult with the

Association about postmasters’ compensation. The

Association contends the statute entitles it to represent these

employees in pay policy negotiations and, accordingly, that the

Postal Service has acted outside the scope of its authority by

refusing to do so. Finally, it claims that the Postal Service failed

to provide it with reasons for rejecting its recommendations.

1. The Postal Service Acted Ultra Vires by Refusing to

Consult Regarding Area and Headquarters Employees

Without Providing Any Explanation

The Postal Service recognizes the Association as an

organization representing Field EAS employees, but not most

Area and Headquarters employees. The reasoning provided by

the Postal Service for this position is sparse and self-serving.

The Postal Service simply asserts, with no evidence to support

its claim, that Area and Headquarters employees are not

“supervisory” or “other managerial employees” under the Act.

Br. for Appellee 10, 43-44; see 39 U.S.C. § 1004(b). According

to the Postal Service, these employees are “professional,

technical, administrative[,] and clerical employees” and,

therefore, not entitled to representation. Br. for Appellee 10.

No further explanation has been provided as to how the Postal

Service reached this conclusion or why certain EAS employees

qualify for representation and others do not. Compl. ¶ 63, J.A.

19. As a result, most Area and Headquarters EAS employees

have been denied representation by the Association in the pay

policy process.

The Association argues that the term “supervisory and

other managerial employees,” as used in the Act, is

synonymous with EAS employees. Corrected Br. for Appellant

41. It points out that the Area and Headquarters employees in

question are neither executives nor members of collective

22

bargaining units, but rather an in-between group that

undertakes the supervisory and managerial functions of

assuring that the policies set by the executives are carried out

by the craft employees. Id. The designations “Field,”

“Headquarters,” and “Area,” it notes, have been created by the

agency and do not appear in the Act. Id. at 43. The Association

thus alleges that the Postal Service has acted outside the scope

of its authority by refusing to consult on pay policy for Area

and Headquarters employees.

Under ultra vires review, a statutory construction by an

agency is “impermissible” if it is “utterly unreasonable.” Aid

Ass’n for Lutherans, 321 F.3d at 1174. “We ‘owe a measure of

deference to the agency’s own construction of its organic

statute, but the ultimate responsibility for determining the

bounds of administrative discretion is judicial.’” Id. at 1173

(quoting National Association, 602 F.2d at 432-33). Moreover,

an agency acts ultra vires when its decision is not supported by

“a contemporaneous justification by the agency itself,” but

only a “post hoc explanation [by] counsel.” N. Air Cargo, 674

F.3d at 860 (citing SEC v. Chenery, 318 U.S. 80 (1943)).

Here, we cannot assess whether the Postal Service’s claim

regarding “supervisory and other managerial employees” is

plausible because the Postal Service has failed to offer any

support for its position. “When an administrative agency sets

policy, it must provide a reasoned explanation for its action.

That is not a high bar, but it is an unwavering one.” Judulang

v. Holder, 565 U.S. 42, 45 (2011). In this case, we do not know

the criteria by which employees were categorized as

“professional, technical, administrative, [or] clerical

employees,” nor how their job functions differ from those the

Postal Service deems “supervisory and other managerial

employees.” We have no insight into the Postal Service’s

classification of any particular role. Moreover, the thin

23

reasoning the Postal Service has supplied was provided for the

first time in this litigation by counsel. Corrected Br. for

Appellant 47-50.

What is clear is that the Postal Service may not arbitrarily

exclude employees from representation they are entitled to

under the Act. See Leedom, 358 U.S. at 189 (finding an agency

action ultra vires that “deprived . . . employees of a ‘right’

assured to them by Congress”). The Postal Act plainly

obligates the agency to consult with respect to compensation

for supervisory and other managerial employees regardless of

their designation by the Postal Service as “Field,”

“Headquarters,” or “Area” employees. Moreover, section

1004(b) indicates that employees are either entitled to

representation by a union for the purposes of collective

bargaining under chapter 12 of the Act, or permitted

representation by a “program for consultation with recognized

organizations of supervisory and other managerial personnel.”

39 U.S.C. § 1004(b).

We reject the Postal Service’s position that it may deny

employees the representation rights granted by Congress by

simply declaring employees not to be supervisory or other

managerial personnel. It draws on a definitional provision in

the statute to argue that “members of the supervisors’

organization” are limited to employees “who are recognized

under an agreement between the Postal Service and the

supervisors’ organization as represented by such organization.”

