[Federal Register: November 1, 2005 (Volume 70, Number 210)]
[Rules and Regulations]
[Page 66115-66220]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01no05-16]
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Part IV
Department of Defense
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Office of Personnel Management
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5 CFR Chapter XCIX and Part 9901
Department of Defense Human Resources Management and Labor Relations
Systems; Final Rule
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DEPARTMENT OF DEFENSE
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Chapter XCIX and Part 9901
RIN 3206-AK76/0790-AH82
Department of Defense Human Resources Management and Labor
Relations Systems
AGENCY: Department of Defense; Office of Personnel Management.
ACTION: Final rule.
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SUMMARY: The Department of Defense (DoD or the Department) and the
Office of Personnel Management (OPM) are issuing final regulations to
establish the National Security Personnel System (NSPS), a human
resources management system, within DoD, as authorized by the National
Defense Authorization Act (Pub. L. 108-136, November 24, 2003). These
regulations govern basic pay, staffing, classification, performance
management, labor relations, adverse actions, and employee appeals.
These changes are designed to ensure that the Department's human
resources management and labor relations systems align with its
critical mission requirements and protects the civil service rights of
its employees.
DATES: Effective November 28, 2005.
FOR FURTHER INFORMATION CONTACT: At OPM: Nancy Kichak at 202-606-6500;
at DoD: Brad Bunn at 703-696-4664.
SUPPLEMENTARY INFORMATION:
Table of Abbreviations
AJ--Administrative Judge
COLA--Cost of Living Adjustment
CONUS--Continental United States
DARPA--Defense Advanced Research Projects Agency
DoD--Department of Defense
ECI--Employment Cost Index
EEO--Equal Employment Opportunity
EEOC--Equal Employment Opportunity Commission
EPI--Extraordinary Pay Increase
FLRA--Federal Labor Relations Authority
FLSA--Fair Labor Standards Act
FMCS--Federal Mediation and Conciliation Service
FSIP--Federal Service Impasses Panel
FWS--Federal Wage System
GAO--Government Accountability Office (former General Accounting
Office)
GS--General Schedule
HR--Human Resources
KPP--Key Performance Parameter
LWOP--Leave Without Pay
MRO--Mandatory Removal Offense
MSPB--Merit Systems Protection Board
NAF--Nonappropriated Fund
NAPA--National Academy of Public Administration
NSLRB--National Security Labor Relations Board
NSPS--National Security Personnel System
OMB--Office of Management and Budget
OPM--Office of Personnel Management
PEO--Program Executive Office
PFR--Petition for Review
RFR--Request for Review
SES--Senior Executive Service
SL--Senior Level
ST--Scientific or Professional Positions
WGI--Within-Grade Increase
Table of Contents
This supplementary information section is organized as follows:
Introduction
The Case for Action
Pay and Classification
Performance Management
Staffing, Employment and Workforce Shaping
Adverse Action and Appeals
Labor-Management Relations
Development of the National Security Personnel System
Strategic Engagement and Establishment of the Program Executive
Office
Development of Design Options
Guiding Principles and Key Performance Parameters
Communications During the Design Process
Outreach to Employee Representatives
Outreach to Employees
Outreach to Other Stakeholders
Development of Design Options--Working Groups
Publication of Proposed Regulations
Public Comments
Meet-and-Confer Process
Major Issues
Specificity of the Regulations
Pay for Performance and Pay Pool Funding
Adverse Actions and Appeals
Mandatory Removal Offenses
Labor Relations
Management Rights/Scope and Duty to Bargain
Independence of the National Security Labor Relations Board
Response to Specific Comments and Detailed Explanation of
Regulations
Subpart A--General Provisions
Section 9901.101--Purpose
Section 9901.102--Eligibility and Coverage
Summary of Coverage Eligibility Chart
Section 9901.103--Definitions
Section 9901.104--Scope of Authority
Section 9901.105--Coordination with OPM
Section 9901.106--Continuing Collaboration
Section 9901.107--Relationship to Other Provisions
Section 9901.108--Program Evaluation
Subpart B--Classification
Section 9901.201--Purpose
Section 9901.202--Coverage
Section 9901.203--Waivers
Section 9901.204--Definitions
Section 9901.211--Career Groups
Section 9901.212--Pay Schedules and Pay Bands
Section 9901.221--Classification Requirements
Section 9901.222--Reconsideration of Classification Decisions
Section 9901.231--Conversion of Positions and Employees to the
NSPS Classification System
Subpart C--Pay and Pay Administration
General Comments
Section 9901.301--Purpose
Section 9901.302--Coverage
Section 9901.303--Waivers
Section 9901.304--Definitions
Section 9901.311--Major Features
Section 9901.312--Maximum Rates
Section 9901.313--National Security Compensation Comparability
Section 9901.321--Structure
Section 9901.322--Setting and Adjusting Rate Ranges
Section 9901.323--Eligibility for Pay Increase Associated with a
Rate Range Adjustment
Section 9901.331--General
Section 9901.332--Local Market Supplements
Section 9901.333--Setting and Adjusting Local Market Supplements
Section 9901.334--Eligibility for Pay Increase Associated with a
Supplement Adjustment
Section 9901.341--General
Section 9901.342--Performance Payouts
Section 9901.343--Pay Reduction Based on Unacceptable
Performance and/or Conduct
Section 9901.344--Other Performance Payments
Section 9901.345--Treatment of Developmental Positions
Section 9901.351--Setting an Employee's Starting Pay
Section 9901.352--Setting Pay Upon Reassignment
Section 9901.353--Setting Pay Upon Promotion
Section 9901.354--Setting Pay Upon Reduction in Band
Section 9901.355--Pay Retention
Section 9901.356--Miscellaneous
Section 9901.361--General
Section 9901.371--General
Section 9901.372--Creating Initial Pay Ranges
Section 9901.373--Conversion of Employees to the NSPS Pay System
Subpart D--Performance Management
General Comments
Section 9901.401--Purpose
Section 9901.402--Coverage
Section 9901.403--Waivers
Section 9901.404--Definitions
Section 9901.405--Performance Management System Requirements
Section 9901.406--Setting and Communicating Performance
Expectations
Section 9901.407--Monitoring Performance and Providing Feedback
Section 9901.408--Developing Performance and Addressing Poor
Performance
Section 9901.409--Rating and Rewarding Performance
Subpart E--Staffing and Employment
General Comments
Section 9901.501--Purpose
Section 9901.502--Scope of Authority
Section 9901.503--Coverage
Section 9901.504--Definitions
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Section 9901.511--Appointing Authorities
Section 9901.512--Probationary Periods
Section 9901.513--Qualification Standards
Section 9901.514--Non-Citizen Hiring
Section 9901.515--Competitive Examining Procedures
Section 9901.516--Internal Placement
Subpart F--Workforce Shaping
General Comments
Section 9901.601--Purpose and Applicability
Section 9901.602--Scope of Authority
Section 9901.603--Definitions
Section 9901.604--Coverage
Section 9901.605--Competitive Area
Section 9901.606--Competitive Group
Section 9901.607--Retention Standing
Section 9901.608--Displacement, Release, and Position offers
Section 9901.609--Reduction in force Notices
Section 9901.610--Voluntary Separation
Section 9901.611--Reduction in force Appeals
Subpart G--Adverse Actions
General Comments
Section 9901.701--Purpose
Section 9901.702--Waivers
Section 9901.703--Definitions
Section 9901.704--Coverage
Section 9901.711--Standard for Action
Section 9901.712--Mandatory Removal Offenses
Section 9901.714--Proposal Notice
Section 9901.715--Opportunity to Reply
Section 9901.716--Decision Notice
Section 9901.717--Departmental Record
Subpart H--Appeals
General Comments
Section 9901.802--Applicable Legal Standards and Precedents
Section 9901.803--Waivers
Section 9901.804--Definitions
Section 9901.805--Coverage
Section 9901.806--Alternative Dispute Resolution
Section 9901.807--Appellate Procedures
Section 9901.808--Appeals of Mandatory Removal Actions
Section 9901.809--Actions Involving Discrimination
Subpart I--Labor-Management Relations
General Comments
Section 9901.901--Purpose
Section 9901.902--Scope of Authority
Section 9901.903--Definitions
Section 9901.904--Coverage
Section 9901.905--Impact on Existing Agreements
Section 9901.906--Employee Rights
Section 9901.907--National Security Labor Relations Board
Section 9901.908--Powers and Duties of the Board
Section 9901.909--Powers and Duties of the Federal Labor
Relations Authority
Section 9901.910--Management Rights
Section 9901.911--Exclusive Recognition of Labor Organizations
Section 9901.912--Determination of Appropriate Units for Labor
Organization Representation
Section 9901.913--National Consultation
Section 9901.914--Representation Rights and Duties
Section 9901.916--Unfair Labor Practices
Section 9901.917--Duty to Bargain and Consult
Section 9901.918--Multi-Unit Bargaining
Section 9901.919--Collective Bargaining Above the Level of
Recognition
Section 9901.920--Negotiation Impasses
Section 9901.921--Standards of Conduct for Labor Organizations
Section 9901.922--Grievance Procedures
Section 9901.923--Exceptions to Arbitration Awards
Section 9901.924--Official Time
Section 9901.925--Compilation and Publication of Data
Section 9901.926--Regulations of the Board
Section 9901.927--Continuation of Existing Laws, Recognitions,
Agreements, and Procedures
Section 9901.928--Savings Provisions
Next Steps
NSPS Implementation
Employee Transition Plan (Spiral Strategy)
HR and Labor Relations Transition
Development of Implementing Issuances and Continuing
Collaboration Training
Regulatory Requirements
E.O. 12866--Regulatory Review
Regulatory Flexibility Act
E.O. 12988--Civil Justice Reform
E.O. 13132--Federalism
Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35)
Unfunded Mandates
Introduction
The Secretary of Defense, Donald Rumsfeld, and the Director of the
Office of Personnel Management, Linda M. Springer, jointly prescribe
this final regulation to establish a flexible and contemporary system,
consistent with statutory merit system principles and prohibitions
against prohibited personnel practices (in 5 U.S.C. 2301 and 2302,
respectively), for managing the Department's human capital. This system
has been developed pursuant to a process based on extensive outreach to
employees and employee representatives. In addition, DoD and OPM have
engaged in outreach to the public as well as to the Congress and other
key stakeholders. As enacted by section 1101 of the National Defense
Authorization Act (Pub. L. 108-136, November 24, 2003, hereinafter
referred to as ``enabling legislation'' or ``enabling statute'') and
codified at 5 U.S.C. 9902, the system preserves all core civil service
protections, including merit system principles, veterans' preference,
and due process. It also protects against discrimination, retaliation
against whistleblowers, and other prohibited personnel practices, and
ensures that employees may organize and bargain collectively (when not
otherwise prohibited by law, including these regulations, applicable
Executive orders, and any other legal authority).
This Supplementary Information addresses the following areas:
The Case for Action
Summary of the Design Process
[cir] Strategic Engagement and Establishment of the Program
Executive Office
[cir] Development of Design Options
[cir] Meet-and-Confer Process
Major Issues
Response to Specific Comments and Detailed Explanation of
Regulations
Next Steps
The Case for Action
``* * * a future force that is defined less by size and more by
mobility and swiftness, one that is easier to deploy and sustain,
one that relies more heavily on stealth, precision weaponry, and
information technologies.''
With that statement on May 25, 2001, President Bush set a new
direction for defense strategy and defense management--one toward
transformation. On January 31, 2002, Secretary of Defense Donald
Rumsfeld echoed the sentiments expressed by President Bush, stating
that ``[a]ll the high-tech weapons in the world will not transform the
U.S. armed forces unless we also transform the way we think, the way we
train, the way we exercise, and the way we fight.''
Transformation is more than acquiring new equipment and embracing
new technology--it is the process of working and managing creatively to
achieve real results. To transform the way DoD achieves its mission, it
must transform the way it leads and manages the people who develop,
acquire, and maintain our Nation's defense capability. Those
responsible for defense transformation--including DoD civilian
employees--must anticipate the future and wherever possible help create
it. The Department must seek to develop new capabilities to meet
tomorrow's threats as well as those of today. NSPS is a key pillar in
the Department of Defense's transformation--a new way to manage its
civilian workforce. NSPS is essential to the Department's efforts to
create an environment in which the Total Force (military personnel,
civilian employees, and contractors) thinks and operates as one
cohesive unit.
DoD civilians are unique in government: They are an integral part
of an organization that has a military function. DoD civilians must
complement and support the military around the world in every time
zone, every day. Just as new threats, new missions, new technology, and
new tactics are changing the work of the military, they are changing
the work of our 700,000 civilians. To support the
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interests of the United States in today's national security
environment--where unpredictability is the norm and greater agility the
imperative--civilians must be an integrated, flexible, and responsive
part of the team.
At best, the current personnel system is based on 20th century
assumptions about the nature of public service and cannot adequately
address the 21st century national security environment. Although the
current Federal personnel management system is based on important core
principles, those principles are operationalized in an inflexible, one-
size-fits-all system of defining work, hiring staff, managing people,
assessing and rewarding performance, and advancing personnel. These
inherent weaknesses make support of DoD's mission complex, costly, and
ultimately risky. Currently, pay and the movement of personnel are
pegged to outdated, narrowly defined work definitions; hiring processes
are cumbersome; high performers and low performers are paid alike; and
the labor system encourages a dispute-oriented, adversarial
relationship between management and labor. These systemic
inefficiencies detract from the potential effectiveness of the Total
Force. A more flexible, mission-driven system of human resources
management that retains those core principles will provide a more
cohesive Total Force. The Department's 20 years of experience with
transformational personnel demonstration projects, covering nearly
30,000 DoD employees, has shown that fundamental change in personnel
management has positive results on individual career growth and
opportunities, workforce responsiveness, and innovation; all these
things multiply mission effectiveness.
The immense challenges facing DoD today require a civilian
workforce transformation: Civilians are being asked to assume new and
different responsibilities, take more risk, and be more innovative,
agile, and accountable than ever before. It is critical that DoD
supports the entire civilian workforce with modern systems--
particularly a human resources management system and a labor relations
system that support and protect their critical role in DoD's Total
Force effectiveness. The enabling legislation provides the Department
of Defense with the authority to meet this transformation challenge.
More specifically, the law provides the Department and OPM--in
collaboration with employee representatives--authority to establish a
flexible and contemporary system of civilian human resources management
for DoD civilians. The attacks of September 11 and the continuing war
on terrorism make clear that flexibility is not a policy preference. It
is nothing less than an absolute requirement, and it must become the
foundation of DoD civilian human resources management.
NSPS is designed to promote a performance culture in which the
performance and contributions of the DoD civilian workforce are more
fully recognized and rewarded. The system offers the civilian workforce
a contemporary pay-banding construct, which will include performance-
based pay. As the Department moves away from the General Schedule
system, it will become more competitive in setting salaries and it will
be able to adjust salaries based on various factors, including labor
market conditions, performance, and changes in duties. The HR
management system is a foundation for a leaner, more flexible support
structure and will help attract skilled, talented, and motivated
people, while also retaining and improving the skills of the existing
workforce.
Despite the professionalism and dedication of DoD civilian
employees, the limitations imposed by the current personnel system
often prevent managers from using civilian employees effectively. The
Department sometimes uses military personnel or contractors when
civilian employees could have and should have been the right answer.
The current system limits opportunities for civilians at a time when
the role of DoD's civilian workforce is expanding to include more
significant participation in Total Force effectiveness. NSPS will
generate more opportunities for DoD civilians by easing the
administrative burden routinely required by the current system and
providing an incentive for managers to turn to them first when certain
vital tasks need doing. This will free uniformed men and women to focus
on matters unique to the military.
The law requires the Department to establish a contemporary and
flexible system of human resources management. DoD and OPM crafted NSPS
through a collaborative process involving management, employees, and
employee representatives. DoD leadership will ensure that supervisors
and employees understand the new system and can function effectively
within it. The system retains the core values of the civil service and
allows employees to be paid and rewarded based on performance,
innovation, and results. In addition, the system provides employees
with greater opportunities for career growth and mobility within the
Department.
A key to the success of NSPS is ensuring employees perceive the
system as fair. In a human resources management system, fairness is the
basis for trust between employees and supervisors. The Department's
mission cannot be accomplished without the workforce. It is a tenet of
the Department that employees will exercise personal responsibility and
sustain a high level of individual performance and teamwork when they
perceive that the human resources system and their supervisors are
fair.
The Department and the Office of Personnel Management are
addressing fairness in the National Security Personnel System in
several dimensions: System design; the right to seek review of
important categories of management decisions; workforce access to
information about system provisions, processes, and decision criteria;
and accountability mechanisms.
NSPS regulations and implementing issuances will include rules to
guard against arbitrary actions. Examples include written performance
expectations, the guarantee that employees rated higher than
``unacceptable'' will receive the full minimum by which their pay rate
range is adjusted, the requirement to prescribe the conditions for
probationary periods established by the Secretary, public notice of
vacancies when the Department is recruiting externally, and prohibition
against establishing reduction in force competitive areas that target
an individual employee on the basis of non-merit factors.
NSPS continues employees' and labor organizations' rights to
challenge or seek review of key decisions. For example, all employees
will be able to request reconsideration of their performance ratings
through an administrative grievance procedure. Bargaining unit
employees will also have the option of using a negotiated grievance
procedure. Employees must be notified in advance of a proposed adverse
action, be given time and opportunity for reply, and be given a
decision notice that includes the reasons for the decision. Labor
organization officials may file unfair labor practice claims or
grievances.
The Department and its Components will make information about NSPS
rules, policies, and practices readily available to the workforce in
the form of published regulations, published implementing issuances,
local level instructions, training, and other sources.
The last dimension of accountability for fair decisions and
practices under NSPS will call on two major streams of information.
First, human resources management accountability reviews
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within the Department will be used to identify and address issues
regarding the observance of merit system principles and regulatory and
policy requirements, including those established under NSPS. In
addition, the Department will monitor the outcomes of administrative
and negotiated grievances, performance rating reconsiderations, equal
employment opportunity complaints, and whistleblower complaints to
correct chronic problems and particular failings.
The second stream will be NSPS program evaluation findings. These
will enable the Secretary and the Director to determine whether the
design of NSPS and the pattern of its results meet statutory
requirements like fairness and equity and the specific performance
expectations of the NSPS Requirements Document for a credible and
trusted system. Section 9901.108 of these final regulations codifies
the requirement for NSPS program evaluation. It opens to designated
employee representatives the design and results of evaluations of
particular NSPS aspects so that they can provide comments and
recommendations to help ensure balanced and fair methods and
conclusions. A robust and long-term NSPS program evaluation plan of
studies and reviews, transactional data analyses, opinion surveys, and
other evaluative methods will be fielded with NSPS implementation.
Fairness in NSPS is not a specific thing, but rather an intrinsic
quality being built into the design of a flexible human resources
management system--one to be accounted for during reviews and
evaluations of NSPS operations and decisions.
A. Pay and Classification
The NSPS pay and classification system will provide a more flexible
support structure that will help attract skilled, talented, workers;
retain and appropriately reward current employees; and create
opportunities for civilians to participate more fully in the total
integrated workforce. A pay banding structure will replace the
artificial limitations created by the current pay and classification
systems. With broad pay bands, the Department will be able to move
employees more freely across a range of work opportunities without
being bound by narrowly described work definitions. The pay structure
will be much more responsive to market conditions. The Department will
be able to adjust rate ranges and local market supplements based on
variations relating to specific occupations, rather than the current
one-size-fits all approach. Labor market conditions will also be
considered when making pay-setting decisions. As prescribed in the
enabling legislation, the new compensation system will better link
individual pay to performance using performance rather than time on the
job to determine pay increases.
B. Performance Management
In recognition of the increased importance of performance in making
pay and retention decisions, the Department has created a much more
robust performance management system.
The Department will use a multi-level system that makes
distinctions in levels of employee performance. The system will link
employee achievements, contributions, knowledge, and skills to
organizational results. It will also allow the Department to better
recognize and support team contributions and accomplishments.
Performance expectations will be clearly communicated to employees and
will be linked to the organization's strategic goals and objectives.
The ability to recognize valid distinctions in performance and reward
employees based on those distinctions will foster a high performance
culture within the Department.
C. Staffing, Employment and Workforce Shaping
NSPS will retain the merit system principles and veterans'
preference while giving the Department the flexibility necessary to
streamline the hiring process and adapt quickly to critical mission
needs. The Department will be able to use direct-hire authority for
severe shortage or critical needs. NSPS will also provide for a more
efficient process for creating appointing authorities, in conjunction
with the Office of Personnel Management, as new requirements emerge. As
part of this process, the system provides for transparency and public
awareness through notice in the Federal Register. The new pay-setting
flexibilities will also enhance the Department's ability to attract and
retain the talented workforce necessary to accomplish its mission.
Through workforce shaping flexibilities, the Department will create
a reduction in force system that places more emphasis on performance
while continuing to protect veterans' preference rights. The downsizing
process will be less disruptive to employees and the mission. The
Department will continue to fully utilize tools such as separation
incentives and the Priority Placement Program to avoid and mitigate the
impact of any reductions it faces.
D. Adverse Actions and Appeals
Consistent with the enabling legislation, the final regulations
streamline and simplify adverse actions and appeals procedures, but
without compromising due process for DoD employees. Employees will
still receive notice of a proposed adverse action, the right to reply,
and the right to appeal to the Merit Systems Protection Board (MSPB).
In the proposed regulations, we proposed to replace the two existing
authorities and adopt a single process and standard for all actions
whether based on unacceptable performance or misconduct. In doing so,
we proposed to adopt the higher of the two current burdens of proof--
``preponderance of the evidence''--rather than the lower standard--
``substantial evidence.'' We have retained this higher burden of proof.
In addition, the final regulations clarify that the full MSPB's
standard for review is as specified in the enabling legislation. The
final regulations retain authority for the Secretary to establish a
number of mandatory removal offenses (MROs) that have a direct and
substantial adverse effect on the Department's national security
mission. The final regulations also retain authority for the Department
to review decisions of MSPB Administrative Judges who are the first
step in the NSPS appeals process.
E. Labor Management Relations
To ensure that the Department has the flexibility to carry out its
vital mission, as authorized by the enabling legislation, the
regulations, among other things, revise management's rights and its
duty to bargain to ensure that the Department can act as and when
necessary. Collective bargaining is prohibited on such critical matters
as procedures observed in making work assignments and deployments
unless the Secretary, in his or her sole, exclusive, and unreviewable
discretion, elects to bargain. The Secretary may authorize bargaining
on these matters to advance the Department's mission accomplishment or
promote organizational effectiveness. If the Secretary does not elect
to bargain procedures on these matters, consultation is required.
Management and exclusive representatives will negotiate over changes
that have foreseeable, significant, and substantial impact, as well as
appropriate arrangements for employees affected by those changes, under
certain specified conditions. Additionally, the regulations create the
National Security
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Labor Relations Board (NSLRB) to address those issues that are most
important to accomplishing the DoD mission, with other matters retained
by the Federal Labor Relations Authority (FLRA). The regulations
provide the Secretary discretion as to when the NSLRB will be in place.
The regulations also provide the Secretary discretion, in consultation
with the Director, to designate another third party to exercise the
authority of the Board in the interim. The revisions to the regulations
strike the right balance between the mission needs of DoD and the
meaningful involvement of employees and their representatives.
Development of the National Security Personnel System
A. Strategic Engagement and Establishment of Program Executive Office
While dialogue with employee representatives began in January 2004,
in April senior DoD leadership initiated a collaborative process to
design and implement NSPS. This process was crafted by a group of 25 to
30 senior experts representing DoD, OPM, and the Office of Management
and Budget. The Defense Acquisition Management model was used to
establish the requirements for the design and implementation of NSPS,
including Guiding Principles and Key Performance Parameters (KPPs),
which defined the minimum requirements for NSPS. The Honorable Gordon
R. England was appointed by the Secretary of Defense as the NSPS Senior
Executive. As the NSPS Senior Executive, Secretary England established
the NSPS Program Executive Office (PEO) as the central DoD policy and
program office to conduct the design, planning and development,
deployment, assessment, and full implementation of NSPS.
The entire process was accomplished jointly with OPM. An integrated
executive management team composed of senior DoD and OPM leaders
provided overall policy and strategic advice to the PEO and served as
staff to the Senior Executive.
B. Development of Design Options
Guiding Principles and Key Performance Parameters
In setting up the process for the design of the system, senior
leadership adopted a set of Guiding Principles as a compass to direct
efforts throughout all phases of NSPS development. They translate and
communicate the broad requirements and priorities outlined in the
enabling legislation into concise, understandable requirements that
underscore the Department's purpose and intent in creating NSPS. The
Guiding Principles are:
Put mission first--support National Security goals and
strategic objectives;
Respect the individual--protect rights guaranteed by law;
Value talent, performance, leadership and commitment to
public service;
Be flexible, understandable, credible, responsive, and
executable;
Ensure accountability at all levels;
Balance HR interoperability with unique mission
requirements; and
Be competitive and cost effective.
In addition, senior leadership approved a set of Key Performance
Parameters (KPPs), which define the minimum requirements and/or
attributes of the system. Those KPPs are summarized below:
High Performing: Employees/supervisors are compensated/
retained based on performance/contribution to mission;
Agile and Responsive: Workforce can be easily sized,
shaped, and deployed to meet changing mission requirements;
Credible and Trusted: System assures openness, clarity,
accountability and merit principles;
Fiscally Sound: Aggregate increases in civilian payroll,
at the appropriations level, will conform to OMB fiscal guidance, and
managers will have flexibility to manage to budget;
Supporting Infrastructure: Information technology support
and training and change management plans are available and funded; and
Schedule: NSPS will be operational and demonstrate success
prior to November 2009.
Communications During the Design Process
In undertaking a project of this magnitude, impacting over 700,000
civilians of the Department, it was essential to ensure the
availability of information on the new HR and labor relations systems.
It was also critical to solicit the views and ideas of employees,
employee representatives and other stakeholders.
In April 2004, the PEO developed and implemented a communications
strategy. The objectives of DoD's communications strategy are to (1)
demonstrate the rationale for and benefits of NSPS; (2) demonstrate
openness and transparency in the design and process of converting to
NSPS; (3) express DoD's commitment to ensuring NSPS is applied fairly
and equitably; and (4) address potential criticism of NSPS.
The PEO identified numerous channels for disseminating relevant,
timely, and consistent information. These include: Print and electronic
media; e-mail; town hall meetings; focus groups; speeches; and
briefings. A website was developed to serve as a primary, two-way
communications tool for the workforce, other stakeholders, and the
general public. The website includes the capability for visitors to
submit questions and comments. The PEO has responded to thousands of
questions and comments.
The website will remain available during implementation and will
provide current information for managers, supervisors and employees.
Outreach to Employee Representatives
In January and February 2004, we met with union leaders for the
purpose of exchanging ideas and interests on a new labor relations
system. All unions holding DoD national consultation rights (NCR) at
the time were invited to the January 22, 2004, meeting. Seven of these
eight NCR unions elected to attend. In addition, one additional union
without DoD national consultation rights was invited to attend and
participated in the January 22, 2004, meeting. Union leadership from
all of the 43 unions representing DoD employees were invited to attend
and participate in the February 26-27, 2004, meeting. Twenty-six unions
attended and participated in the February 2004 meeting.
In the spring of 2004 and continuing over the course of several
months, we sponsored a series of additional meetings with union
leadership to discuss design elements of NSPS. Officials from DoD and
OPM met throughout the summer and fall with union officials
representing many of the DoD civilians who are bargaining unit
employees. These sessions provided the opportunity to discuss the
design elements, options, and proposals under consideration for NSPS
and solicit union feedback.
During this time, 10 meetings (in addition to the 2 meetings held
in January and February 2004) were held with officials of the 43 unions
that represent DoD employees, including the 9 unions that currently
have national consultation rights. These union officials represent over
1,500 separate bargaining units covering about 450,000 employees. These
meetings involved as many as 80 union leaders from the national and
local level at any one time, and addressed a variety of topics,
including: The reasons change is needed and the Department's interests;
employee communications; and
[[Page 66121]]
proposed design options in the areas of labor relations and collective
bargaining, adverse actions and appeals, and pay and performance
management.
