Colorado Supreme Court Clarifies the Standard of Review Applicable to a State Entity’s Employee Disciplinary Decision.

In Department of Corrections v. Stiles, 2020 CO 90, announced on December 21, 2020, the Colorado Supreme Court clarified the standard of review applicable to an ALJ’s evaluation of a state entity’s employee disciplinary decision.  The Court’s syllabus of the decision provides: “After a certified state employee’s random urinalysis tested positive for marijuana, he was terminated by the appointing authority employing him. He appealed to the Colorado State Personnel Board (“the Board”). Following a hearing, an Administrative Law Judge (“ALJ”) acting on behalf of the Board issued an initial decision reinstating the employee and imposing a less severe sanction. The Board then adopted the initial decision, and a division of the court of appeals affirmed the Board’s ruling. The appointing authority appealed, and the supreme court agreed to take the appeal in the hopes of shedding light on the standard that governs the Board’s review of an appointing authority’s decision to discipline a certified state employee. The court holds that, while an ALJ conducting a hearing on behalf of the Board must afford the disciplined employee an opportunity to present evidence and must then make findings of fact, the ALJ’s review of the appointing authority’s  disciplinary action is governed by the statutorily mandated “arbitrary, capricious, or contrary to rule or law” standard, not “de novo” review. The distinction between the two standards is not without a difference. Unlike de novo review, the arbitrary, capricious, or contrary to rule or law standard accords a degree of deference to the appointing authority’s disciplinary action. Because the division misapprehended the standard of review that controls hearings held by or on behalf of the Board, and because the court can’t discern whether the ALJ applied the correct standard of review or de novo review, it reverses the division’s judgment and remands with instructions to return the case to the ALJ for further proceedings consistent with this opinion. On remand, as the ALJ considers whether the appointing authority’s disciplinary action was arbitrary, capricious, or contrary to rule or law, he should make additional findings. As it relates to the arbitrary or capricious part of the standard, the ALJ should determine whether the appointing authority gave candid and honest consideration to the relevant evidence and whether reasonable people fairly and honestly considering the evidence must reach contrary conclusions. And, as it relates to the other part of the standard, the ALJ should address whether the appointing authority’s disciplinary action contravened any rule or law.”