[00:00:01] Speaker 01:
The United States Court of Appeals for the Federal Circuit is now open and in session.

[00:00:06] Speaker 01:
God save the United States and this honorable court.

[00:00:11] Speaker 04:
Our first case for argument today is 2019-2350, Moorecraft versus United States.

[00:00:20] Speaker 04:
Mr. Trombetta, please proceed.

[00:00:24] Speaker 01:
Thank you.

[00:00:26] Speaker 01:
Good morning, justices.

[00:00:31] Speaker 01:
The I have a little bit of a speech impediment, so it slows me down a little bit.

[00:00:49] Speaker 01:
I think with respect to the raises that

[00:00:57] Speaker 01:
that Ms.

[00:00:58] Speaker 01:
Moorcraft and Ms.

[00:00:59] Speaker 01:
Melendez are seeking in addition to other people.

[00:01:08] Speaker 01:
They were going into, you know, they were going into getting annual raises and they kept being told

[00:01:27] Speaker 01:
No, no, no, no.

[00:01:31] Speaker 01:
And other places in the location, like Boston, and Providence is Providence, they didn't jive.

[00:01:47] Speaker 01:
And I understand that maybe perhaps the amounts may not jive.

[00:01:57] Speaker 01:
But what happened, though, is there was an offset.

[00:02:02] Speaker 01:
And this is after the proceeding below.

[00:02:14] Speaker 01:
What happened was they went ahead, and I think I know that they increased the prices

[00:02:26] Speaker 01:
the compensation by about $6,000 to $9,000 in that one year.

[00:02:33] Speaker 01:
They didn't do anything as to the other years.

[00:02:38] Speaker 01:
So the question becomes, well, why not?

[00:02:44] Speaker 01:
And what we found based on the limited information that we have is that

[00:02:55] Speaker 01:
First of all, we thought, well, we believe that the people in the office for Providence are being dishonest.

[00:03:11] Speaker 01:
And secondly... Excuse me, Counsel.

[00:03:14] Speaker 02:
Yes?

[00:03:16] Speaker 02:
When you say they're being dishonest, are you saying that there was no

[00:03:21] Speaker 02:
mechanism followed with respect to that pay raise that involved OPM at all?

[00:03:30] Speaker 01:
Well, I'd have to say no because they, well, I'd like to say that what they did do is they kept saying there's no need to do it.

[00:03:46] Speaker 01:
We're not obligated to do it.

[00:03:49] Speaker 01:
And, you know, my clients were constantly, you know, going saying, we want an increase.

[00:04:01] Speaker 01:
We do not understand why we're not getting an increase.

[00:04:05] Speaker 00:
And then... Counselor, this is Judge Raina.

[00:04:12] Speaker 00:
So, do you dispute that neither OPM or the VA secretary

[00:04:17] Speaker 00:
that they formally identified a recruitment or a retention problem with respect to the nurses in the Hyannis community?

[00:04:27] Speaker 01:
I guess I would say yes.

[00:04:33] Speaker 01:
And the reason I say yes is because there was, I think, a shortage of, I think, three out of five

[00:04:46] Speaker 01:
Yeah, three out of five.

[00:04:51] Speaker 01:
And the people there, even though you... Three out of five what?

[00:04:58] Speaker 00:
Excuse me?

[00:04:59] Speaker 00:
Three out of five what?

[00:05:03] Speaker 01:
Oh, of the... I'm sorry.

[00:05:12] Speaker 01:
It's the VA...

[00:05:14] Speaker 01:
Is it this LPMs?

[00:05:19] Speaker 01:
So they would have five and they're supposed to have, I mean, they had two and they were supposed to have two more.

[00:05:29] Speaker 01:
I understand that they did get another one.

[00:05:34] Speaker 00:
But the question I asked you is whether OPM or the VA secretary, whether they formally, have they identified a recruitment problem in the area?

[00:05:45] Speaker 01:
Well, they should have because if, you know, you know, they have done correct.

[00:05:56] Speaker 01:
But, but that's wrong because I think the people who were in the, um, if you want to say, um, in on the case.

[00:06:12] Speaker 01:
You know, you have to say that they were under the gun.

[00:06:18] Speaker 01:
I mean, they were not getting paid what they deserve to be paid.

[00:06:24] Speaker 02:
And that's why... Well, Counsel, this is Judge O'Malley.

[00:06:29] Speaker 02:
You know, when you say what they deserve to be paid, I certainly can't disagree that there's probably no nurse in this country or LPN that's getting what they deserve.

[00:06:40] Speaker 02:
But the question is what

[00:06:42] Speaker 02:
What is the government obligated to pay them?