Outreach to Employees
In keeping with DoD's commitment to provide employees and managers
an opportunity to participate in the development of NSPS, the PEO
sponsored a number of Focus Group sessions and town hall meetings at
various sites across DoD. In mid-July 2004, a total of 106 focus groups
were held throughout DoD, including overseas locations. Separate focus
groups were held for employees, civilian and military supervisors, and
managers and practitioners from HR, legal and EEO communities.
Bargaining unit employees and union leaders were invited to
participate. For the major system design elements, focus group
participants were asked what they thought worked well in the current HR
systems and what they thought should be changed. Over 10,000 comments,
ideas and suggestions received during the focus group sessions were
summarized and provided to NSPS Working Groups for use in developing
options for the labor relations, appeals, adverse actions, and human
resources design elements of NSPS.
In addition, town hall meetings were held in DoD facilities around
the world during the summer of 2004, providing an opportunity to
communicate with the workforce, provide the status of the design and
development of NSPS, and solicit thoughts and ideas. The NSPS Senior
Executive, Secretary England, conducted the first town hall meeting at
the Pentagon on July 7, 2004. Some of the town hall meetings were
broadcast live, as well as videotaped and rebroadcast on military
television channels and websites to facilitate the widest possible
dissemination.
Outreach to Other Stakeholders
In addition to reaching out to DoD employees and labor
organizations, DoD and OPM met with other groups who were thought to be
interested in the design of a new HR system for DoD. DoD and OPM
invited selected stakeholders to participate in briefings held at OPM
in August and September 2004.
Those invited to the briefings included: Public interest groups,
such as the National Academy of Public Administration (NAPA), Coalition
for Effective Change, and Partnership for Public Service; veterans'
service organizations; and non-union employee advocacy groups. Both
before and after these briefings, DoD and OPM responded to dozens of
requests for special briefings. DoD and OPM also met with the
Government Accountability Office, Office of Management and Budget, and
Department of Homeland Security to keep them up to date on the team's
activities; and consulted with the Merit Systems Protection Board on
the appeals process to ensure that it provides employees the
protections of due process.
Development of Design Options--Working Groups
In order to incorporate all the information and develop options,
the PEO established functionally aligned Working Groups. Over 120
employees representing the Military Departments (Army, Navy, Air
Force), other DoD Components, and OPM participated in the process.
The Working Groups reviewed all available information, including:
Pertinent laws, rules, regulations; input from NSPS focus groups and
town hall; union consultation meetings; data review and analysis from
alternative personnel systems and laboratory and acquisition
demonstration projects; the enabling legislation; and Guiding
Principles and Key Performance Parameters. In addition, subject matter
experts briefed the Working Groups on a variety of topics, such as pay-
for-performance systems, alternative personnel systems, pay pool
management, and market sensitive compensation systems.
In developing options for the NSPS, the Working Groups benefited
from the Government's experience under demonstration project
authorities (e.g. the China Lake Demonstration Project originally
authorized by section 6 of the Civil Service Miscellaneous Amendments
Act of 1983; the Defense reinvention laboratory demonstration projects
authorized by section 342 of the National Defense Authorization act for
fiscal year 1995, as amended; and the Acquisition Workforce
Demonstration Project, authorized be section 4308 of the National
Defense Authorization Act for fiscal year 1996, as amended) and
alternative personnel systems (e.g. the Defense Intelligence Personnel
System, the Government Accountability Office, and the Federal Aviation
Administration), the DoD ``Best Practices'' initiative (68 FR 16120,
April 2, 2003), and the compilation of research materials from the
Department of Homeland Security HR Systems Design process.
At the conclusion of the process, the Working Groups provided a set
of options covering a broad range of variations on the six areas of
focus: (1) Compensation (classification and pay banding); (2)
performance management; (3) hiring, assignment, pay setting, and
workforce shaping; (4) employee engagement; (5) adverse action and
appeals; and (6) labor relations. Each option was evaluated against the
Guiding Principles and KPPs.
Potential options presented a wide range of views and concerns. The
PEO and senior leaders representing organizations within DoD reviewed
all the options. After extensive discussion, the selected options were
presented to the Overarching Integrated Product Team (OIPT) for review
and the Senior Executive for approval.
Publication of Proposed Regulations
These extensive and collaborative design efforts all preceded the
formal process for developing the new HR and labor relations systems.
The enabling legislation established a formal process in this regard,
officially beginning when the Secretary and the Director published
proposed regulations to establish the new DoD HR and labor relations
systems in the Federal Register on February 14, 2005. The process was
designed to ensure collaboration with employee representatives in the
design and implementation of the new HR and labor relations systems.
The first formal step provided a 30-day period for the public,
employees, and employee representatives to review and submit formal
comments on the proposed system. The second step provided for a minimum
of 30 days to ``meet and confer'' with employee representatives in
order to attempt to reach agreement on the design of the new system.
The third step required notification to Congress on the decision to
implement the new system. The new system becomes effective 30 days
after congressional notification.
C. Public Comments
In response to the proposed rule, the Department received 58,538
comments during 30-day public comment period. The Department received
comments from a wide variety of individuals including DoD civilian and
military personnel, DoD organizations, labor organizations, other
Federal agencies, Members of Congress and the general public. At the
conclusion of the public comment period, and continuing over the next
several months, DoD and OPM staff reviewed and analyzed the comments.
In general, the comments ranged from overall rejection of the
proposed regulations to enthusiastic acceptance. Many comments focused
on the need for
[[Page 66122]]
fairness in the system and the need for training of employees and
managers. Concerns were expressed about maintaining due process and the
scope of bargaining.
Many of the comments were from national labor organizations and
their members.\1\ Almost 80 percent of the comments were form letters
submitted by email or letter.\2\ The form letters expressed general
opposition to the proposed regulations. These submissions expressed
concerns that the proposed regulations lacked sufficient specificity.
The comments also expressed a desire to remain with the current system,
citing too much power being given to managers and supervisors, with no
corresponding accountability. Specific concerns included: Adequate
funding of pay pools; deployment of civilians to war zones; and the
lack of third-party review for performance appraisals, adverse actions
and labor disputes. There was also concern that the regulations did not
adhere to congressional intent to maintain the requirements of the
applicable labor relations statutes. Approximately 415 of the
commenters included substantive analysis of the proposed regulations.
Virtually all of these comments favor some changes, along with a wide
variety of views on the merits of the proposed regulations.
---------------------------------------------------------------------------
\1\ DoD has 43 different unions representing over 1,500 separate
bargaining units covering about 450,000 employees. In the spring of
2004, thirty-six unions joined together to form the United
Department of Defense Workers Coalition (``the Coalition'').
\2\ There were 41 different form letters totaling 43,714
comments. An additional 1,850 form letters were received with
additional comments added by the commenter.
---------------------------------------------------------------------------
Acknowledging that there are strong views on the proposals
presented, DoD and OPM reviewed and carefully considered all the
comments and the arguments made for and against the proposed changes.
The major comments received on the proposed regulatory changes are
summarized below, together with a discussion of the changes made as a
result of the comments. Also summarized are the suggestions for changes
considered where no change is being made. In addition to the more
substantive comments discussed below, a number of editorial suggestions
were made, some of which have been adopted and others which have not. A
number of other changes have been made to better organize or structure
the regulatory text. Finally, we received a number of comments on
issues that go beyond the scope of these regulations, which are not
addressed in the discussion that follows.
D. The Meet-and-Confer Process
The public comment period was followed by the second step in the
formal development process--an additional 30-day period during which
DoD and OPM representatives were to meet and confer with employee
representatives to resolve differences over the proposed regulations
wherever possible.
The meet-and-confer process began officially in April 2005. On
April 8, 2005, a meeting with labor organizations was held to discuss
procedures to be followed during the meet-and-confer process.
The following principals participated in the meet-and-confer
process:
Forty-three labor organizations were invited to
participate. Thirty-six of those labor organizations were represented
by a ``coalition'' led by the AFL-CIO, and were authorized to send an
unlimited number of representatives. Eighteen of the labor
organizations chose to send representatives. The actual number of
representatives present in the room typically ranged from 25 to 50.
The coalition includes: American Federation of State,
County and Municipal Employees (AFSCME); American Nurses Assn. (ANA);
Antilles Consolidated Education Assn. (ACEA); Assn. of Civilian
Technicians (ACT); American Federation of Government Employees (AFGE);
American Federation of Teachers (AFT); Communications Workers of
America (CWA); Fairchild Federal Employees Union (FFEU); Federal
Education Assn. (FEA); Int'l. Assn. of Machinists and Aerospace Workers
(IAMAW); Graphic Communications International Union (GCIU); Hawaii
Council of Commissary Dept. of Defense Unions (HCCDU); Int'l.
Brotherhood of Boilermakers; Int'l. Assn. of Fire Fighters (IAFF);
Int'l. Assn. of Tool Craftsman (IATC); Int'l. Brotherhood of Electrical
Workers (IBEW); Int'l. Brotherhood of Teamsters, Chauffeurs,
Warehousemen and Helpers of America (IBT); Int'l. Guard Union of
America (IGUA); Int'l. Union of Operating Engineers (IUOE); Int'l.
Union of Painters and Allied Trades (IUPAT); Int'l. Federation of
Professional and Technical Engineers (IFPTE); Int l. Organization of
Masters, Mates and Pilots (IOMMP); Laborers International Unions
(LIUNA); National Marine Engineers Beneficial Assn. (MEBA); Metal
Trades Dept./AFL-CIO (MTD); National Assn. of Aeronautical Examiners
(NAAE); National Air Traffic Controller Assn. (NATC); National
Federation of Federal Employees (NFFE); National Assn. of Gov.
Employees (NAGE); Professional Airways Systems Specialists (PASS);
Retail Wholesale, and Department Store Union (RWDSU); Seafarers Int'l.
Union of North America (SIUNA); Service Employees International Union
(SEIU); Sheet Metal Workers Int'l. Assn. (SMWIA); Sport Air Traffic
Controllers (SPORT); United Assn. of Journeymen and Apprentices of the
plumbing, sprinkler fitting industry of the U.S. and Canada (UA);
United Nurses Assn. of California (UNAC); and United Power Trades Org.
(UPTO)
Other unions also participated in the meet-and-confer
process. These include: Fraternal Order of Police (FOP) and the
National Assn. of Independent Labor (NAIL).
Five representatives from DoD, including the Principal
Deputy Under Secretary of Defense (Personnel and Readiness), the
Program Executive Officer, the Deputy PEO, and two senior program
managers.
Two senior executives from the Office of Personnel
Management (OPM) and various senior program managers as necessary.
The Secretary, in consultation with the Acting Director,\3\ also
requested the services of the Federal Mediation and Conciliation
Service for the entire meet-and-confer process. Face-to-face meet-and-
confer sessions occurred from April 18, 2005, through June 2, 2005.
During that period, the parties met for 19 days, with other days spent
preparing for meetings and exchanging recommendations for amendments to
the regulations. The Department provided 36 written recommendations to
revise the regulations as well as 14 recommended clarifications of
intent. The unions presented revised regulations for each subpart of
the proposed regulations in addition to other revisions covering such
topics as--exigencies and post-implementation bargaining, implementing
issuances, and third-party review of performance appraisals and adverse
actions. At the conclusion of the meet-and-confer process, the NSPS
Senior Executive and the Acting Director of OPM met with
representatives from the labor organizations in mid-June 2005, to
provide them with an opportunity to present their issues and concerns
directly to the principals.
---------------------------------------------------------------------------
\3\ During this period of time, the Honorable Dan Blair was
Acting Director of the Office of Personnel Management. On June 28,
2005, the Honorable Linda M. Springer was sworn in as OPM's
Director.
---------------------------------------------------------------------------
The review of the public comments and the proposals during the
meet-and-confer process has led to significant revisions of the
proposed regulations. Some of the revisions are substantial,
[[Page 66123]]
such as extending employees the right to grieve performance ratings of
record, restricting authority to issue implementing issuances \4\ that
supersede inconsistent provisions of collective bargaining agreements,
changing the standard for mitigating penalties, providing an
opportunity for labor organizations to submit names of potential
members of the NSLRB, and retaining the current interest of justice
standard for payment of attorney fees. Other revisions are purely
technical.
---------------------------------------------------------------------------
\4\ Implementing issuances are defined in Sec. 9901.103 of the
regulations. Issuances are defined in Sec. 9901.903.
---------------------------------------------------------------------------
Significant differences with many of the labor organizations remain
over such issues as the scope of bargaining, implementing issuances
that supersede conflicting provisions of collective bargaining
agreements, the specificity of the regulations, the ability to grieve
pay decisions, the use of behavior as part of performance evaluation
and the use of performance in a reduction in force. These differences
cannot be reconciled with the need for a contemporary and flexible
system of human resources management as DoD seeks to transform the
civilian part of the Total Force of military personnel, civilian
employees, and DoD contractors. The current system limits opportunities
for civilians at a time when the role of DoD's civilian workforce is
expanding to include more significant participation in Total Force
effectiveness. NSPS will generate more opportunities for DoD civilians
by easing the administrative burden routinely required by the current
system. It will provide an incentive for managers to (1) identify
military positions that can be converted to civilian and (2) to turn to
civilians first when certain vital tasks need doing. This will free
military men and women to focus on matters unique to the military,
while greatly increasing the role of the Department's civilian
employees. The need for a flexible and contemporary system to support
the Department's national security mission is nothing less than an
absolute requirement and it must become the foundation of DoD civilian
human resources management.
Where we indicate agreement in this Supplementary Information, we
are referring to agreements reached between DoD and OPM, after
consideration of public comments and proposals made during the meet-
and-confer process, rather than to agreements reached between
management and labor organization representatives during the meet-and-
confer process.
Major Issues
The 58,538 public comments, in addition to the face-to-face
discussions during the meet-and-confer process, clearly defined the
issues that were of most concern to DoD civilians potentially covered
by all or parts of NSPS. Major issues identified were as follows: (a)
Specificity of the Regulations; (b) Pay for Performance and Pay Pool
Funding; (c) Adverse Actions and Appeals; (d) Mandatory Removal
Offenses; (e) Labor Relations; (f) Management Rights/Scope and Duty to
Bargain; and (g) Independence of the NSLRB. Because these issues are
critical to understanding the objectives of the Department's new HR and
labor relations systems, as well as the implementation of NSPS, we have
given them particular attention in the following sections of this
SUPPLEMENTARY INFORMATION.
a. Specificity of the Regulations
A significant issue raised in the public comments and during the
meet-and-confer process concerns the lack of specificity in the
proposed regulations. Many of the commenters recommended that the
regulations include far greater specificity, while others referred to
the inability to provide substantive comments on the proposed rule
without more information.
These comments and concerns focused almost exclusively on the
subparts establishing the HR system--those dealing with Subpart B--
Classification, Subpart C--Pay and Pay Administration, Subpart D--
Performance Management, Subpart E--Staffing and Employment, and Subpart
F--Workforce Shaping. Those subparts remain relatively general in
nature and expressly provide for the Department to develop implementing
issuances to carry out the policies established in accordance with
NSPS. In contrast, the subparts dealing with adverse actions, appeals,
and labor relations (subparts G, H, and I, respectively) are more
detailed, requiring fewer implementing issuances.
The law requires the Department to establish a contemporary and
flexible system of human resources management (see 5 U.S.C. 9902(b) (1)
and (2)). Of all of the various objectives set by Congress for this
system in the enabling legislation, flexibility was the very first
enumerated. Unnecessary and excessive detail in subparts B, C, D, E,
and F would undermine that objective. The regulations provide the
overall framework for the new HR system without the inflexible
requirements present in today's system. In response to these comments,
and as a result of the meet-and-confer process, we have added greater
detail to certain sections of the subparts at issue. These additions
are documented at length in our responses to the detailed comments that
follow.
However, even with added detail, all five of the subparts at issue
retain their original structure in the final regulations, establishing
a general policy framework to be supplemented by detailed Departmental
implementing issuances. We believe this is the appropriate approach,
providing the Department the flexibility it requires in implementing an
HR system of this scope.
Labor organization comments focus primarily on process, asserting
that by including greater detail in the proposed regulations, they
would have been given an opportunity to participate and provide input
to the final regulations via the statutory meet-and-confer process set
forth in 5 U.S.C. 9902(f)(1)(A)-(C). Among other things, that statutory
process requires the Department and OPM to provide employee
representatives with an opportunity to comment on the proposed
regulations and, thereafter, meet with DoD and OPM officials (under the
auspices of the Federal Mediation and Conciliation Service, if
necessary) in an attempt to resolve any concerns and disagreements. As
the labor organizations and other commenters have correctly pointed
out, the proposed regulations did not provide for an analogous
opportunity with respect to the development of implementing issuances.
This became a major topic of discussion during the meet-and-confer
process, with labor organizations insisting that DoD and OPM either
include all implementing details in these final regulations or subject
the Department's implementing issuances to collective bargaining. We
did not adopt either alternative. Including such detail in these
regulations would not provide the Department the flexibility its
mission requires. In addition, collective bargaining over the content
of implementing issuances is prohibited by the enabling legislation.
In summary, the inflexibility of the current system required new
ways to meet the rapidly changing requirements for DoD civilians to
provide support to the military members. A standardized, yet flexible
DoD environment that promotes the growth of all employees and improves
the manager's ability to manage the workforce is essential. The
regulations were developed to provide the Department the ability to
maintain flexibility, while at the same time involving employee
representatives in
[[Page 66124]]
the details of new processes established through implementing
issuances.
Five of the subparts in these final regulations remain relatively
general in nature, providing broad policy parameters but leaving much
of the details to implementing issuances. We believe this structure,
patterned after the chapters in title 5 that they replace, is
appropriate. By providing for detailed implementing issuances, the
subparts dealing with Classification, Pay and Pay Administration,
Performance Management, Staffing and Employment, and Workforce Shaping
provide the Department with the flexibility mandated by Congress, and
they do so without compromising the Department's commitment to
substantive employee representative involvement in the development of
those implementing issuances.
b. Pay for Performance and Pay Pool Funding
The pay system we described in the proposed regulations was
designed to fundamentally change the way we pay employees in the
Department of Defense. Instead of a pay system based primarily on
tenure and time-in-grade, we proposed a system that bases individual
pay increases on performance. This proposal honors major points that
were debated by the Congress and agreed upon with the passage of the
enabling legislation. In addition, the proposed pay system would be far
more market-sensitive than the current pay system. The proposed changes
relating to classification, pay, and performance management were
designed to achieve these two primary goals.
A number of commenters agreed with the proposal to create a more
occupation-specific and market- and performance-based classification
and pay system. However, most commenters strongly recommended that we
maintain the status quo; that is, that DoD continue to rely on the
General Schedule (GS) and Federal Wage System (FWS) classification and
pay systems. Many commenters thought the proposed pay-for-performance
system would lower employee morale, increase competition among
employees, and undermine teamwork and cooperation. Some also questioned
the ability of the Department to successfully implement the proposed
system, or of DoD managers to establish and apply performance standards
fairly and consistently to pay decisions. Other commenters thought a
pay-for-performance system would have a chilling effect on the
expression of dissenting opinions, especially those concerning fraud,
waste, and abuse. Some commenters recommended that current employees be
allowed to remain in the existing system or have the option to stay in
the current system or convert to NSPS. Still others wanted a more
gradual implementation with testing of the effectiveness of the new
system on various populations first.
We have retained the system described in the proposed regulations.
We believe Congress and the American people expect their public
employees to be paid according to how well they perform, rather than
how long they have been on the job. They also expect the Department to
do everything it can to recruit and retain the most talented
individuals it can find to carry out its critical mission. The GS and
FWS pay systems do not provide the opportunity to appropriately reward
top performers or pay them according to their true value in the labor
market. Under the GS and FWS pay systems, performance is rewarded as an
exception rather than the rule, and market is defined as ``one size
fits all,'' with no distinction for differences in market pay based on
occupation.
The GS and FWS pay systems are primarily longevity-based systems--
that is, pay increases are linked primarily to the passage of time.
While time in grade determines eligibility for a GS or FWS step
increase, it is true that a finding that the employee is performing at
an acceptable level of competence is also required. However, this
minimal requirement is met by roughly 99 percent of all GS employees.
Thus, at any given grade level, the vast majority of employees can
expect to automatically receive base pay increases of up to 30 percent
over time--in addition to the annual across-the-board pay increases--so
long as their performance is ``acceptable.'' Even employees whose
performance is unacceptable receive annual across-the-board pay
increases that range from 3 to 5 percent, and special rates that are
even higher. Over time, even less productive employees will progress
steadily to the top of the GS and FWS pay ranges and may end up being
paid significantly more than higher-performing employees with less time
in grade. Such a system cannot be fairly characterized as providing
performance-based pay.
The NSPS pay-for-performance system, by contrast, is designed to
recognize and reward performance in two key ways. First, it establishes
the fundamental principle that no employee may receive a base pay or
local market supplement increase if his or her performance does not
meet or exceed expectations. In contrast to the present pay systems,
employees rated unacceptable will not get an annual adjustment. Second,
the NSPS system provides for individual base pay increases based on an
employee's performance, whether by demonstrating requisite competencies
at the entry/developmental level or by meeting or exceeding performance
expectations at the full performance level. In contrast to the present
pay systems, under NSPS, an employee will progress through the pay
range based on how well he or she performs.
This concept may be simply summarized: The higher the performance,
the higher the pay. This, too, is a fundamental principle of the new
system, and we choose the order of these words deliberately. This
system does not assume that individuals are motivated by pay, but
rather that we have an obligation as an employer to reward the highest
performers with additional compensation--however they may be motivated
to achieve excellence. The Department has a special responsibility in
this regard. Thus, the system we have designed is not a ``performance-
for-pay'' system, but a ``pay-for-performance'' system. Nevertheless,
we believe it will inspire DoD employees to perform at their best. This
is in contrast to the GS and FWS pay systems, where it is possible for
a high-performing employee to be paid the same, or even less, than a
lower performing co-worker.
As it designs and implements NSPS, the Department is taking the
following steps to ensure that the performance management system
functions properly:
Training managers to provide candid and constructive
feedback to help employees maximize their contribution and potential;
Emphasizing the need for ongoing and meaningful dialogue
between managers and employees;
Use of a pay pool process to ensure that performance
decisions are made in a careful, deliberative environment that uses a
consistent approach to decisions regarding performance ratings and
shares;
Implementing a new competency-based performance management
system that is intended to create a clear linkage between employee
performance and the Department's strategic plan and core values;
Increasing employee understanding and ownership of
organizational goals and objectives;
Adopting automation tools that facilitate ``best
practices'' in the pay-for-performance environment;
Reinforcing the use of team and organizational rewards;
and
[[Page 66125]]
Preserving non-cash rewards as tools to recognize
performance.
The 50-plus-year-old GS pay system also is not sufficiently market-
sensitive, potentially under-valuing the talents of the Department's
most critical employees. Under the GS and FWS pay systems, all
employees in a given geographic location receive the same annual pay
adjustment without regard to their occupation or the level of duties
and responsibilities they are expected to perform. This one-size-fits-
all approach treats all occupations alike, across the board as well as
in particular locations, regardless of market value. Thus, we
inevitably end up underpaying employees in some occupations and
overpaying others. Even within an occupation, the rigidities of the
current pay systems sometimes force us to underpay employees at the
entry/developmental grades, with recruiting difficulties and high
attrition the result.
The new NSPS pay system is designed to be much more market-
sensitive. First, it allows NSPS, after coordination with OPM, to
define occupational career groups and levels of work within each career
group that are tailored to the Department's missions and components.
Second, it gives DoD considerable discretion, after coordination with
OPM, to set and adjust the minimum and maximum rates of pay for each of
those career groups or bands, based on national and local labor market
factors and other conditions. Instead of ``one size fits all'' pay
rates and adjustments, the system allows DoD to customize those
adjustments and optimize valuable but limited resources. This kind of
flexibility, which is lacking under the GS and FWS pay systems, will
enable DoD to allocate payroll dollars to the occupations and locations
where they are most needed to carry out the Department's mission.
The goals and principles of the new system are sound, and we have
confidence that the Department has the capability to execute them
effectively. Pay-for-performance systems like that proposed for DoD are
not new. Pay banding has been around in the Federal Government since
1980, and the Federal Government has substantial experience in
implementing performance-based pay systems (e.g., in demonstration
projects). DoD alone has tested and implemented 11 performance-based
pay systems since 1980. Research shows that employee attitudes toward
such systems change over time, as they gain experience with them. For
example, employee support for the ``China Lake'' broadbanding/pay-for-
performance demonstration project was only 29 percent before the
project began, reached 51 percent by 1985, and was 69 percent by 1988.
Employee support was 70 percent when Congress made the project
permanent in 1994. Today, thousands of Federal employees already are
covered by successful performance-based pay systems.
The system we have devised is also consistent with the findings and
recommendations of NAPA in its May 2004 Report, ``Recommending
Performance-Based Federal Pay.'' The basis for managing individual
salary increases should be pay for performance. This recommendation has
been a constant theme in discussions for more than two decades and the
principle in every demonstration project that tested new pay policies.
The evidence from the projects confirms that pay for performance can be
successful in DoD. Nonetheless, the switch to a pay-for-performance
system will be implemented via a spiral (multi-phase) approach
resulting in application of the NSPS HR system, including the pay-for-
performance system, to new segments of the DoD population at
approximately 6-month intervals over a 2-year period. The phased
intervals of implementation will provide opportunities to assess and
adjust the system as each new group of employees is covered by the new
system. For the most part, populations phased into NSPS will be grouped
by organization in order to facilitate the change in organizational
culture that will be essential to the success of NSPS and the improved
organizational performance resulting from its implementation.
In summary, we believe the Department's pay-for-performance system
is an imperative, essential to DoD's ability to attract, retain, and
reward a workforce that is able to meet the high expectations set for
it by the Department's senior leaders for the purpose of accomplishing
the Department's mission--the defense of our nation.
Many commenters expressed concern that there will not be sufficient
resources made available to fund pay pools at adequate levels. There
were also many comments suggesting that pay pool money will be diverted
from pay to mission requirements or to reward supervisors and managers,
thereby leaving less for lower-graded employees.
Proper funding of pay pools is fundamental to the success of NSPS.
DoD senior leadership recognized its importance in setting two Key
Performance Parameters--``Credible and Trusted'' and ``Fiscally
Sound.'' In addition, this issue was the subject of testimony by the
NSPS Senior Executive to the Senate Armed Services Committee in April
2005. Secretary England was asked what assurances he could give that
limited appropriations or other budget pressures would not result in
pay pools too small to truly reward performance. He declared that the
Department viewed this as a basic covenant with its employees and
confirmed that action is being taken to protect pay pool funding.
The Department is implementing financial policies for NSPS.
Protection of pay pool funding is being addressed in several different
ways. First, the Department will mandate the minimum composition and
expenditure of pay pool funds. Second, appropriate senior-level
officials are required to certify that funds allocated to the
performance-based pay pools have been used only for the purpose for
which they were intended. Third, any exception to the minimum funding
of the pay pool will be based on stringent criteria, along with higher-
level approval. Fourth, mechanisms will be in place to monitor
compliance.
In accordance with the enabling legislation, for fiscal years 2004
through 2008, the aggregate amount allocated for compensation of DoD
civilian employees under NSPS, to the maximum extent practicable, will
not be less than if they had not been converted to the NSPS. This takes
into account potential step increases and promotions employees would
have received if not converted to NSPS. In addition, Sec. 9901.313(b)
provides that for fiscal years 2009 and beyond, DoD will develop a
formula that ensures, to the maximum extent possible, that employees
are not disadvantaged in the overall amount of pay available, in the
aggregate, as a result of conversion to NSPS, while providing
flexibility to accommodate changes in the function of the organization,
changes in the mix of employees performing those functions, and other
changed circumstances that may affect pay levels.
c. Adverse Actions and Appeals
In authorizing the creation of a new human resources system for the
Department, Congress specifically required that employees be afforded
the protections of due process. Recognizing the critical nature of the
Department's mission, Congress also stated in 5 U.S.C. 9902(h)(2) that
the new appeals process may ``establish legal standards and procedures
for personnel actions, including standards for applicable relief, to be
taken on the basis of employee misconduct, or performance that fails to
meet expectations.''
