Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Community Action Agency of Franklin County, Inc.
DATE: February 6, 1997
Docket No. A-95-168
Decision No. 1609
DECISION
Community Action Agency of Franklin County, Inc. (CAAFC)
appealed a June 29, 1995 determination by the
Administration for Children and Families (ACF) denying
refunding for CAAFC's Head Start Program. This action
was taken pursuant to 45 C.F.R. § 1303.15(c), which
provides that refunding may be denied for "any or all of
the reasons . . . set forth in [45 C.F.R.] § 1303.14(b)."
ACF indicated that its denial of refunding was "based on
the fact that CAAFC . . . violated program regulations
and the terms of . . . [a previously negotiated]
settlement agreement with . . . ACF by terminating . . .
[three employees] without Policy Council approval. In
doing so, CAAFC . . . violated both the terms and
conditions of its 1993-94 refunding as well as federal
regulations and policies." ACF Denial of Refunding
Letter (ACF Denial) at 1.
The record in this case consists of the parties' briefs
and evidentiary submissions, the transcript of a hearing
held in March and May 1996 and the transcript of the
parties' final arguments, taken on October 26, 1996. 1/
Based on our review of that record, we find that a
denial of refunding is warranted pursuant to 45 C.F.R.
§§ 1303.14(b)(4) and (9).
Our decision that denial of refunding is warranted in
this case is based on our conclusion that the Policy
Council's decision to disapprove CAAFC's terminations of
three employees was reasonable. Under the applicable
standard of review, we are not to substitute our judgment
for that of the Policy Council. CAAFC is bound by the
applicable regulations and the terms and conditions of
its grant to abide by a reasonable decision of the Policy
Council, even if CAAFC's Board of Directors honestly
believed that it was the wrong decision to make. We make
no findings about the truth of CAAFC's allegations that
there were program deficiencies for which the terminated
employees were responsible, but hold only that the Policy
Council could have reasonably decided that the
appropriate action to take was to reinstate the employees
for a probationary period. We therefore reject CAAFC's
argument that by upholding the Policy Council's decision
we are condoning any behavior of the terminated employees
which might have resulted in regulatory violations.
I. BACKGROUND
A. Overview of the applicable law and regulations
The Head Start program is designed to deliver
comprehensive health, educational, nutritional, social
and other services to economically disadvantaged children
and their families. See 42 U.S.C. § 9831 and 45 C.F.R.
§ 1304.1-3. ACF provides funds to grantees to serve as
Head Start agencies within designated communities. See
generally 42 U.S.C. § 9836. The Head Start Act requires
that a Head Start agency utilize --
organization, management, and administration
which will assure, so far as reasonably
possible, that all program activities are
conducted in a manner consistent with the
purposes of this subchapter. . . . Each such
agency shall establish or adopt rules to carry
out this section, which shall include rules to
assure full staff accountability in matters
governed by law, regulations, or agency
policy . . . .
42 U.S.C. § 9839(a); see also 45 C.F.R. § 1301.30.
Head Start regulations list nine grounds for which a
grantee agency may be terminated or have its refunding
denied. As applicable here, refunding may be denied when
a grantee has failed to meet the performance standards
for operation of its Head Start program; or failed to
abide by any other terms and conditions of its grant or
applicable laws or regulations. 45 C.F.R.
§§ 1303.14(b)(4) and (9), made applicable by 45 C.F.R.
§ 1303.15(c).
Under Department-wide grants administration regulations
in Part 74, only a "material failure" to comply with
grant terms justifies termination of a grant award.
Part 74 regulations apply to Head Start grantees the
extent that they are consistent. 2/ Given the general
statutory preference for continuing funding to existing
Head Start grantees (42 U.S.C. § 9836(c)(1)) and, where
appropriate, permitting a grantee the opportunity to
correct deficiencies (42 U.S.C. § 9836a(d)(1)(B)), it is
consistent to read 45 C.F.R. § 1303.14(b), which lists
the bases for termination or denial of refunding actions,
as referring to material failures to comply. Certainly,
ACF should not seek to end a grantee's Head Start
participation on a mere technicality. 3/
The Head Start Act and corresponding regulations provide
that a grantee denied refunding shall have an
"opportunity for a full and fair hearing" on whether
refunding should be denied. See 42 U.S.C. § 9841(a)(3)
and 45 C.F.R. § 1303.15. Procedures for the conduct of a
hearing are set forth at 45 C.F.R. § 1303.16. The Board
is authorized to act on behalf of the Secretary to
provide this opportunity for hearing. 57 Fed.
Reg. 59,260 (December 14, 1992). The Board's procedural
regulations at 45 C.F.R. Part 16 apply to these
proceedings insofar as they are not inconsistent with
Part 1303. 45 C.F.R. § 1303.15(b)(1).
Parent participation is a key element of Head Start. The
basic parent participation policy, with which each Head
Start agency must comply as a term of its grant of
financial assistance, is contained in the Head Start
Policy Manual, Instruction I-31-Section B2, The Parents
(OCD Transmittal Notice 70.2, dated August 10, 1970).
See 45 C.F.R. § 1304.5-2(a). This Policy Manual appears
as Appendix (App.) B to 45 C.F.R. Part 1304, and is
commonly referred to by ACF and Head Start grantees
simply as "70.2." It explains the rationale for parent
involvement in the Head Start program as follows:
Head Start believes that the gains made by the child
in Head Start must be understood and built upon by
the family and the community. To achieve this goal,
Head Start provides for the involvement of the
child's parents and other members of the family in
the experiences he receives in the child development
center. . . .
* * *
It is clear that the success of Head Start . . .
demands the fullest involvement of the parents,
parental-substitutes, and families of children
enrolled in its program. . . .
* * *
Project Head Start must continue to discover new
ways for parents to become deeply involved in
decision-making about the program and in the
development of activities that they deem helpful and
important in meeting their particular needs and
conditions. . . .
This sharing in decisions for the future is one of
the primary aims of parent participation and
involvement in Project Head Start.
Appendix B also identifies "four major kinds of parent
participation in local Head Start programs," including
"participation in the process of making decisions about
the nature and operation of the program." The Appendix
requires that "[e]very corporate board operating a Head
Start program must have a Policy Committee or Council as
defined by HHS." The Policy Council must consist of
"[a]t least 50% parents of Head Start children presently
enrolled in that grantee's program plus representatives
of the community." 45 C.F.R. Part 1304, App. B, Chart A.
Appendix B assigns specific roles to the Board of
Directors, Executive Director, Head Start Policy Council
and Head Start Director in the management and operation
of the grantee agency's Head Start program. Chart C of
Appendix B describes the responsibility of the Policy
Council with respect to 17 "major management functions."
The Policy Council must approve or disapprove actions
taken to carry out 12 of the 17 functions listed. This
entails approval "before the decision is finalized or
action taken." Included in this list of actions
requiring Policy Council approval are the hiring and
termination of all Head Start employees. In addition,
the Policy Council must "have been consulted in the
decision making process prior to the point of seeking
approval." Its role with respect to the remaining
functions ranges from "general responsibility" to "may be
consulted." These represent "the minimum functions and
degrees of responsibility . . . ," although the Policy
Council "may negotiate for . . . a greater share of
responsibility if all parties agree."
B. Factual Background
Due to a disagreement between CAAFC's Board of Directors
and its 1992-1993 Policy Council, CAAFC submitted its
refunding application for the 1993-1994 program year to
ACF without having received Policy Council approval for
that application. In September 1993, based on the
absence of an approved application, ACF appointed an
interim grantee to operate CAAFC's Head Start program.