[00:06:46] Speaker 02:
And there are very specific requirements that have to precede any pay increase, correct?

[00:07:01] Speaker 01:
Well, I would have to say, you know, respectfully no to that.

[00:07:09] Speaker 01:
And the reason is because

[00:07:12] Speaker 01:
right north of it is Boston.

[00:07:15] Speaker 01:
And Boston gives raises every single year.

[00:07:20] Speaker 01:
And, you know, why, you know, there'll be some raises for Providence, but why are they getting the benefit of this review?

[00:07:35] Speaker 01:
And the question, the answer is because Providence was not doing any review.

[00:07:42] Speaker 01:
And if you look at, you know, Providence's, what do you want to say?

[00:07:49] Speaker 01:
If you want to look at their performance during the 10 years, there's nothing.

[00:07:57] Speaker 01:
There's nothing in the file which will say, hey, it should be up, it should be down.

[00:08:06] Speaker 01:
It's nothing.

[00:08:07] Speaker 02:
Is there anything, Council, this is Judge O'Malley again, is there anything in the special rates statute or in Title 38 Chapter 74 that actually requires VA facilities to conduct local market surveys?

[00:08:28] Speaker 01:
Well, I think yes, because I think everybody else does it.

[00:08:34] Speaker 02:
Well, can you give me a sentence or a phrase that's in either one of those provisions?

[00:08:43] Speaker 01:
Your Honor, I don't have that in front of me.

[00:08:50] Speaker 01:
But what I'm trying to say is, let's just say that the

[00:09:03] Speaker 01:
You know, what the VA is doing is wrong, okay?

[00:09:09] Speaker 01:
Even the high end of the VA, it's wrong, okay?

[00:09:16] Speaker 01:
So what are we supposed to do?

[00:09:18] Speaker 01:
I mean, it seems to me that the only thing you can do is somehow raise the rates.

[00:09:27] Speaker 01:
Otherwise, there's nothing you can do.

[00:09:31] Speaker 01:
I think that's clear at least for Providence because, you know, I understand you're in, well, I don't want to really say, oh, you're in Washington.

[00:09:47] Speaker 01:
But I don't understand how these people in Providence could get away with this by essentially lying because there is no, excuse me,

[00:10:02] Speaker 01:
there is no basis for them to go ahead and say, oh, yeah, we did this, we did that, when you didn't do anything.

[00:10:11] Speaker 01:
And you can look right north and you can say, hey, look at Boston.

[00:10:15] Speaker 01:
They're doing it all the time.

[00:10:18] Speaker 01:
So the question is, it doesn't seem fair to me.

[00:10:22] Speaker 01:
That's how I see it.

[00:10:26] Speaker 01:
And I have to find the

[00:10:31] Speaker 01:
whatever it is, you know, the handbook or whatever it is, which shows that that's the way it goes.

[00:10:40] Speaker 01:
And I just don't think that, you know, that doing it Providence's way is even close to being that.

[00:10:55] Speaker 01:
And how do we explain, how do we explain Boston?

[00:11:00] Speaker 01:
in other places.

[00:11:03] Speaker 01:
So that's why we're just looking for it to be even.

[00:11:10] Speaker 01:
And we don't think it has been.

[00:11:13] Speaker 01:
And as evidence of that, right after there was a decision in this case, I think a few months later, they raised

[00:11:30] Speaker 01:
the case or the compensation, but I think it was $6,000 to $9,000.

[00:11:37] Speaker 01:
So I don't get that either.

[00:11:42] Speaker 01:
Like, why didn't they do it beforehand?

[00:11:45] Speaker 01:
Because they wanted to get rid of this case.

[00:11:48] Speaker 01:
And somebody probably made a mistake with the case by allowing this to go forward.

[00:11:58] Speaker 01:
So that's

[00:11:59] Speaker 01:
That's how I see it, Your Honor.

[00:12:08] Speaker 04:
Okay.

[00:12:08] Speaker 04:
Thank you, counsel.

[00:12:10] Speaker 04:
We should hear now from the government, Ms.

[00:12:12] Speaker 04:
Soares.

[00:12:14] Speaker 03:
Thank you, Your Honor.

[00:12:15] Speaker 03:
May it please the court.

[00:12:17] Speaker 03:
The trial court's judgment should be affirmed in all respects.

[00:12:20] Speaker 03:
First, the trial court correctly dismissed the appellant's amended complaint.

[00:12:24] Speaker 03:
for failure to state a claim for unpaid wages under the special rate statute.

[00:12:29] Speaker 03:
Second, the trial court correctly dismissed appellants' amended complaint for failure to state a claim for overtime under the Fair Labor Standards Act.