[[Page 66126]]
The proposed regulations included a number of changes to adverse
actions and appeals procedures. Consistent with the enabling
legislation, these changes were intended to simplify and streamline
those procedures and provide for greater individual accountability, all
without compromising guaranteed due process or protections against
whistleblower reprisal or discrimination. Greater accountability is
particularly critical to the Department. By its very nature, the
Department's national security mission requires an exceptionally high
level of workplace order and discipline. The fact that DoD employees
provide critical support to the military mission of defending the
country means that they, and the Department have a special
responsibility to the public.
With that in mind, the proposed regulations provided for shorter
notice for adverse actions, an accelerated appeals adjudication process
using MSPB AJs, a preponderance of the evidence burden of proof to
sustain the Department's adverse actions, whether based on conduct or
performance, or both, and specifically limited the mitigation of agency
selected penalties by MSPB AJs and private arbitrators. The proposed
regulations also required that arbitration decisions on adverse actions
be reviewable by the Department and the full MSPB prior to review by
the Federal Circuit Court of Appeals. The proposed regulations also
gave the Secretary authority to establish a number of mandatory removal
offenses (MRO)--that is, offenses that have such a direct and
substantial impact on national security that they must carry a
mandatory removal penalty. While the enabling legislation provides
authority to establish an internal appeals process using adjudicators
other than MSPB AJs, the Secretary and the Director decided that with
the changes outlined above, DoD could achieve the objectives of the
enabling legislation using MSPB AJs for initial review of employee
adverse action appeals. Ultimately, the enabling legislation provides
for full MSPB review of any DoD final appeals decision as well as for
judicial review.
Commenters, including labor organizations participating in the
meet-and-confer process, generally expressed concern that these
changes, separately and together, would vitiate the due process rights
of DoD employees. They argued that the changes would substantially
diminish the authority of third parties such as MSPB and arbitrators to
fully and fairly review and adjudicate adverse actions. Commenters, as
well as some members of Congress, expressed particular concern, about
the proposal to permit the Department to review arbitrator and MSPB AJ
decisions on adverse actions. Commenters expressed skepticism that the
stringent standards established for this review would adequately
protect due process of employees. Commenters also expressed concern
about the proposal to limit the ability to mitigate penalties unless
the penalty was ``wholly without justification.'' Commenters generally
supported the proposal to adopt a ``preponderance of evidence''
standard of proof, although a few commenters were opposed to this
proposal.
These comments express a fundamental misconception of the
requirements of due process as established by the United States Supreme
Court. For example, in accordance with Supreme Court decisions, due
process requires that before an employee who has a property interest in
a job is removed, he or she is entitled to notice, an opportunity to
reply, a decision, and a post-decision review. The final regulations
preserve these due process rights for covered employees and afford even
greater protection than the U.S. Constitution requires. Recognizing
that many of these comments were erroneously characterized as due
process issues, we nevertheless considered their merits.
DoD and OPM have decided that the final regulations will continue
to provide for a shorter, 15-day minimum advance notice to an employee
of a proposed adverse action (compared to a 30-day notice under current
law). We have also retained the provision giving employees a minimum of
10 days to respond to the charges specified in the notice of adverse
actions. Some commenters suggested that the 10-day period was not long
enough, but this notice is actually longer than the 7-day minimum reply
period that is provided under current law. This reply period runs
concurrently with the notice period, which is also consistent with
current law. Employees continue to have a right to be heard before a
proposed adverse action is taken against them. This change protects
that right while still providing for a more streamlined process. Since
these are minimum time periods, local management may extend these time
limits on a case-by-case basis if necessary.
We are persuaded by the concerns expressed by commenters, as well
as labor organizations during the meet-and-confer process, that the
enabling legislation establishes the standard by which the full MSPB
may mitigate penalties. Specifically, the proposed regulations
precluded mitigation except where a determination is made that the
penalty is so disproportionate to the basis for the action as to be
wholly without justification. Since the enabling legislation
specifically provides the criteria for full MSPB review of NSPS appeals
decisions, the Secretary and Director agree that it is unnecessary to
require the full Board to apply the ``wholly without justification''
standard. The criteria for full MSPB review as provided in the enabling
legislation have been added to these regulations. Furthermore, the
Secretary and Director agree to revise the ``wholly without
justification'' standard for MSPB AJs that are used as part of the
Department's appeals process as well as arbitrators. The standard has
been revised to preclude mitigation except when the action is ``totally
unwarranted in light of all pertinent circumstances.'' This standard is
similar to that recognized by the Federal courts and is intended to
limit mitigation of penalties by providing deference to an agency's
penalty determination. The Department has statutory authority to
establish new legal standards. In this case, the Department is electing
to adopt a legal standard that meets the need of the Department by
ensuring deference is provided to the Department's penalty
determinations along with the requirement that AJs give consideration
to the Department's national security mission.
Under the final regulations, MSPB AJs (as well as arbitrators) will
also be able to mitigate penalties in adverse action cases, but only
under limited circumstances. We continue to believe that, because the
Department bears full accountability for national security, it is in
the best position to determine the penalty for poor performance and/or
misconduct, subject to a more limited review than exists now under
chapter 75 of title 5, U.S. Code. Thus, its judgment in regard to
penalty should be given deference. This limited standard for mitigation
of penalties selected by DoD is intended to explicitly restrict the
authority of MSPB AJs and arbitrators to modify penalties to those
situations where the penalty is simply not warranted. MSPB AJs and
arbitrators may not modify the penalty imposed by the Department unless
such penalty is totally unwarranted in light of all pertinent
circumstances. Consistent with the intent that deference be given to
agency selected penalties, the regulations also provide that when a
penalty is mitigated, the maximum justifiable penalty must be applied.
In determining the maximum justifiable
[[Page 66127]]
penalty, MSPB AJs and arbitrators will use the applicable agency table
of penalties or other internal guidance.
Commenters and labor organizations expressed strong concerns over
DoD reviewing MSPB AJ decisions. These concerns ranged from whether the
Department had legal authority to conduct this review to whether this
assists in achieving the Department's goal of streamlining the appeals
process. Some expressed concerns that this would not be a truly
independent appeals process as a result. We recognize these concerns,
but believe that the process provides for appropriate review and
safeguards. The enabling legislation authorizes an appeals process
resulting in a final Department decision that is subject to full MSPB
review. Consistent with this authority, we have established an
independent appeals process using existing and familiar resources, MSPB
AJs, to adjudicate employee appeals of DoD adverse actions. These AJs
would issue initial decisions that would lead to a final Department
decision subject to full MSPB review. The decision to utilize the MSPB
AJ corps, rather than establishing a new corps of AJs, is purposeful.
We are mindful of the need to conserve resources and recognize the
value these AJs' independence brings to the process. Nevertheless, to
ensure that the Department receives proper deference to its critical
mission requirements, the Department will retain the opportunity to
review and modify, under criteria prescribed in these regulations,
those initial AJ decisions before they become final Department
decisions. In response to concerns raised by the unions during the
meet-and-confer process, this review will occur at the DoD level. This
highlights that the highest levels of the Department wish to ensure
that this process is applied fairly and consistently across the
Department. Also, in order to ensure timely decisions by the Department
when taking action on an AJ or arbitrator decision, time limits for
taking action will be established in implementing issuances.
Ultimately, any decision of the Department is subject to review by the
full MSPB and the Court of Appeals for the Federal Circuit. We believe
this process affords employees full and fair opportunity for redress,
as well as adjudicative independence, and deference to DoD's critical
mission needs, consistent with the NSPS statutory authority.
Finally, many commenters and labor organizations participating in
the meet-and-confer process expressed concerns about the organization
of the appellate procedures, finding them difficult to follow. We are
persuaded by their concerns and have reorganized the appellate
procedures in a user-friendly format.
With the changes outlined above, we believe we have addressed and
resolved the concerns raised by commenters regarding adverse actions
and appeals. Due process is preserved under the final regulations.
Thus, the adverse actions and appeals procedures set forth in these
regulations are ``fair, efficient, and expeditious,'' consistent with
congressional direction.
d. Mandatory Removal Offenses
The proposed regulations authorized the Secretary to identify
offenses that, because they have a direct and substantial adverse
impact on the Department's national security mission, warrant a
mandatory penalty of removal from the Federal service. Only the
Secretary could mitigate the removal of an employee determined to have
committed such a mandatory removal offense (MRO). Employees alleged to
have committed these offenses would have the right to advance notice,
an opportunity to respond, and a written decision. They would also be
entitled to appeal that decision to the independent MSPB AJs, who could
reverse the action but could not mitigate the removal penalty.
Decisions of the MSPB AJs are subject to review by DoD as well as the
full MSPB.
Commenters and unions expressed a number of objections to the
concept of MROs. Since no examples of potential MROs were provided in
the proposed regulations, they feared that removal could be too harsh a
penalty as for yet unspecified offenses. They also were concerned that
employees would not be given full and complete notice of such offenses
prior to their application.
As proposed, an MRO should have a direct and substantial adverse
impact on the Department's national security mission. Accordingly, we
have decided to retain MROs. However, in response to comments, the
Secretary and the Director understand the concern over the lack of
specificity with regard to MROs. During the meet-and-confer process,
participating labor organizations expressed a similar concern, but we
believe we were able to satisfactorily address most of their objections
about lack of specificity by sharing with them potential mandatory
removal offenses.
In addition to those MROs discussed during the meet-and-confer
process, an illustrative list of potential MROs follows:
Purchasing, using, or transporting weapons or materials
for the purpose of committing, attempting to commit, or aiding and
abetting terrorism.
Committing, attempting to commit, or aiding and abetting
an act of sabotage against the Department of Defense that resulted or
could have resulted in loss of life, significant financial loss or
adverse impact on military readiness.
Soliciting or intentionally accepting a bribe or other
unauthorized personal benefit in return for an act that compromises or
could compromise national security.
Employees involved in the Personnel Reliability Program
failing to safeguard the assets for which they are directly responsible
and such failure results in loss, theft, sabotage, unauthorized use,
destruction, detonation, or damage.
Intentionally engaging in activities that compromise or
could compromise the information or financial infrastructure, including
major procurement fraud, of the Department of Defense, when the
employee knew or reasonably should have known of the compromise or
potential compromise.
There is no question that employees must be made aware of the final
list of MROs approved by the Secretary. Both the Secretary and the
Director believe that this is a basic issue of fairness and a tenet of
an organizational culture that establishes clear accountability. That
is why the proposed regulations provided that MROs will be identified
to employees in advance, as part of implementing issuances, and made
known to all employees upon identification. During the meet-and-confer
process, participating labor organizations were especially concerned
about this issue. We agree that these offenses should not be a surprise
to anyone, and have retained these provisions in the final regulations
but have also added a requirement that they be publicized via notice in
the Federal Register. The Secretary also intends to consult with the
Department of Justice in preparing the list of offenses for
publication.
With these changes, the final regulations provide for the
independence demanded by commenters while assuring DoD's ability to
remove employees who engage in offenses that have direct and
substantial impact on the Department's national security mission. The
Secretary is accountable to the President and the American people for
safeguarding national security. No other agency or department bears
this burden. These regulations ensure that the Secretary's authority
aligns with that responsibility.
[[Page 66128]]
e. Labor Relations
Without exception, employee representatives objected to the
proposed labor relations regulations, both in their comments and during
the meet-and-confer process. Employee representatives argued that
Congress expressly specified only two modifications to chapter 71--
bargaining above the level of recognition and independent third party
review of decisions. We disagree. In enacting chapter 99, Congress
expressly recognized the need for the Department to design a labor
relations system that both addresses the unique role that the
Department's civilian workforce plays in supporting the Department's
national security mission and allows for a collaborative issue-based
approach to labor management relations.
Moreover, Congress specifically authorized the Secretary, together
with the Director, to establish and adjust this labor relations system
in support of the overall HR management system notwithstanding the
provisions of the current system as set forth in chapter 71. Thus, the
Secretary and the Director have modified chapter 71 ``to address the
unique role that the Department's civilian workforce plays in
supporting the Department's national security mission.'' (5 U.S.C.
9902(m)) In taking the steps necessary to establish and adjust this
labor relations system, Congress further recognized that the provisions
of this system will supersede existing collective bargaining agreements
covering Department employees and negotiated pursuant to the provisions
of chapter 71. Finally, Congress indicated that the authority of the
Secretary and Director to devise and adjust the Department's labor
relations system would expire in 2009 absent further action by Congress
(5 U.S.C. 9902(d)(2) and 5 U.S.C. 9902(m)(1), (2), (8), and (9)).
f. Management Rights/Scope and Duty To Bargain
The ability to act quickly is central to the Department's national
security mission--not just during emergencies but, more importantly, in
order to prepare for or prevent emergencies. The ability to act quickly
is necessary even in meeting day-to-day operational demands. The
Department must be able to assign employees and to introduce the latest
security technologies without delay. This principle was crucial in the
formulation of the enabling legislation and in the congressional debate
that followed its introduction. Congress clearly recognized the
Department's need to operate under a new labor relations system that
would provide the flexibility necessary to respond to a variety of
vital operational challenges and carry out its national security
mission.
To achieve this objective, the proposed regulations revised, among
other things, the management rights and duty to bargain provisions
found in 5 U.S.C. chapter 71. We expanded the list of management rights
that are excluded from bargaining, including the numbers, types, and
grades of employees or positions assigned to any organizational
subdivision, work project, or tour of duty; and the technology,
methods, and means of performing work--rights that deal directly with
the Department's national security operations. In addition, we excluded
from bargaining the procedures that the Department would follow in
exercising these expanded operational management rights. We also
proposed to allow the Department to take action in any of these areas
without advance notice to labor organizations and without pre-
implementation bargaining.
Without exception, labor organizations objected to the proposed
regulations, both in their comments and during the meet-and-confer
process, arguing that altering the scope of bargaining in any way is
contrary to the enabling legislation. They also claimed that these
changes were unnecessary because current law already provided the
Department with sufficient flexibility to deal with emergencies. They
also took strong exception to the provisions in the proposed
regulations that would allow issuances to supersede conflicting
provisions of any collective bargaining agreements and limit bargaining
to only those matters that are not inconsistent with the issuances.
Labor organizations did acknowledge the Department's need to take
certain actions without pre-implementation bargaining, and during the
meet-and-confer process they proposed a process for accelerated
bargaining within established time limits and the use of binding
arbitration to resolve all bargaining disputes. Additionally, they
suggested that the term ``emergency'' be interpreted as including
``exigencies requiring action reasonably necessary to carry out the
Department's national security mission before collective bargaining
concerning the action can be completed,'' and that in such exigencies
the Department will afford the opportunity to bargain when
circumstances reasonably allow. Their proposals would have allowed the
Department to temporarily suspend provisions of collective bargaining
agreements in situations where there is a direct connection between the
exigency and the Department's national security mission. Even under
such mission critical and exigent conditions, they insisted that post
implementation agreements would have prospective effect only if the
emergency was unforeseen. If the national security exigency were
foreseen, then any remedy for Department action that was contrary to a
contractual provision would have retroactive effect unless the
retroactive effect would ``unduly disrupt Department operations
reasonably necessary to carry out the Department's national security
mission.''
We recognize the good faith effort made by these labor
organizations to meet the Department's operational needs. However,
their proposals were lacking in several respects. We have, therefore,
retained the management rights/scope of bargaining provisions in the
proposed regulations with some modifications.
With respect to procedures, the proposals offered by the labor
organizations do not go far enough. They would still require the
Department to bargain, before acting, over the procedures it would
follow in exercising its management rights, including those that deal
directly with its operations. Once negotiated, those procedures can and
do place significant constraints on critical actions such as the
assignment of work, the deployment of personnel, and the staffing of
tours of duty. These procedures are negotiable under 5 U.S.C. chapter
71. Labor organizations would have the Department continue that
obligation, but under time limits and with an expanded interpretation
of the chapter 71 provisions regarding emergencies that would allow
management to bargain post implementation in certain limited
circumstances.
However, in today's operational environment, the exception has
become the rule. Department managers, supervisors, and employees are
critical to the Department's mission to defend our national security.
The Department must be able to rely on the judgment and ability of
managers and supervisors to make day-to-day decisions--even if this
means deviating from established or negotiated procedures. Moreover,
the Department's managers and supervisors must be able to make split-
second decisions to deal with operational realities free of procedural
constraints.
With respect to post-implementation bargaining, the proposals
offered by labor organizations are similarly lacking. Although they
would allow management to implement without bargaining in advance when
faced with
[[Page 66129]]
an emergency, they would still require immediate post-implementation
negotiations and third-party impasse resolution over such matters.
However, the reality of DoD's operational environment today is that
change is constant, and as a consequence, so too would be post-
implementation bargaining, with the prospect of prolonged third-party
impasse resolution. These negotiations would be required even in cases
where the change was short-lived and/or where its impact was
insignificant, insubstantial, or transient. The demand on DoD's
frontline managers, supervisors and employees to engage in constant
post-implementation negotiations would divert them from accomplishing
the mission. This is unacceptable and inconsistent with the authority
Congress granted to the Department in the enabling legislation.
Further, under 5 U.S.C. chapter 71, interpretations of negotiated
appropriate arrangements tend to assume that those agreements have
anticipated future changes, but today's operational environment belies
that assumption. Changes necessitated by operational demands are
recurring and variable. Our frontline managers and supervisors must not
be bound by agreements presupposing circumstances that are assumed to
be constant, when they must face current and future exigencies.
Nevertheless, in recognition of the concerns articulated by
commenters during the public comment period and during the meet-and-
confer process by participating labor organizations and as a result of
the June 16, 2005, meeting of the United DoD Workers Coalition, DoD's
NSPS Senior Executive, and OPM's Acting Director, the Secretary and the
Director decided that the proposed regulations would be revised in a
number of ways.
First, we have modified the definition of ``issuances'' to make
clear the distinction between an ``implementing issuance'' and an
``issuance''. An ``implementing issuance'' is a document issued to
carry out a policy or procedure implementing NSPS (but does not include
internal operating guides, manuals, or handbooks that do not change
employees' conditions of employment), while an ``issuance'' is a
document to carry out a non-NSPS policy or procedure of the Department.
We have also clarified that while an implementing issuance immediately
supersedes those provisions of collective bargaining agreements that
are inconsistent with the implementing issuance, an issuance does not
supersede a conflicting provision of a collective bargaining agreement
during the term of that agreement. This ensures the viability of the
collective bargaining process under NSPS. When a provision of a
collective bargaining agreement conflicts with an issuance, the
collective bargaining provision remains in effect until the expiration
or renegotiation of the agreement, at which time the parties will have
to bring the conflicting provision into conformance with the issuance.
This is comparable to the process that has long been followed regarding
Governmentwide regulations. Specifically, issuances will be subject to
national consultation with those labor organizations holding national
consultation rights. Moreover, following consideration of comments and
recommendations received through the national consultation process,
issuances are subject to collective bargaining to the extent proposals
are not inconsistent with the issuance and are otherwise negotiable
under Sec. 9901.910 and Sec. 9901.917.
More importantly, and in response to concerns that managers may
issue implementing issuances and issuances for the sole purpose of
invalidating particular provisions of a collective bargaining agreement
that they do not like, we have also modified the regulations to specify
that implementing issuances, that is, those that implement NSPS and
supersede conflicting provisions of existing collective bargaining
agreements, may only be issued by the Secretary, Deputy Secretary,
Principal Staff Assistants, or Secretaries of the Military Departments.
We have limited ``Principal Staff Assistants'' to senior officials in
the Office of the Secretary of Defense who report directly to the
Secretary and Deputy Secretary of Defense. We also have added a new
subparagraph, Sec. 9901.905(c) to make clear that any provision of a
collective bargaining agreement that is inconsistent with issuances
that do not implement NSPS will remain in effect until the expiration,
renewal, or extension of the agreement, whichever occurs first.
Finally, we have modified the regulations to permit bargaining, in
the sole, exclusive, unreviewable discretion of the Secretary, over the
procedures that would be followed in exercising the expanded
operational management rights. We have also modified the regulations to
permit bargaining, at the election of the Secretary, over appropriate
arrangements on the routine matters related to the expanded operational
management rights. The Secretary may authorize such bargaining to
advance the Department's mission accomplishment or promote
organizational effectiveness. Mid-term agreements on appropriate
arrangements and procedures for (a)(1) and (a)(2) management rights are
not precedential or binding on subsequent acts, or retroactively
applied, except at the Secretary's sole, exclusive, and unreviewable
discretion. Procedures and appropriate arrangements in term agreements
are binding, except that nothing will delay or prevent the Secretary
from exercising his or her authority under subpart I. For example, the
Secretary may authorize deviation from such agreements when it is
necessary to carry out the Department's mission. This authority builds
on the authority that exists today when an emergency occurs, as that
term is applied under chapter 71, to address the unique nature of the
Department's mission and the operational demands it must face.
Taken together, we believe these revisions meet the Department's
mission needs, are consistent with the enabling legislation's intent to
preserve collective bargaining rights as provided for in 5 U.S.C.
chapter 99, and assure employees that issuances will not be issued for
the improper purpose of eliminating local bargaining. While commenters
have argued that any alteration of the scope of bargaining violates the
enabling legislation, this interpretation is inconsistent with the
express authority Congress has given the Secretary and the Director to
establish and from time to time adjust the labor relations system for
the Department to address the unique role that the Department's
civilian workforce plays in supporting the Department's national
security mission. These regulations fulfill that statutory requirement
while providing employees with the rights envisioned by Congress.
g. Independence of the National Security Labor Relations Board
The National Security Labor Relations Board (NSLRB) described in
the NSPS regulations is intended to act as one element of independent
third-party review of collective bargaining disputes as provided for in
5 U.S.C. 9902(m)(6). Commenters, including labor organizations
participating in the meet-and-confer process, objected to the creation
of the NSLRB because they believe that an internal DoD review board
would not be independent from management influence, unlike the Federal
Labor Relations Authority (FLRA). Commenters suggested that any board
whose membership would be appointed and removed by the Secretary could
not reasonably be expected to remain impartial. They also suggested
that the primary reason for taking
[[Page 66130]]
jurisdiction of these matters away from the independent and impartial
FLRA is to guarantee that DoD management can influence the NSLRB's
decisions, giving them an unfair advantage over employee
representatives.
We have decided to retain the NSLRB. Employing the NSLRB to
adjudicate labor disputes in place of the FLRA ensures timely and
efficient case management by a body cognizant of the important and
unique nature of the Department's mission. We believe that the final
regulations have adequately balanced the Department's interest in
timeliness and mission recognition with employees' desire to have an
impartial dispute adjudicator. The regulations establish NSLRB
membership criteria that require candidates to exhibit integrity and
impartiality in addition to extensive knowledge of labor laws, DoD's
mission, or both. Although the Secretary has authority to remove NSLRB
members before the expiration of their terms, that authority is limited
to removal for inefficiency, neglect of duty or malfeasance in office,
which is a standard similar to that for removing members of the FLRA.
In addition, since the standard is established in these jointly
prescribed regulations, it may not be changed unilaterally by the
Secretary. Finally, we stress that the NSLRB decisions are subject to
review by the FLRA, which acts as another element of independent third-
party review. The FLRA decisions, including those reviewing decisions
of the NSLRB, remain subject to judicial review as they are under
chapter 71. These regulations establish that the NSLRB will operate
independent of the chain of supervision as does any agency
administrative judge or administrative review board whose decisions can
be appealed to a higher authority.
Multiple commenters, including labor organizations participating in
the meet-and-confer process, recommended that the labor organizations
be given the opportunity to participate in the NSLRB nomination
process. We agree and have included in the final regulations an
explicit requirement that the Secretary consider labor organization
nominations. Whereas the proposed regulations did not provide a role
for labor organizations in the nomination process, the final
regulations provide that the Secretary will consider labor organization
nominations in selecting the two non-chair members of the NSLRB. This
assures labor organizations a voice in the NSLRB selection process.
While we have not adopted all suggestions related to the NSLRB, we
believe the final regulations ensure that NSLRB members will discharge
their duties in a fair and impartial manner by (1) including employee
representatives in the process for selecting such members; (2)
requiring that individuals appointed as members have integrity,
impartiality, and subject matter expertise; (3) limiting the grounds on
which the Secretary can remove NSLRB members; and (4) providing for
FLRA review of NSLRB decisions and, as prescribed in chapter 71,
judicial review of FLRA decisions.
Response to Specific Comments and Detailed Explanation of Regulations
Subpart A--General Provisions
Section 9901.101--Purpose
Section 9901.101 explains the overall purpose of the regulations in
5 CFR part 9901, which is to implement a new human resources management
system and a new labor relations system, as authorized by 5 U.S.C.
9902. The section states various guiding principles and key operational
characteristics and requirements. We have added a reference in Sec.
9901.101(a) to the labor relations system, which is established under 5
U.S.C. 9902(m), since this is a separate and distinct authority. (See
additional discussion regarding this distinction in the analysis of
comments regarding Sec. 9901.102.)
Commenters questioned the authority to waive or modify statutes
through these regulations. We are modifying Sec. 9901.101(a) to
clarify that 5 U.S.C. 9902 provides authority for these regulations to
waive or modify certain statutory provisions.
A commenter recommended that the regulations restate the statutory
merit principles instead of just referencing them as a guiding
principle. We do not believe such a restatement is necessary; however,
we have added a statutory citation--5 U.S.C. 2301--in Sec.
9901.101(b)(1).
Commenters expressed concern regarding the key operational
characteristic ``Agile and Responsive Workforce and Management,'' which
was further described as ``workforce can be easily sized, shaped, and
deployed to meet changing mission requirements.'' In particular, some
objected to viewing civilian employees as deployable in the same manner
as military personnel. While DoD has always had and will continue to
have the right to assign employees to serve in geographic locations
based on mission requirements, the word ``deploy'' in this section is
being used in a broader context and was intended to encompass the
strategic organization of work based on employee skills and
competencies and mission needs. In particular, we believe the authority
in subpart B to classify work into broader career groups supports this
objective.
Section 9901.102--Eligibility and Coverage
Section 9901.102 sets forth general rules regarding employee
eligibility and coverage under the various subparts of part 9901.
Categories of eligible employees become covered only when the Secretary
affirmatively approves coverage as of a specific effective date.
Commenters indicated that the Secretary's discretionary authority
in coverage matters is too broad. We believe it is essential that the
Secretary be given such discretion. The authority to establish systems
would be meaningless unless there is corresponding authority to place
eligible employees under the system. The Secretary needs flexibility to
phase in coverage in an orderly way, while retaining authority to
change effective dates as needed, based on changing conditions or
mission requirements.
Commenters stated that the authority in Sec. 9901.102(b)(1) to
establish an immediate effective date for subpart I (dealing with labor
relations) conflicts with 5 U.S.C. 9902(l). Section 9902(l) provides
that the Secretary may apply the ``National Security Personnel System''
only if (1) the affected organizational or functional unit has no more
than 300,000 employees or (2) the Secretary determines ``in accordance
with subsection (a)'' that the Department has in place a performance
management system that meets the criteria in 5 U.S.C. 9902(b). The term
``National Security Personnel System'' is defined in 5 U.S.C. 9902(a)
to be the ``human resources management system,'' which is established
under the authority of subsection (a). Section 9902(b) provides
requirements for a system established ``under subsection (a).'' Under 5
U.S.C. 9902(b)(3)(D) and (d), the human resources management system
established under subsection (a) does not reach to the labor relations
system established under 5 U.S.C. chapter 71. Instead, 5 U.S.C. 9902(m)
provides a totally separate authority to establish and adjust a ``labor
relations system.'' We believe it is clear that the limitations in 5
U.S.C. 9902(l) apply only to the human resources management system
established under 5 U.S.C. 9902(a).
Commenters raised questions about the coverage of employees in
certain DoD laboratories who are covered by a demonstration project or
an alternative system. Section 9902(c) of title 5, U.S. Code, states
that the National Security Personnel System will not apply to
[[Page 66131]]
defense laboratories in organizations listed in Section 9902(c)(2)
before October 1, 2008, and will apply after that date only if the
Secretary determines that greater flexibilities are available.
