This is a civil service case, presenting important issues concerning the interpretation to be given the "transfer of functions" provision of Section 12 of the Veterans Preference Act of 1944, 58 Stat. 390, 5 U.S.C. § 861 (1958). Plaintiffs-appellees, employees of the Department of the Navy rated and described as "Shop Analysts and Schedulers," brought suit in the United States District Court for the District of Columbia, alleging that certain action taken with respect to them violated their rights under that section. The District Court granted declaratory relief, and the Government has appealed.

In 1950, the Bureau of Ships, Department of the Navy, set up a "Production Planning and Control" system for altering, repairing and maintaining naval vessels at each Navy Yard. Upon notification that a vessel was coming in for alterations or repair, those employees in the Planning Division of the Navy Yard having the rating of "Planner and Estimator" (P&E) drew up job orders for all the work to be done to the vessel in accordance with plans or design specifications, made estimates of cost, procured materials, and prepared planning schedules for the work.

The job orders then went to the Shop, or Production Department, of the Yard. There employees with the rating of "Shop Analyst and Scheduler" (A&S), whose duties were to serve as staff assistants to the Master Mechanic of the Yard, took the job order received from the Planning Division, broke it down in greater detail into the various job operations required, made their own cost estimates, scheduled the work by operations, kept an eye on its progress and on workloads, and in general established the controls over the Shop's production. The A&S position carried a lower rating and salary than the P&E position.

In 1959 the Navy Department began a reorganization — not yet completed — of the existing Production Planning and Control system. The reorganization was directed toward abolishing the duplication and repetition of effort, and cutting the costs and excessive paperwork, involved in the existing system. It abolished the A&S position, and assigned to the Planners and Estimators of the Planning Division the duty of putting the job order into the greater detail needed for scheduling work in the Production Department. A new position denominated "Shop Planner" was created in the Production Department to perform the shop planning duties which remained after the assignment to the P&E position of the duty of preparing detailed job orders. Employees with the A&S rating were given the opportunity to take an examination for the higher P&E rating, and those who passed the examination have been given the P&E rating and salary. Others with former A&S ratings are being assigned to other jobs for which they are qualified, such as "Shop Planner."

The twelve plaintiffs-appellees are former A&S employees who did not pass the test for the P&E rating.1 Being entitled to the rights given by the Veterans Preference Act, they appealed to the Civil Service Commission, limiting their claim by stipulation to the contention that a "transfer of function" to the Planning Division of each Navy Yard occurred when the A&S positions were abolished, within the meaning of Section 12 of the Veterans Preference Act, 58 Stat. 390, 5 U.S.C. § 861 (1958). That section provides in pertinent part:

"In any reduction in personnel in any civilian service of any Federal agency, competing employees shall be released in accordance with Civil Service Commission regulations which shall give due effect to tenure of employment, military preference, length of service, and efficiency ratings: Provided * * * And provided further, That when any or all of the functions of any agency are transferred to, or when any agency is replaced by, some other agency, or agencies, all preference employees in the function or functions transferred or in the agency which is replaced by some other agency shall first be transferred to the replacing agency, or agencies, for employment in positions for which they are qualified, before such agency, or agencies, shall appoint additional employees from any other source for such positions."

Urging that a transfer of function had occurred, plaintiffs asserted before the Commission that they were entitled under the Act to be transferred along with their job "function" to the P&E position, without test and with seniority rights. The Commission, for reasons we will later discuss, ruled adversely to them. This litigation followed.

Turning first to the text of Section 12 of the Veterans Preference Act of 1944, it is clear that Congress was primarily concerned with the problems caused by major government reorganizations. The section speaks of the situation arising "when any or all of the functions of any agency are transferred to, or when any agency is replaced by, some other agency, or agencies * * *." This was a situation which had frequently arisen in the years just prior to 1944. Under the authority of the Reorganization Act of 1939,2 the President had on numerous occasions abolished or curtailed the activities of a particular agency, transferring its duties to one or more other agencies — already existing or newly created — in the interest of increased efficiency and economy in governmental operations.3 The Reorganization Act of 1939 provided, inter alia, in Section 4, 53 Stat. 562, for the "transfer of the whole or any part of any agency or the functions thereof to the jurisdiction and control of any other agency;" or "the abolition of the whole or any part of any agency" whose functions have been or will be "terminated" or transferred. The word "functions" was not expressly defined, but was evidently used in the sense of "authority, powers and duties" (see Section 8(b), 53 Stat. 563), when "expressly authorized by law" (see Section 3(f), 53 Stat. 562).4

The Reorganization Act of 1939, in Section 4(d) (2), 53 Stat. 562, required the President to "make provision for the transfer or other disposition of the * * * personnel affected * * *" by a plan. In Section 10, 53 Stat. 563, a limited measure of job protection was given to the affected personnel.5

When the bill which became the Veterans Preference Act of 1944 was under consideration, veterans' groups asked for a greater measure of job protection in reorganizations. Mr. Flemming, Chairman of the Civil Service Commission, and Congressman Starnes, author of the bill, spoke as follows:

"Mr. Flemming: It [the bill] does not guarantee a job. It simply provides, if there is a transfer of that kind, that the agency to which the functions have been transferred cannot go out into the open labor market to recruit people until they have placed all preference eligibles who are qualified for positions in that agency.