[00:12:38] Speaker 03:
Third, the trial court correctly held that it did not possess jurisdiction to hear appellants' fraud and misrepresentation claims.

[00:12:46] Speaker 03:
And finally, appellants have waived their Back Pay Act claim.

[00:12:50] Speaker 03:
Beginning with appellants' special rate claims,

[00:12:54] Speaker 03:
The trial court correctly held that appellants failed to establish that they were entitled to a special rate.

[00:12:59] Speaker 03:
Relying on the statute and regulations, the trial court correctly concluded that appellants failed to show that either OPM or the VA found that there was a retention or recruitment issue at the Hyannis facility, warranting a special rate.

[00:13:24] Speaker 02:
when they made the new raise, when they did the new raise, did they follow all of these procedures that you're saying were required?

[00:13:31] Speaker 03:
Yes, Your Honor.

[00:13:33] Speaker 03:
And just to make it clear, this statute was designed to help the Veterans Administration effectuate its mission of providing healthcare to veterans.

[00:13:48] Speaker 03:
And it essentially provides what the VA handbook calls a management tool so that local facilities can, if facing retention or recruitment problems, meet those problems by increasing the rate of the special rate.

[00:14:10] Speaker 03:
The special rate statute wasn't enacted to basically serve as a benefit for workers.

[00:14:18] Speaker 03:
Rather, as I said, it was enacted to ensure that the VA could handle any significant retention and recruitment problems related to its mission.

[00:14:30] Speaker 03:
Pointing to the regulations, no one factor or combination of factors requires the government to establish a special rate, and that's set forth expressly in the regulations at 5 CFR 530.306C.

[00:14:47] Speaker 03:
And the government can terminate a special rate after establishing it if it determines that it's no longer needed, Your Honor, and that's set forth expressly at 5 CFR 530.307E.

[00:15:00] Speaker 03:
Appellants contend that somehow there's been some wrongdoing on the part of the government because upwards of 20 months after perhaps, I believe,

[00:15:12] Speaker 03:
their 2018 congressional letter, congressional request to Congressman Keating, the VA has determined now, 20 months later, that there is a need to address recruitment and retention problems.

[00:15:28] Speaker 03:
There's no basis for a conclusion that somehow the government has not followed the requirements set forth in the regulations to look at local

[00:15:38] Speaker 03:
look at the situation prevailing within the Providence VA Medical Center.

[00:15:46] Speaker 03:
And that is, Your Honor, the parent VA Medical Center that covers a number of duty stations, four duty stations, including Hyannis.

[00:16:00] Speaker 03:
So what is prevailing within the Providence VA Medical Center as the parent entities

[00:16:06] Speaker 03:
is what drives whether or not there is a need for a special rate.

[00:16:10] Speaker 03:
In 2018, there was no need, and that is what was reported to the VA in response to Congressional delegations.

[00:16:17] Speaker 03:
Fast forward 20 months.

[00:16:19] Speaker 03:
Presently, there was an issue as of the summer of 2019, which ultimately led to the special rate that was established in November 2019, and that was based on

[00:16:35] Speaker 03:
concerns because there were requests or threats that LPNs, for example, were moving on to other positions.

[00:16:47] Speaker 03:
And based upon those concerns with potential loss of LPNs, the Providence VA Medical Center determined that it was necessary to establish a special rate.

[00:17:01] Speaker 03:
Appellants continue to rely upon the fact that Boston

[00:17:06] Speaker 03:
has instituted a special rate, but it's undisputed, Your Honor, that the Hyannis facility is one of four community-based outpatient clinics that's discussed in appellants' amended class action complaint on page 14 of the supplemental appendix.

[00:17:30] Speaker 03:
Their appellants recognize that the Providence VA Medical Center is the parent facility

[00:17:35] Speaker 03:
and that there are only four duty stations under that VA Medical Center, including Hyannis.

[00:17:42] Speaker 03:
Thus, the Providence VA Medical Center and the Boston VA Medical Center are not equivalent for purposes of establishing pay.

[00:17:52] Speaker 03:
The regulations that were promulgated under the statute provide further support.

[00:17:58] Speaker 03:
As defined by the Reg, pay schedules are determined by an employee's official work site.

[00:18:04] Speaker 03:
which is also referred to in the definitions and the regulation as an official duty station.

[00:18:09] Speaker 03:
And that's in 5 CFR 530.302, the definitions.

[00:18:15] Speaker 03:
The regulations also provide that whether an employee is covered by a special rate is based on the geographic location of the official work site.