Consistent with the explanation in the preceding paragraph, the
reference to the ``National Security Personnel System'' in 5 U.S.C.
9902(c) refers to the human resources management system which is
defined as the National Security Personnel System in Section 9902(a).
Thus, the restrictions in 5 U.S.C. 9902(c) do not apply to the coverage
of these laboratory employees under the labor relations system
established under 5 U.S.C. 9902(m), and these employees may be covered
by subpart I (dealing with labor relations) before October 1, 2008.
Commenters objected to the possible coverage of certain civilian
mariners who are currently covered by a pay system established under 5
U.S.C. 5348 and are also covered by 5 U.S.C. chapter 71. These
employees will be covered by subpart I (dealing with labor relations).
However, the Secretary has determined that they will not be covered by
the human resources system, including the adverse actions and appeals
provisions. Other commenters asked about certain Army Corps of
Engineers employees under Public Law 97-257. U.S. Army Corps of
Engineers employees paid from Corps of Engineers Special Power Rate
Schedules will be covered by subpart I (dealing with labor relations).
The Secretary has determined that they will not be covered by the human
resources system, including the adverse actions and appeals provisions.
Commenters asked whether a category of employees could be covered
by some, but not all, provisions of subparts B through H. In
particular, commenters noted that National Guard Technicians were
eligible for coverage but were subject to certain provisions outside
title 5--e.g., qualification requirements established under title 32,
instead of qualification standards established under 5 U.S.C. chapter
51. Since 5 U.S.C. 9902 does not provide authority to modify or waive
statutory provisions outside of certain specified chapters in title 5,
any such provisions would continue in effect. The Secretary may extend
coverage to eligible employees under subparts B through H to the extent
those provisions are not in conflict with other statutory requirements.
Commenters proposed that certain occupations be excluded from
coverage--e.g., attorneys or law enforcement officers--because of the
nature of their work. We disagree. We believe the flexible systems we
are authorizing can be applied successfully to all occupational
categories.
Commenters raised questions regarding the purpose of Sec.
9901.102(f). Paragraph (f) is intended to allow the Secretary to extend
NSPS coverage to employees who are currently covered by systems
established administratively under authorities outside of title 5, but
only when those authorities give DoD the discretion to cover those
employees under administratively determined systems or to leave them in
the title 5 systems that would otherwise apply. For example, if DoD has
discretionary statutory authority to cover a category of employees
under an administratively determined classification and pay system
instead of the General Schedule, such employees remain potentially
eligible for General Schedule coverage and accordingly would also be
eligible for NSPS coverage. Commenters questioned whether paragraph (f)
could be used to cover educators employed by the DoD Education Activity
in an NSPS pay system. Since the pay system for those educators
employed overseas (Department of Defense Dependents Schools) is
established under nondiscretionary statutory provisions in title 20,
they are not eligible for coverage under an NSPS pay system. However,
the pay system for those educators employed in the Continental United
States (Defense Domestic Elementary and Secondary Schools) is
established under discretionary provisions in title 10. Therefore, they
are eligible for coverage under an NSPS pay system.
Commenters proposed that current employees (or at least current
employees meeting certain age and service requirements) be
``grandfathered'' and left in existing title 5 systems instead of being
covered by NSPS, unless they elect otherwise. This proposal is not
practicable from an administrative viewpoint and is contrary to the
objectives behind the enabling legislation. We believe the
flexibilities provided under the proposed NSPS will yield significant
benefits to the Government and will also benefit employees based on
their performance. It is therefore not acceptable to delay full
application of NSPS.
Commenters questioned why members of the Senior Executive Service
(SES) are not covered by NSPS--specifically, the classification, pay,
and performance provisions in subparts B through D. In fact, SES
members are eligible for coverage under those NSPS provisions, subject
to the conditions in Sec. 9901.102(d). (See coverage provisions in
Sec. Sec. 9901.202(b)(4), 9901.302(b)(4), and 9901.402(b)(1).) We note
that the SES pay and performance provisions in title 5 are already
designed to be performance-sensitive. Thus, DoD does not plan to cover
SES members in its initial implementation spirals. DoD may determine at
a later date whether coverage under NSPS pay and performance provisions
is necessary given the title 5 authorities that already apply to SES
members.
In light of the numerous comments regarding the coverage
eligibility of specific categories of DoD employees under the various
subparts of these regulations, we have prepared the following summary
chart showing various categories of employees that are eligible for
coverage under the NSPS systems. This chart is not intended to be
comprehensive or authoritative, but covers the major categories of
employees in DoD outside of the General Schedule. In the chart,
categories of employees that are identified as eligible for coverage
under a particular subpart are annotated with ``Yes,'' and those that
are identified as ineligible for coverage are annotated with ``No.''
The chart and its footnotes must be read together for full information
on coverage eligibility. Actual coverage is subject to applicable law
and approval by the Secretary under Sec. 9901.102(b).
Summary of Non-General Schedule Coverage Eligibility Under 5 CFR Part 9901
----------------------------------------------------------------------------------------------------------------
Eligible for human resources
Category system/appeals process (subparts Eligible for labor relations
B-H) system (subpart I)
----------------------------------------------------------------------------------------------------------------
Air and Army Reserve Technicians........... Yes.............................. Yes.
Army and Air National Guard technicians Yes \1\.......................... Yes.\2\
(dual status) under 32 U.S.C. 709.
[[Page 66132]]
Army and Air National Guard technicians Yes \1\.......................... Yes.\2\
(non dual status) under 32 U.S.C. 709.
Hydropower Corps of Engineers Special Power No............................... Yes.
Rate Schedules (WB pay plan).
Navy Civil Service Mariner (WM pay plan)... No............................... Yes.
Overseas Teachers (DoDDS).................. No............................... Yes.
Pentagon Force Protection Agency (title 5 Yes \3\.......................... Yes.
and title 10 employees).
Federal Wage System (WA, WD, WG, WJ, WK, Yes.............................. Yes.
WL, WN, WO, WS, WT, WY, XF, XG, XH pay
plans).
Nonappropriated Fund....................... Yes \4\.......................... Yes.
Domestic Teachers (DDESS).................. Yes \4\.......................... Yes.
Defense Laboratories in Organizations No \5\........................... Yes.
listed in 5 U.S.C. 9902(c).
Armed Services Board of Contract Appeals... No for Board members;............ No for Board members;
Yes for other employees.......... Yes for other employees.
Court of Appeals for the Armed Forces...... No for Judges and attorneys in No for Judges and attorneys in
chambers; Yes for other chambers; Yes for other
employees \6\. employees.\6\
Consultants and Experts (10 U.S.C. 129b)... No............................... No.
DARPA, scientists and engineers............ No............................... No.
DCIPS (including DISES).................... No............................... No.
Executive Schedule......................... No............................... No.
Faculty at DoD Educational Institutions:... Yes \4\.......................... Yes.
Air University, Air Force Institute of
Technology, Army War College/Command &
General Staff College, Defense
Acquisition University, National Defense
University, Defense Language Institute,
George C. Marshall Center, Asia-Pacific
Center for Security Studies, Western
Hemisphere Institute for Security
Cooperation, U.S. Naval Postgraduate
School, Naval War College/U.S. Marine
Corps University, USAF Academy, U.S.
Naval Academy, U.S. Military Academy.
Faculty and staff at USUHS................. No............................... No.
Foreign Nationals (Direct Hire)............ No............................... No.
Schedule C................................. Yes.............................. No.
SES........................................ Yes.............................. No.
Senior Level (SL/ST)....................... Yes.............................. Yes.
DoD Office of the Inspector General........ Yes, unless appointed under No.
authority of the Inspector
General Act of 1978 (5 U.S.C.
App. Sec. 6)\7\.
----------------------------------------------------------------------------------------------------------------
\1\ Subject to limitations pursuant to 32 U.S.C. 709.
\2\ But excluded from national level bargaining under 5 U.S.C. 9902(g).
\3\ Title 10 employees under title 10 discretionary authority and subject to 10 U.S.C. 2674.
\4\ Under title 10 discretionary authority.
\5\ Until 2008, excluded from HR system and appeals process pursuant to 5 U.S.C. 9902(c).
\6\ Pursuant to 10 U.S.C. chapter 47, subchapter XII.
\7\ Currently there are no appointees under that authority.
Section 9901.103--Definitions
Section 9901.103 provides definitions of terms used in more than
one subpart. Commenters expressed concerns about some definitions.
Commenters requested greater clarity with respect to the use of
``implementing issuances.'' Accordingly, we are revising the definition
of ``implementing issuances'' to make clear that such documents can be
issued by only certain high-level DoD officials (despite the
Secretary's broad delegation authority), including those formally
designated as acting in those high-level positions. We have also
clarified that implementing issuances do not include internal operating
guides, handbooks, or manuals that do not change conditions of
employment. This is consistent with current practice. We have also
added a definition of ``Military Department.''
To address general comments regarding the need for greater
specificity where possible, we have added definitions of the terms
``initial probationary period'' and ``in-service probationary period.''
These terms are used in subpart E (Staffing and Employment) and subpart
F (Workforce Shaping). In addition, we clarified the definition of
``NSPS'' to more closely track the language in the statute. ``NSPS''
means the human resources management system established under 5 U.S.C.
9902(a). It does not include the labor relations system established
under 5 U.S.C. 9902(m). We do, however, use ``NSPS'' in the
supplementary information and in public statements as a shorthand
reference to describe both the HR and the labor relations systems. We
also note that chapter 99 is entitled the National Security Personnel
System.
Commenters expressed concern about the definition of
``performance.'' In particular, commenters objected to the
[[Page 66133]]
use of the terms ``behavior,'' ``demeanor,'' ``attitude,'' and ``manner
of performance'' in defining performance. We note that these terms are
used in a context that makes clear that we are dealing with observable
behaviors that affect the accomplishment of assignments,
responsibilities, and organizational goals. We believe performance
assessments would not be complete without considering employees'
behaviors in carrying out assigned work. For example, customer service
is generally a paramount organizational objective. Thus, the manner in
which employees treat customers is an important aspect of overall
performance. Employee behaviors can be objectively observed and
evaluated against established performance expectations. Some commenters
suggested that assessments of manner of performance would open the door
to abuse, cronyism, punishment for criticism of management, or
retaliation against whistleblowers. We disagree. Under NSPS, employees
are still protected against prohibited personnel practices and will
have the same whistleblower rights they have always had. We note that
managers will be held accountable for how they manage this process.
A commenter questioned whether the definition of ``promotion''
allows management to add higher-level duties without providing pay
increases. It appears that this comment is primarily directed at the
new classification authority under subpart B that would allow DoD to
reduce the number of grade level distinctions by using bands to
describe levels of work. Each band will encompass a single broad level
of work that may encompass a range of duties previously performed at
different grade levels. Promotion is movement to a higher level of
work, i.e., higher band.
Commenters requested greater clarity regarding the term
``unacceptable performance.'' In conjunction with related changes made
in subpart D (Performance Management), we are clarifying that an
employee's performance may be found to be unacceptable based on failure
to successfully complete work assignments or other instructions that
amplify written performance expectations.
Section 9901.104--Scope of Authority
Section 9901.104 identifies the provisions in title 5 that are
subject to waiver or modification under 5 U.S.C. 9902.
Commenters objected to any modification or waiver of any title 5
provision. A commenter suggested this section would grant legislative
power reserved for Congress. In fact, this section merely implements an
authority provided by Congress. Under 5 U.S.C. 9902, DoD and OPM may
prescribe regulations establishing new human resources management and
labor relations systems notwithstanding certain title 5 provisions. In
other words, Congress has provided that systems established by
regulation may be used in place of certain statutory systems. This is
not dissimilar to numerous cases where Congress has excluded an agency
from a title 5 provision and allowed the agency to develop its own
rules administratively, except that, in the case of NSPS, Congress has
actually established additional requirements to guide system
development in terms of both substance and procedure.
Commenters asserted that this section was misleading in that it did
not reveal that the enabling legislation gave DoD authority to waive
any part of title 5, including provisions dealing with retirement,
health benefits, life insurance, leave, etc. This assertion is
incorrect. Section 9901.104 identifies the limited number of title 5
provisions that are subject to waiver or modification. DoD and OPM have
no authority to waive or modify title 5 provisions, except as provided
for in 5 U.S.C. 9902. (Other laws are affected only for the purpose of
dealing with references to waived or modified provisions, as described
in Sec. 9901.107). Section 9902(b)(5) of title 5, U.S. Code, states
that a system established under 5 U.S.C. 9902(a) is ``not limited by
any specific law or authority under this title [i.e., title 5] * * *
that is waived in regulations prescribed under this chapter [i.e.,
chapter 99], subject to paragraph (3).'' The referenced paragraph (3)
in 5 U.S.C. 9902(b) includes a subparagraph (D) that links to 5 U.S.C.
9902(d), which in turn specifies that most of title 5 is nonwaivable,
except as provided for in section 9902.
Commenters questioned the inclusion of chapters 33 and 35 in the
list of waivable or modifiable chapters in Sec. 9901.104, since those
chapters include veterans' preference rules. However, Sec. 9901.104(a)
states that chapters 33 and 35 may be waived or modified only as
authorized by 5 U.S.C. 9902(k). Section 9902(k) of title 5, U.S. Code,
requires the Secretary to comply with veterans' preference
requirements. Thus, the regulations in subpart E (Staffing and
Employment) and subpart F (Workforce Shaping) that modify parts of
chapters 31 and 33 do not affect veterans' preference rights and
protections.
A commenter questioned the effect of the NSPS regulations on
determinations under the Fair Labor Standards Act (FLSA). OPM's
authority to administer the FLSA is found in section 4(f) of the Fair
Labor Standards Act of 1938, as amended. (See also 29 U.S.C. 204(f).)
Since this authority is outside the waivable title 5 chapters, these
regulations do not affect OPM's FLSA regulations or OPM's authority to
settle FLSA claims.
Section 9901.105--Coordination With OPM
Section 9901.105 identifies the areas which trigger a requirement
to coordinate DoD implementing issuances and certain other actions with
OPM. As described in the section, ``coordination'' entails (1)
providing OPM with an opportunity to review and comment on DoD
proposals and to officially concur or nonconcur with all or part of the
proposals, (2) taking OPM's views into account, and (3) advising OPM of
the final DoD decision, including reasonable advance notice of the
decision's effective date.
Commenters expressed concern that Sec. 9901.105 gave DoD too much
authority. Some recommended that DoD should be required to get formal
OPM approval, rather than just ``coordinate'' with OPM. A commenter
also suggested that DoD should be required to coordinate with other
agencies with national security missions so that national security
employees would have a common framework. Under the enabling
legislation, OPM's authority is to approve jointly developed
regulations, and OPM has exercised that authority in these part 9901
regulations. By design, and in keeping with the statutory objective of
establishing a ``flexible'' system, these regulations give DoD
considerable authority within the regulatory framework. At the same
time, OPM continues to have a role in overseeing the civil service
system and in advising the President on civil service matters,
including matters covered by these regulations. We believe a
coordination role is sufficient to allow OPM to fulfill its
responsibilities. In this coordination role, OPM will ensure that
Governmentwide interests and the interests of other agencies are
appropriately considered.
In these final regulations, we have added a coordination
requirement with respect to the establishment of policies and
procedures for time-limited appointments under Sec. 9901.511(d),
consistent with our original intent. The supplementary information for
the proposed regulations stated that coordination with OPM would occur
in this area. (See 70 FR 7563.) We have added a coordination
requirement with
[[Page 66134]]
respect to the modification of coverage, retention procedures, or
appeals rights under subpart F (Workforce Shaping). This coordination
requirement is consistent with Sec. 9901.602, which provides that, in
accordance with Sec. 9901.105, DoD will prescribe implementing
issuances to carry out the provisions of subpart F. Also, we have moved
the coordination provision related to qualification standards from
Sec. 9901.105(c) to Sec. 9901.105(e) to address concerns raised
during the meet-and-confer process that language in the proposed
regulations did not clearly identify OPM's role in this matter.
Finally, we have added a requirement that the Secretary coordinate with
the Director regarding the Secretary's determination under 5 U.S.C.
9902(l) that the Department has in place a performance management
system that meets the criteria in 5 U.S.C. 9902(b). This determination
must be made before the Department applies the human resources
management system established under 5 U.S.C. 9902(a) to an organization
or functional unit that exceeds 300,000 civilian employees.
Section 9901.106--Continuing Collaboration
As authorized by 5 U.S.C. 9902(f)(1)(D) and (m), section 9901.106
of the regulations establishes a process called ``continuing
collaboration'' for involving employee representatives in the further
planning and development of the HR and labor relations systems after
promulgation of the joint DoD/OPM enabling regulations. Under this
continuing collaboration provision, DoD will provide employee
representatives the opportunity to participate in the development of
implementing issuances that carry out the provisions of part 9901.
Section 9901.106 implements 5 U.S.C. 9902(f)(1)(D), which requires
the Secretary and the Director to develop a method for employee
representatives to participate in further planning and development
after promulgation of joint DoD/OPM regulations establishing the HR
system under 5 U.S.C. 9902(a). In addition, this section provides for
the same continuing collaboration with respect to application of the
labor relations system established by joint DoD/OPM regulations under 5
U.S.C. 9902(m). Section 9901.106 does not apply to the adjustment of
the NSPS enabling regulations themselves. Such regulatory adjustments
must be made using the meet-and-confer process described in 5 U.S.C.
9902(f)(1)(A)-(C) or (m), as applicable.
During the meet-and-confer process, several participating labor
organizations suggested that adjustments to the HR system or labor
relations system should be subject to the meet-and-confer process
rather than the continuing collaboration process, and others suggested
that there should be collective bargaining over implementing issuances.
In addition, commenters questioned whether continuing collaboration on
implementing issuances met the requirements of 5 U.S.C. 9902(f)(1)(D),
which requires a method for employee representatives to participate in
any further planning or development which might become necessary.
As we have already explained, we agree that adjustments to the HR
system regulations or the labor relations system regulations would be
subject to the meet-and-confer process described in 5 U.S.C.
9902(f)(1)(A-(C) and (m)(3). However, we did not adopt the suggestion
to require that implementing issuances be subject to collective
bargaining or the meet-and-confer process. Collective bargaining is
inappropriate for the development of HR system implementing issuances,
since it is inconsistent with the requirements of Section 9902(f)(4).
In addition, Congress expressly required DoD and OPM to develop a
separate method, apart from the meet-and-confer process, for employee
representatives to participate in the further planning and development
of the HR system (which will be manifested in the implementing
issuances). The continuing collaboration process does meet the
requirements of 5 U.S.C. 9902(f)(1)(D), and we therefore have retained
this process in the final regulations.
In addition, we have added language to clarify that the continuing
collaboration process in Sec. 9901.106 is the exclusive process for
employee representatives to participate in the further planning,
development, and implementation of the NSPS HR and labor relations
systems established by these enabling regulations. (See 5 U.S.C.
9902(f)(4) and (m)(1)-(2).)
We also received comments during the meet-and-confer process, as
well as written comments, suggesting that all labor organizations
representing employees affected by an implementing issuance should have
the opportunity to be represented in the continuing collaboration
process. Labor organizations recommended that we eliminate the
provision authorizing the Secretary to determine the number of employee
representatives who will participate in the continuing collaboration
process. While, as a practical matter, it would be administratively
inefficient to include representatives from more than 1500 Departmental
bargaining units in the continuing collaboration process, we do agree
that bargaining units affected by an implementing issuance should be
represented in the process. Therefore, we have retained the provision
giving the Secretary sole and exclusive discretion to determine the
number of employee representatives that may participate in the process,
but we have modified the final regulations to make clear that each
national labor organization with one or more bargaining units affected
by an implementing issuance will be provided the opportunity to
participate in the process. We believe this will provide for an
efficient and meaningful continuing collaboration process, particularly
when large numbers of bargaining units are affected.
Commenters, including labor organizations participating in the
meet-and-confer process, suggested that employee representatives should
be involved before a draft implementing issuance is proposed. In fact
the continuing collaboration process provides the Secretary flexibility
to involve affected labor organizations whenever appropriate, including
at the conceptual stage. These commenters further suggested that there
should be some feedback to the labor organizations regarding the
disposition of any recommendations made during the continuing
collaboration process. We agree and have modified the regulations to
ensure that the Department considers the views and recommendations
offered during the process before taking final action. A commenter also
expressed concern that the Secretary was not required to adopt
suggestions or recommendations, but we believe 5 U.S.C. 9902 intended
the Secretary to have the final authority to implement the NSPS. In
addition, employee representatives will receive from the Department a
written statement of the reasons for taking final action regarding an
implementing issuance.
Finally, commenters, including labor organizations participating in
the meet-and-confer process, recommended that the regulations provide
employee representatives a reasonable time to submit their comments.
The complexity of issues will vary greatly from implementing issuance
to implementing issuance, which makes it imprudent to establish a
standard time for commenting in the regulations. Therefore, we have not
adopted this recommendation and have retained the provision authorizing
the Secretary to establish these timeframes.
[[Page 66135]]
Section 9901.107--Relationship to Other Provisions
Section 9901.107 describes the relationship of the NSPS regulations
to other laws and regulations. Commenters expressed confusion regarding
the purpose of this section `` in particular, paragraph (b). For
example, a commenter suggested that DoD was attempting to exempt itself
from title 5 rules on back pay. Paragraph (b) is merely addressing
situations where other laws contain references to statutory provisions
that are being waived and replaced by NSPS regulations. In general, our
purpose is to give those other laws continuing effect by deeming the
references to waived provisions to be references to the NSPS
regulations replacing those waived provisions. Thus, for example, we
are not eliminating NSPS employees' entitlement to back pay under 5
U.S.C. 5596, but are merely giving meaning to references in Section
5596 to statutory provisions in chapters 71 and 77 that no longer apply
to NSPS employees. The final regulations reflect a technical revision
in paragraph (b)(3) to make clear that all references in section 5596
to provisions in chapter 71 (dealing with labor relations) are
considered to be references to corresponding provisions in subpart I of
these regulations. Also, in paragraph (b)(2), we revised a regulatory
citation consistent with the rearrangement of sections in subpart H.
Commenters expressed concern regarding Sec. 9901.107(a)(2), which
(1) provides that part 9901 must be interpreted in a manner that
recognizes DoD's need to accomplish its critical national security
mission swiftly and effectively and (2) accords DoD and OPM's
interpretation of the regulations great deference. The principle of
providing deference to the agencies responsible for regulating and
implementing a statute is well established. We believe it is entirely
appropriate that the regulations recognize that the need for deference
is even greater when the agency is responsible for defending and
protecting our country and its citizens against external threats. We
have clarified that deference is to be given to DoD's and OPM's
interpretation of these regulations. In paragraph (c), we have removed
the reference to law enforcement officer geographic adjustments under
section 404 of the Federal Employees Pay Comparability Act of 1990,
since those adjustments are no longer payable.
Finally, in paragraph (d), we have removed the reference to 29 CFR
part 1614 as unnecessary because the paragraph specifically provides
that the employment discrimination laws that the Equal Employment
Opportunity Commission (EEOC) enforces under 42 U.S.C. 2000e et seq.,
29 U.S.C. 621 et seq., 29 U.S.C. 791 et seq., and 29 U.S.C. 206(d) are
not waived, modified, or otherwise affected by these regulations. This
is consistent with the enabling statute and our commitment to full and
vigorous enforcement of Federal sector nondiscrimination laws. This
means that employees and applicants for employment will have the right
to file EEO complaints under those provisions of law as they do today
and that EEOC's jurisdiction over those complaints remains unchanged.
Section 9901.108--Program Evaluation
Section 9901.108 requires that DoD establish procedures for
evaluating the NSPS regulations and their implementation.
Commenters recommended that other organizations, such as OPM, be
involved in program evaluation. They consider it important that program
evaluations be conducted by independent, unbiased organizations. This
regulation is meant to place a self-evaluation requirement on DoD, not
to address third-party evaluations of NSPS. We believe it is a matter
of good management that any agency implementing new human resources
management and labor relations systems have responsibility for
evaluating those systems so that problems can be corrected and
improvements made. Under law and Executive order, OPM has general
oversight responsibilities with respect to agency administration of
human resources management programs. Of course, OPM has a particular
interest and accountability with respect to NSPS, since Congress
authorized OPM and DoD to jointly prescribe the NSPS regulations. OPM
expects to review the results of DoD evaluations of NSPS and may
conduct evaluations of its own. Nothing in these regulations prevents
evaluations of NSPS by other appropriate organizations, such as the
Merit Systems Protection Board or the Government Accountability Office.
A commenter suggested that DoD establish an ongoing mechanism
whereby employees can submit observations and recommendations for
improving NSPS (including anonymous submissions). The commenter
observed that this was especially important when employees (including
supervisors) are not part of a bargaining unit. We do not believe it is
necessary to establish a special, ongoing mechanism for such input
within this regulation. When appropriate for the subject, NSPS
evaluation methods established under Sec. 9901.108 will elicit
workforce observations and recommendations; and employees also may use
normal Departmental processes to comment on the human resources system.
In addition, we note that the term ``employee representative'' as used
in 5 U.S.C. 9902 is not limited to representatives of labor
organizations. DoD may request views and comments from representatives
of other employee groups, such as a managers' association.
Commenters requested greater detail on the nature of DoD
evaluations, such as evaluation criteria, benchmarks, parameters, and
timeframes. Commenters also stated that the program evaluation process
in the proposed regulation is too vague with respect to the
participation of employee representatives and recommended that we
incorporate more specific provisions, such as providing information to
employee organizations, timeframes for review, and procedures for
employee organizations to collect information directly from employees.
Section 9901.101 of these regulations already identifies ``key
operational characteristics and requirements,'' which are essentially
high-level evaluation criteria. DoD will provide additional detail as
it develops its evaluation program. The timing, nature and complexity
of NSPS program evaluations will vary greatly and will be affected by
the spiral rollout strategy for the human resources system. We consider
it to be imprudent to set standard timeframes. We believe this is an
area where flexibility is essential so that DoD can adjust the
evaluation program based on experience. Accordingly, we have not
adopted the recommendations made by commenters for greater specificity.
Subpart B--Classification
General Comments
Commenters were concerned about the lack of specificity about the
structure of the NSPS classification system and commented on this issue
with regard to each section of this subpart. A number of commenters
felt the proposed regulations were too vague and did not provide enough
details about how the career groups and bands will be established,
which occupations will be in each career group, and which positions
will be in each band. Commenters recommended a number of amendments to
subpart B to provide more detailed criteria.
Commenters expressed a strong desire that this subpart of the
regulations be
[[Page 66136]]
more specific and that employees and employee representatives be
involved in the design of the NSPS classification system. Responding to
the lack of detail in the regulations, labor organizations recommended
that the bar on collective bargaining of the NSPS classification system
under Sec. 9901.903 of the proposed regulations be removed. Commenters
also requested that implementing issuances for this subpart be subject
to public review and comment. We have not removed the bar on collective
bargaining. While the detailed implementing issuances for this subpart
will not be subject to public review and comment, they will be
established under the ``continuing collaboration'' provisions in Sec.
9901.106. Under continuing collaboration, the exclusive process for
employee representative involvement (5 U.S.C. 9902(f)(4)), employee
representatives will have the opportunity to review and comment on
draft implementing issuances. Furthermore, we have added a new section
at Sec. 9901.205, which further clarifies that classification matters
are not subject to collective bargaining. This is consistent with the
statutory mandate that the scope of bargaining not be expanded under
NSPS (5 U.S.C. 9902(m)(7)).
We understand the desire for the regulations to provide more
specificity about how the NSPS classification system will operate.
However, the regulations must provide sufficient flexibility for a
classification system with career groups and bands that support the
market-based features of the NSPS pay system and can be customized to
meet DoD's mission requirements and strategic human capital needs both
today and in the future. Except as otherwise explained in this section
of the SUPPLEMENTARY INFORMATION, we have not modified subpart B of the
regulations in response to these comments. The regulations provide for
implementing issuances that will provide further details, including the
criteria for the career groups and definitions of the bands. DoD will
consider the suggestions and recommendations made by commenters as it
develops these implementing issuances.