Br. for Appellee 41 (quoting 39 U.S.C. § 1004(i)(2)). The

Postal Service proffers that if it does not agree to recognize

employees as “members,” then those employees are not

entitled to representation under the Act. Id. This is a specious

argument.

24

Indeed, the Association represented at oral argument that

no such “agreement between the Postal Service and the

supervisors’ organization” has been in effect since 1981. The

Postal Service did not dispute this claim. If the Postal Service’s

position regarding enforcement of the requirement to consult

were accepted, then all Association members would be without

consultation rights. Obviously, this would be an untenable

situation. Therefore, to support its claim that certain Area and

Headquarters employees do not qualify for representation by

the Association, the Postal Service must demonstrate that the

job functions of these employees are not supervisory or “other

managerial” in nature. 39 U.S.C. § 1004(b).

The Postal Service further claims that the Association has

not plausibly alleged a violation of section 1004(b) because “it

has not even attempted to allege facts demonstrating that it

represents any discrete set of EAS employees covered by the

[Area and Headquarters] Pay Package.” Br. for Appellee 44.

This claim is belied by the record. The Association has alleged

that it represents 7,500 employees throughout the country

whom the Postal Service categorizes as “Headquarters” or

“Area” employees, and claimed that such employees perform

supervisory and managerial responsibilities. Compl. ¶ 57, J.A.

18. It has also contended that the Postal Service “failed entirely

to consult” with the Association regarding compensation

policies for all Headquarters and Area employees, and that the

Postal Service refuses to recognize its representation of many

of these employees. Id. ¶¶ 59-63, J.A. 18-19.

For those few Area and Headquarters employees the Postal

Service recognizes as represented by the Association, the

Postal Service has exceeded its authority by failing to consult.

At oral argument, the Postal Service attempted to argue that

because it expressly excluded those employees from the

general Area and Headquarters Pay Package and did not issue

25

any 2016 to 2019 pay package for these employees, it did not

breach its obligation to consult. See also id. ¶¶ 61-62, J.A. 18-

19. This reeks of chicanery. The Postal Service may not evade

its statutory obligation to consult by excluding employees from

its pay packages and refusing to promulgate any pay policies

for them. See 39 U.S.C. § 1004(e)(1) (requiring the Postal

Service to propose a pay package for members of a supervisory

organization within forty-five days of reaching a collective

bargaining agreement for rank-and-file employees).

As things now stand, it appears that the Postal Service is

of the view that the majority of Area and Headquarters

employees are not entitled to representation by the Association

because they are not “supervisory” or “other managerial

employees.” Id. § 1004(b). However, the Postal Service’s

position reflects nothing more than an unsupported assertion

that is strongly contested by the Association. On remand, the

District Court must determine which of these employees have

been improperly excluded from the right to representation

granted in section 1004(b).

2. The Postal Service’s Refusal to Consult with the

Association Regarding Postmasters is Ultra Vires

Section 1004(b) sets the requirements for a group to

become a “recognized organization[]” that is “entitled to

participate directly” in the planning and development of

compensation policy for its members. 39 U.S.C. § 1004(b). In

order to become a recognized organization, a group must prove

that it is either (1) a supervisory organization that represents a

majority of supervisors; (2) an organization (other than an

organization representing supervisors) that represents at least

twenty percent of postmasters; or (3) a managerial organization

(other than an organization representing supervisors or

postmasters) that represents a substantial percentage of

26

managerial employees. Id. Once an organization has satisfied

any one of these three standards, “such organization . . . shall

be entitled to participate directly” in the development of

compensation policies “relating to supervisory and other

managerial employees.” Id.

The Postal Service contends this provision mandates that

separate, mutually exclusive organizations represent only

supervisory employees or postmasters or managerial

employees. Br. for Appellee 38-40. Because the Association

represents supervisory employees, the Postal Service insists, it

cannot also represent postmasters. The Postal Service relies on

this construction to justify its refusal to consult with the

Association regarding its 4,100 postmaster members. Because

there is currently no freestanding organization to represent

managerial employees, who are instead represented by the

Association and recognized organizations of postmasters, this

interpretation would deny all managerial employees

representation in the development of pay policies. Corrected

Br. for Appellant 47; Reply Br. for Appellant 4. Intervenor

United Postmasters has endorsed the Postal Service’s position.