ACF formally denied CAAFC's 1993-1994 refunding
application on October 13, 1993. CAAFC appealed that
action to this Board, and ACF awarded CAAFC supplemental
funding to operate its program during the course of the
appeal. Following the transfer of operations from the
interim grantee back to CAAFC, several Head Start
employees wrote to ACF complaining that they had not been
rehired and that CAAFC's decision not to rehire them had
not been approved by the Policy Council. CAAFC informed
ACF that it was recalling only those employees it
considered essential and would defer action on other
personnel until it had a functioning policy council. ACF
asserted that this action constituted a violation
of 70.2.
On June 10, 1994, ACF and CAAFC reached a settlement
agreement resolving the refunding dispute. See
Attachment (Att.) 3 to CAAFC's Notice of Appeal. Under
the terms of that agreement, CAAFC agreed to reinstate
the three employees at issue (CAAFC's Head Start
Director, Nutrition Coordinator and Social Services
Coordinator) and provide them with back pay, which was
supplied to CAAFC through a supplemental funding award
from ACF. CAAFC also agreed that it would comply with
70.2 regarding the potential termination of any of the
reinstated employees. Specifically noted were the
provisions of 70.2 that, if CAAFC subsequently decided to
take any personnel actions against the employees, the
Policy Council must have been consulted in the decision
making process prior to the point of seeking approval
and, if the Policy Council did not approve, the proposed
personnel action could not be taken until agreement was
reached between the disagreeing groups or individuals.
CAAFC also agreed to provide 70.2 training to its
Executive Director, Board of Directors, Policy Council
and Head Start Director, and to have the Head Start
Director report directly to CAAFC's Child and Family
Services Director instead of CAAFC's Executive Director.
6 of Settlement Agreement. In the settlement
agreement, ACF recognized that the employees'
reinstatement represented a continuation of their
employment with CAAFC so that reinstatement could take
place without Policy Council approval; CAAFC had the
authority to supervise its employees; and any action
taken by the employees, before or after their
reinstatement, could be used to establish cause for their
termination. 2 of Settlement Agreement. ACF withdrew
its denial of refunding for 1993-1994 (and approved
CAAFC's refunding application for that period), and CAAFC
withdrew its appeal of that denial.
On June 13, 1994, CAAFC reinstated the three employees
(effective June 27th) and paid them back wages. However,
CAAFC did not place these individuals in their former
jobs. Rather, it informed them, in the letter offering
reinstatement, that it intended to institute termination
proceedings. See ACF Exs. 13-15. These employees were
suspended on September 30, 1994 and terminated on
October 14, 1994. CAAFC did present the question of
these terminations to its Policy Council for approval on
August 30, 1994. On September 1, 1994, the Policy
Council voted 9-4 against termination.
On June 29, 1995, after attempting to get the Policy
Council and CAAFC to settle their differences, and after
reviewing the Policy Council's reasons for refusing to
approve the terminations, ACF again denied refunding to
CAAFC, leading to this appeal. ACF gave two bases for
its decision. First, ACF asserted that CAAFC's
termination of the employees without Policy Council
approval violated the program performance standards for
parent involvement embodied in 70.2. Second, ACF alleged
that CAAFC failed to abide by the terms of the settlement
agreement, which, according to ACF, constituted a failure
to abide by the terms and conditions of the subsequent
grant award. Specifically, ACF asserted that CAAFC
breached the agreement because: CAAFC did not comply
with Head Start personnel policies in implementing the
employees' suspension and termination in fall 1994; did
not obtain Policy Council approval of the terminations;
did not reinstate the employees; and did not provide the
required training in 70.2.
II. ANALYSIS
A. The Standard of Review
It is undisputed that the Head Start performance
standards require Policy Council approval of a decision
to hire and fire a Head Start Director and staff of the
grantee agency. 45 C.F.R. Part 1304, App. B, Chart C,
III.(b) and (c). It is also undisputed that CAAFC did
not obtain Policy Council approval of its termination
actions. However, ACF is not necessarily required to
deny refunding based on the absence of Policy Council
approval. In North Shore Community Action Programs, Inc.
v. Shalala, Civil Action No. 93-1834 (D.D.C. October 10,
1993), a U.S. district court held that HHS must examine
whether a Policy Council's decision was arbitrary,
capricious, or illegal, before denying refunding based on
the lack of Policy Council approval.
North Shore involved the question whether the statutory
right to a hearing on the denial of a refunding
application applied where the Policy Council did not
approve the grantee's application. ACF had determined
that, without Policy Council approval, there was no valid
refunding application to deny, and, thus, no right to a
hearing. The court held that there was a refunding
application pending before HHS, even though the
application was missing a required element, so that the
statutory right to a hearing applied. As one basis for
its decision, the court noted that to accept HHS's
position that the grantee was not entitled to a hearing
on the denial of refunding "would essentially provide a
Policy Council with absolute and unreviewable discretion
on refunding." North Shore at 4. The court further
stated:
The HHS interpretation provides no review mechanism
for Policy Council actions -- even if those actions
were plainly illegal or suffered from constitutional
infirmities. For example, without the prescribed
hearing, a Policy Council could refuse to approve an
application because the grantee employed minorities
or because it refused to provide the Policy Council
with kickbacks. [Footnote omitted.] The Court
believes that the hearing requirement contained at
section 9841(a)(3) was provided in the statute
precisely to address these sorts of issues.
Id. at 5. The court also noted that an administrative
law judge had held in another case that if the Policy
Council's actions "were unreasonable, arbitrary, or
improperly motivated, HHS could continue assistance to a
grantee despite the lack of approval by the Council."
Id. at n.7.
ACF asserted that North Shore required the Board to
examine the Policy Council's actions in light of the
standard established by the Supreme Court in Citizens to
Preserve Overton Park v. Volpe, 401 U.S. 402 (1971).
There the Court stated that in order to determine whether
a decision was arbitrary, capricious, or illegal, one
must examine whether the decision was based on a
consideration of the relevant factors and whether there
has been a clear error of judgment. Id. at 416. ACF
noted that this standard of review was "quite narrow."
ACF Post-Hearing Brief (PHBr.) at 5. Thus, according to
ACF, this Board should limit its review to a
determination of whether the Policy Council's decision
rested upon a consideration of the relevant factors and
did not represent a clear error of judgment. Id. The
Board used the Overton Park standard to review the Policy
Council decision in Lonoke Economic Development Agency,
DAB No. 1568 (1996).
CAAFC countered that application of the Overton Park
standard of review was dependent upon the expertise of
the "agency" whose decision was under review. Hearing
Transcript 4/ (Tr.) at 1228-29. CAAFC maintained that
it terminated the three individuals because they were
"unsupervisable" and "out of control," and had committed
violations of federal and state laws and regulations
which endangered the children in the program. 5/
Tr. 1225. CAAFC argued that assessment of these
shortcomings required expertise in the areas of health,
child abuse and labor law, which the Policy Council did
not have; thus, CAAFC contended that Overton Park is
inapplicable. Tr. 1230-31.
CAAFC also argued that the fact that, under New York Law,
boards of directors of non-profit corporations can be
personally liable for corporate acts also rendered the
Overton Park analysis inappropriate. In conjunction with
this position, CAAFC cited Weiss v. Opportunities for
Cortland County, Inc., 337 N.Y.S. 2d 409 (1972), for the
proposition that, due to its responsibility to the
corporation, the Board of Directors of a Head Start
corporation could terminate a Head Start Director without
Policy Council approval. Tr. 1237. CAAFC argued that
this higher duty of its Board of Directors should be
taken into account in determining the standard of review
to be applied to the Policy Council's decision. CAAFC
also argued that the members of its Board of Directors
were more qualified than those of the Policy Council to
make judgments about the issues of employment, health,
and child abuse law involved in this particular case.
CAAFC therefore contended that, rather than looking to
Overton Park for guidance, the Board should apply a
common law definition of the term "arbitrary" in
reviewing the Policy Council's actions. Thus, CAAFC
urged that the Policy Council's actions be measured
against those which would be taken by a reasonable person
with the appropriate expertise in the same situation.
Tr. 1231-32.