Commenters recommended that DoD issue classification standards to
ensure consistent application of the NSPS classification system. DoD
will establish standardized classification procedures and criteria in
the implementing issuances required by this subpart.
Other Comments on Specific Sections of Subpart B
Section 9901.201--Purpose
Section 9901.201 explains the purpose of subpart B, which
establishes a classification structure and rules for covered DoD
positions and employees. The lack of details in this subpart of the
proposed regulations caused some commenters to question whether the
proposed classification system would provide for ``equal pay for equal
work.'' The merit system principle at 5 U.S.C. 2301(b)(3) ensures that
``Equal pay should be provided for work of equal value, with
appropriate consideration of both national and local rates paid by
employers in the private sector, and appropriate incentives and
recognition should be provided for excellence in performance.'' The
NSPS classification system established by these regulations will
provide for a classification structure with consistently defined work
levels, while the performance management and compensation systems will
establish the value of that work, as required under this principle.
Section 9901.202--Coverage
Section 9901.202 identifies the employees and positions eligible
for coverage under this subpart, including those otherwise covered by
the General Schedule and prevailing rate systems, employees in SL and
ST positions, and members of the SES, subject to Sec. 9901.102(d).
This section also provides the authority for the Secretary to designate
additional employees and positions for coverage. Commenters requested
clarification of coverage for students and for laboratories. Students
in positions otherwise classified to the General Schedule or other
covered classifications systems will be covered under the NSPS
classification system. Section 9902(c) of title 5, U.S. Code, specifies
that coverage will not occur before October 1, 2008, for the defense
laboratories in the following organizations: Aviation and Missile
Research Development and Engineering Center, Army Research Laboratory,
Medical Research and Materiel Command, Engineer Research and
Development Command, Communications-Electronics Command, Soldier and
Biological Chemical Command, Naval Sea Systems Command Centers, Naval
Research Laboratory, Office of Naval Research, and Air Force Research
Laboratory. Section 9902(c)(1) of title 5, U.S. Code, provides that on
or after October 1, 2008, these laboratories will be covered to the
extent the Secretary determines the flexibilities provided by NSPS are
greater than the flexibilities they currently have under demonstration
authority.
Commenters recommended excluding Civilian Mariner, Emergency
Essential Civilians, and dual status military technicians from coverage
under this subpart. We have not changed coverage under this subpart
based on these comments. The classification system is an integral part
of NSPS and provides the flexibility needed as the foundation for the
performance management and pay components of the system.
Section 9901.203--Waivers
Section 9901.203 of the regulations specifies the provisions of
title 5, U.S. Code, that are waived for employees covered by the NSPS
classification system established under subpart B. As specified in
Sec. 9901.203(a) the waivers apply when a category of DoD employees is
covered by a classification system established under this subpart,
except with respect to OPM's authority under 5 U.S.C. 5112(b) and
5346(c) to act on requests for review of classification decisions,
under Sec. 9901.107 and Sec. 9901.222(d). Section 9901.203(b) states
that the classification of positions above GS-15 is not waived for
certain purposes.
A commenter requested clarification of whether this section waives
5 U.S.C. 6303(f) regarding the annual leave accrual for members of the
SES and employees in SL and ST positions. As specified in Sec.
9901.203(b), this is one of the enumerated provisions that may not be
waived.
Section 9901.204--Definitions
This subpart defines the key components and terms used in the NSPS
classification system. A commenter suggested revising the definition of
``classification'' to remove the phrase ``job evaluation,'' to
eliminate potential confusion with ``performance evaluation.'' We did
not make this change. The phrase is not used to define classification,
but rather is included to explain that the terms may be used
interchangeably.
Section 9901.211--Career Groups
Section 9901.211 provides DoD the authority to establish career
groups. DoD's implementing issuances will provide the criteria and
rationale for grouping occupations or positions into career groups.
One commenter noted that this section does not mention OPM's role
in establishing the career groups. Under Sec. 9901.105(c)(1), DoD is
required to coordinate with OPM before establishing career groups.
[[Page 66137]]
Commenters expressed a need for consistent career groups across
DoD. We did not make a change in the regulations based on this comment;
however, DoD anticipates uniform career groups. Several commenters
provided specific recommendations about grouping occupations together
into career groups. Other comments recommended limiting the number of
career groups to keep the system simple. In developing the implementing
issuances, DoD will consider these suggestions.
Section 9901.212--Pay Schedules and Pay Bands
Section 9901.212 provides DoD with the authority to establish pay
schedules within each career group, and pay bands within each pay
schedule. One commenter noted that the bands, as defined in this
section, are simple to understand.
Commenters noted an incorrect reference in the proposed regulations
at Sec. 9901.212(d). We have corrected the reference.
Commenters noted that this section does not mention OPM oversight
and recommended that OPM review and approve the pay schedules. Under
Sec. 9901.105(c)(1), coordination of pay schedules and pay bands with
OPM is required.
The proposed regulations stated in Sec. 9901.221(a) that pay
schedules ``may include two or more pay bands.'' We made a technical
correction to clarify that a pay schedule may include one or more pay
bands.
Commenters expressed a need for consistent pay bands throughout
DoD. We did not make a change in the regulations based on this comment;
however, DoD anticipates that bands will be defined consistently for a
given occupation. Several commenters recommended grouping particular
General Schedule grades into pay bands. Commenters also recommended
placing specific occupations (e.g., attorney) into particular bands.
Additional commenters suggested ways to band supervisory positions,
while other commenters requested clarification of how supervisory and
team leader positions will be placed into bands. DoD will consider
these suggestions and address the number and composition of pay bands
and the assignment of supervisor and team leader positions to bands in
its implementing issuances.
Several commenters requested further detail on the classification
of prevailing rate positions under NSPS. One commenter suggested
adopting the bands used for DoD nonappropriated fund (NAF) employees.
DoD will consider these comments when establishing NSPS pay schedules
and pay bands for prevailing rate positions.
A commenter questioned how duty levels within bands will be
described. DoD will establish a process for consistently describing the
duties of positions.
Several commenters requested that DoD establish military rank
equivalencies for each band, for purposes such as travel
accommodations. Such equivalency determinations are outside the scope
of the NSPS regulations.
Several commenters noted the importance of dual career paths to
support both supervisory and non-supervisory expertise. DoD agrees that
this is an important feature to include in the NSPS classification
system. The pay band structure supports this concept through pay bands,
such as expert and supervisory bands, which could provide for parallel
career progression.
Section 9901.221--Classification Process
Section 9901.221 of the regulations requires DoD to establish a
method for describing jobs and documenting those descriptions. DoD will
establish procedures for assigning each job to an occupational series,
career group, pay schedule, and band, and will classify each job
accordingly.
Labor organizations participating in the meet-and-confer process
expressed concern that employee promotions might be unduly delayed
because Sec. 9901.221(d) in the proposed regulations did not provide a
timeframe for classification decisions. As a result of these
discussions, we have added a requirement in this section that personnel
actions implementing classification decisions occur within four pay
periods after the date of the decision.
Some commenters expressed concerns that under the NSPS
classification system, position descriptions will not be required. They
were concerned that the duties required by a position will not be
clearly defined and will be too broad, which may result in uncertain
expectations or the assignment of work unrelated to an employee's
position. While NSPS provides increased flexibility, DoD will establish
a process for consistently describing the requirements of positions.
Section 9901.222--Reconsideration of Classification Decisions
Section 9901.222 of the proposed regulations provides employees the
right to request that DoD or OPM reconsider the classification of their
official position of record including the pay system, career group,
occupational series, pay schedule, or pay band.
Commenters expressed concern that this section provides
insufficient detail. DoD's implementing issuances will establish
policies and procedures for handling an employee's request for
reconsideration of classification decisions.
A commenter noted that current regulations provide employees the
right to request reconsideration of official titles of their positions
of record and asked that the regulations provide this right under the
NSPS classification system. We agree and have added ``official title''
to Sec. 9901.222(a).
Commenters were concerned that there was no independent review to a
neutral party. Paragraphs (a) and (c) of this section provide employees
the right to directly request OPM reconsider the classification of
their official position and allow an employee to request that OPM
reconsider a DoD classification reconsideration decision, respectively.
This right is parallel to the classification appeal right of current
General Schedule employees under 5 U.S.C. 5112(b).
Commenters suggested that the regulations authorize retroactive
promotions if an employee's position is found to be misclassified, and
one commenter suggested that retroactive promotions be limited to 2
years preceding the reconsideration determination. Under the current
classification law and regulations (5 U.S.C. chapter 51 and 5 CFR part
511) classification decisions generally may not be made effective
retroactively. (See 5 CFR 511.701(a)(4).) In addition, the Supreme
Court has held that neither the Classification Act under 5 U.S.C.
chapter 51 nor the Back Pay Act under 5 U.S.C. 5596 creates a
substantive right to back pay for periods of wrongful classifications.
(See United States v. Testan, 424 U.S. 392 (1976).)
OPM regulations at 5 CFR 511.703 provide an exception to this
general rule and allow a retroactive effective date if upon
classification appeal an employee is found to have been wrongfully
demoted. Any similar retroactive effective date provisions regarding
classification reconsideration decisions will be addressed in DoD's
policies and procedures for reviewing these requests, under Sec.
9901.222(b).
Commenters suggested that classification reconsideration decisions
should be based on OPM's classification standards. The appropriate
criteria for reconsideration are those criteria used in classifying the
position. As noted in Sec. 9901.222(e), where DoD has adopted OPM
standards, OPM criteria will be
[[Page 66138]]
used; and where DoD has established its own criteria for classifying
positions under this subpart, DoD criteria will be used.
Commenters suggested that DoD should have a central classification
appeals office. This change has not been made in the regulations. DoD
currently has a central classification appeals office.
Section 9901.231--Conversion of Positions and Employees to the NSPS
Classification System
Section 9901.231 of the regulations addresses the conversion of
positions to the classification system established under this subpart.
Commenters expressed concerns about the conversion process, finding
it vague and requesting further detail. They questioned whether all
positions will be reclassified, whether employees will be required to
reapply for their current job, and how DoD will deal with employees in
entry positions who have completed training but not yet met time-in-
grade criteria. A commenter requested that the length of ``save pay''
be a minimum of 2 years. Additionally, commenters requested guidance on
converting employees currently classified under demonstration projects
and on converting employees leaving DoD from NSPS to the General
Schedule. A commenter requested that employees be provided new position
descriptions prior to conversion. DoD will consider these comments when
issuing the implementing issuances to prescribe the conversion process.
Commenters questioned the applicability of the conversion rules to
employees converted to the NSPS pay system from demonstration projects
and alternative pay systems. In response to these comments, we revised
Sec. 9901.231(b) to provide that DoD will convert employees to the
system without a reduction in their rate of pay, including any
applicable locality payment, special rate supplement, local market
supplement, or ``similar payment under other legal authority.''
We also made a technical correction, changing the term ``special
rate'' to ``special rate supplement.'' This change is consistent with
other recently published special rate regulations.
Subpart C--Pay and Pay Administration
General Comments
Commenters and the labor organizations participating in the meet-
and-confer process articulated concerns about the lack of specificity
in subpart C of the regulations on the pay structure and the pay
administration rules governing the NSPS pay system. Commenters felt the
regulations were too vague and difficult to understand because of the
lack of detailed information on such issues as establishment of career
groups and pay schedules, establishment and adjustment of pay band
rates and rate ranges, establishment and adjustment of local market
supplements, composition and funding of performance pay pools, pay-
setting, and premium pay. Commenters expressed difficulty in
understanding how their rate of basic pay and pay adjustments would be
determined under NSPS and the impact individual and group performance
would have on pay. Other commenters recommended that the regulations be
withdrawn until the entire system could be disclosed or tested.
Commenters, including labor organizations participating in the
meet-and-confer process, repeatedly referenced the lack of specificity
when recommending a number of amendments to subpart C of the
regulations which they felt would provide detailed criteria and
situations for setting and adjusting rate ranges; entitlement to rate
range adjustments; setting and adjusting local market supplements;
entitlement to local market supplements; eligibility and amounts of
performance pay increases; and setting pay for initial hires,
reassignments, promotions, and reductions in band. Amendments were also
suggested for initial conversion into NSPS.
Citing the lack of specificity, commenters and the labor
organizations participating in the meet-and-confer process stated that
the regulations should be revised to remove the bar in subpart I on
collective bargaining of the NSPS pay structure and system and to
provide that the NSPS pay system be subject to national consultation
rights.
Numerous commenters requested that the regulations be more
transparent and that DoD work closely with employees and employee
representatives in designing the NSPS pay system. They also cited the
lack of details in the regulations as the basis for doubting the
fairness and equity of the NSPS pay system.
We recognize the desire that the regulations provide greater
specificity and guarantees pertaining to the NSPS pay system. However,
the regulations must afford DoD sufficient flexibility to design an
agile pay system that is performance-based, market-based, and tailored
to DoD's performance goals, mission requirements, and strategic human
capital needs. Except as otherwise explained in this section of the
SUPPLEMENTARY INFORMATION, we have not modified subpart C of the
regulations in response to these comments.
However, we concur with commenters that the NSPS pay system must be
designed in a transparent and credible manner that involves employees
and employee representatives. While we have not removed the bar on
collective bargaining in subpart I, the implementing issuances, as
defined in Sec. 9901.103, which will include the details of the NSPS
pay system, will be covered by the ``continuing collaboration''
provisions in Sec. 9901.106, which Congress established as the
exclusive process for the involvement of employee representatives in
the further planning and development of the HR system (5 U.S.C.
9902(f)(1)(D) and (f)(4)). (See Section 9901.103--Definitions and
Section 9901.106--Continuing Collaboration.) Further, DoD will consider
the suggestions and recommendations made by commenters as it develops
implementing issuances for the NSPS pay system. Finally, we have added
a new section at Sec. 9901.305, which further clarifies that pay
matters are not subject to collective bargaining. This is consistent
with the statutory prohibition against expanding the scope of
bargaining under NSPS to those matters not subject to bargaining today
because they are governed by law or Governmentwide regulations (5
U.S.C. 9902(m)(7)).
Commenters also stated that the regulations should require the new
pay system to fully comply with the merit system principles and protect
against prohibited personnel practices, implement the performance
management provisions of subpart D prior to implementing the pay system
in subpart C, require DoD to assess the impact of the pay system on
employees prior to implementation, and establish a DoD compensation
board. Neither the merit system principles nor the rules regarding
prohibited personnel practices are waived under NSPS. Regarding testing
and/or assessment of the system prior to implementation, the Department
has tested many of these flexibilities via the demonstration projects.
Additionally, the Department will use a spiral implementation strategy
that will allow it to make modifications as necessary based on lessons
learned in the earlier spirals. With regard to the recommendation for a
compensation board, establishment of a mechanism for determining rate
range adjustments will be addressed in implementing issuances.
[[Page 66139]]
Commenters stated the concern that they would lose pay
comparability with DoD employees remaining under the General Schedule
and with employees in other Federal agencies. Commenters stated that
employees should receive pay increases equivalent to the increases they
would have received under the General Schedule. Many commenters also
stated that the Department should continue to rely on the General
Schedule classification and pay system--in essence, a retention of the
status quo--or make the General Schedule system more flexible. Other
commenters questioned the Department's ability to successfully
implement the system and/or the ability of the Department's managers to
establish and apply performance standards fairly and consistently to
pay determinations, especially if they have not used the current system
effectively. Other commenters stated that the NSPS pay system must
contain the transparency and objectivity of the General Schedule,
including the involvement of Congress and the Federal Salary Council.
The Department plans to implement the system described in the
proposed regulations. That system is consistent with the statutory
requirement that the Department establish a ``pay-for-performance''
system that better links individual pay to performance. (See 5 U.S.C.
9902(b)(6)(I).) Furthermore, we believe Congress and the American
public expect their public employees to be paid according to how well
they perform, rather than how long they have been on the job. They also
expect the Department to maximize its efforts to recruit and retain the
most talented and motivated workforce to accomplish its critical
national defense mission.
The General Schedule classification and pay system is an impediment
to these expectations. The General Schedule does not provide the
opportunity to appropriately reward top performers and/or compensate
them in relation to their labor market value. Under the General
Schedule, performance is rewarded by exception, and market value is
defined as ``one size fits all.''
The General Schedule pay system is primarily a longevity-based
system, i.e., pay increases are linked primarily to time in grade. In
addition to length of time, employees must be found to be performing at
an ``acceptable level of competence'' to receive a step increase.
However, since 99 percent of all employees satisfy this requirement,
virtually all employees can expect to receive base pay increases
automatically of up to 30 percent over time. These increases are in
addition to annual across-the-board pay increases. Even employees whose
performance is unacceptable receive the annual across-the-board and
locality pay increases that average between 3 and 5 percent. Over time,
even minimally productive employees will progress steadily to the top
of the General Schedule pay range and may be compensated significantly
more than higher performing employees with less time in grade. A system
based primarily on longevity is not designed to base compensation on
performance.
Commenters stated that employees have no basis to predict salary
from year to year and that they have no way of knowing the amount of
their annual salary increases. Commenters stated that many benefits
(e.g., leave, retirement, life insurance) are based on salary, and
since raises are not guaranteed and cannot be predicted under NSPS,
they will be losing benefits. Other commenters stated that their
``high-three'' average salary could be less under NSPS, which will
reduce employee annuities. A commenter also noted that because salary
costs under the NSPS pay system cannot be easily predicted, the A-76
contract bidding process will be more difficult to analyze.
The Department, while recognizing that there is less predictability
under the NSPS pay system, also notes that pay increases are not
completely predictable under the current system--other than periodic
within-grade increases. Additionally, under current title 5 provisions
a number of situations affect an employee's salary (e.g., transfer from
one locality pay area to another and change from an occupation with a
special rate to an occupation without one) and therefore affect an
employee's annuity calculation. Furthermore, NSPS is a pay-for-
performance system that will provide meaningful financial rewards to
high-performing employees and greater employee control over future pay
increases. High-performing employees will have the opportunity to
achieve significant pay increases--the higher the performance, the
higher the pay. The Department will be able to use salary trends to
estimate future costs for purposes such as A-76.
Commenters questioned the Department's statements that DoD has more
than 20 years' experience with pay-for-performance systems. Pay-for-
performance systems similar to this proposal are not new. Pay banding
has been part of the Department's compensation program since 1980, and
the Department has a significant amount of experience in implementing
and evaluating performance-based pay systems (e.g., demonstration
projects). Currently, approximately 44,000 of the Department's
employees are covered by performance-based pay systems.
Other Comments on Specific Sections of Subpart C
Section 9901.301--Purpose
Many commenters stated that the pay-for-performance system would
lower employee morale, increase competition among employees, and
undermine teamwork and cooperation.
The NSPS performance management system provides opportunities for
the Department to recognize and reward teamwork. The Department does
not assume that employees are solely motivated by pay. As a responsible
employer, the Department has the obligation to reward the highest
performers with the highest levels of compensation--regardless of their
motivational basis for achievement. The Department believes the new
system will enhance employees' desire to strive for maximum
achievement. More importantly, this will provide for more equitable
treatment of employees based on level of performance (which is
consistent with merit system principles) and will help create a high-
performance culture within the Department. In addition, a pay-for-
performance system will allow the Department to be more competitive in
recruiting and retaining top performers who have higher value in the
labor market.
Commenters stated that since DoD bases military ``within-grade
increases'' on longevity, civilian employees should continue to receive
time-based increases. The enabling legislation did not grant the
Department authority to waive the provisions of title 10, United States
Code, under which military pay and benefits are established.
Additionally, while the Department values both its military personnel
and civilian employees, it continues to support separate pay and
benefit systems in recognition of the different attributes and demands
of military and civilian service.
Section 9901.302--Coverage
Section 9901.302 lists the categories of employees eligible for
coverage under subpart C. Commenters stated that Federal Wage System
(FWS) and other prevailing rate employees should not be covered by the
NSPS pay system. Others stated that since FWS and other prevailing rate
pay systems are already based on market rates, such employees should be
excluded from coverage. Other commenters thought the NSPS
[[Page 66140]]
pay system should cover GS and FWS employees at the same time.
The Department intends to include all eligible employees in the
NSPS human resources management and labor relations systems, as
described in the Subpart A--General provisions section of this
SUPPLEMENTARY INFORMATION. However, the Department does not intend to
cover FWS employees in the initial implementation phases of the NSPS
human resources management system. (See the Next Steps section of this
SUPPLEMENTARY INFORMATION.) Prior to including FWS employees in the
system, the Department will conduct additional analyses to determine
the appropriate application of NSPS in the trades and crafts
environment. Part of that analysis will include reviewing current wage
survey approaches.
A commenter urged the regulations to exclude law enforcement
officers from the NSPS pay system. The commenter stated that DoD has
not provided any evidence that a pay-for-performance system is
appropriate for law enforcement work, that law enforcement work often
has no counterpart outside the Federal Government for labor market
comparisons, and that the proposal does not consider the current
difficulties in recruiting and retaining law enforcement officers. The
Department considers pay for performance appropriate for law
enforcement work. It also recognizes that it will have to use
appropriate comparisons when making determinations regarding pay ranges
for law enforcement officers.
Commenters stated that employees appointed under the authority of
section 1113 of Public Law 106-398 should be added to the coverage
statement in Sec. 9901.302. We believe that this refers to section
1101 of the National Defense Authorization Act for Fiscal Year 1999, as
amended. This section provides authority for DARPA and selected
military department laboratories to hire and pay a limited number of
scientists and engineers. As shown in our matrix, these positions are
outside the scope of NSPS. (See Section 9901.102--Eligibility and
Coverage.)
Section 9901.303--Waivers
Section 9901.303 lists the provisions of title 5 which DoD may
waive or modify under these regulations, including the student loan
repayment authority at 5 U.S.C. 5379. Commenters expressed concern that
attorneys and other excepted service positions are ineligible to
participate in the student loan repayment program.
Section 9901.303(c) states that employees occupying positions
excepted from the competitive service because of their confidential,
policy-determining, policy-making, or policy-advocating character are
ineligible. This exclusion is identical to the exclusion in 5 CFR part
537, Repayment of Student Loans, and it does not exclude most attorneys
and other excepted service employees from eligibility for student loan
repayment.
Section 9901.304--Definitions
Section 9901.304 provides definitions of terms used in subpart C.
Commenters asked whether extraordinary pay increases (EPIs) are basic
pay increases or bonuses. We have revised the definition of
``extraordinary pay increase'' or ``EPI'' to clarify that an EPI may be
a basic pay increase or a bonus.
A commenter asked for the meaning of ``pay pool level,'' as used in
the definition of ``modal rating.'' The definition of modal rating has
been revised to clarify that the term modal rating for this subpart
refers to the most frequently occurring rating for employees in the
same pay band within a particular pay pool for a particular rating
cycle.
In response to general comments requesting greater clarity, we have
revised the definition of ``pay pool'' to mean ``the amount designated
for performance payouts'' instead of ``the dollar value of the funds
set aside for performance payouts.''
Commenters made various other requests for additional definitions
of terms used in subpart C, such as ``compensation,'' ``aggregate
pay,'' ``conduct,'' ``pay system,'' and ``rate range.'' In some cases,
we do not believe a definition is needed. In other cases, we believe it
is more appropriate to define or explain such terms in implementing
issuances in order to preserve the Department's flexibility.
Section 9901.311--Major Features
Section 9901.311 provides DoD with the authority to establish the
NSPS pay system through implementing issuances and lists the major
features of the NSPS pay system. Commenters questioned whether
supervisory and nonsupervisory employees will be under the same pay
system. Others questioned the use of a supervisory differential under
the system.
The same pay structure and pay administration rules cover both
supervisory and nonsupervisory employees. Details on the treatment of
supervisors and non-supervisors under this section will be addressed in
the implementing issuances. At this time, DoD plans to include
supervisory and nonsupervisory employees in the same career groups but
to place them under separate pay schedules. NSPS does not establish a
supervisory differential.
Section 9901.312--Maximum Rates
Section 9901.312 provides the Secretary with the authority to
establish limitations on maximum rates of basic pay and aggregate pay
for employees covered by the NSPS pay system. During the meet-and-
confer process, participating labor organizations recommended retitling
the section ``Maximum and Minimum Rates'' and adding a requirement to
the end of the section that the overall amount allocated for
compensation for DoD employees covered by NSPS must not be less than
the amount that would have been allocated for compensation if they had
not been converted to NSPS. This section has not been changed; however,
this topic is addressed under Section 9901.313--National Security
Compensation Comparability of this SUPPLEMENTARY INFORMATION.
Commenters expressed concerns that maximum rates would limit the
Department's ability to reward pay for good performance and reduce
current pay potential. However, we note that any pay system will
include salary ranges (including a maximum rate) for any given set of
jobs, consistent with the applicable labor market. Even the most
outstanding performers will be limited by the salary range for the job
they perform. The proposed NSPS pay system is designed to allow the
best performers to progress in pay more rapidly. The ability to reach
the range maximum more quickly is a benefit to the high-performing
employee.
Section 9901.313--National Security Compensation Comparability
Section 9901.313 is consistent with 5 U.S.C. 9902(e)(4), which
requires that, to the maximum extent practicable, through fiscal year
2008, the overall (aggregate) amount allocated for compensation of the
Department's civilian employees covered by NSPS may not be less than
the amount that would have been allocated for compensation of such
employees if they had not been converted to the NSPS pay system.
During the meet-and-confer process, the participating labor
organizations recommended adding a new paragraph to this section of the
regulations that requires the rates of compensation for DoD civilian
employees to be adjusted at the same time and in the same proportion as
the rates of compensation for members of the armed forces, as required
by 5 U.S.C. 9902(e)(3). Other commenters recommended that civilian
[[Page 66141]]
employees receive pay increases identical to members of the armed
forces. Comparability with military pay is already addressed under 5
U.S.C. 9902(e)(3) and does not need to be repeated in these
regulations.
Commenters requested clarification on the formula DoD will develop
in applying this section. Commenters recommended that DoD ensure that
through 2008 each individual installation receive the same funding it
would have received under the General Schedule. Others, including labor
organizations during the meet-and-confer process, recommended that the
final regulations state that the money allocated to employees
collectively will be the same as that allocated under the General
Schedule. Commenters also asked whether the amount of money available
to employees after 2008 will be less than the amount available under
the General Schedule. Commenters requested that Sec. 9901.313 include
a requirement that the Department actually spend the same level of
funding for employee pay increases under NSPS as would be spent under
the General Schedule. Other commenters pointed out that this section
protects a pool of money, but does not protect the pay of individual
employees.
The Department is developing financial policy guidance for
issuance. In addition, training will be conducted to reinforce these
funding requirements. However, Public Law 108-136 does not require that
every installation be funded at the same level as under the General
Schedule, nor does it require that each individual employee will
receive the same pay increase under NSPS that he or she would have
received under the General Schedule.
One of the key requirements of the NSPS pay-for-performance system
is providing meaningful financial rewards to high-performing employees.
Without the proper funding, this requirement cannot be realized.
Although the enabling legislation does not mandate a funding level
beyond fiscal year 2008, the Department recognizes the importance
adequate funding plays in a pay-for-performance system.
Commenters questioned the meaning of various terms used in this
section. For example, commenters asked what ``pay in the aggregate''
means in paragraph (a). Commenters also asked for a definition of ``to
the maximum extent practicable'' in paragraph (b) of this section and
who would decide what ``to the maximum extent practicable'' means.
Commenters also questioned the meaning of ``flexibility to accommodate
changes in the function of the organization and other changed
circumstances that might impact pay levels'' in that same paragraph.
Commenters stated that DoD could use the flexibility provided by this
section to lower payroll costs and divert such funds to other budget
needs.
