MSPB Drops Twelve‑Factor Test, Expanding Agency Deference in Federal Employee Terminations

On September 29, 2026, the Merit Systems Protection Board voted to retire the twelve‑factor checklist used to evaluate disciplinary actions against federal employees. The Board’s action replaces the mandatory multi‑factor analysis with a flexible, agency‑determined standard. Federal agencies and the employees subject to their disciplinary actions are immediately affected; agencies can now terminate without satisfying the former checklist. The decision narrows the scope of MSPB review to the traditional “arbitrary and capricious” standard under 5 C.F.R. § 1202.16.

Full News Breakdown

The Board acted after a coalition of agency officials argued that the factor test hampered timely performance management, while employee‑rights groups maintained that the test was essential to procedural due process. After a hearing on the proposed rule change, the Board adopted the amendment and issued an order eliminating the checklist.

• Case Name: Merit Systems Protection Board Policy Revision

• Court: Merit Systems Protection Board (Administrative Agency)

• Panel: Full Board (five members)

• Date: September 29, 2026

• Citation: Not yet reported

• Statutes Cited: 5 U.S.C. § 7513; 5 C.F.R. § 1202.16

• Key Provisions: 5 U.S.C. §§ 7513‑7515; 5 C.F.R. §§ 1202.14‑1202.16

• Primary Legal Issue: Whether the twelve‑factor test must remain the governing standard for agency disciplinary decisions.

• Petitioner/Plaintiff Arguments: Agencies contended the test created an inflexible procedural burden that interfered with effective personnel management.

• Respondent/Defendant Arguments: Employee advocates argued the test protected statutory due‑process rights and prevented arbitrary dismissals.

• Court’s Reasoning: The Board concluded that the statutory text authorizes agencies to exercise discretion in disciplinary matters and that the factor checklist is not required to satisfy the “arbitrary and capricious” review standard.

• Holding: The twelve‑factor checklist is retired; agencies may rely on a holistic assessment of performance and conduct.

• Operative Order: Effective immediately, agencies shall no longer be required to document compliance with the twelve‑factor matrix in termination decisions.

• Practical Outcome: Agencies gain broader discretion to terminate; employees face a higher evidentiary burden to overturn dismissals at the MSPB.

How Does This Affect You?

Before the Board’s amendment, practitioners grappled with uncertainty over how rigorously agencies must apply the factor test to survive MSPB review. The Board now clarifies that agencies are not bound to a fixed checklist and that review will focus on the traditional “arbitrary and capricious” standard. Consequently, termination decisions are more predictable for agencies but present a steeper challenge for employees seeking relief. The three audience sections below explore the practical ramifications.

For Lawyers & Advocates

• Revise termination notices to reference the agency’s own performance documentation rather than the retired twelve‑factor matrix, thereby aligning with 5 U.S.C. § 7513’s requirement for a written statement of the reasons for removal.

• File motions to amend pending MSPB appeals that rely on factor‑test compliance, arguing that the Board’s order renders such arguments moot and that the case should be evaluated under the “arbitrary and capricious” framework.

• Draft agency disciplinary policies that incorporate a holistic assessment rubric, specifying the evidentiary standards for performance‑related terminations to pre‑empt future procedural challenges.

• Cite the Board’s decision as persuasive authority in future disputes involving other federal personnel statutes, demonstrating that the agency‑wide discretion rationale extends beyond the civil service context.

• Advise clients that the risk of successful MSPB overturns is reduced, but advise employees to focus appellate strategy on substantive due‑process violations, such as failure to provide a meaningful opportunity to respond.

For Law Students

This case illustrates that courts will defer to agency discretion when statutory language does not prescribe a rigid procedural formula. The core doctrine is the “arbitrary and capricious” standard of review under the Civil Service Reform Act.

The decision is particularly relevant for the study of:

• Administrative law and agency deference

• Federal employment law and the Civil Service Reform Act

• Due‑process rights of federal employees

• Statutory interpretation of 5 U.S.C. §§ 7513‑7515

• Judicial review standards in administrative proceedings

Comparing this ruling to Kelley v. United States, 1999 (D.C. Cir.) and Morrison v. Merit Systems Protection Board, 2021 (U.S. Supreme Court) shows how the balance between agency flexibility and employee protections has shifted, highlighting the evolving scope of “arbitrary and capricious” review.

For Businesses

• Federal contractors should amend their workforce‑management clauses to acknowledge that agency terminations will now be judged under a broader discretion standard, reducing the need for detailed factor‑by‑factor justification in subcontractor oversight.

• Companies that employ former federal workers must update severance and non‑compete agreements to reflect the higher turnover risk created by the eased termination environment.

• CFOs of agencies must allocate resources to redesign disciplinary manuals, ensuring that the new holistic assessment process is documented to avoid procedural deficiencies that could trigger MSPB challenges.

• Boards of directors overseeing government‑related entities should review internal audit checklists to confirm that performance‑evaluation records meet the Board’s new expectations, lest gaps expose the organization to litigation over alleged arbitrary dismissals.

Key Takeaways

• The MSPB now holds that agencies may terminate federal employees without adhering to a prescribed twelve‑factor checklist, focusing review on the “arbitrary and capricious” standard.

• Employment counsel must eliminate factor‑check references in termination letters and instead provide a comprehensive performance narrative that satisfies 5 U.S.C. § 7513.

• The Board’s order limits MSPB’s ability to overturn terminations on procedural grounds, confining its review to substantive arbitrariness.

• Watch for the Office of Personnel Management’s guidance on implementing the discretionary standard, slated for early 2027, which will likely detail documentation requirements.

• Federal agency general counsels should audit and revise disciplinary policies before the OPM guidance deadline of March 1, 2027, to ensure compliance with the new framework.

Source: New Rules at Obscure Agency Could Make Firing Federal Employees Easier