At the oral argument, ACF insisted that the Overton Park
standard applied, but also contended that even if the
Board were to apply the common law standard advanced by
CAAFC, CAAFC would still not prevail under the
circumstances present in this case.
In considering what standard the Board should use in
reviewing the Policy Council's decision, we note that the
North Shore court was concerned with the possibility that
a Policy Council might decide to disapprove a grantee's
proposed action for reasons which are unconstitutional or
otherwise illegal. This is apparent from the court's
reference to the "unreasonable, arbitrary, or improperly
motivated" standard employed by courts in reviewing
administrative agency decisions. We agree with ACF that
this language echoes that of the Supreme Court in Overton
Park, in which the Court stated that the question was
whether the challenged decision was arbitrary,
capricious, or illegal, a comparable standard. Moreover,
we find that the Overton Park analysis, in which one must
examine whether the decision was based on a consideration
of the relevant factors and whether there has been a
clear error of judgment, is appropriate here because of
the Head Start Act's strong emphasis on parent
involvement.
The Head Start Act and implementing regulations are rife
with support for the proposition that the decision to
approve the hiring or firing of staff is properly the
domain of the Policy Council. As previously discussed,
parents are expected to participate in the management of
the Head Start program. The Head Start Act provides, in
pertinent part, that in order to be designated a Head
Start agency, an agency must --
(1) establish effective procedures by which parents
and area residents concerned will be enabled to
directly participate in decisions that influence the
character of programs affecting their interest; (2)
provide for their regular participation in the
implementation of such programs . . . .
42 U.S.C. § 9837.
The objectives of the performance standards regulations
implementing the Head Start Act's parent involvement
policy found in 45 C.F.R. Part 1304, Subpart E, include:
(c) Provide the following kinds of opportunities
for parent participation:
(1) Direct involvement in decision making in
program planning and operation.
45 C.F.R. § 1304.5-1(c)(1). In order to promote these
parent involvement objectives, Head Start grantees are
required to have a parent involvement plan that
provides --
a system for the regular provision of information to
members of Policy Groups. The purpose of such
communication is to enable the Policy Group to make
informed decisions in a timely and effective
manner . . . .
45 C.F.R. § 1304.5-4(b). The guidelines in 70.2
explicitly recognize that Head Start Directors and staff,
who have received training in early childhood development
and in program management, may have difficulty sharing
power with Head Start parent groups:
It may not be easy for Head Start directors and
professional staff to share responsibility when
decisions must be made. Even when they are
committed to involving parents, the Head Start staff
must take care to avoid dominating meetings by force
of their greater training and experience in the
process of decisionmaking.
45 C.F.R. Part 1304, App. B, B.1. Among the program
management decisions requiring Policy Council approval
are all staff hiring and firing decisions. Id. at
Chart C.
Thus, we find that the Head Start Act, regulations, and
guidelines contemplate that Head Start parents, acting
through the Policy Council, will share with the grantee
the responsibility for making decisions about the nature
and operation of the program. Shared decisionmaking is a
cornerstone of the Head Start program. CAAFC's argument
that members of its Board of Directors are more qualified
than the Policy Council about the issues would have us
dismiss the Policy Council as a competent decisionmaker
simply because its members are less likely to be
professionals. This would be inconsistent with the
guidelines, which warn against overriding opinions of the
Policy Council on that basis. The Head Start Act places
a high value on the involvement of parents in
decisionmaking because they have a stake in the success
of the program and are in a position to evaluate its
daily operation. The Head Start Act also gave CAAFC the
responsibility to provide information on a regular basis
to the Policy Council so as to enable it to make
decisions in an informed fashion, despite any lack of
independent expertise in making termination decisions.
We therefore reject CAAFC's contention that the Policy
Council's alleged lack of expertise makes application of
the Overton Park standard inappropriate.
In addition, we disagree that the New York appellate
court's analysis in the Weiss decision indicates that the
Overton Park standard is inappropriately applied to the
Policy Council decision at issue. In that case, the
court held that since New York corporate law provided for
individual liability of the non-profit Head Start
grantee's Board of Directors in fulfilling their duties,
those Directors were authorized to terminate a Head Start
Director despite the Head Start regulation requiring
Policy Council approval of the termination.
CAAFC implied that the Board should give the Policy
Council's decision less weight than the Board of
Directors' because Policy Council members were not
individually liable for judgments against CAAFC that
might have resulted from the terminated employees'
actions. However, this line of reasoning is based on
several assumptions which we reject. First, CAAFC
assumes that Policy Council members, over half of whom
must by regulation be parents of Head Start enrollees,
would be less concerned than Board Members about placing
Head Start participants at risk simply because they could
not be sued. Second, accepting this rationale would also
require assuming that CAAFC continuously accepted, in bad
faith, a grant with the provision requiring Policy
Council approval of terminations. This provision has
been a term and condition of CAAFC's grants all the years
it has been a Head Start grantee. Moreover, since it
appears that the Weiss case did not involve a functioning
Policy Council and that the court was unaware that the
grantee voluntarily entered into a grant accepting Policy
Council participation, the court's analysis in that case
does not persuade us that New York State law requires
that the Board of Directors' decision be given greater
weight than the Policy Council's. Consequently, we
conclude that the Head Start Act's requirement for
parent participation is best implemented by applying the
Overton Park standard to the Policy Council's actions.
Accordingly, we next examine the record in this case to
determine whether the Policy Council's decision was based
on a consideration of the relevant factors and whether
there has been a clear error of judgment. Overton Park
at 416.
B. Whether the Policy Council Considered the Relevant
Factors
In order to determine whether the Policy Council
considered the relevant factors in reaching its decision,
we first outline the information available to the Policy
Council when it made its decision. Then we discuss the
reasons given by the Policy Council for its decision, as
evidenced by documents and testimony in the record before
us. In reviewing these reasons, we examine CAAFC's
arguments that the Policy Council's decision should be
rejected because some of the reasons are not relevant to
a proper decision. Finally, we explain why our findings
and conclusions about the information available, the
reasons given, and the effect of any allegedly irrelevant
reasons support a conclusion that the Policy Council's
decision was based on a consideration of relevant
factors.
1. The Information Available to the Policy Council
The employees in question -- CAAFC's Head Start Director,
Nutrition Coordinator and Social Services Coordinator --
were effectively first terminated in October 1993, when
they were not recalled after CAAFC regained the Head
Start grant from the interim grantee. The minutes of the
Policy Council show that, during the time between CAAFC's
resumption of the grant in October 1993 and its
settlement agreement with ACF in June 1994, the Policy
Council repeatedly sought information on why the
employees had not been returned to the job. CAAFC
Miscellaneous Exhibit (Misc. Ex.) 2 at 85 (January 20,
1994 Policy Council Minutes); and 97 (March 17, 1994
Policy Council Minutes) and 118 (June 7, 1994 Policy
Council Minutes). However, CAAFC did not respond
substantively to those inquiries until it brought the
proposed terminations before the Policy Council for
approval on August 30, 1994.
In early 1994, CAAFC hired Jack Eisenberg, a Rochester,
New York labor law attorney with a Head Start background,
to investigate the three employees' performance.
Tr. 568-70. He presented his findings to the Personnel
Committee of the CAAFC Board of Directors on June 30,
1994. Id. at 502. As a result of his findings, the
Board voted to seek approval of the Policy Council to
terminate the employees. From around May 31 until
August 30, 1994, CAAFC attempted several times to set up
a joint meeting with the Board and the Policy Council to
allow Mr. Eisenberg to present his findings to the Policy
Council.
On August 30, 1994, Mr. Eisenberg appeared before the
Policy Council. Several members of CAAFC's Board of
Directors, its Executive Director, and the Head Start
Director also attended the Policy Council meeting and
answered questions.