The enabling legislation recognizes that all future circumstances
cannot be predicted. The terminology ``to the maximum extent
practicable'' was used in the enabling legislation and was designed to
preserve the flexibility to accommodate changes in missions, changes in
the composition of the workforce (e.g., mix of new employees, long-term
employees, and retirement eligible employees), and other changes that
might affect pay levels. Further defining the term would be
inconsistent with the intent of the law. However, under NSPS guiding
principles, the Department values a high-performing workforce and
recognizes that maximum effort to adequately fund civilian employee
compensation is crucial. The term ``pay in the aggregate'' refers to
the concept addressed earlier that the enabling legislation does not
require that each individual employee will receive the same pay
increase under NSPS that he or she would have received under the
General Schedule. The enabling legislation protects pay for employees
overall rather than at the individual level.
A commenter recommended that the two uses of the term ``pay'' in
Sec. 9901.313(b) be replaced with the term ``compensation'' because
``compensation'' is defined in paragraph (c) and ``pay'' is not. We
agree and have replaced the term ``pay'' with ``compensation'' in Sec.
9901.313(b).
During the meet-and-confer process, the participating labor
organizations recommended adding a paragraph to this section to address
locality pay funding. Another commenter recommended that the payments
included as ``compensation'' under Sec. 9901.313(c) be clarified. To
clarify what types of payments are included in the term
``compensation'' as used in this section, we have redefined
``compensation'' to mean basic pay ``taking into account any applicable
locality payment under 5 U.S.C. 5304, special rate supplement under 5
U.S.C. 5305, local market supplement under Sec. 9901.332, or similar
payment under other legal authority.''
Section 9901.322--Setting and Adjusting Rate Ranges
Section 9901.322 provides DoD with the authority to set and adjust
rate ranges, determine the effective date of rate range adjustments,
establish different rate ranges and provide different rate range
adjustments for different pay bands, and adjust the minimum and maximum
rates of a pay band by different percentages.
Commenters, including labor organizations participating in the
meet-and-confer process, were concerned about the frequency and
effective dates of rate range adjustments. In response to these
comments, paragraph (b), which says DoD may determine the effective
date of newly set or adjusted band rate ranges, has been modified to
add: ``Established rate ranges will be reviewed for possible adjustment
at least annually.'' We anticipate making rate range adjustments (when
warranted) and performance payouts in January of each year. However, we
have not revised the regulations to prescribe an effective date for
such adjustments because this would unduly limit the Department's
ability to make adjustments at other times in response to significant
labor market changes or nonstandard performance cycles.
Commenters questioned whether consideration of the ``availability
of funds'' in Sec. 9901.322(a) will allow DoD to use salary funds for
other budget needs and noted that this factor appears to contradict the
funding guarantees provided under Sec. 9901.313--National security
compensation comparability. We believe it is clear in the regulations
that DoD must comply with Sec. 9901.313. The availability of funds
criterion may be considered only after the requirements of Sec.
9901.313 have been met.
Commenters asked why labor market conditions will be considered in
setting and adjusting rate ranges. Others asked why different pay
adjustments should be made for different pay bands. Other commenters
felt that basing pay for employees on the local job market is a step in
the right direction of closing the pay gap between Federal employees
and their private sector counterparts. Commenters asked whether a
private sector company's lay-offs will cause a rate range minimum or
maximum to be adjusted downward.
The Department has not revised Sec. 9901.322(c). The ability to
adjust rate ranges based on labor market conditions and to adjust
different pay bands by different percentages is a key flexibility in
designing a system responsive to labor market factors. Under Sec.
9901.322(a), the Department will consider a number of factors in
determining appropriate rate ranges. Labor market conditions are only
one of these factors. Others include such factors as the Department's
mission requirements, availability of funds, and pay adjustments
granted to employees
[[Page 66142]]
of other Federal agencies. The NSPS regulations do not give any one
factor greater weight than others. Given the circumstances of a
particular year, any factor may have a greater or lesser effect on
decisions regarding adjustments in rate ranges. Section 9901.322 refers
to ``other relevant factors,'' which could include any number of
indicators, such as recruitment and retention rates for specific
occupations/locations and the projected availability of candidates for
specific occupations compared to projected vacancies in these
occupations. In the framework set by Sec. 9901.322, private sector pay
trends do not require the Department to match these trends
automatically, because they are only one of several factors that may be
considered in setting and adjusting rate ranges.
Commenters and labor organizations participating in the meet-and-
confer process were concerned about the flexibility provided in Sec.
9901.322(d) allowing DoD to adjust the minimum and maximum rates of a
pay band by different percentages. The labor organizations recommended
that the regulations require pay band minimum and maximum rates to be
adjusted by the same percentage. Other commenters recommended that the
minimum and maximum rates be adjusted by the same percentage to
minimize administrative burdens and to avoid pay compression if the
minimum rate is increased, but not the maximum rate.
Commenters also felt that allowing the Department to adjust the
maximum rate of a pay band by an amount different from the minimum rate
could benefit a few favorite employees at the top of a band by
providing opportunities for greater performance pay increases at the
expense of other good employees. Commenters also were concerned that,
if minimum pay band rates are not increased, employees in such bands
will not receive a rate range adjustment. A commenter suggested that
employees receive the average percentage increase of the minimum and
maximum pay band rates to prevent DoD from freezing pay. The Department
does not believe that a requirement to automatically adjust the minimum
and maximum pay band rates by the same amount would provide the
flexibility necessary to make the NSPS pay structure reflective of
market-based factors. However, pay compression is one the factors that
will be considered in establishing minimum and maximum rates.
Commenters stated that only Congress should have power to set pay
raises. Others stated that Sec. 9901.322 will allow DoD to reduce
congressionally approved pay raises to a lower level and that all
employees, including high performers, can have their pay cut if DoD
decides to use the money for mission or other requirements. Others
stated that every year Congress and the President determine the cost-
of-living adjustment (``COLA'') increase that employees receive and
that it is not fair to take money Congress intended to offset inflation
and put the money in a performance pool. Commenters recommended that
DoD continue to allocate the annual average pay raise that is
authorized and appropriated by Congress for GS employees to NSPS
employees who are fully successful in addition to other rewards based
on outstanding performance. The current practice under the General
Schedule of increasing pay for all employees by the same amount results
in the overpaying of employees in some occupations and the underpaying
of employees in other occupations. Under NSPS, the Department is
creating a system that allows the flexibility necessary to consider
both market factors and performance in making compensation decisions.
As set forth in 5 U.S.C. 5303, the amount of the annual January
adjustment in the General Schedule is based on a formula using the
Employment Cost Index (ECI)--a measure of the movement in wages and
salaries for private industry workers. However, the President may
propose an alternate plan due to national emergency or economic
conditions and notify Congress of his plan to adjust the General
Schedule by a different amount than that indicated by the ECI. In
recent years Congress has specified in legislation the amount of the
increase in General Schedule pay. However, whether it is specified by
the President or by legislation, the adjustment in General Schedule
rates is not based on a cost-of-living calculation, and is not a COLA
increase. (As a point of clarification, nonforeign area cost-of-living
allowances (COLAs) are paid as additional compensation to certain
Federal employees in Alaska, Hawaii, Puerto Rico, Guam, the U.S. Virgin
Islands, and the Commonwealth of the Northern Mariana Islands. The COLA
is designed in recognition of the higher living costs in these local
areas compared with living costs in the Washington, DC, area. To set
the COLA rates, OPM surveys the prices of more than 200 items,
including goods and services, housing, transportation, and
miscellaneous expenses in each of the allowance areas and in the
Washington, DC, area. Section 5941 of title 5, United States Code, and
Executive Order 10000 (as amended) authorize the payment of COLAs in
nonforeign areas.)
Commenters stated that it is unfair for the Secretary to set pay in
secret, that such decisions may result in no or smaller increases for
some pay bands compared to others, that unlike General Schedule pay
decisions, pay-setting decisions will now be made behind closed doors
and employees will have no opportunities to influence the decisions,
and that the Bureau of Labor Statistics (BLS) data used by the current
system is available for public review and accountability. A commenter
also questioned what safeguards are in place to ensure that rate range
adjustments do not result in EEO violations. Merit system principles
and anti-discrimination laws are not waived under NSPS. The merit
system principle at 5 U.S.C. 2301(b)(3) ensures that ``Equal pay should
be provided for work of equal value, with appropriate consideration of
both national and local rates paid by employers in the private sector,
and appropriate incentives and recognition should be provided for
excellence in performance.''
The Department concurs with commenters that the NSPS pay system
must be designed and executed in a transparent and credible manner that
involves employees and employee representatives. The Department will
establish in its implementing issuances a process for determining rate
range adjustments. Employee representatives will be involved through
the ``continuing collaboration'' process.
Section 9901.323--Eligibility for Pay Increase Associated With a Rate
Range Adjustment
Section 9901.323 provides that an employee must have a rating of
record above ``unacceptable'' to receive a pay increase associated with
a rate range adjustment. A number of commenters stated that payment of
rate range adjustments should not be based on employee performance.
Commenters objected to withholding such annual increases for employees
with an unacceptable rating, especially if employees are denied the
ability to appeal or grieve the rating. As discussed in our analysis of
comments on subpart D, we have revised the regulations to provide
bargaining unit employees with the option of grieving a rating of
record through a negotiated grievance process. The Department believes
that providing pay increases to employees whose ratings are
unacceptable is inconsistent with a performance-based pay system.
Commenters and the labor organizations participating in the meet-
and-confer process expressed concerns
[[Page 66143]]
that Sec. 9901.323(c) penalizes employees who do not have a rating of
record by not guaranteeing them a rate range adjustment and that such
employees should be presumed to have a rating of above
``unacceptable.'' In response to these comments, we have revised the
regulations to provide that an employee without a current rating of
record for the most recently completed appraisal period will receive
the same percentage increase as employees with a rating above
``unacceptable.'' Paragraph (a) has been modified to add that, except
for employees receiving a retained rate under Sec. 9901.355, employees
with a current rating of record above ``unacceptable,'' and employees
who do not have a current rating of record for the most recently
completed appraisal period, will receive a percentage increase in basic
pay equal to the percentage by which the minimum of their rate range is
increased (not to exceed the maximum rate of the band). Additionally,
paragraph (c) has been deleted.
Commenters stated it was not clear whether all employees with a
rating of record above ``unacceptable'' will receive the same
percentage increase. Other commenters stated that this section implies
that all employees above ``unacceptable'' will receive a rate range
adjustment, but those with salaries at the top of the pay band may not
if the maximum rate of that band is not increased.
Section 9901.323(a) provides that employees with a rating of record
above unacceptable will receive a percentage increase in basic pay
equal to the percentage by which the minimum rate of their rate range
is increased. However, this increase is subject to Sec. 9901.356(b),
which provides that an employee's rate of basic pay may not exceed the
maximum rate of the employee's pay band rate range, except when pay
retention under Sec. 9901.355 applies.
Commenters asked if an employee's pay could drop below the minimum
of the pay band rate range due to not receiving a pay increase based on
unacceptable performance. Other commenters asked whether employees will
be converted to the next lower band if pay falls below the pay band
minimum rate. Under the NSPS pay system, an employee's pay could drop
below the minimum of the pay band rate range if the minimum of the rate
range exceeds the employee's salary. However, this situation does not
require the employee to be placed in a lower pay band. The employee's
pay band is determined by work assignment.
Commenters asked if employees on retained rates will receive rate
range increases. We have revised Sec. 9901.323(a) to clarify that
employees receiving a retained rate under Sec. 9901.355 will not
receive a rate range increase.
Section 9901.331--General
Section 9901.331 includes general provisions regarding local market
supplements. Commenters asked for clarification of the difference
between GS locality pay and the NSPS local market supplements described
in Sec. 9901.331. Commenters also asked whether local market
supplements will replace current GS locality rates and special rates
and nonforeign area cost-of living-allowances. Finally, some commenters
questioned the cost of administering a new locality pay system.
The local market supplement authority replaces the GS locality pay
and special rate authorities. Under NSPS, employees stationed in
locations outside the 48 contiguous States will continue to receive
applicable foreign and nonforeign area cost-of-living allowances and
other differentials and allowances under 5 U.S.C. chapter 59.
Under the GS locality pay system, all employees in a geographic
location receive the same locality rate without regard to their
occupation or the level of duties and responsibilities they are
expected to perform. This ``one-size fits all'' method treats all
occupations alike, regardless of market value and competition. This
method results in underpaying employees in some occupations and
geographic areas while overpaying others (as compared to the applicable
labor market). NSPS is designed to be much more market-sensitive. It
gives the Department significant discretion to set and adjust the
minimum and maximum rates of pay for each pay band based on national
and local labor market factors and conditions. Instead of ``one size
fits all'' pay increases, NSPS allows the Department to allocate
payroll dollars to the occupations and locations where they are most
needed to carry out the Department's mission. The Department believes
that the development of a new system to identify appropriate rate range
adjustments and local market supplements is critical to appropriately
compensating its workforce and will consider cost factors as it
determines the most effective and efficient method for this purpose.
In response to comments regarding the lack of specificity in the
pay retention provisions of the regulations, we have removed the
language in Sec. 9901.331 providing DoD with the authority to
determine the extent to which local market supplements will apply to
employees receiving a retained rate. Section 9901.355(e) provides that
employees receiving a retained rate are entitled to any applicable
local market supplement. (See Section 9901.355--Pay retention.)
Section 9901.332--Local Market Supplements
Section 9901.332 provides DoD with the authority to establish local
market supplements and local market area boundaries. This section also
provides the purposes for which local market supplements are considered
basic pay.
A number of commenters expressed concerns about variations among
local market supplements for occupations in the same geographic area.
The commenters felt this flexibility allows errors and inequities to
develop over time and will be confusing to employees. Other commenters
were pleased to see a shift in the determination of locality pay from
strictly geographic to occupation-based as a way to help recruit and
retain employees. The Department believes that variations in local
market supplements based on occupations are appropriate and reflective
of the conditions in some labor markets.
Commenters felt that the criteria for establishing local market
supplements and local market areas should be in regulation. A commenter
stated that the regulations should require clear, compelling criteria
for the establishment of additional local market supplements that
require a balance of human resources interoperability with mission
requirements. Another commenter recommended that the regulations be
modified to ensure that employees in rural areas and those adjacent to
current locality pay areas are not unfairly impacted. Others questioned
whether the cost of living, hazardous duties, education, or unique or
special skills requirements will be considered in establishing local
market supplements. A number of commenters asked whether local market
supplements will apply to employees stationed in nonforeign and foreign
areas and noted that such payments may help with staffing in those
areas.
In response to comments requesting additional specificity, we have
revised paragraph (a) to clarify that the Secretary will have sole and
exclusive authority to establish local market areas for ``standard
local market supplements'' and ``targeted local market supplements.''
We have also added definitions of ``standard local market supplement''
and ``targeted local
[[Page 66144]]
market supplement'' in Sec. 9901.304. Standard local market
supplements apply to employees within a given pay schedule or band who
are stationed within a specified local market area, unless a targeted
local market supplement applies. Targeted local market supplements
apply to a defined category of employees (based on occupation or other
appropriate factors) that may be established to address recruitment and
retention difficulties or for other appropriate reasons.
DoD will consider the comments regarding the establishment of local
market supplements and local market areas in developing the
implementing issuances. The regulations do allow for the possibility of
establishing local market supplements in foreign and nonforeign areas
outside the 48 contiguous States; however, in determining the need for
and level of any such supplements, DoD will take into account
employees' entitlement to allowances and differentials under 5 U.S.C.
chapter 59.
A commenter questioned the attempt to preclude judicial review of
local market area boundaries under Sec. 9901.332(b). We have clarified
Sec. 9901.332(b) to be more consistent with the limitation on judicial
review of locality pay areas in 5 U.S.C. 5304(f)(2). Section 5304(f)(2)
of title 5, U.S. Code, is not waived by these regulations, but is
modified for continued application. Judicial review of any DoD
regulation regarding the boundaries of standard local market areas is
limited to whether or not the regulation was promulgated in accordance
with the administrative procedures requirements in 5 U.S.C. 553. This
same type of limitation on judicial review applies to locality pay
areas administered by the President's Pay Agent under the current
locality pay law.
A number of commenters asked for clarification on the purposes for
which local market supplements are considered basic pay. Commenters
stated that local market supplements should be considered basic pay for
the same purposes as GS locality rates. Commenters also questioned
whether local market supplements will be used to compute awards and
performance payouts under Sec. 9901.342 that are computed as a
percentage of basic pay.
In response to these comments, we have revised paragraph (c) to add
that local market supplements are basic pay for recruitment,
relocation, and retention incentives, supervisory differentials, and
extended assignment incentives under 5 U.S.C. chapter 57, subchapter
IV, and 5 CFR part 575, and for lump-sum payments for accumulated and
accrued annual leave under 5 CFR part 550, subpart L, consistent with
the locality pay regulations at 5 CFR part 531, subpart F. We note that
paragraph (c) includes a catchall provision under which local market
supplements are considered basic pay in computing other payments and
adjustments for which locality pay under 5 U.S.C. 5304 is considered
basic pay. (See Sec. 9901.332(c)(11) in these final regulations. We
have revised the language in the proposed regulations, which was
located in Sec. 9901.332(c)(8), to clarify this provision.) Thus,
local market supplements also would be used in computing percentage-
based awards under 5 U.S.C. chapter 45, consistent with the treatment
of locality pay under 5 CFR 531.610(h). Local market supplements are
not considered basic pay in applying the performance payouts provision;
instead, local market supplements are applied after determining the
employee's new rate of basic pay.
Section 9901.333--Setting and Adjusting Local Market Supplements
Section 9901.333 provides DoD with the authority to set and adjust
local market supplements and determine the effective date of such
adjustments. A number of commenters requested clarification on how
labor market conditions would be considered in setting local market
supplements. For example, some commenters questioned how local market
supplements will work for occupations that have no local labor market,
no private-sector job equivalents, or where local market rates are not
high. Other commenters noted that local labor markets can be volatile
and that the ups and downs of the market may be difficult for employees
to understand. Commenters also questioned whether local market
supplements may be reduced. The Department will consider these comments
as it develops its procedures for setting and adjusting local market
supplements.
Commenters stated that 9901.333(b) should be revised to state that
supplements will be reviewed periodically. Labor organizations
participating in the meet-and-confer process recommended that the
regulations be amended to require that local market supplements be
adjusted the first pay period in January and that supplements be
reviewed at least annually in conjunction with rate range adjustments
to determine whether an adjustment is warranted. Section 9901.333(b)
provides that DoD will review established local market supplements at
least annually. This language is retained since it does not prevent the
Department from conducting a review more frequently. However, we have
not revised the regulations to prescribe an effective date for such
adjustments because this would unduly limit the Department's ability to
make adjustments at other times in response to significant labor market
changes.
Section 9901.334--Eligibility for Pay Increase Associated With a
Supplement Adjustment
Section 9901.334 provides that an employee must have a rating of
record above ``unacceptable'' to receive a pay increase associated with
a local market supplement adjustment. A number of commenters stated
that payment of local market supplement adjustments should not be based
on employee performance. Commenters objected to withholding such
increases for employees with an unacceptable rating, especially if
employees are denied the ability to appeal or grieve the rating. As
discussed in our analysis of comments on subpart D, we have revised the
regulations to provide bargaining unit employees with the option of
grieving a rating of record through a negotiated grievance process.
However, the Department does not consider providing pay increases to
employees with ratings of unacceptable to be consistent with the intent
of a performance-based system.
Commenters and the labor organizations participating in the meet-
and-confer process expressed concerns that Sec. 9901.334(c) penalizes
employees who do not have a rating of record by not guaranteeing them a
local market supplement adjustment and that such employees should be
presumed to have a rating of above ``unacceptable.'' In response to
these comments, we have revised the regulations to specify that an
employee without a current rating of record for the most recently
completed appraisal period will receive the same percentage increase as
employees with a rating above ``unacceptable.'' Paragraph (a) has been
modified to add that employees with a current rating of record above
``unacceptable'' and employees who do not have a current rating of
record for the most recently completed appraisal period will receive a
pay increase resulting from a supplement adjustment. Additionally,
paragraph (c) has been deleted.
Commenters asked whether employees on retained rates will receive
local market supplement increases. Commenters also asked whether all
employees with a rating of record above unacceptable will receive the
same percentage local market supplement
[[Page 66145]]
increase. As previously discussed in this Supplementary Information,
Sec. 9901.355 is revised to provide that employees receiving a
retained rate will receive any applicable local market supplement
increase.
Section 9901.341--General
During the meet-and-confer process, the participating labor
organizations recommended adding language at the end of Sec. 9901.341
stating that the pay and pay administration process must be fair,
transparent, and credible. The regulations already set forth the
objectives that the entire NSPS, including the NSPS pay system, be
understandable, credible, trusted, and consistent with merit system
principles. (See Sec. 9901.101.)
Based on a comment regarding language consistency between
Sec. Sec. 9901.341 and 9901.342(a), to maintain consistency we have
added individual contribution as a factor in awarding performance-based
pay to employees.
Section 9901.342--Performance Pay Increases
Section 9901.342(a) provides an overview of the DoD performance-
based pay system for employees under a performance management system
established under subpart D. Under a pay-for-performance system, a
portion of the annual salary increase received by an employee is based
on his or her rating of record. The rating is retrospective, looking
back over the employee's performance and contribution over the
applicable rating period. This section establishes that NSPS will use a
pay pool concept to manage, control and distribute performance-based
payouts. Pay pool panels serve as calibration committees and are
normally populated by management officials. DoD implementing issuances
will provide additional details regarding pay pool constructs, pay pool
management, and a pay pool reconciliation process. The pay pool concept
improves fairness over the current performance evaluation methodologies
in the Department by forcing the open collaboration of peer managers in
discussing and assigning ratings to employees within the pay pool. The
specific processes for performance management and the accompanying
performance-based pay decisions will be addressed in DoD implementing
issuances.
Commenters expressed mixed concerns about basing performance
payouts on employee contributions. Some commenters recommended that the
regulations allow components to implement a contribution-based system.
Other commenters agreed that the level and value of an employee's
contribution should be factored into performance payouts. Others
recommended that contributions not be factored into performance payouts
because management controls an employee's possible contribution level
and the contribution assessment is arbitrary. NSPS is a performance-
based system, and we believe it is appropriate to consider an
employee's contribution in the rating and performance payout an
employee receives.
Based on a comment regarding language consistency between
Sec. Sec. 9901.341 and 9901.342(a), we have added team performance as
a factor in awarding performance-based pay to employees. Other
commenters questioned how team or organizational performance will
affect individual employee payouts. Some commenters believe that
organizational performance should not affect an individual's pay, while
other commenters stated that performance payouts should be based on
organizational performance. Under the NSPS range of shares concept,
organizational performance can be considered in determining the
appropriate share assignment.
Regarding the use of pay pool panels, a number of comments
suggested that pay pool deliberations and recommendations are
susceptible to internal politics, funding availability, staffing needs,
and personal favoritism. Similarly, many commenters, including labor
organizations participating in the meet-and-confer process, expressed
concern that unless the regulations preclude supervisors from inclusion
in the same pay pool as their subordinate employees, management
cronyism would undermine the system. Commenters also expressed concerns
about a pay pool manager's ability to overturn a supervisor's
decisions. Other commenters questioned how consistency will be ensured
among pay pools.
Subject to continuing collaboration, implementing issuances will
require that pay pool management be transparent and credible while
protecting the privacy interests of employees concerned and allowing
the free exchange of viewpoints and observations. Subject to continuing
collaboration, implementing issuances will provide safeguards to
support the neutrality and impartiality of pay pool proceedings. The
responsibilities of a pay pool manager under a pay-for-performance
system typically include the review of supervisors' proposed ratings of
record for consistency and equity across organizational units and to
guard against potential discrimination or politicization before
finalizing ratings. The regulations and implementing issuances will
require that decisions made by pay pool panel members and managers must
be consistent with the merit systems principles found in 5 U.S.C. 2301.
We have added a new paragraph (a)(3) in Sec. 9901.342 that expressly
states the requirement that pay pools will be managed by a pay pool
manager or pay pool panel, with the responsibility for reviewing
proposed rating and share assignments to ensure fairness and
consistency.
Regarding the comments on the commingling of employees and
supervisors in the same pay pool, we have not prescribed this level of
specificity for the structuring of the pay pool in this rule. There are
a number of considerations relative to pay pool constructs. These
include functional or organizational orientations, funding, and
population size. Depending on these and other factors it may be
appropriate to commingle supervisory and non-supervisory personnel
provided other measures are taken to prevent actual and perceived
conflicts of interest. For example, participants in the pay pool
process will not be allowed to participate in deliberations that
directly affect their own performance assessment or pay. This level of
detail is best handled in implementing issuances.
Some comments expressed the belief that pay-for-performance is
contrary to the needs of national security and that instead of
encouraging team cooperation and organizational efforts, the system
will encourage unhealthy competition. The deterioration of team or
collaborative work ethics and atmosphere is not an inevitable outcome
of a pay-for-performance system. We expect that the importance of
teamwork and cooperation will be reinforced in the expression of
performance standards and performance objectives. Through
communication, ongoing feedback, performance rating and performance
rewards, the importance of teamwork and cooperation will be impressed
on employees.
Some commenters questioned the use of the modal rating for
employees who do not have a rating of record. The final regulations
continue to provide that, for certain employees without a rating of
record, DoD will base the performance payout under Sec. 9901.342 on
the employee's last rating of record or modal rating, whichever is most
advantageous to the employee. (As discussed later, we have made some
[[Page 66146]]
clarifying language changes in Sec. 9901.342(f) and (g) and added a
sentence to give DoD authority to address situations where it is not
possible to determine the modal rating. Also, we have revised the
definition of ``modal rating'' in Sec. 9901.304.) DoD considered
several options for addressing this issue and determined that use of a
modal rating is the most equitable. The modal rating provision applies
only to employees returning from a period of military service as
described in Sec. 9901.342(f) or employees returning to duty after
being in a workers' compensation status as described in Sec.
9901.342(g), except as otherwise provided in DoD implementing
issuances. (See Sec. 9901.342(a)(2).)
We note that in Sec. 9901.342(a)(2), the term ``performance
payout'' has been substituted for ``pay increase or bonus payment under
this part'' as a matter of consistent terminology.
During the meet-and-confer process, the participating labor
organizations recommended deletion of the proposed language at Sec.
9901.342(a)(2) authorizing the appropriate rating official to prepare a
more current rating of record, consistent with Sec. 9901.409(b). Other
commenters also were concerned about the fairness of this provision.
One commenter agreed with the flexibility to prepare a more current
rating of record, but cautioned that any payout should be based on
overall performance, not performance that has occurred more recently.
We have not changed the regulations in response to these comments.
This provision is intended to allow a rating official to raise or lower
an employee's rating of record based on sustained and significant
changes in his or her performance since the last rating of record and
is consistent with current regulations. In keeping with the principle
that pay and retention should be linked to performance, it is incumbent
on management to ensure that the record accurately reflects
performance, whether it has improved or deteriorated. This is
particularly true in the case of an employee who was previously
performing below expectations and who shows improvement over a
significant period of time, perhaps as a result of work restructuring
or additional training. We note that the issuance of any rating of
record is subject to reconsideration procedures. While the regulations
remain unchanged, the implementing issuances will require that such
ratings be subject to procedures similar to those required for ratings
issued at the end of the appraisal period.
A number of comments addressed concerns that pay increases will be
subject to influences beyond the control of the individual employee,
such as the number of shares assigned to other employees in the pay
pool, pay pool funding levels, the use of pay pool funds for entry/
developmental pay increases, and the distribution of discretionary
payments. Similarly, many commenters were concerned that if more
employees within a pay pool receive higher ratings, the value of the
payout for each employee is reduced. Commenters also suggested that
this pay pool and shares system will result in forced ratings
distributions and quotas. Other commenters, including the labor
organizations participating in the meet-and-confer process, made a
number of recommendations regarding the funding for pay pools. Finally,
a number of commenters expressed concerns about including across-the-
board increase money in pay pool funds.
It is true that pay pools will not have unlimited funds available.
