Federal Circuit Rules “Willful” and “Intentional” are Not Synonymous
This case law update was written by James P. Garay Heelan, an attorney at the law firm of Shaw Bransford & Roth, where he has practiced federal personnel and employment law since 2012. Mr. Heelan represents federal personnel across the Executive Branch, including career senior executives, law enforcement officers, foreign service officers, intelligence officers, and agencies in matters of federal personnel and employment law.
On June 14, 2021, the Federal Circuit affirmed the removal of an IRS employee who wrongly believed that the prohibition on disclosure of taxpayer information did not apply if the disclosure was made to her attorney in an attorney-client privileged communication.
The employee, in defending herself against a proposed suspension, forwarded an Examining Officer’s Activity Record from a taxpayer’s file to her attorney, and did not redact the taxpayer’s information. When the agency discovered this disclosure, it proposed and sustained her removal, alleging she made an unauthorized disclosure of taxpayer information to her attorney. The employee appealed to the MSPB, and an MSPB Administrative Judge found that the agency proved the charge, and that the penalty of removal was not unreasonable under the circumstances.
The MSPB AJ credited the employee’s testimony “that her disclosure of taxpayer information was not intentional in the sense that she did not intend to violate a law or policy.” In other words, the AJ believed the employee’s explanation that she believed the attorney-client privilege would protect her disclosure from being unauthorized. However, the MSPB AJ held that she nevertheless acted “intentionally” when she knowingly transmitted a taxpayer’s record to her attorney.
After the MSPB AJ sustained her removal, the employee petitioned the United States Court of Appeals for the Federal Circuit for review. At the Federal Circuit, the employee argued that the agency and the MSPB AJ improperly applied the penalty for “willful” disclosure, rather than “negligent” disclosure. The employee cited the IRS Internal Revenue Manual (“IRM”), which states that “[a]n unauthorized access or disclosure” can be considered ‘willful’ only if it is made ‘with full knowledge that it is wrong.’” She argued that her disclosure, while admittedly unauthorized, was not willful because she did not have “full knowledge that [the disclosure to her attorney was] wrong.”
According to the employee, because the deciding official improperly identified her disclosure as willful, his penalty assessment was corrupted. Specifically, the employee argued that the deciding official’s assessment of three of the twelve Douglas factors (from Douglas v. Veterans Administration, the seminal MSPB case regarding reasonableness of the penalty) was incorrect. Those factors were: “the nature and seriousness of the offense, the clarity with which the employee was on notice of any rules that were violated in committing the offense, and the consistency of the penalty with any applicable agency table of penalties.”
But according to the appeals court, the employee’s removal “was properly predicated on her intention to disclose the information to her attorney and did not depend on whether she knew that the disclosure was wrong.”
The appeals court found, regarding the nature and seriousness of the offense, that the Board correctly credited the employee’s supervisor’s testimony that “taxpayer privacy is ‘sacrosanct,’” and that employees are trained that any disclosure of taxpayer information outside of work is prohibited. The appeals court also found that the Board’s finding of intentional transmission as an aggravating factor, even though the employee did not intend to violate a law or policy, was supported by the law. The appeals court wrote that “the IRS might have viewed this case quite differently if [the employee’s] disclosure was a mistake – for example, had she intended to send the information to an authorized person but mistakenly sent the information to her attorney instead.”
With regard to whether the penalty was consistent with the applicable agency table of penalties, the appeals court disagreed with the employee that the IRS imposed the penalty reserved for “willful” disclosure (drawing from the definition of “willful” in the IRM). The appeals court noted that the relevant section of the table of penalties did not use the word “willful” at all, but instead recommended removal for a first offense of “intentional” disclosure to unauthorized persons. Lesser penalties are recommended for “disclosure due to carelessness, recklessness, or negligence.” The appeals court held that the employee “improperly conflates willful unauthorized disclosures – which may constitute a felony, see I.R.C. § 7213—from disclosures, like hers, that were merely intentional.”
The appeals court disagreed with the employee that “intentional” and “willful” are synonymous, and held that the use of “intentional” in the penalty guidelines refers to disclosures “that were made on purpose even if the employee did not know that the disclosures were wrong.” The appeals court cited the Supreme Court’s opinion in Jerman v. Carlisle, 559 U.S. 573, 582-83, which held that an act can be “intentional” even if the actor lacks actual knowledge that the conduct violates the law. A requirement for willful conduct, by contrast, is “more often understood in the civil context to excuse mistakes of law.”
The employee argued that her disclosure was “due to carelessness, recklessness, or negligence,” therefore warranting a lesser penalty, but the appeals court held that those categories all involved unintentional disclosures, not intentional ones like hers.
The appeals court held that “it is clear that the IRS used the word ‘intentional’ rather than ‘willful’ in the Penalty Guide to connote that removal for a first offense is warranted even if the disclosure were not made will full knowledge that it was wrong,” and therefore the penalty of removal “is not inconsistent with the Penalty Guide.”
For the above stated reasons, the United States Court of Appeals for the Federal Circuit affirmed the employee’s removal.
Read the full opinion: Vestal v. Dep’t of Treasury.
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