CAAFC complained that the Policy Council showed a
predisposition to ignore or an unwillingness to listen to
Mr. Eisenberg because the Policy Council limited his
presentation to two hours. However, testimony from
Policy Council members (Tr. 233 [Mary Duryea]; Tr. 27-28
[Barbara Silman]) confirmed that this time limit was a
usual practice of the Policy Council, not an exceptional
limit adopted to shortchange Mr. Eisenberg. Furthermore,
Mr. Eisenberg testified that he was able to complete his
presentation. Tr. 554. Mr. Eisenberg testified that he
had with him at the Policy Council meeting copies of
documents supporting his Report, but that he distributed
only a copy of an outline of his presentation. He also
testified that no Policy Council member asked to see any
of the supporting documents during or after his
presentation.
Transcripts of the tapes of the August 30 meeting were
made by both the Policy Council and CAAFC and submitted
into the record. See ACF Ex. 24 and CAAFC Notice of
Appeal, Att. 11. At that meeting Mr. Eisenberg
chronicled a long list of problems in the program which,
in his view, justified termination of the three
employees. Mr. Eisenberg's Report divided his findings
into two categories, program deficiencies and 70.2
violations. The program deficiencies involved Health,
Social Services and Nutrition.
The Report noted that the centrifuge used for the
program's blood-testing was antiquated to the point of
being ineffective and was unsanitary (i.e., caked with
dried blood). Moreover, during the preparation for
transition to the interim grantee, Head Start employees
found a plastic bleach bottle in an unlocked cabinet in
the office of the Head Start Health and Disabilities
Coordinator containing used blood-testing equipment such
as syringes (including at least one needle), glass
capillary tubes, lancets, rubber gloves and general blood
waste. While this was a second floor office, he found
that it was otherwise accessible to the children. The
Head Start Social Services Coordinator was responsible
for drawing blood samples from children at the start of
the school year and, apparently, had stored this waste
there. Further, the equipment used for children's
hearing tests was antiquated and inadequate.
The Report noted that, in the Social Services component,
Family Needs Assessments were incomplete or poorly
completed. Employees charged with collecting and
compiling the information contained in those assessments
did not receive adequate instruction or training. The
CAAFC Head Start policy on child abuse directly
contravened applicable New York State procedures.
Finally, eligibility standards for applicants from one
community in CAAFC's service area as well as the Head
Start program's overall record keeping in terms of
contacts with participating families were called into
question.
The Report cited the Head Start food service operation
due to unsanitary working conditions, both in employees'
personal hygiene and the condition of equipment and food
preparation surfaces. Records pertaining to food storage
were not properly maintained, nor were the dietary needs
of the general student population, or those children with
special needs, adequately addressed.
The Report also found deficiencies pertaining to 70.2
that included the Head Start Director's failure to obtain
approval of the CAAFC Executive Director in establishing
and implementing personnel policies; her failure to meet
with the CAAFC Board of Directors to plan the Head Start
budget; her failure to get the Executive Director's
approval on the budget and her submission of budgets to
the CAAFC Board almost simultaneous with their due date
for submission to ACF in spite, in at least one instance,
of a request to submit it to the Board six weeks prior to
its due date; her decision to change the composition of
the Policy Council without Board of Director or Executive
Director involvement or approval; her rejection of a
Board of Directors' nominee for community representative
to the Policy Council; her assertion to a prospective
Policy Council member that cross-representation between
Policy Council and Board of Directors was not permitted
while apparently knowing otherwise; and her hiring of a
Nutrition Coordinator without the Executive Director's
prior knowledge, input or approval.
Following Mr. Eisenberg's presentation, the Policy
Council went into executive session and decided that,
prior to voting on the proposed terminations, the Policy
Council should hear a response to Mr. Eisenberg's
findings from the three employees. It scheduled a
meeting on September 1 for that purpose.
Although some Board members were present at the August 30
meeting, none were specifically invited to the
September 1 meeting, and none attended, except for Ms.
Duryea (the Policy Council representative on the Board)
and Mr. McDonald (the Board representative on the Policy
Council). The CAAFC Executive Director testified that
she knew of the meeting because it was held in CAAFC's
home office, but that she neither attended nor informed
the Board Members because it was her policy to attend
Policy Council meetings only when invited. Tr. 1078-80.
At the September 1, 1994 Policy Council meeting, the
terminated employees submitted a jointly signed written
rebuttal (with Attachments) to Mr. Eisenberg's Report.
6/ See ACF Ex. 26.
In an Attachment to the Joint Rebuttal, the Nutrition
Coordinator asserted that gloves for kitchen employees
were not required by law in certain instances (although
she did not say that this covered all of Mr. Eisenberg's
concerns). She conceded that hairnets were not always
worn, but noted that efforts were made to wear hairnets a
majority of the time and that ("[a]ccording to . . .
Code") hands were always washed. She admitted that food
inventories were kept but not dated. She asserted that
the children's special dietary needs were met by making
any problems known to Teachers Assistants and,
ultimately, parents. She contended that the program's
kitchens had passed a Health Inspector's Report in 1992-
93 with only cosmetic corrections recommended.
Consequently, she asserted that none of the deficiencies
raised by Mr. Eisenberg were imminent health hazards.
ACF Ex. 26 at 8.
The Joint Rebuttal asserted that Hematocrit testing was
not done by Head Start personnel in 1993, but rather by
the doctor conducting physicals. The Joint Rebuttal
contested the allegation that the centrifuge was
encrusted with blood and argued that at worst, "it was
most likely just not cleaned" following its most recent
use. Alternatively, it suggested that CAAFC personnel
who had moved the equipment might have suffered an injury
causing them to bleed and contaminate it. The Joint
Rebuttal denied that the equipment was antiquated, noting
that only in recent years had newer equipment become
available and affordable. The Joint Rebuttal
characterized CAAFC's allegations about blood waste as
sensationalized and asserted that the waste was
inaccessible to the children. Further, the Joint
rebuttal noted that "had the Health Coordinator been
allowed to work as requested," the container would have
been disposed of properly. In terms of the hearing
testing equipment, the Joint Rebuttal stated that a
tympanometer was purchased in 1993 and the audiometer was
calibrated annually. ACF Ex 26. at 2-3.
The Joint Rebuttal also touched on the following areas:
o 70.2 Violations -- The Joint Rebuttal indicated that
the Head Start Director had merely made a "minor
addition" to the personnel policies in 1992. Id. at 1.
o Budget/Grant Application -- The Joint Rebuttal pointed
out that CAAFC's Comptroller had participated in the
budget process, intimating therefore that the Executive
Director should have been aware of the various stages of
the budget process. Moreover, the Joint Rebuttal
asserted that grant applications were always on the
Executive Director's desk at least ten days prior to
Board meetings and implied that blame for any delay in
presenting documents to the Board of Directors rested
with the Executive Director. Id.
o Policy Council -- The Joint Rebuttal asserted that the
Head Start Director followed 70.2 for selection of
community representatives until 1993 when the Board of
Directors advised her otherwise in order "to have more
control over the Policy Council." Id. at 1.
o Hiring -- The Joint Rebuttal contended that personnel
decisions were made according to 70.2 and that the
Executive Director was invited to participate and kept
informed as necessary. However, the Joint Report noted
that, according to 70.2, the Executive Director did "not
have to approve" hiring or firing of staff, except for
the Head Start Director. Id. at 2.
Following the presentation of the Joint Report, the
Policy Council went into executive session to vote on
whether to approve CAAFC's proposed terminations of the
employees. The record shows that the Policy Council
voted 9-4 against termination. On September 12, 1994,
the Policy Council informed CAAFC of its decision.
On October 14, 1994, Mr. Eisenberg submitted another
report to the CAAFC Board of Directors which analyzed the
employees' responses and concluded that they were
insufficient to overcome the findings of deficient
performance. See CAAFC Att. 4 to Notice of Appeal.
Thereafter, the Board voted to go forward with the
terminations despite the Policy Council's disapproval.