To create a system based on that approach would be fiscally unsound. In
keeping with our guiding principles, the NSPS performance management
system is designed to place greater emphasis on making meaningful
distinctions between different levels of performance and to reward
employees appropriately based on those levels. The proposed regulations
state that supervisors and managers will be held accountable for making
meaningful distinctions among employees based on performance and
contribution. Implementing issuances will continue to stress
accountability at all levels for performance evaluations and the
related pay decisions and will provide more specific guidance on pay
pool funding. We note that a share-based system does not result in
forced distribution of ratings, since a share-based system does not
rely on the distribution of ratings to control costs. Current across-
the-board increases will be replaced by a combination of adjustments,
including adjustments to minimum levels of the rate ranges and
performance-based increases, and, thus, such funding may be included in
the pay pool. The Department believes that this is consistent with
intent of the enabling legislation.
Another recurring theme among commenters was the concern that an
employee's pay would be subject to his or her manager's communication
and persuasion skills as demonstrated at the pay pool panel meetings.
We agree that care must be taken during the pay pool management process
to ensure that an employee's final rating is more than a function of
the negotiating skills of his or her manager. Expectations for raters
and pay pool panel participants will be emphasized in training
materials and implementing issuances.
During the meet-and-confer process, participating labor
organizations requested that a fixed number of shares, rather than a
range of shares, be associated with a particular rating level.
Commenters also expressed the belief that by fixing a single share per
level of performance, employees would be better insulated from bias and
unfair treatment by management. The Department recognizes that a valid,
reliable, and transparent performance management system with adequate
safeguards for employees is essential. However, for a system to be
effective, it must avoid a rigid, one-size-fits-all approach by
providing the flexibility to address a variety of circumstances. By
allowing a range of decision points regarding the number of shares,
managers can more appropriately address the variety and complexity of
factors that relate to employee compensation. For example, factors that
may be considered in the assignment of shares could include the
position of the employee's salary within the rate range, the receipt of
a promotion pay increase within the last year, the employee's
contribution to the accomplishment of important organizational
objectives, team/organizational performance, whether the performance
was sustained and likely to continue over time or related to a
particular set of tasks or projects, or other appropriate factors. In
response to the concerns expressed regarding use of a range of shares,
we have added a new paragraph (c)(3) in Sec. 9901.342, which (1)
requires that DoD provide in implementing issuances additional guidance
on the use of share ranges, including some examples of appropriate use
of factors in making specific share assignments; (2) requires that DoD
organizations inform employees of the factors that may be considered in
making share assignments within their pay pool at least 90 days prior
to the end of the appraisal period; and (3) provides that pay pool
managers and/or pay pool panels will review proposed share assignments
to ensure that factors are applied consistently across the pay pool and
in accordance with the merit system principles.
Section 9901.342(d) of the regulations provides the parameters and
criteria for the performance share calculation methodology in
sufficient specificity so that managers, employees, and employee
representatives can better understand how performance pay increases
will be determined and paid. At the same time, the regulations allow
[[Page 66147]]
DoD to tailor the performance share calculation to the mission and
performance needs of individual components and the specific performance
requirements and priorities of organizations, individuals, and
occupational groups.
Commenters requested that the regulations provide a more detailed
explanation of the formulas used to derive share values and payout
amounts. This can best be handled by DoD in its implementing issuances
or operating procedures. Similarly, some comments requested that share
values be set or predetermined. Some commenters recommended that share
value be expressed as a dollar amount. Others recommended that share
value be expressed as a percentage. Because DoD is prohibiting the use
of forced ratings distribution, the exact value of a share cannot be
determined prior to completion of the rating process. In addition, the
regulations preserve flexibility in setting share values to establish a
more nimble pay-for-performance system. We have not changed the
regulations in response to these comments.
Commenters questioned the relationship of the share value to the
employee's salary. DoD intends to prescribe a payout calculation such
that an employee's payout will be a function of the pool total base
salary value, the number of shares assigned within the pool, the
employee's salary (if the share value is computed on a percentage
basis), and the number of shares assigned to the employee.
Section 9901.342(d)(3) authorizes DoD to establish ``control
points'' within a pay band that limit increases in the rate of basic
pay and may require certain criteria to be met for increases above the
control point. A commenter likened control points to ``invisible
barriers that prevent most employees from ever reaching the top of
their band.'' The same commenter suggested that the use of pay pools
will provide sufficient cost control without the need for control
points. A number of other commenters also expressed similar concerns
about control points. During the meet-and-confer process, participating
labor organizations recommended that the authority to establish control
points be deleted from the regulations.
The concept of control points is not inconsistent with the goals of
a pay-for-performance system, which envisions a greater link between
pay decisions and an individual's performance. Control points are tools
to manage employees' progression through the bands and can help to
ensure that only the highest performers move into the upper range of a
pay band, which would allow the Department to set pay more consistently
with the labor market and to be more effective in attracting and
retaining top performers. Several DoD personnel demonstration projects
have successfully used control points in their pay-for-performance
systems. We will ensure that if control points are used under NSPS,
they are well defined and understandable to employees.
Section 9901.342(d)(4) specifies that a performance payout may not
cause an employee's rate of basic pay to exceed the maximum rate of the
band or applicable control point. Commenters expressed concerns that
this provision unduly limits pay increases and that the paragraph
should be modified to state that an employee's rate of basic pay may
not exceed a control point only if the employee does not meet the
applicable control point criteria. We have not modified the regulations
in response to this comment, since we believe the regulatory text is
clear. Section 9901.342(d)(4) states that an employee may not receive a
pay increase that causes his or her rate of basic pay to exceed an
``applicable'' control point. A control point is not applicable unless
the employee fails to meet the criteria established under Sec.
9901.342(d)(3).
Also relative to Sec. 9901.342(d)(4), a number of comments relayed
concern that management decisions relative to the distribution of
performance payouts between bonuses and increases in basic pay would be
subject to bias and favoritism. Many comments suggested that
organizations might institute polices that promote the use of lump-sum
payments in lieu of increases in basic pay as a cost savings measure.
Commenters especially emphasized the long-term cost to employees in
terms of retirement benefits. We acknowledge that such decisions cannot
be taken lightly. Again, these regulations require, and DoD
implementing issuances will emphasize, that such distinctions must be
consistent with the merit system principles found in 5 U.S.C. 2301 and
supported by employee job performance and contribution. Training and
supplemental guidance will illustrate the short- and long-term outcomes
of payout distribution decisions as they affect organizations and
employees. In addition to the system requirements at Sec.
9901.405(b)(4) and (c), which hold supervisors accountable for
effective performance management, the proposed regulations provide at
Sec. 9901.406(c) that the performance expectations for supervisors and
managers will include the assessment and measurement of how well they
exercise their performance management responsibilities under NSPS.
Consistent with other changes in the regulations that clarify how
DoD will grant performance payouts to retained rate employees, we have
amended Sec. 9901.342(d)(6) to clarify that for an employee receiving
a retained rate under Sec. 9901.355, a lump-sum performance payout may
not exceed the amount that may be received by an employee in the same
pay pool with the same rating of record who is at the maximum rate of
the band. (See Section 9901.355--Pay Retention for additional
information.)
Section 9901.342(e) specifies the circumstances under which
performance payouts may be prorated. Commenters asked for clarification
or made suggestions regarding when and how performance payouts would be
prorated. This language remains unchanged. Policies relative to
proration can best be handled by DoD in its implementing issuances.
Sections 9901.342(f) clarifies how DoD will set the rate of basic
pay for employees upon reemployment after performing honorable service
in the uniformed services and how intervening performance pay
adjustments for such employees would be determined upon reemployment.
The regulations require DoD to issue implementing issuances governing
how it will set the rate of basic pay for employees upon reemployment
and require DoD to credit the employee with intervening rate range
adjustments under Sec. 9901.323 and increases from performance
payouts. Commenters agreed that employees returning from performing
honorable uniformed service should not be disadvantaged under the NSPS
pay system. However, some comments suggested that employees performing
military service will be negatively affected upon return to civilian
service under NSPS. For example, a commenter noted that the regulations
do not address the flexibility managers will have to assign a returning
service member to the low end or the high end of the share range
assigned to a rating level. We have revised the language to clarify
that the pay of an employee returning from qualifying service (who does
not have a rating of record for the appraisal period serve as the basis
for the performance payout) will be set at a rate including
performance-based pay increases equal to either the average increase
received by employees assigned the modal rating or assigned the same
rating as the employee's actual, most recent rating of record,
whichever is most advantageous to the employee.
[[Page 66148]]
Additionally, the following language was added to Sec.
9901.342(f): ``In unusual cases where insufficient statistical
information exists to determine the modal rating or when previous
ratings do not convert to the NSPS rating scale, DoD may establish
alternative procedures for determining a basic pay increase under this
section.'' This language was added primarily in response to concerns
that some organization may experience skewed pay pools during the first
years NSPS is implemented because of the absence of a statistically
significant number of employees in the pay pool due to mobilizations
(as in the case of military technicians).
Section 9901.342(g) clarifies how DoD will set the rate of basic
pay for employees upon reemployment after being in a workers'
compensation status. This section has been modified to the extent
necessary so that it remains consistent with Sec. 9901.342(f) and in
response to comments made about paragraph (g) that were similar to
those made about paragraph (f).
During the meet-and-confer process, the participating labor
organizations recommended adding a new paragraph to Sec. 9901.342
requiring that all provisions in part 9901, including ratings of record
and payouts, be subject to a final independent third-party review. A
commenter agreed with the rule in Sec. 9901.342(c) that employees with
unacceptable ratings of record should not receive a performance payout,
but only if the employee has the ability to appeal or grieve the
rating. Other commenters made similar recommendations and questioned
what appeals or grievance process employees can use if they do not
agree with their pay increase. As discussed in our analysis of comments
on subpart D, we have revised the regulations to provide bargaining
unit employees with the option of grieving a rating of record through a
negotiated grievance process. If that process results in a new rating
of record, the employee's rate of basic pay would be adjusted
accordingly. However, management decisions as to the amount of a pay
increase are not subject to review as long as those decisions are
consistent with the validated rating of record and within the
flexibilities provided by the regulations.
During the meet-and-confer process, the participating labor
organizations recommended adding a requirement to the regulations for
all employees rated ``fully successful'' or better to share in
performance payouts. We have not accepted this recommendation. The
Department has not definitively identified the number of rating levels
or their descriptors. Therefore, it is premature to guarantee a pay
increase to any specific group of employees.
Section 9901.343--Pay Reduction Based on Unacceptable Performance and/
or Conduct
Section 9901.343 provides DoD with the authority to reduce an
employee's rate of basic pay for unacceptable performance or conduct
under the adverse action procedures in subpart F of these regulations.
During the meet-and-confer process, the participating labor
organizations were very concerned that the proposed regulations
provided DoD with the authority to reduce an employee's pay any number
of times within the appraisal period. In response we have revised this
section to specify that an employee's rate of basic pay may not be
reduced more than once in a 12-month period based on unacceptable
performance, conduct, or both.
Other commenters felt that pay reductions should not be permitted
for any reason and that pay reductions do not improve performance, are
disruptive to the workplace, and have greater impact on an employee's
family than on the employee. DoD believes it is necessary to retain
flexibility to reduce the pay of an unacceptable performer in order to
achieve and retain a high-performing workforce.
During the meet-and-confer process, participating labor
organizations recommended that Sec. 9901.343 specify that the maximum
10 percent reduction will include any annual increase, local market
supplement, or other pay increases withheld from the employee but given
to employees who are similarly situated and rated above unacceptable.
Similarly, the labor organizations recommended that the proposed
regulations be revised to provide that the pay of employees who improve
performance within 90 days will be adjusted retroactively to reflect
pay increases they would have received if they had been performing at
an acceptable level at the time such increases were effected for the
rest of the workforce. Other commenters felt that a 10 percent limit on
pay reductions is too high. The recommendation to count increases not
received (e.g., minimum rate range adjustments) as part of the 10
percent reduction limit, to restore all lost pay if the employee's
performance improves during a 90-day improvement period, and to lower
the pay reduction limit are inconsistent with the intent of the NSPS
pay system.
Commenters and the labor organizations participating in the meet-
and-confer process recommended that Sec. 9901.343 clarify that
reductions in pay under this section are subject to adverse action
procedures. Such clarification is unnecessary because Sec. 9901.343
already refers to the regulations at Sec. 9901.352 and Sec. 9901.354
clarifying that such reductions are subject to adverse action
procedures under subpart G (or similar authority).
Section 9901.344--Other Performance Payments
Section 9901.344 of the regulations provides DoD with the authority
to reward employees or groups of employees through other types of
payments. Situations where such payments may be warranted include
recognition of extraordinary individual performance and organizational
or team achievements. This section further explains that an employee in
receipt of an extraordinary pay increase (EPI) is expected to continue
to perform and contribute at an exceptionally high level.
Both public comments and recommendations made by labor
organizations participating in the meet-and-confer process suggested
that funding for these payments should be separate from funding for the
performance pay pools. Some of the comments expressed concern that use
of these payments would unfairly divert funds from deserving employees
to unfairly reward or overpay other employees. As stated previously,
managers and supervisors at all levels will be held accountable for
fairly and impartially making performance-based reward determinations.
DoD implementing issuances will provide for checks and balances to
mitigate the potential for abuse.
Commenters asked whether extraordinary pay increases (EPIs) are
basic pay increases or bonuses. As previously stated, we have revised
the definition of ``extraordinary pay increase'' or ``EPI'' in Sec.
9901.304 to clarify that an EPI may be a basic pay increase or bonus.
(See Section 9901.304--Definitions.)
Commenters questioned whether an EPI could be revoked if an
employee does not continue to perform at an exceptionally high level.
Others recommended that the exceptionally high level performance
expectation be removed from the regulations as an unfair requirement.
We believe that the extraordinary pay increase is an important
flexibility and have not revised the language.
Commenters asked for clarification on whether payments in
recognition for organizational or team achievement will be basic pay
increases or bonuses and
[[Page 66149]]
what other special circumstances might warrant additional payments.
Under NSPS payouts based on organizational or team achievement could
take the form of either basic pay increases or bonuses. Any other
special circumstances will be addressed in implementing issuances.
Section 9901.345--Treatment of Developmental Positions
Section 9901.345 of the regulations provides DoD with the authority
to establish policies and procedures for adjusting the pay of employees
in developmental positions. During the meet-and-confer process, the
participating labor organizations requested that the regulations
clarify how such employees will progress through a pay band. Other
commenters also asked for clarification and recommended that entry/
developmental employees receive pay increases equivalent to GS entry/
developmental pay increases. The language has been modified to clarify
that entry/developmental pay adjustments may be made in lieu of or in
addition to those authorized under Sec. 9901.342. However, we have not
modified the language to require that developmental employees progress
in the same time frames as under the current system, because such a
change would be inconsistent with a performance-based system.
During the meet-and-confer process, participating labor
organizations also requested the addition of language so that employees
in developmental positions will be given equivalent access to the
training and assignments needed to meet standardized assessment or
certification points and progress to the full performance band on a
timely basis. In many cases, employee training and development occurs
within DoD on a decentralized basis. Since training and development
opportunities are administered according to each unit's needs and
competency requirements, it would be difficult to address these issues
appropriately at the DoD-wide level. However, all of these programs
must be consistent with the merit system principles. DoD will provide
further guidance in implementing issuances regarding increases
resulting from the acquisition of skills and competencies for employees
in developmental positions.
Commenters questioned whether entry/developmental pay increases
will come out of the performance pay pool. The Department will address
the financial management of pay pools in financial policies.
Section 9901.351--Setting an Employee's Starting Pay
Section 9901.351 of the proposed regulations provides for DoD to
set the starting rate of pay for individuals who are newly appointed or
reappointed to the Federal service anywhere within the assigned pay
band, subject to DoD implementing issuances. Some commenters expressed
concern over the lack of specificity in this section and questioned
what criteria will be used in setting pay for new employees. Other
commenters expressed the belief that it is unfair to offer new
employees higher salaries than current employees.
We have not changed the regulation in response to these comments.
The Department needs maximum flexibility in setting starting rates of
pay to be competitive when recruiting new talent. Appropriate
parameters will be described in implementing issuances.
Commenters requested clarification on the meaning of the terms
``newly appointed'' and ``reappointed'' and whether this section will
be used to set pay for employees of other agencies who are ``newly
appointed'' to an NSPS position. A commenter stated that any Government
employee entering into the NSPS pay system should receive no reduction
in basic pay. Except for the pay administration terms defined in Sec.
9901.103, NSPS pay administration terminology and additional guidance
as to how pay will be set for individuals moving into NSPS from outside
the Federal Government and from other Federal agencies will be
addressed in implementing issuances.
A commenter suggested that NSPS incorporate a signing or
recruitment bonus authority in Sec. 9901.351 or another section of the
regulations. The enabling legislation does not give the Department the
authority to waive the recruitment, relocation, or retention incentive
authorities in 5 U.S.C. chapter 57. Therefore, these provisions remain
applicable to NSPS employees.
Section 9901.352--Setting Pay Upon Reassignment
Section 9901.352(a) provides for DoD to set pay anywhere within the
assigned pay band when an employee is reassigned, either voluntarily or
involuntarily. Some commenters expressed concern over the lack of
specificity in the regulations. Others expressed concern about the
opportunity for management to show favoritism in setting pay. Except as
discussed in this section of the SUPPLEMENTARY INFORMATION, we have not
changed the regulation in response to these comments, thereby ensuring
the Department has maximum flexibility in setting rates of pay when
employees are reassigned from one position to another within a pay band
or across comparable pay bands. However, we have clarified that
appropriate parameters will be described in implementing issuances.
In response to comments regarding the applicability of the adverse
action procedures to certain employees, we have revised Sec.
9901.352(b) to clarify the procedures applicable to employees subject
to actions not covered by subpart G.
A number of commenters strongly objected to providing DoD with the
authority to reduce pay when an employee is involuntarily reassigned to
a comparable band when not as a result of unacceptable performance or
conduct. Commenters suggested that this authority could be used to
punish employees and could result in significant pay reductions.
Commenters asked whether pay retention would apply in such involuntary
situations. The Department will address specific parameters and
guidance concerning management's authority to set or reduce pay when an
employee is involuntarily reassigned, to include defining appropriate
circumstances for pay retention consistent with the changes in Sec.
9901.355.
Commenters asked whether adverse action procedures apply to all pay
reductions under Sec. 9901.352. Commenters and the labor organizations
participating in the meet-and-confer process recommended that Sec.
9901.352(a) be amended to make any reduction in pay subject to adverse
action procedures. However, there are situations when reductions in pay
would not appropriately be covered by adverse action procedures (e.g.,
return of an employee to their position of record at the end of a
temporary promotion). Therefore, we have not adopted this suggestion.
Other commenters agreed to the 10 percent limit on pay reductions,
but were concerned that the adverse action procedures and methods for
challenging performance ratings in the NSPS regulations are inadequate.
We believe these concerns are appropriately covered in subparts D and
G, respectively.
During the meet-and-confer process, participating labor
organizations recommended that the language in Sec. 9901.352 specify
that the maximum 10 percent reduction will include any annual increase,
local market supplement, or other pay increases withheld from the
employee but given to employees who are similarly situated and rated
above unacceptable. We
[[Page 66150]]
believe counting increases not received (e.g., minimum rate range
adjustments) as part of the 10 percent reduction limit is inconsistent
with the intent of the NSPS pay system.
The labor organizations participating in the meet-and-confer
process also recommended deleting the reference to ``conduct'' in Sec.
9901.352(b), and other commenters stated that conduct should not be a
basis for pay reductions. We believe we have appropriately addressed
the issue of conduct as part of performance in our discussion of the
definition of ``performance'' in subpart A.
A commenter asked whether Sec. 9901.352 provides DoD with the
authority to increase an employee's pay upon reassignment to a
different position in the same pay band. We have revised Sec.
9901.352(a) to clarify that DoD may set pay anywhere within the
assigned pay band when an employee is reassigned to a position in the
same or comparable pay band. We have also added a new paragraph (c) to
Sec. 9901.352 to provide that when an employee completes a temporary
reassignment or when an employee's in-service probationary period is
terminated, the employee's rate of basic pay will be set at the same
rate the employee received prior to the temporary reassignment or
placement in the position requiring the in-service probationary period,
with appropriate adjustment of the employee's rate of basic pay based
on rate range increases or performance payouts that occurred during the
time the employee was assigned to the new position.
Section 9901.353--Setting Pay Upon Promotion
Section 9901.353 of the proposed regulations allowed DoD to set pay
anywhere within the assigned pay band when an employee is promoted to a
position in a higher pay band, subject to DoD's implementing issuances.
During the meet-and-confer process, participating labor organizations
expressed concern that no parameters were provided on pay setting
actions and suggested a pay increase of at least a 6 percent increase
over current pay when an employee is promoted under NSPS. Other
commenters also expressed strong concerns that the proposed regulations
did not guarantee pay increases upon promotion and provided for
possible pay reductions.
In response, we have revised the final regulations to provide a
general rule establishing a minimum percentage increase of 6 percent
for promotions; however, regardless of the minimum percentage, the
salary resulting from the promotion cannot be lower than the minimum of
the rate range for the applicable pay band and no higher than the
maximum of the rate range for the applicable pay band.
Commenters also requested that the regulations clarify what types
of movements will be considered ``promotions.'' The Department will
provide specific guidance on the types of movements which will be
considered ``promotions'' for pay administration purposes under NSPS in
implementing issuances.
Section 9901.354--Pay Setting Upon Reduction in Band
Section 9901.354(a) of the proposed regulations allowed DoD to set
pay anywhere within the assigned pay band when an employee is reduced
in band, either voluntarily or involuntarily, subject to Sec.
9901.354(b). Some commenters expressed concern over the lack of
specificity in the regulations. Others expressed concern about the
opportunity for management to reduce an employee's pay repeatedly or
for any reason. The Department will ensure appropriate parameters are
described in implementing issuances. We have not changed Sec.
9901.354(a) to provide more specificity. However, in response to
comments requesting clarification, we have amended paragraph (a) to
state that DoD may set pay anywhere within the assigned pay band
subject to Sec. 9901.354(b) and (c).
Some commenters objected to pay reductions of any amount upon
reduction in band. Others felt that the 10 percent limit on pay
reductions under Sec. 9901.354(b) is too high. Some commenters agreed
to the 10 percent limit, but were concerned that the adverse action
procedures and methods for challenging performance ratings in the NSPS
regulations are inadequate. Other commenters stated that conduct should
not be a basis for pay reductions or reductions in band. We have not
revised the regulations in response to these comments. We believe that
allowing for reductions in pay within defined limits for unacceptable
performance or conduct is an essential feature of a performance-based
pay system. Consistent with NSPS as a performance-based system, the
Department will address in implementing issuances the parameters and
guidance covering circumstances which could lead to a reduction in pay
as a result of a reduction in band and the appropriate percentage of
the reduction.
During the meet-and-confer process, participating labor
organizations recommended that the language in section Sec.
9901.354(b) specify that the maximum 10 percent reduction will include
any annual increase, local market supplement, or other pay increases
withheld from the employee but given to employees who are similarly
situated and rated above unacceptable. We believe counting increases
not received (e.g., minimum rate range adjustments) as part of the 10
percent reduction limit is inconsistent with the intent of the NSPS pay
system.
In response to comments regarding the applicability of the adverse
action procedures to certain employees, we have revised Sec.
9901.354(b) to clarify the procedures applicable to employees subject
to actions not covered by subpart G.
Section 9901.354(c) of the proposed regulations provided that if an
employee is reduced in band involuntarily, but not through adverse
action procedures (e.g., termination of a temporary promotion or
failure to successfully complete a supervisory probationary period),
DoD would limit any reduction in pay in accordance with implementing
issuances. During the meet-and-confer process, participating labor
organizations recommended that we amend this section to ensure an
employee reduced in band involuntarily, but not through adverse action
procedures, will have his or her pay reduced to not less than the
amount the employee would have received if he or she had not been
temporarily promoted or assigned to a supervisory position. Other
commenters raised similar concerns. Based on these recommendations, we
have revised this section to state that such an employee's pay will be
set at the level the employee would have received if he or she had not
been temporarily promoted or assigned to a supervisory or other
position requiring an in-service probationary period, including rate
range and performance payout increases that occurred during the
intervening period. We have also clarified that any resulting reduction
in pay is not considered an adverse action under subpart G (or similar
authority) consistent with the provision in Sec. 9901.356(e) of the
proposed regulations.
Section 9901.355--Pay Retention
Section 9901.355 of the proposed regulations provided that DoD
would issue implementing issuances regarding pay retention. This
section also provided that pay retention would be based on the
employee's rate of basic pay in effect immediately before the action
that would otherwise reduce the employee's rate and that a retained
rate
[[Page 66151]]
will be compared to the range of rates of basic pay applicable to the
employee's position. During the meet-and-confer process, participating
labor organizations recommended that we address the lack of specifics
on pay retention. Other commenters also suggested that the regulations
provide more detail on pay retention entitlements.
Accordingly, we have revised the language in this section to
clarify that (1) employees will receive pay retention for a 2-year
period under appropriate circumstances, e.g., reduction in force or
reclassification; (2) employees on pay retention may receive
performance payouts as bonuses, not salary adjustments; (3) employees
on pay retention will not receive minimum rate range adjustments; (4)
employees on pay retention will receive local market supplements; and
(5) local market supplements are not considered part of basic pay in
applying pay retention. In addition, as previously discussed, we have
revised Sec. 9901.342(d)(6) to clarify how performance bonus payouts
will be computed for an employee receiving a retained rate. (See
Section 9901.342--Performance Pay Increases for additional
information.)
Commenters questioned whether grade or ``band'' retention will
apply under the NSPS pay system. The NSPS pay system does not include a
grade or ``band'' retention authority.
Section 9901.356--Miscellaneous
Section 9901.356 provides miscellaneous pay administration rules
for the NSPS pay system. Commenters were confused by Sec. 9901.356(a)
and asked whether an employee's pay can be less than the minimum rate
of the pay band. Under the NSPS system, an employee's pay could drop
below the minimum rate of the pay band if the minimum rate of the rate
range for that band exceeds the employee's salary. This could occur if
the employee has an unacceptable performance rating and does not
receive a rate range adjustment under Sec. 9901.323. However, this
situation does not require the employee to be placed in a lower pay
band. The employee's pay band is determined by work assignment.
Commenters asked whether the special pay increase under Sec.
9901.356(d), which DoD may pay to an NSPS employee prior to moving to a
GS position, will be paid to employees moving to GS positions in DoD
and other agencies. DoD may apply Sec. 9901.356(d) to an NSPS employee
moving to a GS position within or outside of DoD.
During the meet-and-confer process, the participating labor
organizations recommended that Sec. 9901.356(e) be revised to require
DoD to set an employee's pay upon expiration of a temporary
reassignment or promotion under Sec. 9901.354(c) and not be subject to
separate implementing issuances. Other commenters asked whether
Sec. Sec. 9901.356(e) and 9901.354(c), which both cover pay-setting
upon expiration of temporary promotions, are consistent. Other
commenters requested a definition of ``temporary reassignment'' and
expressed concerns that Sec. 9901.356(e) provided a loophole DoD could
use to reduce an employee's pay without following adverse action
procedures. The term ``reassignment'' is defined in Sec. 9901.103 of
subpart A. The specific conditions and considerations of pay setting
upon reassignment are more appropriately addressed in implementing
issuances. However, as previously discussed, we have revised Sec. Sec.
9901.352 and 9901.354 to clarify that upon completion of a temporary
reassignment or temporary promotion, an employee's rate of basic pay
will be set at the same rate the employee received prior to a temporary
reassignment or temporary promotion. In addition, we do not believe
Sec. Sec. 9901.356(e) and 9901.354(c) were inconsistent. However, to
further clarify, we have moved the provision in Sec. 9901.356(e) of
the proposed regulations to new Sec. Sec. 9901.352(c) and 9901.354(c)
to provide that any reductions in pay at the conclusion of a temporary
promotion or temporary reassignment would not be covered by adverse
action procedures. We have removed Sec. 9901.356(e) from the final
regulations because it is no longer necessary. (See Section 9901.352--
Setting Pay Upon Reassignment and Section 9901.354--Setting Pay Upon
Reduction in Band in this SUPPLEMENTARY INFORMATION for additional
information.)
