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No. 96, September Term, 1995 Comptroller of the Treasury v. Helen Nelson et al. [Whether, Under The Applicable Statutory And Regulatory Scheme, A State Agency Is Entitled To Deny Its Employees Reclassifications Solely Because Of Present Fiscal Difficulties]

IN THE COURT OF APPEALS OF MARYLAND No. 96 September Term, 1995 ________________________________________

COMPTROLLER OF THE TREASURY

v.

HELEN NELSON et al. _______________________________________ Eldridge Rodowsky Chasanow Karwacki Bell Raker McAuliffe, John F. (Retired, specially assigned), JJ. ________________________________________ Opinion by Eldridge, J. ________________________________________ Filed: June 6, 1997

The issue in this case is whether, under the applicable statutory and regulatory scheme, a state agency is entitled to deny its employees reclassifications solely because of present fiscal difficulties. I. Vicki George, Margaret Glidden and Helen Nelson were

previously employed as Revenue Examiners III at the Motor Fuel Tax Division of the Office of the Comptroller of the Treasury. 1991, During

all three employees met the qualifications for Revenue

Specialist I, a position with a higher rate of pay and greater responsibilities than required for Revenue Examiner III. Upon

meeting these qualifications, the Division Director submitted to the Comptroller's personnel office applications for reclassification and back pay on behalf of the three employees. The applica-

tions were filed on April 4, 1991, July 18, 1991, and March 4, 1992, respectively. Although each application was initially marked with a

statement of approval by the personnel office, no action was taken on any of the applications.1 In response to a September 1990

When the employees' applications were initially submitted, they were stamped with the following statement: "We hereby certify that funds are available in our current budget to fund the recommended personnel transaction." According to the Personnel Director of the Office of the Comptroller, however, this stamp is (continued...)

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-2directive issued by Governor Schaefer, the Comptroller had frozen all reclassification requests as of November 1990.2 The Comptroller's decision to freeze reclassification

requests was consistent with two policies promulgated by the Comptroller, both of which are applicable to the employees in this case. The first, "Personnel Policy # 8," provides in pertinent

part as follows: "G. Availability of Funds The classification of a position may not be changed unless funds are available in the department's and/or agency's current budget to

(...continued) merely a "blanket statement" or a "formality," and does not accurately reflect the current amount of funds in the agency's budget. In a memorandum dated September 4, 1990, Governor Schaefer directed all cabinet secretaries and heads of independent agencies "to reduce General Fund appropriations by $150 million to cover a current year shortfall caused by faltering revenues and unexpected cost increases." In pertinent part, the Governor's letter stated as follows: "Effective today I am directing all State agencies to institute a hiring freeze on all current vacancies of full-time, part-time, and contractual positions. . . . I am further directing that all agencies begin a critical review of State construction projects, loan programs, and equipment purchases. "To achieve the reduction in General Funds appropriation, I am assigning each agency head a General Fund reduction target and requesting a costcontainment plan be developed to achieve the targeted amount."
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-3cover the cost of such a change."3 Under a second policy of the Comptroller's Office, the effective date of reclassifications and, therefore, salary

upgrades, was deferred until the next pay period following approval of the reclassification requests.4 Accordingly, it was unnecessary

under this policy to award back pay to the three employees for the period before their reclassifications had been approved. The three employees did not learn of the freeze on reclassifications until April 1993, when employees George and Glidden met with the Deputy Comptroller of the Treasury to discuss the status of their applications.5
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At that time, the Deputy Comptroller

The Office of the Comptroller distinguishes between "Personnel Policy # 7" reclassifications, which involve different steps or "grades" within a given position title, and "Personnel Policy # 8" reclassifications, which involve a different position title and upgrade, and greater responsibilities. The employees in this case were seeking Personnel Policy # 8 reclassifications. Applications for Personnel Policy # 7 reclassifications were typically processed first while Personnel Policy # 8 applications were processed "in the discretion of the management." Thus, if the Office lacked the funds to approve the Personnel Policy # 8 reclassifications, it would refuse to do so. From 1981 through 1993, the Office of the Comptroller adhered to this policy. On October 26, 1994, however, the Comptroller amended the policy to make reclassifications effective immediately after the date on which the new duties and responsibilities were assigned to the employee. There was some disagreement at the administrative level and in the courts below as to when the employees first learned that their reclassification requests were being denied. The Comptroller previously argued that the employees did not timely file their grievance applications pursuant to Maryland Code (1994, 1996 Supp.),

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