CAAFC contended that the Policy Council's deliberations
were tainted by lobbying from the affected employees,
especially the former Head Start Director, in the form of
contacts with Policy Council members outside of the
Policy Council meetings. However, in denying CAAFC's
request to issue a subpoena to the Policy Council
Chairperson to seek evidence on this subject, we
concluded that contacts between the employees and Policy
Council members outside of Policy Council meetings were
to be expected in a community of the size served by CAAFC
and were not inappropriate. Ruling on Motion for
Subpoena at 3 (June 18, 1996). Consequently, we find
that any information obtained as a result of "lobbying"
outside of formal meetings could reasonably be considered
by the Policy Council members in reaching their decision.
Moreover, since many of the 1993-94 Policy Council
members either had been Policy Council Members previously
or had had children in the Head Start program during the
time that the terminated employees served, those Policy
Council members would have had independent knowledge and
opinions of the performance of those employees which
could reasonably be brought to bear in reaching their
decisions on how to vote. Finally, the Policy Council
members had and could properly draw upon their own
experiences as professionals (where applicable), parents,
Head Start participants, employers, and employees in
analyzing all the arguments for and against termination
of the three employees.
2. The Reasons Given by the Policy Council Members
In its post-hearing brief, ACF listed the reasons given
by Policy Council members for the Policy Council's
refusal to approve the employees' termination as follows:
a. There were no written personnel evaluations notifying
the employees of their deficient performances.
b. The termination actions were not in compliance with
CAAFC's personnel policies.
c. The deficiencies were not reported in previous
audits.
d. The employees offered reasonable explanations for the
deficiencies.
e. The deficiencies were discovered after the employees
had been laid off.
f. CAAFC was acting in violation of the settlement
agreement.
g. The deficiencies did not warrant termination.
ACF PHBr. at 8-14. We follow this list as a convenient
way of organizing our review of the record on this issue.
a. There were no written personnel evaluations
notifying the employees of their deficient
performances.
The principal reason cited by Policy Council witnesses
for the results of the vote was that none of the three
employees had been given written personnel evaluations
notifying them that their performances were so deficient
as to warrant termination, nor had they been given an
opportunity to correct the alleged deficiencies and
improve their performance. According to one witness, the
Head Start Director had never received an evaluation,
while the other two employees had received only positive
evaluations. Tr. 249, 279-280.
Policy Council Members Silman, Duryea, Pamela Latreille,
and Preston Miller all cited this factor as key to the
Policy Council's decision. 7/ The transcript of the
September 1, 1994 Policy Council meeting also reveals the
Council's concern that there was no prior paper trail of
problems with these employees. See generally ACF Ex. R7.
In addition, although Mr. Eisenberg reported that there
was a history of problems between the Head Start Director
and CAAFC's Executive Director and Board, he did not
provide copies of correspondence from the Head Start
Director's personnel files or any other supporting
documentation to the Policy Council.
The Policy Council members viewed the lack of written
negative evaluations as significant for several reasons.
Some concluded that it was unfair to terminate an
employee without having previously notified the employee
that his or her performance was deficient. Without
written negative evaluations, there was no evidence
contradicting the employees' statements before the Policy
Council that they had had no such notice. In fact, these
employees had been congratulated, with the rest of the
Head Start staff, by the Executive Director for their
good work during the previous year. ACF Ex. 6. In
addition, the Policy Council had had the opportunity to
observe at least the Head Start Director and the Social
Services Coordinator in their interactions with the
Policy Council and therefore had an independent basis on
which to judge those employees' performance. Finally,
the lack of prior notice of deficiencies certainly led
some Policy Council members to give less credence to
allegations of deficiencies that were not described until
after CAAFC had already announced its intent to terminate
these employees.
CAAFC attempted to denigrate this factor as a reasonable
basis for deciding to retain the employees by suggesting
that the deficiencies placed Head Start children's and
staff's safety at risk. According to CAAFC, these
deficiencies were so serious that the employees did not
deserve a second chance. Tr. 1241-42. In addition,
CAAFC alleged that it deemed these employees
unsupervisable, so that it was unreasonable to think that
they would respond favorably to attempts to correct their
performance. However, this assumes that the Policy
Council believed that all the alleged deficiencies were
factual, were the fault of the employees, and could not
be corrected or ameliorated. As we discuss below, none
of these assumptions are correct. Thus, we reject
CAAFC's allegation that the Policy Council preferred
fairness to employees over safety considerations. Given
that there are no such statements in the record by any
Policy Council member and that many of the Policy Council
members had children in the program whose safety could
have been jeopardized, we find that allegation to be
unfounded.
CAAFC also noted that one Policy Council member (Ms.
Duryea) stated a belief that employees could not be fired
without a written evaluation. Tr. 251. CAAFC contended
that neither state law nor CAAFC's personnel policies
required this, so that a decision based on this reason
was arbitrary. Id. at 1242. We lack sufficient
information to resolve the question of New York state
law, but, as we discuss below, we find that it was not
unreasonable to read CAAFC's personnel policies as Ms.
Duryea did. Moreover, her statement was not
representative of the Policy Council's reasoning, which
was based more broadly on a sense that terminating these
employees without notice of and an opportunity to correct
their deficiencies would be unfair. We therefore
conclude that this statement does not invalidate the
overall Policy Council rationale for disapproval of the
terminations.
Consequently, we find the Policy Council's reliance on
this factor to be reasonable and consistent with the
Head Start regulations' preference for continuing
employment of qualified personnel. See 45 C.F.R.
§ 1302.11(c) ("The bases for making a selection among
applicants which submit approvable applications to
replace a grantee, in addition to the basis in § 1302.10
of this part, shall be . . . [t]he extent to which
provision is made for continued employment by the
applicant of the qualified personnel of the existing
program.").
Requiring grantee management to deal fairly with
employees is also properly within the Policy Council's
bailiwick as a decision about the "nature and operation
of the program." Certainly, permitting the termination
of employees without prior notice of deficient job
performance could adversely affect the morale of the
remaining employees and thus the program.
b. The termination action was not in compliance
with CAAFC's personnel policies.
This factor includes both CAAFC's failure to do written
performance evaluations and its failure to respond to the
employees' grievances. According to 70.2, personnel
policies are to be developed by the grantee, the Head
Start Director, and the Policy Council, and approved by
the Policy Council. 45 C.F.R. Part 1304, App. B,
Chart C. CAAFC's management was obliged to proceed
according to the written personnel policies adopted by
the Policy Council. 45 C.F.R. §1303.31(a) and (b).
The specific parts of CAAFC's personnel policy allegedly
violated were those dealing with evaluations and
grievances. With respect to evaluations, the policy
provides:
a. Staff performance is formally reviewed by the
Head Start Director. Evaluations are accomplished
by first-line supervisory personnel with written
reports filed in the employee's records. . . .
* * *
c. Employees have the opportunity to accept or
reject findings -- an unfavorable report
entails the possibility of being denied
increment, and/or possible discharge.
Employees may appeal unfavorable evaluations by
following the grievance procedures outlined in
Item 15 of this section.
18, Affirmative Action/Personnel Policies (CAAFC
Miscellaneous Ex. 17, at 424). The relevant paragraph
entitled Employee Grievances provided --
Employee grievances will be given prompt and fair
consideration. An employee should take his or her
grievance to one or more of the following in order:
a. Immediate Supervisor
b. Head Start Director
c. Policy Council Personnel Committee
d. CAA Executive Director
e. CAA Board Personnel Committee
The resolution and final decision of the grievance
must be approved or disapproved by the Head Start
Policy Council and the CAA Board of Directors.
There is no dispute that the employees in question did
not receive written negative evaluations and that they
filed formal grievances with CAAFC when they were not
brought back to work in October 1993, but did not receive
any response to those grievances before their
termination. During the April 20, 1994 Policy Council
meeting, Policy Council members expressed concern about
the failure of CAAFC to respond to the grievances. CAAFC
Misc. Ex. 2 at 110.