"Mr. Starnes: That is one principle the veterans' organizations have fought for most vigorously. Oftentimes they have found agencies which have transferred or abolished their functions entirely and a new agency was set up in its place. The new agency then would leave the veterans in the cold and go out into the open labor market and recruit new appointees. It is a device which the veterans claim have been used against them to eliminate them from Government appointments, by simply abolishing the function or transfer the function and leaving the personnel out in the cold. That is one practice of ignoring veterans' preference." (Hearings on H.R. 4115, 78th Cong., 2d Sess., before the Senate Committee on Civil Service, May 19, 1944, p. 10)

The congressional purpose was thus to protect veterans who were affected by transfers of functions from one agency to another, and the term "functions" was evidently to have the same meaning ("authority, powers, and duties") as under the Reorganization Act of 1939. Nothing in the statute or the legislative history refers to similar transfers within a single agency.6 The regulation adopted by the Civil Service Commission in 1944 to implement Section 12 simply copied the statutory language, and spoke only of transfers between agencies. See Section 20.8 of the Regulations, 5 C.F.R. § 12.306 (1944 Supp.); 5 C.F.R. § 20.8 (1961). However, in 1954, the Commission decided that the statute and Section 20.8 of the Regulations also applied to transfers of functions within a single agency. Under date of January 12, 1954, it sent Departmental Circular No. 740 to the heads of all agencies, advising them of its conclusions. Later, on May 19, 1959, the General Counsel of the Commission rendered an opinion concerning the problems "brought about by the disestablishment of the Corpus Christi Naval Overhaul and Repair Facility," with special reference to the interpretation of Section 12 of the Veterans Preference Act. Finally, under date of June 23, 1960, the Commission issued Supplement No. 2 to Departmental Circular 740, further defining its position as to the application of Section 12.

The personnel actions complained of here took place on or about November 17, 1959. Appellees argue that only the regulations promulgated prior to that date, together with the statute, can be considered in determining the legality of the action taken. Assuming for present purposes (as did the Commission) that this is so, we note first that the statute and the 1944 regulation (Section 20.8) deal only with transfers of functions between agencies, and have no direct bearing on the present case — unless the word "agency" is given some meaning not apparent on the face of the statute. We come, then, to the 1954 Departmental Circular, in which for the first time the Commission ruled that Section 12 applied to transfers within an agency. It did this by construing "agency," as used in Section 12, as including "an entire independent establishment, a bureau, branch, division, section, or smaller organizational entity."7 The Commission went on to say:

"The applicability of Section 20.8(a) depends upon a judgment as to whether, in conjunction with a reduction in force, a function or functions of one organizational entity can be identified as having been transferred to another organizational entity. If such is found to be the case, then the incumbent or incumbents of positions engaged in the transferred functions must be given the opportunity to follow the functions prior to any reduction-in-force action which might otherwise affect them."

No effort, however, was made to define or explain what was meant by the terms "function" or "functions."

We turn now to the administrative rulings made in the present case.

As we have noted, after the action of the Navy Department in abolishing the A&S position in 1959, appellees brought their case before the Civil Service Commission. The Chief Appeals Examining Officer, after hearing, concluded on the evidence before him that there had not been a transfer of functions within the meaning of the statute and the regulations in force on November 17, 1959.8 He also held against the employees on an alternative ground:

"Even if the contention of the attorney for the appellants is correct that some act of transfer was required, Section 20.8 of the Commission's regulations would require that the transfer of Shop Analysts and Schedulers be accomplished without change in tenure of appointment. In other words, they would have arrived in the Planning Division as Shop Analysts and Schedulers and in a reduction in force they would have no right to promotion to the positions of Planners and Estimators.

"In short, the result would have been exactly the same as the present action if the Department of the Navy followed the method advocated by the attorney for the appellants; a reduction in force among Shop Analysts and Schedulers."

Appeal was then taken to the Board of Appeals and Review. However, the Civil Service Commission decided to review the case itself. It held adversely to the employees in a final decision rendered on December 7, 1960.

The Civil Service Commission took the view that "in reality the primary work of the Planners and Estimators and the primary work of the Shop Analysts and Schedulers were, prior to the reorganization, operating parts of a single function and not independent and separable functions." Thus, it said, "no transfer of function occurred * * *."9

We think these conclusions of the Commission are solidly based in the evidence, are consistent with the applicable law and regulations, and are in accord with the interpretation and understanding of the term "function" under the Reorganization Act of 1939. The Analysts and Schedulers were individual workers, assigned as staff assistants to the Master Mechanic of the Yard. They were not an "organizational entity" within the Commission's definition of the statutory term "agency," as used in its 1954 regulation (Section 20.8). Nor did the Planners and Estimators constitute such an entity. The transfer which occurred was not the transfer of the functions of an "agency," as defined by the Commission, but the transfer of certain job duties of individual workers, or, perhaps more correctly, of a class or grade of individual workers, to workers of another class or grade.10

Though the Commission did not refer to or discuss the alternate ground of decision relied on by the Chief Appeals Examining Officer, we think that ground has considerable merit. The P&E rating was higher than the A&S rating. In a reduction in force, persons in each grade or rating compete with others in that grade: the process does not permit persons in lower grades to compete at a higher level and thus gain a promotion. A transfer followed by a reduction in force, as desired by the appellees, would thus appear to gain them little or nothing. Cf. Powell v. Brannan, 91 U.S. App.D.C. 16, 196 F.2d 871 (1952); Cutting v. Higley, 98 U.S.App.D.C. 288, 235 F.2d 515, cert. denied, 352 U.S. 883, 77 S. Ct. 99, 1 L. Ed. 2d 81 (1956). The Navy Department, as we have noted, has provided an opportunity to appellees to qualify for the higher P&E rating, by examination. It has also offered other jobs to appellees. We do not think that the law required it to do more.

For these reasons, the cause will be remanded to the District Court with directions that the judgment for the appellees be vacated and the motion of appellants for summary judgment be granted.

So ordered.