See Br. for Intervenor Def.-Appellee 8.

Once again, the question before us is whether “the

disputed [agency interpretation] defies the plain language of a

statute or . . . the agency’s construction is utterly unreasonable

and thus impermissible.” Aid Ass’n for Lutherans, 321 F.3d at

1174. As we explain below, the Postal Service’s construction

requires adding text to the Act that Congress pointedly omitted.

We therefore hold that the Postal Service’s position is contrary

to the plain language of the Act.

The carefully worded language of section 1004(b) presents

different requirements for supervisory organizations than it

does for postmaster or managerial organizations. In requiring

27

that a supervisory organization represent “a majority of

supervisors,” Congress made clear that there can be only one

such organization authorized to consult on behalf of

supervisors. 39 U.S.C. § 1004(b). Multiple organizations

cannot each represent “a majority of supervisors,” only one

can. However, because any given postmasters’ organization

must only represent “at least 20 percent of postmasters,” as

many as five postmasters’ organizations could qualify under

the Act. Likewise, a managerial organization must only

represent “a substantial percentage of managerial employees,”

so many managerial organizations could qualify. Id. This

distinction sets the supervisory organization apart from the

start.

While postmasters’ organizations are expressly prohibited

from also representing supervisors, and managerial

organizations are prohibited from also representing supervisors

or postmasters, no such restriction is placed on supervisory

organizations. Supervisory organizations – beyond having to

show they represent a majority of supervisors – are not limited

in who else they can represent. This precisely crafted statute

thus presents a “nested” structure, in which Congress placed

deliberate restrictions on postmasters’ organizations (which

may not represent supervisors) and on managerial

organizations (which may not represent either supervisors or

postmasters), but conspicuously left the supervisory

organization free to represent either postmasters or managers

alongside supervisors. See Figure 1, infra. “[W]hen Congress

includes particular language in one section of a statute but

omits it in another . . . , it is generally presumed that Congress

acts intentionally and purposely in the disparate inclusion or

exclusion.” Collins v. Yellen, 141 S. Ct. 1761, 1782 (2021)

(quoting Barnhart v. Sigmon Coal Co., 534 U.S. 438, 452

(2002)). The Act does not say that a supervisory organization

cannot represent postmasters. Therefore, the Postal Service’s

28

construction of the statute would require us to write a

restriction into the text that is not there. We will not do that.

Alabama v. North Carolina, 560 U.S. 330, 352 (2010) (“We do

not—we cannot—add provisions to a federal statute.”).

Managers

Postmasters

Supervisors

Figure 1: Section 1004(b)’s Nested Structure

This precise enactment of statutory language on the part of

Congress was no accident. First, it reflects the history of the

Act and the representative organizations that were in existence

when the Act was first passed. When the consultation process

was established in 1970, the Association represented “a

majority of supervisors” and was thus the sole recognized

supervisory organization. See National Association, 602 F.2d

at 438 (discussing early consultation agreements between the

Association and Postal Service). The original statute made no

reference to postmasters or postmaster organizations, but

permitted “managerial organization[s] (other than an

organization representing supervisors) [that] represent[] a

substantial percentage of managerial employees.” Pub. L. No.

91-375, 84 Stat. 719, 731 (1970). At that time, organizations

29

representing postmasters qualified for consultation as

“managerial organization[s].” See National Association, 602

F.2d at 426 n.7 (describing the National Association of

Postmasters of the United States and the National League of

Postmasters of the United States as recognized organizations

under § 1004(b) before the statute mentioned postmasters’

organizations). Postmasters were thus understood to be a subset

of “supervisory and other managerial” employees. No

standalone organization for managerial employees existed at

the Act’s inception, nor does one exist today. Corrected Br. for

Appellant 47; Reply Br. for Appellant 4.

In 1980, Congress added to the Act the detailed

participation process and factfinding panel for resolving

disputes now codified in 39 U.S.C. § 1004(c)–(g). Pub. L. No.