CAAFC asserted that the Policy Council was mistaken in
its evaluation of the personnel policies. CAAFC
contended that neither New York state law nor CAAFC's
personnel policies required written employee evaluations
prior to termination. Tr. 1242-43. Moreover, since the
"employees" in question had been laid off, CAAFC argued
that it did not have to address their grievances.
It is not necessary for us to resolve definitively
whether state law or CAAFC's personnel policies required
CAAFC to provide written employee evaluations prior to
termination or whether CAAFC was bound to respond to the
employees' grievances. The Policy Council's
interpretation of the language of the personnel policies
is reasonable, especially when viewed in context. Both
provisions demonstrate an overall personnel policy that
requires informing employees about management's opinion
of their job performance and about proposed personnel
actions, and giving employees an opportunity to respond
to management's assertions. Moreover, CAAFC was
repeatedly made aware of the Policy Council's concern
about CAAFC's failure to give substantive reasons for not
returning these employees and its failure to respond to
their grievances. See, e.g., CAAFC Misc. Ex. 2 at 85-86
(January 20, 1994 Policy Council Minutes); and 110
(April 20, 1994 Policy Council Minutes). Management is
supposed to follow policies set by the Policy Council.
We therefore conclude that this is a reasonable factor
for the Policy Council to take into account.
c. The deficiencies were not reported in previous
audits.
Some Policy Council members testified that they reviewed
Head Start program reviews and audits for the relevant
period to determine if the employee deficiencies reported
by Mr. Eisenberg had previously been discovered and
reported by others. Tr. 244 (Ms. Duryea); Tr. 32-34 (Ms.
Silman). ACF performed an On-Site Program Review at
CAAFC in 1991 (ACF Ex. 2), reporting its findings on an
On Site Program Review Instrument (OSPRI). CAAFC had
performed a required self assessment in 1993 as reflected
in Self-Assessment Valuation Instrument or SAVI (ACF
Ex. 4), and was subject to periodic surveys by the New
York State Departments of Health and Social Services.
None of these reviews or audits found any major program
deficiencies.
CAAFC contended that a defect in the child abuse policy
(one of the deficiencies in Mr. Eisenberg's Report) had
been noted in a prior OSPRI and that such reviews were
too infrequent to be relied on as evidence of what
current employee practices were. CAAFC did not address
the other, more recent, reviews cited by the Policy
Council witnesses. There is no evidence that the Policy
Council members who sought out this information were not
aware of the respective dates of the reviews and Mr.
Eisenberg's Report, and did not give them the proper
weight.
This apparently clean record from official reviewing
authorities, even if some of the reports were from an
earlier period, could reasonably affect the weight which
some Policy Council members gave to Mr. Eisenberg's
Report. Given Mr. Eisenberg's stated purpose -- to
explain why CAAFC was proposing termination -- it was
reasonable for Policy Council members to seek out and
consider independent evaluations of the program in coming
to a conclusion about the employees' abilities. Thus,
this factor was relevant and was appropriately considered
by the Policy Council in reaching its decision.
d. The employees offered reasonable explanations
for the deficiencies.
It is noteworthy that Mr. Eisenberg admitted that he did
not share his Report with the affected employees prior to
his August 30, 1994 presentation to the Policy Council.
Tr. 509, 574-75. 8/ Consequently, the employees' first
opportunity to respond to the allegations of deficient
job performance was at the September 1, 1994 Policy
Council meeting. The employees' responses are outlined
above; in general, the employees stated that they were
not responsible for some of the deficiencies or had
followed established, presumably acceptable, procedures.
Some Policy Council members testified that they found
some of the employees' explanations for the alleged
deficiencies credible. For example, Ms. Duryea testified
that she verified through conversation with other Head
Start staff that the hematocrit machine had not been
operated by one of the terminated employees. Tr. 244-46.
On the other hand, some Policy Council members testified
that they considered the deficiencies quite serious.
See, e.g., Tr. 919, 924; 964. CAAFC contended that most
of the deficiencies were not satisfactorily or truthfully
explained by the employees, and that it was illogical for
the Policy Council to reject Mr. Eisenberg's Report.
CAAFC also noted that the Policy Council did not review
supporting documentation that Mr. Eisenberg brought to
the August 30 meeting.
It was reasonable for Policy Council members to consider
the employees' explanations for the alleged deficiencies,
and to determine whether those explanations mitigated
some of the deficiencies. The explanations could also
have persuaded Policy Council members that some of the
alleged deficiencies did not exist. It was also
reasonable for Policy Council members to use those
explanations, and the fact that Mr. Eisenberg had not
interviewed the employees prior to making his Report, in
deciding how much weight to give the Report. As for the
documentation that Mr. Eisenberg had with him at the
August 30 meeting, he distributed only an outline of his
findings and did not state to the Policy Council that he
had the documentation with him; we therefore do not fault
the Policy Council for failing to examine it. Thus, we
find that this factor was relevant and that the Policy
Council reasonably considered it in reaching its
decision.
e. The deficiencies were discovered after the
employees had been laid off.
Several Policy Council members testified that they
discounted the report of the employees' deficiencies
somewhat because the deficiencies were not discovered
until after the employees had been laid off. Policy
Council members were aware that ACF had consistently
taken the position that all employees should have been
called back to work when CAAFC had resumed the grant in
October 1993. Consequently, some Policy Council members
testified that they believed that the report of
deficiencies might be motivated by a desire to justify
the employees' termination after the fact. ACF alleged
that Mr. Eisenberg essentially admitted that his job was
to justify the terminations. ACF PHBr. at 12, citing
CAAFC Att. 11 at 1-2. In addition, Policy Council member
Silman wondered why, if the deficiencies were so serious,
they had not been discovered earlier. Tr. 144. Ms.
Silman also testified that she believed that the charges
against the employees were developed to justify their
terminations since they did not fit into the Executive
Director's vision for CAAFC. Id. at 169-170.
Furthermore, the Policy Council minutes for January 20,
1994 indicate that when asked why these employees had not
been returned to their jobs, the Executive Director
stated that there was no money in the budget to bring
them back to work, not that she or CAAFC had determined
that the employees' performances were deficient. CAAFC
Misc Ex. 2, at 85.
CAAFC contended that this factor was irrelevant, and that
it was not surprising that the deficiencies were not
discovered until after the employees had been laid off
because they were the persons responsible for overseeing
those parts of the program.
While it is true that some of the alleged deficiencies,
such as the unsanitary centrifuge, might have been more
readily discovered after the employees left, others, such
as the nutrition and social services deficiencies, should
have been evident to program participants, or to CAAFC if
it were properly monitoring the program, during the
employees' tenure. Moreover, this was not the principal
factor cited for any Policy Council member's vote, but
was apparently taken into consideration in determining
what weight to give to Mr. Eisenberg's Report. Thus, we
conclude the Policy Council reasonably considered this
factor in reaching its decision.
f. CAAFC was acting in violation of the settlement
agreement.
Several Policy Council members cited as an additional
factor in their decision-making that they believed that
the process CAAFC followed in terminating the employees
violated CAAFC's settlement agreement with ACF. Some
Policy Council members stated that they understood the
settlement agreement as requiring CAAFC to reinstate the
employees and give them an opportunity to correct their
deficiencies, rather than reinstating them and
immediately initiating termination actions. See, e.g.,
Tr. 89.
CAAFC's Board President briefed the Policy Council on the
terms of the proposed settlement agreement at a May 25,
1994 meeting. Tr. 292-93. On July 26, 1994 the Policy
Council adopted a resolution directing CAAFC to comply
with the terms of the settlement agreement requiring
reinstatement of the three employees. The Policy Council
was given copies of the settlement agreement at a
July 27, 1994 meeting with an ACF regional official, and
that official explained ACF's view of the settlement
agreement at that time. One witness (Ms. Silman)
specifically remembered that the ACF official stated that
termination of the employees was still possible, but that
CAAFC would have to get Policy Council approval. Tr. 81.