[00:18:25] Speaker 03:
And that's at 5 CFR 530.303, Set B. Another regulation, 5 CFR 531.605,

[00:18:34] Speaker 03:
covers determining an employee's official work site.

[00:18:38] Speaker 03:
And that, again, is determined by the location of the employee's position of record, where the employee regularly performs his or her duties.

[00:18:46] Speaker 03:
And this official work site.

[00:18:48] Speaker 02:
So, Council, I guess I'm trying, I mean, I guess I'm now understanding why there was some belief that these nurses were being lied to, or technicians were being lied to.

[00:19:02] Speaker 02:
So you say that all of this has to be done, but in this particular race that actually went through it, it wasn't done.

[00:19:09] Speaker 03:
No, no, no, Your Honor.

[00:19:10] Speaker 03:
Of course, no, I am saying consideration of the local facility and its needs was done, Your Honor.

[00:19:18] Speaker 03:
That is the basis for the VA to establish a special rate.

[00:19:23] Speaker 03:
The VA Medical Center determined that

[00:19:26] Speaker 03:
They were facing a potential loss of LPN.

[00:19:32] Speaker 03:
So that was done.

[00:19:33] Speaker 03:
That was the basis for the determination in November 2019 to establish a special rate.

[00:19:40] Speaker 03:
My citation to the regs only points out that this is a local

[00:19:44] Speaker 03:
facility level determination, it doesn't have anything to do with other facilities.

[00:19:48] Speaker 03:
For example, the Boston labor market is not equivalent to the Providence Medical Center labor market.

[00:19:56] Speaker 03:
There are different needs, and the regulation requires that determinations be made at the facility level, i.e.

[00:20:04] Speaker 03:
Hyannis.

[00:20:05] Speaker 03:
and the other duty stations within the Providence Parent VA Medical Center, not another VA medical parent entity such as the Boston VA Medical Center.

[00:20:16] Speaker 03:
So everything was done according to what the statutory and regulatory scheme requires, which is that the facility consider whether it's losing LPNs, whether it faces potential loss of LPNs because they are hearing threats that they will quit.

[00:20:32] Speaker 03:
And that is what happened in November 2019.

[00:20:36] Speaker 00:
So what is it that prompts an annual survey if not the threats of the employees to quit?

[00:20:44] Speaker 00:
It just seems to me that maybe this was something like it would just drag on and drag on.

[00:20:49] Speaker 00:
And the employees are held hostage to an agency that's not reacting when maybe it should.

[00:20:59] Speaker 03:
Your Honor, both the statute and the regulations leave it absolutely to the discretion of the government to determine whether or not a special rate is required.

[00:21:10] Speaker 00:
It is based upon... This is not a statute that... But that discretion has to have some sort of reasonable basis to it.

[00:21:18] Speaker 00:
It just can't be at will.

[00:21:21] Speaker 03:
No, of course, Your Honor.

[00:21:22] Speaker 00:
There's a whole statutory scheme here.

[00:21:24] Speaker 00:
There's a statutory framework that I understand is designed to

[00:21:29] Speaker 00:
add institutional strength to the VA employment practices.

[00:21:36] Speaker 00:
But on the other hand, the employees fit within this statutory scheme and deserve a raise when certain things happen.

[00:21:46] Speaker 00:
But if those things don't happen, then they never get a raise.

[00:21:49] Speaker 03:
Well, Your Honor, the statute and the regulations do not provide that.

[00:21:54] Speaker 03:
that employees are entitled to any kind of raise.

[00:22:00] Speaker 03:
This is about me... No, I understand that.

[00:22:03] Speaker 00:
I understand that.

[00:22:04] Speaker 00:
And I understand that there has to be this annual survey.

[00:22:08] Speaker 00:
But I guess I'm asking you, what is it that kicks off the annual survey?

[00:22:13] Speaker 03:
No, Your Honor.

[00:22:13] Speaker 03:
There is no requirement that there be an annual survey.

[00:22:16] Speaker 03:
And that goes to the claim that OPM or the VA

[00:22:23] Speaker 00:
were required to do local labor market surveys, neither the statute or the... There doesn't have to be an annual survey, but it is at the discretion, correct, to have an annual survey.

[00:22:36] Speaker 03:
Yes, the regulation provides that OPM may consider the following factors, among which is the nature of it, but it's not required to do so.

[00:22:44] Speaker 03:
In fact, Your Honor, the regulations make it clear the OPM, the agency are not required, they're not required to

[00:22:52] Speaker 00:
depend or they're not required to consider any... I understand that they're not required to conduct an annual survey.

[00:23:04] Speaker 00:
I understand that.