96-326, 94 Stat. 1023 (1980). However, as originally enacted,

these provisions permitted only the supervisory organization to

engage in these processes. Id. “Managerial organizations,” then

consisting of organizations representing postmasters, could

consult but were excluded from protection of the participation

requirements and dispute resolution process. S. Rep. No. 108-

112, at 3 (2003). This “left postmasters with no avenue to

resolve disagreements with Postal Headquarters” and “limited

their ability to have meaningful discussions with Postal

Headquarters on issues relating to pay and benefits.” Id.

In 2003, Congress amended the Postal Act to allow

postmasters’ organizations access to the same participation and

dispute resolution procedures available to supervisory

organizations. See Postmasters’ Equity Act of 2003, Pub. L.

No. 108-86, 117 Stat. 1052. It defined “postmasters’

organization” in the Act, added the twenty percent threshold

for recognition, and afforded postmasters’ groups access to the

dispute resolution process. Id. at 1052-53. Congress left in

30

place the catchall category of “managerial organization,” even

though no such separate group existed.

Rather than institute a rigid separation, the 2003

amendment confirms that postmasters are managers:

“‘postmaster’ means an individual who is the manager in

charge of the operations of a post office, with or without the

assistance of subordinate managers or supervisors.” 39 U.S.C.

§ 1004(i)(3). Notably, when Congress amended the Act in

2003, it did not add a restriction that would prevent postmasters

who were already members of the Association from continuing

membership in that larger umbrella group. Rather, Congress

took care to preserve these employees’ access to membership

in the general supervisory organization, while ensuring that

postmasters’ organizations could additionally avail themselves

of the dispute resolution measures.

Importantly, Congress safeguarded the ability of

managerial personnel – who had no organization of their own

– to seek representation via either an existing recognized

supervisory organization or postmasters’ organization. The

resulting structure gives Postal Service managers and

postmasters the choice to throw in their lot with the general

supervisory organization, which represents the interests of all

supervisory and managerial employees including postmasters,

or, if they prefer, to join their own, category-specific

negotiating body.

It is noteworthy that the Postal Service’s position that it

“cannot lawfully recognize [the Association] as a

representative of postmasters in addition to supervisors,”

Compl. ¶ 79, J.A. 23, is belied by its own practice. At oral

argument, counsel for the Postal Service acknowledged that the

agency has consulted with the Association (and Intervenor

United Postmasters and Managers of America) on

31

compensation policies for managerial employees and

continues to do so today. The parenthetical restrictions in the

statute cannot both be read to permit these organizations to

represent managerial employees but to deny supervisory

organizations the ability to represent postmasters. The Postal

Service’s proposed interpretation that these groups must be

mutually exclusive presents an “utterly unreasonable”

interpretation of the statute that contravenes Congress’s careful

wording and would deny thousands of managerial employees

access to the protections of the Act as Congress intended. Aid

Ass’n for Lutherans, 321 F.3d at 1174.

In sum, it is undisputed that the Association qualifies as a

recognized organization under the Postal Act because it

represents “a majority of supervisors.” 39 U.S.C. § 1004(b);

Br. for Appellee 7-8. Having met this threshold requirement, it

is therefore “entitled to participate directly in the planning and

development of pay policies . . . relating to supervisory and

other managerial employees.” 39 U.S.C. § 1004(b). Its

postmaster members, described in the Act as “manager[s] . . .

with or without the assistance of subordinate managers or

supervisors,” id. § 1004(i)(3), plainly fall into the broad

category of “supervisory and other managerial employees” the

Association may represent, id. § 1004(b). It follows that section

1004(b) requires the Postal Service to consult with the

Association regarding compensation for these employees.

3. The Postal Service Must Give Reasons for Rejecting the

Association’s Recommendations

Finally, the Association alleges the Postal Service did not

supply reasons for rejecting its recommendations on the Field

Pay Package before issuing a final decision. Compl. ¶¶ 53-54,

J.A. 17. The plain text of section 1004(b) and our precedent

mandate that the Postal Service must “suppl[y] the

32

Association[] with reasons for rejecting any criticisms in

advance of a final decision.” National Association, 602 F.2d at

439. The Postal Service exceeded the scope of its statutory

authority by issuing the Field Pay Package without first

explaining why it was rejecting the Association’s

recommendations.

III. CONCLUSION

For the reasons set forth above, we hold that the

Association plausibly alleges that the Postal Service exceeded

the scope of its delegated authority on multiple counts.

Accordingly, the judgment of the District Court is reversed and

the case is remanded for further proceedings consistent with

this opinion.