CAAFC contended that it was improper for the Policy
Council to take the settlement agreement into account
because it was not a party to that agreement and because
the Policy Council was mistaken in believing that CAAFC
had violated the settlement agreement.
We are not persuaded that it was improper for Policy
Council members to consider the requirements of the
settlement agreement in reaching their decision. It
appears that some Policy Council members' reading of the
settlement agreement as requiring a probationary period
reflected both the sense of what the Policy Council had
suggested to CAAFC prior to the Settlement Agreement and
what ACF may have implied to the Policy Council. Even
though we have since upheld CAAFC's interpretation of the
settlement agreement as permitting the simultaneous
reinstatement and institution of termination proceedings
(Ruling on Motion for Summary Disposition at 2-3
(December 14, 1995)), it was reasonable for Policy
Council members to take into account that CAAFC's action
was contrary to the Policy Council's earlier expressed
wishes and to ACF's view of the settlement agreement.
Given that CAAFC had a recent history of strained
relations with both the Policy Council and ACF, and given
that ACF was the funding source for the Head Start
program, a reasonable person could have considered it
poor judgment on CAAFC's part to proceed in this manner
even if it was technically permitted by the settlement
agreement. In any event, we note that none of the Policy
Council members testified that this was an important
factor in reaching the decision to deny approval of the
terminations. We therefore conclude that the Policy
Council reasonably considered this factor.
g. The deficiencies did not warrant termination.
Several Policy Council members testified that they found
the alleged deficiencies easily correctable and not
significant enough to warrant termination of the
employees without giving them an opportunity to correct
the deficiencies. See, e.g., Tr. 46, 112 (Ms. Silman);
Tr. 244 (Ms. Duryea). For example, Ms. Silman and Ms.
Duryea each stated that the blood waste container was not
a danger to the children because it was located in a
place where there would not be unsupervised children.
Tr. 50, 127-28; 341. In addition, Ms. Silman, who had
considerable experience in child abuse issues, testified
that she considered the problem with CAAFC's child abuse
policy "an easily changeable situation." Tr. 121. (On
the other hand, as we noted above, some Policy Council
members testified that they considered the deficiencies
serious.)
We simply do not agree with CAAFC that the Policy
Council's failure to reach the same conclusion about the
alleged deficiencies as CAAFC's Board of Directors
renders the Policy Council's decision per se arbitrary
and capricious. The CAAFC Board of Directors was
persuaded by the information contained in Mr. Eisenberg's
Report. As noted above, there were a number of factors
which caused the Policy Council to give less weight to
that Report. The Policy Council provided the employees
with an opportunity to respond in person to Mr.
Eisenberg's Report and was able to question the employees
about the causes and possible effects of those alleged
deficiencies. For reasons not entirely clear, CAAFC's
Board of Directors did not address these employees
directly. The Policy Council also sought information
about the terminated employees' performance from other
staff members and parents and from past program audits
and reviews; there is no indication in the record that
the Board of Directors made similar inquiries. 9/
Although there was some testimony from a Board Member
that the Head Start Director's performance had been a
problem for some time and that the Board was aware of the
problem, the record does not indicate that the Policy
Council was provided copies of contemporaneous
documentation of the problems. We also question (as we
mentioned before) CAAFC's apparent assumption that the
Policy Council would be less concerned about the
children's safety than would the Board of Directors.
CAAFC also did not explain why the deficiencies were not
easily correctable or why close supervision of the
employees could not prevent any harm to the children
should the employees' performance fail to improve during
a probationary period.
Consequently, we find that CAAFC has not established that
the deficiencies reported by Mr. Eisenberg were so
significant, serious, and incapable of correction that
they warranted automatic dismissal of the employees
involved. We therefore find that it was reasonable for
the Policy Council to conclude, after deliberation, that
the employees could safely be given a second chance.
3. Conclusion -- the Policy Council's decision was based
on a consideration of relevant factors.
We have discussed above the factors cited by the Policy
Council as the reasons that a majority of voting members
rejected CAAFC's proposed terminations of the three
employees. The principal reason was that the Policy
Council believed that it would be unfair to terminate the
employees on the basis of the deficiencies alleged when
the employees had not had prior notice that their job
performance was unsatisfactory. In other words, the
majority of the Policy Council thought that the employees
should have a probationary period in which to attempt to
improve their job performance. We have examined the
other reasons cited by Policy Council witnesses and have
determined that, notwithstanding CAAFC's contentions that
some of these reasons should not have been part of the
Policy Council's analysis, all of these other reasons
were proper considerations for the Policy Council to use
as factors in making its decision. CAAFC did not
establish that the Policy Council failed to consider a
relevant factor that would have led to a different
result. Consequently, we conclude that the record before
us shows that the Policy Council's decision was based on
a consideration of relevant factors. Therefore, unless
there exists evidence that some additional, illegal
reason was the motivating factor for the Policy Council's
decision, the applicable regulations require that CAAFC
abide by that decision.
C. Whether the Policy Council's Decision Represents a
Clear Error of Judgment Or Was Improperly Motivated
In its response to ACF's Motion for Summary Disposition
of this appeal, CAAFC stated that it would provide
testimony in support of its contention that Policy
Council members who refused to approve CAAFC's
termination of certain employees were biased.
Specifically, CAAFC alleged that some Policy Council
members had an active interest in having the employees
retained and were biased against CAAFC for a variety of
other reasons. In our Ruling on that Motion, we
concluded that CAAFC's proffered testimony concerning
ulterior motivating factors was relevant to a disputed
fact and the proper subject of an evidentiary hearing.
Ruling on Motion for Summary Disposition at 6-8. For
that and other reasons stated in the Ruling, we denied
ACF's Motion for Summary Disposition and this appeal went
on to evidentiary hearing.
In its post-hearing presentation, CAAFC did not point to
any testimony supporting its theory that the Policy
Council was biased or otherwise improperly motivated.
Instead, CAAFC only implied that the several times that
the Policy Council scheduled and then canceled a meeting
to hear CAAFC's charges against the employees showed that
it was reluctant to hear those charges. CAAFC also
argued that no "objective" person could have decided to
continue the employment of these employees given the
severity of their deficiencies. CAAFC pointed to the
follow-up report written by Mr. Eisenberg in which he
found the explanations given to the Policy Council by the
employees to be faulty. In addition, as we discussed
above, CAAFC alleged that the Policy Council was mistaken
about some factors, such as whether written evaluations
were required prior to termination of an employee for
cause. Thus, CAAFC alleged that the Policy Council
members simply liked the employees and wanted to keep
them. Tr. 1243.
We find that CAAFC has not shown that the Policy Council
was biased or otherwise improperly motivated. The
meeting delays do not show a reluctance by the Policy
Council to hear the charges against the employees. The
record shows that throughout the 1993-94 program year,
the Policy Council repeatedly asked for an explanation of
why the three employees were not returned to work. Once
the settlement agreement calling for the reinstatement of
the employees was signed in June, some Policy Council
members apparently believed that the matter was resolved
because CAAFC was no longer going to pursue termination.
A meeting to present CAAFC's reasons for the proposed
terminations was eventually held on August 30 and, as we
noted above, CAAFC's representatives were given a full
opportunity to make their presentation. Since CAAFC's
reasons were based on deficiencies that had allegedly
taken place the previous year, it suffered no significant
prejudice from delaying the presentation by a few months.
Thus, these facts do not support a finding that the
Policy Council's timing in scheduling a meeting to hear
CAAFC's reasons for termination shows bias.