[00:23:06] Speaker 00:
I'm asking you, what is it that has to happen in order for, at the discretion of the agency, to conduct the annual survey?

[00:23:13] Speaker 00:
What is it that kicks that off?

[00:23:16] Speaker 03:
Well, in this situation, it's that the facility, the local level facility, Hyannis, for example, one of the duty stations under the Providence VA Medical Center would have to hear employees, for example, threatening to quit.

[00:23:34] Speaker 03:
That is a key driver.

[00:23:36] Speaker 00:
Is that happening here?

[00:23:38] Speaker 03:
Well, that was in 2019 while this appeal was pending.

[00:23:43] Speaker 03:
The VA determined that

[00:23:45] Speaker 03:
they were, the VA facility in Providence was hearing threats from LPNs that they were going to move on to other positions if they did not receive increased pay.

[00:23:59] Speaker 03:
So based on those, and that's all, and that is what the VA has to consider, whether they're facing significant recruitment and retention issues.

[00:24:09] Speaker 03:
And even then, the regulation makes it clear that even then,

[00:24:13] Speaker 03:
nothing requires the government to institute a special rate.

[00:24:18] Speaker 00:
How do you judge the difference, the degree or the magnitude of difference between the Boston locale and the Hyannis locale if you don't conduct a survey?

[00:24:32] Speaker 03:
Well, what the driver is

[00:24:36] Speaker 03:
is whether your facility is facing problems with retaining or recruiting your LPNs in your facility.

[00:24:45] Speaker 03:
There is no need under this statute or the regulations to look elsewhere beyond the local facility, which in this case is Hyannis.

[00:24:53] Speaker 04:
Council.

[00:24:55] Speaker 04:
This is Judge Moore.

[00:24:56] Speaker 04:
These employees are not held hostage, right?

[00:25:01] Speaker 04:
If they are dissatisfied and believe that in the same market,

[00:25:06] Speaker 04:
money by going elsewhere, they could leave, couldn't they?

[00:25:10] Speaker 04:
Yes, Your Honor, absolutely.

[00:25:12] Speaker 04:
And if they did leave in mass exodus because they really did have better opportunities elsewhere for more money, then that would certainly be one of those indicators that would trigger the need to re-evaluate the salary structure.

[00:25:27] Speaker 04:
Is that correct?

[00:25:28] Speaker 04:
That's absolutely correct, Your Honor.

[00:25:29] Speaker 04:
Okay, stop.

[00:25:31] Speaker 04:
So in the absence

[00:25:33] Speaker 04:
of any evidence that that's actually occurring, why in the world would the government just sort of gratuitously raise salaries?

[00:25:42] Speaker 04:
I mean, isn't salary really market and somewhat geographically driven?

[00:25:48] Speaker 04:
So, you know, wouldn't the government, in the absence of anyone leaving, in the absence of being able to find people, why would you just gratuitously raise salaries?

[00:26:01] Speaker 03:
One would not, the government would not.

[00:26:05] Speaker 03:
It is, if it's with the current staffing able to meet its mission, there is absolutely no requirement that they increase the special rate.

[00:26:14] Speaker 03:
It's not a benefit for the workers.

[00:26:16] Speaker 03:
It's not an entitlement.

[00:26:17] Speaker 04:
So maybe, I mean, we don't know why, but maybe they have to pay more in Boston because it's a more expensive place to live than Hyannis and they wouldn't be able to retain people there.

[00:26:26] Speaker 03:
Is that possibly true?

[00:26:28] Speaker 03:
Of course, Your Honor, and of course it has many more hospitals than Providence.

[00:26:33] Speaker 03:
I mean, there are world-class hospitals, for example, in Boston that are both private and the public sector.

[00:26:41] Speaker 03:
So it is an absolutely different labor market.

[00:26:44] Speaker 03:
And Your Honor is absolutely correct.

[00:26:47] Speaker 03:
The government isn't required to make a determination to increase the special rate if there is no need in that local-level Hyannis facility to do so.

[00:26:57] Speaker 03:
LPNs have options.

[00:26:59] Speaker 03:
If they want to go to Boston, they can do so.

[00:27:01] Speaker 03:
If they want to go to another facility in another city, they can do so.

[00:27:09] Speaker 03:
But there's no entitlement, there's no obligation that under this particular statute and its regulations, that the government simply listen to complaints by workers.

[00:27:23] Speaker 03:
Okay.

[00:27:23] Speaker 03:
Thank you, counsel.

[00:27:24] Speaker 04:
This case is taken under submission.

[00:27:27] Speaker 04:
Thank you, Your Honor.