We also reject CAAFC's argument that no "objective"
person could have decided to continue the employment of
these employees given the severity of their
deficiencies. 10/ As we discussed above, some Policy
Council members gave less weight to Mr. Eisenberg's
Report on deficiencies because the deficiencies had not
been reported in contemporaneous written evaluations by
supervisors, OSPRI reviewers or New York State survey
personnel. Thus, these Policy Council members considered
the Report an effort to justify the terminations after
the fact. As for the follow-up report written by Mr.
Eisenberg in which he found the explanations given to the
Policy Council by the employees to be faulty, that
subsequent analysis was not available to the Policy
Council to consider in making its decision. Moreover,
neither report satisfactorily addressed the principal
concern of the Policy Council with treating the employees
fairly by giving them fair notice of their deficiencies
and a chance to correct them. Further, notwithstanding
its allegations to the contrary, CAAFC did not show that
this goal could not be met without endangering program
participants.
We also reject CAAFC's contention that the Policy Council
showed bias by relying on CAAFC's failure to provide
written evaluations of the employees, since, according to
CAAFC, no such evaluations were required by CAAFC's
personnel policies or by state law. We find that the
Policy Council's interpretations of the personnel policy
provisions regarding written evaluations and grievance
procedures were reasonable readings of those provisions.
Moreover, the Policy Council's reliance on this factor
was based as much on its sense of fair play as it was on
any legal interpretation of CAAFC's obligations to these
employees.
Finally, while past dealings with the people involved may
have caused the members of the Policy Council to have
friendly feelings towards the terminated employees and
possibly unfriendly feelings towards CAAFC's Board of
Directors, this record is devoid of any evidence showing
improper motivation or the type of bias cited by the
North Shore court as potentially impeaching a Policy
Council decision. As the Court stated in Overton Park,
we are not to substitute our judgment for that of the
decisionmaker whose decision we are reviewing. We have
found that the Policy Council based its decision on a
consideration of relevant factors and that there is no
evidence here of improper motivation. Consequently,
there is no basis for overturning that decision.
D. CAAFC Also Violated the Settlement Agreement, Which
Was a Condition of Its Head Start Grant.
The other principal reason stated by ACF for its
termination decision was that CAAFC had violated the June
1994 settlement agreement, which was a condition of
CAAFC's 1994-95 Head Start grant. In our Ruling on ACF's
Motion for Summary Disposition, we found that the
settlement agreement was indeed a condition of the grant,
since ACF's withdrawal of its denial of CAAFC's
application for refunding was a part of that agreement.
We also held that CAAFC did not violate the terms or
spirit of the settlement agreement by including in its
letters to the employees offering reinstatement a
statement that CAAFC would seek their termination. Id.
at 3. Thus, we denied ACF's Motion insofar as it was
premised on this view of the settlement agreement.
The chief purpose of the settlement agreement from ACF's
point of view was to bring CAAFC into compliance
with 70.2, since it was CAAFC's alleged violation of that
program requirement that had caused ACF to deny refunding
in 1993. Indeed, in its closing argument CAAFC stated
that the real heart of this case was whether or not there
was Policy Council approval of the terminations.
Tr. 1226. The settlement agreement called for CAAFC to
reinstate the three employees at issue (as had been
requested by the Policy Council during the dispute that
was settled by the agreement); to comply with 70.2
regarding the potential termination of any of the
reinstated employees, including consulting the Policy
Council in the decision making process prior to the point
of seeking approval of any proposed personnel actions; to
obtain Policy Council approval of any proposed personnel
actions prior to implementing them; and to provide Policy
Council training to its Executive Director, Board of
Directors, Policy Council and Head Start Director.
The parties disputed whether CAAFC satisfied the
particulars of the agreement in all respects, but there
was no dispute on the central issue: CAAFC admitted that
it had terminated three employees without Policy Council
approval. Given that we have determined above that this
was a violation of 70.2, we see no need to analyze
whether CAAFC's actions with respect to particular
provisions of the settlement agreement designed to
enforce CAAFC's compliance with that key regulatory
requirement satisfied the letter or spirit of those
provisions. Thus, we conclude that CAAFC's termination
of the three employees without Policy Council approval
was a violation of the settlement agreement.
Consequently, we find that CAAFC violated a material term
and condition of its grant so that termination of the
grant is warranted under 45 C.F.R. § 1303.14(b)(9).
Conclusion
Based on the preceding analysis, we find that a denial of
refunding is warranted pursuant to 45 C.F.R.
§§ 1303.15(c) and 1303.14(b)(4) and (9).
_____________________________
Judith A. Ballard
_____________________________
Norval D. (John) Settle
_____________________________
M. Terry Johnson
Presiding Board Member
* * * Footnotes * * *
1. CAAFC made an oral argument in lieu of filing a post-
hearing brief.
2. The concept of materiality is found in 45 C.F.R. §
74.113. That regulation has been amended and redesignated as 45
C.F.R. § 74.62, but continues to require materiality. See 59 Fed.
Reg. 43,760 (August 25, 1994).
3. In its closing argument, CAAFC contended that some of
the settlement agreement provisions that it allegedly violated were
immaterial, and stated that the real issue was Policy Council
approval. Moreover, CAAFC did not argue that its termination of
the employees without Policy Council approval was immaterial, but
instead challenged the reasonableness of the Policy Council's
decision to disapprove the terminations. Thus, we conclude that
CAAFC in essence conceded that, if the Policy Council's decision
was reasonable, failure to abide by that decision was a material
failure to comply with the applicable regulations and with the
terms and conditions of its grant.
4. CAAFC presented an oral post-hearing brief which was
transcribed into the record. In that same presentation, ACF
responded to CAAFC's arguments. For ease of reference, the Board
directed that the pagination of the hearing transcript be continued
to include CAAFC's "brief" and ACF's response. The post-hearing
pagination runs from pages 1222 through 1267.
5. For example, as discussed more fully below, CAAFC
pointed to alleged mishandling of blood testing equipment and blood
waste at the Head Start Center and misapplication of New York State
laws regarding child abuse notification.
6. A fourth employee, whose termination is not in issue,
appears as a signatory on that document. The grammatical style of
the Joint Rebuttal made it difficult to ascertain if it was a
document authored by one individual with four signatures attached
or a joint effort by the signatories.
7. Ms. Silman: "[T]he center of the discussion was, given
the violations and deficiencies, were these sufficient grounds to
terminate people without some kind of what we consider due process,
either any supervisory -- without any supervisory process which
made them aware of and allowed them the ability to change their
performance, if there had been problems with their performance."
Tr. 41-42; Ms. Duryea: "One of the biggest problems I had . . .
was no documentation;" Tr. 243; "To my knowledge, there wasn't any
[information regarding their deficiencies] presented to . . . [the
employees] during their employment." Tr. 249; Ms. Latreille: "I
feel at the time if the deficiencies occurred, they should have
been addressed with the employee in an office. . . . [T]hey should
have been presented something in writing so that the employee could
sign it and there would be documentation in their personnel file .
. . ." Tr. 409-10; Mr. Miller, a CAAFC witness who was on the
Policy Council and who voted for termination: "[those opposed to
termination] felt that they [the employees] hadn't been justly
treated" Tr. 967.
8. At the oral argument, CAAFC stated that the employees
had been asked to address the Board of Directors a number of times
but had refused. CAAFC did not point to any evidence of these
requests in the record, however.
9. In fact, Mr, Eisenberg testified that he did not speak
to the terminated individuals or the employees they supervised.
Tr. 574-75.
10. CAAFC also argued that it was placed in an untenable
position by ACF's reliance on the Policy Council's decision because
it was possible that, if ACF had discovered the deficiencies, ACF
could have based a decision to terminate CAAFC's grant on those
deficiencies even if the Policy Council refused to terminate the
employees responsible. This argument ignores ACF's responsibility
to review the Policy Council's action; if ACF found that the Policy
Council's refusal to approve was arbitrary or improperly motivated,
HHS could continue assistance to a grantee despite the lack of
approval by the Council. See North Shore, at 5 n.7.