During the meet-and-confer process, participating labor
organizations also recommended adding a new paragraph (f) to Sec.
9901.356 to address determinations of ratings of record for employees
who perform activities during duty time that are not DoD assignments
(e.g., EEO counselors and union representatives) for the purpose of
performance payouts and RIF retention. This issue will be addressed in
implementing issuances.
Section 9901.361--General
Section 9901.361 provides DoD with the authority to issue
implementing issuances establishing premium pay provisions. A number of
commenters strongly objected to providing DoD such authority. They did
not understand why title 5 premium pay provisions need to be waived and
were concerned that DoD will reduce premium pay entitlements to save
money. Commenters expressed concerns about the lack of specificity in
this section and that this section provides DoD with too much authority
to affect employees' pay. Other commenters questioned whether specific
types of premium pay, such as environmental differential pay and
compensatory time off for travel, would be waived under this authority.
During the meet-and-confer process, participating labor organizations
recommended adding a paragraph to this section providing that premium
pay under NSPS will not be less than would have been applicable if
employees had not been converted to NSPS. Other commenters made similar
recommendations.
We believe the ability to modify premium pay in response to current
and future Departmental needs is a critical feature of NSPS. This
flexibility facilitates the Department's ability to accomplish its
diverse missions. For example, it is essential that the Department have
the ability to fully compensate deployed employees and employees
supporting surge requirements; the ability to equitably compensate
employees performing overtime work; and the ability to make premium pay
provisions fair, equitable, understandable, and credible to our
employees. Specific issues regarding premium pay, including payments
made under subchapter V of chapter 55 as well as those made in lieu of
subchapter V of chapter 55, will be addressed in implementing
issuances. Implementing issuances are subject to continuing
collaboration. Also, under Sec. 9901.105, any policies regarding
premium pay that differ from those that exist in Governmentwide
regulations must be coordinated with OPM. We have revised Sec.
9901.361(a) to clarify that these regulations are the source of the
authority to waive the premium pay provisions, consistent with Sec.
9901.303(a)(2).
Commenters stated that law enforcement officer availability pay
should not be waived for NSPS law enforcement officers. Commenters
noted that OPM has stated that Federal law enforcement officers should
have consistency in terms of premium pay entitlements. Other commenters
questioned why firefighter pay under 5 U.S.C. 5545b is not waivable, if
DoD can waive availability pay.
Under 5 U.S.C. 9902(d)(2), DoD may waive premium pay provisions
under 5
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U.S.C. chapter 55, subchapter V, including availability pay for
criminal investigators under 5 U.S.C. 5545a, but is prohibited from
waiving pay for firefighters under 5 U.S.C. 5545b. DoD must coordinate
with OPM prior to establishing policies regarding premium pay for law
enforcement officers that differ from those in Governmentwide
regulations. (See Sec. 9901.105.)
Commenters also questioned whether this section provides DoD with
the authority to change FLSA overtime pay. As previously discussed,
since the FLSA authority is outside the waivable title 5 chapters,
these regulations do not affect FLSA overtime pay entitlements. (See
Section 9901.104--Scope of Authority for additional information.)
Section 9901.371--General
Commenters requested that Sec. Sec. 9901.371 through 9901.373,
regarding the conversion of employees into the NSPS pay system, be
revised to provide detailed information on converting employees in
demonstration projects and alternative personnel systems to NSPS.
The Department recognizes the desire that the regulations provide
greater specificity. However, employees in organizations currently
covered by demonstration projects and alternative personnel systems
have the same rights and protections as other employees upon their
conversion to the NSPS pay system. Sections 9901.372 and 9901.373 have
been revised to clarify such protections. (See Section 9901.372--
Creating Initial Pay Ranges and Section 9901.373--Conversion of
Employees to the NSPS Pay System.)
Commenters asked whether Sec. Sec. 9901.371 through 9901.373 are
applicable to employees coming into NSPS after the initial spiral for
an organization. Other commenters asked whether the pay-setting rules
in Sec. Sec. 9901.351, 9901.352, and 9901.353 will apply to such
employees. Another commenter stated that the language in Sec.
9901.371(a), which excludes employees ``reassigned or transferred'' to
the NSPS system, is not adequate, since employees could move into such
positions by another pay action.
These sections apply only to employees in an organization at the
time the organization undergoes its conversion to the NSPS pay system.
They do not apply to an employee who moves into an organization after
the organization has been converted to the NSPS pay system. We have
revised Sec. 9901.371(a) by replacing ``are reassigned or
transferred'' with ``move'' to clarify that the conversion provisions
exclude employees who move from a non-NSPS position to a position
already covered by NSPS under any circumstances. The Department will
issue implementing issuances detailing the conversion procedure for
employees entering an organization after its conversion to the NSPS pay
system.
Commenters requested a 3-year moratorium on any action that would
reduce an employee's pay after the employee's conversion to the NSPS
pay system. The Department is not changing the conversion rules to
provide a moratorium on such actions. The Department guarantees
employees will convert into the NSPS pay system without a reduction in
pay. However, subsequent employee pay actions will be based on pay-for-
performance criteria.
Section 9901.372--Creating Initial Pay Ranges
Section 9901.372 provides DoD with the authority to set initial pay
band rate ranges under subpart C. Some commenters supported the use of
the General Schedule salary structure as the baseline for moving an
employee into a new band to allay concerns that pay rates will be
reduced. Other commenters recommended that the regulations guarantee
that the initial rate ranges be at least equal to the employees' former
rate ranges. During the meet-and-confer process, the participating
labor organizations recommended that Sec. 9901.372 be amended to
require initial pay band rate ranges to link to the ranges that applied
to employees in their former pay system. The Department has not changed
the regulatory language in this area but will consider these comments
when developing implementing issuances.
In response to comments regarding the applicability of the
conversion rules to employees converted to the NSPS pay system from
demonstration projects and alternative pay systems, we have revised
Sec. 9901.372 to provide that initial pay band ranges may link to the
ranges that apply to employees in their previously applicable pay
system, taking into account any applicable locality payment, special
rate supplement, local market supplement, or ``similar payment under
other legal authority.''
Section 9901.373--Conversion of Employees to the NSPS Pay System
Section 9901.373 provides the rules for converting employees into
the NSPS pay system when that system is initially applied to a category
of employees. Section 9901.373(a) provides that DoD will convert
employees into the system without a reduction in their rate of pay.
In response to comments regarding the applicability of the
conversion rules to employees converted to the NSPS pay system from
demonstration projects and alternative pay systems, we have revised
Sec. 9901.373(a) to provide that DoD will convert employees to the
system without a reduction in their rate of pay, including any
applicable locality payment, special rate supplement, local market
supplement, or ``similar payment under other legal authority.'' Also,
consistent with other changes in subpart C, we have revised Sec.
9901.373(b) to address other adverse action authorities for employees
subject to actions not covered by subpart G.
Commenters stated that employees on temporary promotions will lose
money at conversion under Sec. 9901.373(d). Others stated that all
employees on temporary promotions will be downgraded upon conversion
into NSPS. Other commenters recommended that the regulations provide
DoD components the option to terminate temporary promotions prior to
conversion and repromote the employee immediately after conversion.
Under Sec. 9901.372(d) employees will be returned to their
permanent position upon conversion to the NSPS pay system. However,
organizations may simultaneously reassign or repromote an employee to
the position held prior to conversion. The Department will issue
implementing issuances detailing the pay-setting procedures for
employees who are returned to a temporary position.
Many commenters requested details on whether employees would
receive a pay increase for the time spent towards their next within-
grade increase upon conversion into the system and recommended that the
regulations provide explicitly for such increases. During the meet-and-
confer process, the participating labor organizations also recommended
that the regulations require such increases to be paid upon conversion.
Other commenters stated that Sec. 9901.373(e) is confusing, since it
implies the Secretary of Defense could use this authority to reduce
pay. Still others asked whether DoD will pay such increases to
employees converting into NSPS from demonstration projects or
alternative pay systems.
During the conversion to NSPS, the Department will provide a
prorated pay increase based on the amount of service a GS or prevailing
rate employee performing at an acceptable level has completed towards
the next within-grade increase (WGI). Section 9901.373(e) is the
authority under which the Department will provide the prorated pay
increase--commonly
[[Page 66153]]
referred to as a ``WGI buy-in.'' We have revised this paragraph to
provide DoD with the discretion to pay conversion increases to
employees in other pay systems, subject to DoD implementing issuances.
Some other commenters asked whether employees on a special rate
would receive a pay increase for the time spent towards their next
within-grade increase and others asked whether such a pay increase
would be calculated using the applicable special rate table or the
General Schedule base rate.
During the conversion to NSPS, the Department will provide a
prorated pay increase to employees on a special rate. The increase will
use the same formula for determining the prorated pay increase that
will be used for employees on regular General Schedule rates.
Commenters requested details on whether employees would receive a
pay increase for the time spent in grade towards a career-ladder
promotion. During the meet-and-confer process, the participating labor
organizations recommended that the regulations require that such
increases be paid upon conversion. A number of other commenters made
similar recommendations.
The Department does not consider prospective career-ladder
promotions to be time-based. All promotions, even career-ladder
promotions, involve the assignment of higher-graded duties to an
employee. After employees have converted to NSPS, the system will
provide sufficient capability to recognize the progression of trainees
through pay increases under Sec. 9901.345.
Commenters asked how employees on leave without pay (LWOP) and on
other absences, such as suspensions, long-term training assignments,
and Intergovernmental Personnel Act assignments, will be converted into
the NSPS pay system. Other commenters asked how employees on grade and
pay retention will convert into the NSPS system.
Employees are placed in a LWOP status for a number of different
reasons. Each circumstance affects the conversion rules applicable to
an employee. In recognition of this, the Department will issue
implementing issuances governing the conversion procedures for
employees in a LWOP status. Implementing issuances also will address
the conversion of (1) employees absent for various other reasons and
(2) employees on grade or pay retention.
Commenters stated that employees outside CONUS could be negatively
affected when they return to CONUS positions in NSPS because, unlike
CONUS employees whose conversion will be based on base pay plus
locality pay, employees outside CONUS do not have a locality pay rate
which will result in a lower pay rate at the time of conversion.
Under the current title 5 provisions, employees returning to CONUS
positions receive the applicable locality rate. Under NSPS provisions,
employees returning to CONUS positions will receive the local market
supplement applicable to their new position and geographic location. We
anticipate that local market supplements will initially be set equal to
the applicable locality pay rate.
Commenters asked for assurances regarding how pay will be set if
employees leave NSPS and return to GS positions. Upon movement to a GS
position, pay for NSPS employees will be set under the GS pay-setting
rules at 5 CFR part 531, subpart B, subject to the gaining
organization's pay-setting policies.
Subpart D--Performance Management
General Comments
A general concern expressed by many commenters, as well as labor
organizations during the meet-and-confer process, was a lack of
specificity in the proposed regulations. Many commenters wanted to see
detailed requirements and procedures for how the classification, pay,
and performance systems would operate. The regulations set forth the
general requirements and establish a framework for the development of
more specific systems through a series of implementing issuances. For
example, the performance management implementing issuances will address
the specific processes and practices that will be used within the
Department and its components regarding such matters as rating levels,
core competencies, standard performance factors, and progress reviews.
By far the greatest concern expressed by commenters regarding the
proposed performance management regulations involved the perception of
fairness of the new system. This concern was expressed in a variety of
ways, including the following:
Potential for rater subjectivity, consistency of raters,
rater favoritism, rater bias, and potential for ``cronyism.''
Equality of treatment across agency lines, i.e., employees
performing the same amount and quality of work in one DoD agency could
receive a lower performance-based pay increase than a counterpart in
another DoD organization.
Concern that employees with the same performance rating
could receive two different amounts of money or that one could receive
a pay increase and another a bonus.
Directly related to the concern for fairness was the concern that
the new system provide adequate performance management safeguards and
the recommendation that the new system provide adequate checks and
balances over the exercise of discretionary authority of supervisors
and managers to affect the pay of employees through performance. Some
commenters assumed that the accountability measures provided in the
proposed regulations were the only safeguards to be included in NSPS
and therefore found the proposed regulations insufficient. Some
understood that the implementing issuances would further define these
tools, which could include the use of an oversight panel, but preferred
that they be specified in the enabling regulations. Others simply
wanted to emphasize the importance of safeguards and checks and
balances in a pay-for-performance system.
The regulations make every attempt to ensure that the NSPS
performance management system will be fair. First, the regulations
adopt guiding principles based on the performance management system
criteria Congress has recently enacted with respect to chapters 47, 54,
and 99 of title 5, United States Code. These principles require any
performance management system(s) established by DoD to be fair,
credible, and transparent and to adhere to the merit system principles
found in 5 U.S.C. 2301. Second, the Department is committed to further
developing these principles as it designs its performance management
system through its implementing issuances. Section 9901.401 requires
DoD to establish ``effective safeguards to ensure that the management
of the system is fair and equitable and based on employee
performance,'' and Sec. 9901.405(c) specifies supervisory and
managerial responsibilities for effective performance management.
Many commenters recognized that conversion to the NSPS would
require new skills, knowledge, and a change in organizational culture.
These commenters overwhelmingly emphasized the need for DoD to include
proper training programs for employees, but especially supervisors and
managers, since they will carry the primary responsibility for
administering a pay-for-performance system. The commenters further
acknowledged the need for NSPS training programs to be properly funded
and appeared to draw
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a nexus between fair administration of performance management and pay
and the level of supervisory competency and training. A significant
number of commenters were also concerned about the participation of
military supervisors in the administration of civilian performance
management and pay under NSPS. These commenters were concerned about
the potential effect military supervisors unfamiliar with civilian
performance management and pay-for-performance processes might have on
employees' pay and retention. They also raised concerns about the
effect of frequent military assignment rotations on the familiarity of
supervisors with the civilian subordinates' work and performance.
DoD is committed to extensive training for managers, supervisors,
and employees so that they understand the requirements of the
performance management system. Further, DoD is committed to the
training of managers and supervisors, including military members, and
will focus that training on how to establish and communicate
performance expectations, how to assess employee performance, and how
to appropriately translate that assessment into pay adjustments.
Finally, the Department is committed to creating a performance culture
in DoD that sustains a high performance organization.
Commenters also suggested that there should be a formal evaluation
of any performance management system. Section 9901.108 of both the
proposed and final regulations includes the requirement for the
establishment of procedures for evaluating regulations and the
implementation of any regulations established under 5 U.S.C. 9902.
Therefore, no change was made in subpart D to address this comment
because the performance management system is covered by the overall
evaluation requirement.
In addition, during the meet-and-confer process, participating
labor organizations suggested including a requirement for the
Government Accountability Office (GAO) to conduct an annual review of
the performance management system, including pay-for-performance
provisions and payouts, and make a report to Congress. Congress has
stated that it will carefully monitor the development and
implementation of the NSPS. Furthermore, it would not be appropriate
for DoD and OPM to mandate that GAO prepare an annual report to
Congress.
Most of the suggestions discussed in the general comments section,
as well as many others that suggest specific practices or processes, by
their nature relate to the operation of the performance management
system DoD will establish through implementing issuances. As such, they
are not specifically addressed by these enabling regulations. These
comments will be taken into account by DoD as it develops a more
detailed picture of the NSPS performance management system through
implementing issuances.
Other Comments on Specific Sections of Subpart D
Section 9901.401--Purpose
Many commenters, including participating labor organizations during
the meet-and-confer process, questioned the need to revise current
performance management rules, stating that what NSPS proposes under the
new performance management system could be done under the current
rules, with additional training for management and staff, or through
minor modifications of 5 U.S.C. chapter 43 rather than the redesign of
the entire performance management system. Others recommended putting
specific provisions from chapter 43 into the NSPS performance
management requirements.
Section 9901.401 provides for the establishment of a DoD
performance management system and sets out the guiding principles that
govern it. These guiding principles are based on the criteria Congress
recently enacted with respect to chapter 99 of title 5, U.S. Code. The
regulations are based on a clear mandate from Congress to strengthen
the performance management system to support a high performance culture
and serve as the basis for pay decisions, as explained in the Case for
Action.
Section 9901.402--Coverage
Section 9901.402 of the proposed regulations clarified which
categories of employees are eligible for coverage under subpart D--
Performance Management. Commenters recommended that this subpart be
revised to exclude employees whose pay is set by other statute (e.g.,
overseas teachers). Other commenters raised questions concerning
whether certain populations of employees would be covered by this
subpart. Section 9902(a) of title 5, U.S. Code, provides authority for
the Secretary of Defense to make such determinations upon establishment
of the NSPS or after NSPS is established by regulation. Therefore, it
is not necessary to determine inclusion/ exclusion of each unique
population within DoD in the enabling regulations. Consequently, no
change was made to this section.
Section 9901.403--Waivers
Section 9901.403 specifies that employee coverage under this
subpart results in the waiver of the provisions of 5 U.S.C. chapter 43
with regard to that employee or category of employees. Many employees
and labor organizations strongly recommended that we continue to manage
performance subject to 5 U.S.C. chapter 43. However, for the reasons
explained in the Pay for Performance discussion under Part VII, Major
Issues, of this SUPPLEMENTARY INFORMATION, we have concluded that the
waiver of chapter 43 is appropriate. No change has been made in this
section.
Section 9901.404--Definitions
Commenters asked for additional explanation of terms used in the
proposed regulations or that we define additional terms. We have
addressed some of these terms in the SUPPLEMENTARY INFORMATION
regarding subpart A of the regulations, where we have defined common
terminology that is used in several subparts of the regulations. Many
of the terms are more appropriately left to implementing issuances.
However, two of the terms related to this subpart that drew a number of
comments are addressed here.
Several commenters expressed concern about the definition of
``unacceptable performance'' in Sec. 9901.103. That definition defines
``unacceptable performance'' as ``the failure to meet one or more
performance expectations.'' A few commenters expressed concern that
under the proposed definition, performance measures could only define
and differentiate ``acceptable'' and ``unacceptable'' performance.
Other commenters were concerned that unattainable goals and
expectations would be used in conjunction with the proposed definition.
In response to these concerns, we have modified the definition of
``unacceptable performance'' found in Sec. 9901.103. The new
definition provides that performance expectations may be amplified
through work assignments or other instructions, for which the employee
is held individually accountable. As part of its implementation
strategy, DoD will provide training on setting appropriate performance
expectations.
During the meet-and-confer process, the participating labor
organizations suggested that the definition of ``performance
expectations'' in the
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proposed regulations be amended to require such expectations to meet
certain characteristics (e.g., objective and observable or verifiable
descriptions of manner, quality, quantity, timeliness, and cost
effectiveness). Many of the commenters also suggested that this
language be modified to require that any performance expectation used
in assessment of performance be ``objective and measurable.'' While
many of these characteristics are noteworthy, due to the breadth of
missions and types of work performed in DoD, such characteristics may
not always be applicable to each and every performance expectation. In
response to comments that the definition of ``performance
expectations'' was too broad, we have revised the definition to explain
that expectations are based on (1) the duties, responsibilities,
competencies, and objectives associated with an employee's position and
(2) the contributions and demonstrated competencies management expects
of an employee.
Section 9901.405--Performance Management System Requirements
Section 9901.405 provides for the establishment of a performance
management system under NSPS through the use of implementing issuances.
This section also establishes the requirements that must be met by the
NSPS performance management system.
During the meet-and-confer process, participating labor
organizations proposed that the development of the performance
management system be accomplished through a three-step process:
Continuing collaboration, national consultation, and finally
bargaining. Such a cumbersome and inefficient process would inevitably
lead to a fragmented and inconsistent implementation of the NSPS.
Furthermore, it is inconsistent with the statutory prohibition against
expanding the scope of bargaining (5 U.S.C. 9902(m)(7)) and the mandate
that the collaborative process established by 5 U.S.C. 9902(f) be the
exclusive process for involvement of employee representatives in the
planning, development, and implementation of the NSPS HR system.
Therefore, this suggestion has not been incorporated into the final
regulations, and continuing collaboration in the development of the
implementing issuances will be the means for ensuring employee
involvement in the design and implementation of the performance
management system.
Many commenters had specific ideas and recommendations for the
design and operation of performance management systems. We will address
some of these concerns here, and others will be addressed more
appropriately as DoD develops the implementing issuances. For example,
a few commenters recommended more overtly embedding the concept of
contribution in the enabling regulations. However, we find that the
concept of contribution already is clearly presented in the enabling
regulations, including a definition of the term in subpart A.
Other commenters suggested providing system transparency by
requiring the agency to publish the performance ratings and payouts for
all employees. We agree with the concept of incorporating additional
transparency in the performance management system, but not at the
expense of employee confidentiality and privacy. There are many other
effective methods for providing transparency that do not require
disclosure of individual performance ratings. Many of these methods are
practiced today in DoD's pay-for-performance demonstration projects.
While protecting individual identifying information, organizations
often publish summary results and aggregate data such as average
ratings and payouts within pay pools and career paths. Additionally,
organizations often provide employees with comparative compensation
data in the form of scatter grams or similar graphic representations of
payout statistics, in which data points are anonymous.
Several commenters proposed tying performance ratings to customer
satisfaction and/or the use of 360-degree ratings. These suggestions
are related to the operation of the performance management system, the
details of which DoD will establish through implementing issuances.
While we agree that the use of customer input and/or 360 degree ratings
should be tools available to DoD Components in the implementation of
this subpart, these tools are not appropriate for application to all
types of work and work environments. Therefore, we did not adopt the
suggestion to require their use Department-wide.
During the meet-and-confer process, the participating labor
organizations recommended that appraisals be required once a year.
Management agreed with this recommendation, and this section has been
modified to include the requirement that performance appraisals occur
at least annually.
Section 9901.406--Setting and Communicating Performance Expectations
Section 9901.406 provides the requirements and guidelines for
communicating with employees regarding their performance through the
use of ``performance expectations.''
Regarding the requirements in Sec. 9901.406(a), some commenters
said it would be difficult to link individual performance to the
Department's strategic objectives, some thought the linkage already
exists in the current system, and some recommended that DoD
implementing issuances amplify how this be done. We agree that
additional guidance will be helpful and that this degree of specificity
is best accomplished through DoD implementing issuances and/or DoD
Component regulations and guidance. Therefore, no changes were made in
response to these comments.
We received comments concerning the content of Sec. 9901.406(b),
which also was a topic of discussion during the meet-and-confer
process. A majority of commenters objected to the inclusion of
``professionalism and standards of appropriate conduct and behavior,
such as civility and respect for others' as indicators of performance.
Most of these commenters believed assessment of these traits would lead
to arbitrary and subjective determinations. Others thought this
provision would be a tool for advancing favoritism or retaliation in
the workforce. Still others interpreted this requirement to apply to
nonsupervisory employees only and recommended the application of this
requirement to supervisors and managers, as well. We have addressed
these issues in our discussion of the definition of ``performance'' in
subpart A. These requirements apply equally to all employees, including
supervisors and managers.
During the meet-and-confer process, the participating labor
organizations recommended changes to specify that performance
expectations are appropriately and clearly communicated to employees.
Management shared these concerns and agreed that the basic performance
expectations should be provided to employees in writing. We have
revised this section accordingly.
Other comments expressed concern that employees could be rated
against expectations that had not been communicated or that employees
would be rated against continually varying and changing expectations.
We believe the regulations sufficiently address concerns about
communication of
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performance expectations. This section of the proposed regulations
clearly stated the requirement that performance expectations be
communicated to employees prior to holding the employee accountable for
them. No changes were made in the regulations to address concerns about
management flexibility to change performance expectations. Such
flexibility is necessary to enable DoD to respond to changes in
organizational mission and priorities.
Labor organizations participating in the meet-and-confer process,
as well as many commenters, raised concerns regarding supervisory and
managerial accountability. Specifically, they questioned how this would
be accomplished, since many believe supervisors and managers are not
held accountable now. Section 9901.406(c) expressly states that
supervisors' and managers' performance expectations will include
``assessment and measurements'' of how well they complete their
performance management responsibilities. DoD will provide training on
the appropriate competencies to ensure that supervisors and managers
are prepared to do this. In addition, supervisors' and managers'
ratings of record will be based, in part, on how well they perform this
important function. Ultimately, pay decisions for supervisors and
managers will be affected by their performance of this function.
Section 9901.406(d) of the proposed regulations provides examples
of a variety of forms performance expectations could take. Many
commenters made suggestions regarding the purpose and content of
performance expectations. Some of these commenters recommended the
establishment of standard performance elements in order to promote
consistency across organizational lines. Other commenters recommended
the use of performance standards tied to each individual's area of
responsibility. The performance management system envisioned by the
Department will include both standard performance elements and
individual goals and objectives. These elements of the system will be
addressed in the DoD implementing issuances.
In addition, individual commenters and participating labor
organizations alike expressed concern that the explanation of
performance expectations was too broad. In response, a new paragraph
has been added to Sec. 9901.406 to explain that performance
expectations may be amplified through particular work assignments or
other instructions, which need not be in writing, and 9901.406(d)(5),
which allowed for the use of any other means as long as it would be
clear to a reasonable person, has been deleted.
Several commenters objected to the language in Sec. 9901.406(f)
limiting employee involvement in developing performance expectations to
``insofar as practicable.'' In some cases, individual employees may not
be directly involved in the development of particular performance
expectations because the performance expectations were developed
through a group endeavor, or the same expectations might be applied to
an entire group of employees where a smaller group of employees was
involved in their initial development. Some commenters also objected to
reserving final decisions regarding performance expectations to the
sole and exclusive discretion of management. This is no different than
the current practice regarding performance elements and standards, and
both performance elements/ standards and performance expectations are
part of assigning work, which is a management right.
Section 9901.407--Monitoring Performance and Providing Feedback
Section 9901.407 establishes the basic responsibility for
supervisors to monitor employee and organizational performance and
inform employees of their progress in meeting their performance
expectations. This section received two primary comments:
(1) The recommendation that the regulation require more than one
progress review per year and (2) the concern that interim performance
or progress reviews would not occur despite regulatory language. We
agree that multiple interim performance reviews and/or interim feedback
are appropriate for many types of work and positions. However, since
this is not true of all types of work, the enabling regulation will
continue to specify a minimum interim performance review requirement of
at least once during each appraisal period. We also made no change in
response to comments indicating that regulations alone would not result
in conducting interim performance reviews. We believe the proposed
regulation provides sufficient language in subpart D to hold
supervisors and managers accountable for effectively managing the
performance of employees. (See our previous discussion regarding Sec.
9901.406(c).)
Section 9901.408--Developing Performance and Addressing Poor
Performance
Section 9901.408 addresses two aspects of developing or improving
performance: The continual improvement that is part of a high-
performance culture and the remedial improvement that addresses poor
performance.
Many commenters expressed concern that without the protections
provided by mandatory improvement periods, management would be overly
harsh in adverse actions related to poor performance. Similarly, during
the meet-and-confer process and through written comments, participating
labor organizations asked that employees be provided a reasonable
opportunity to improve performance before an adverse action is proposed
or initiated, except in the most extreme case of a performance
deficiency that endangers national security or the safety of personnel.
The proposed regulations provided for an improvement period as one of
several options available to address or correct unacceptable
performance prior to taking an adverse action. We continue to believe
an improvement period should be an option under the new system, but not
a requirement as it is now under chapter 43 of title 5, U.S. Code.
Therefore, we made no changes as a result of these recommendations. An
agency may now take a performance action under chapter 75 without
affording an improvement period. Additionally, as specified in subpart
H, employees continue to have the right to appeal adverse actions.
At least two commenters recommended modification of the language in
Sec. 9901.408(c) to acknowledge adverse action appeal procedures for
groups of employees not covered by subpart H of the NSPS regulations.
In response to this recommendation, we have revised this section to
reference appropriate appeal procedures for employees not covered by
actions subject to subpart H.
Section 9901.409--Rating and Rewarding Performance
Section 9901.409 establishes the requirements regarding rating and
rewarding employee performance, including the use of a multi-level
rating system, the purposes for which ratings may be issued, and
procedures for challenging a rating of record.
Section 9901.409(a) received many comments indicating that DoD was
taking a step backward in moving from, in some cases, a pass/fail
performance management systems to a multi-level
[[Page 66157]]
rating system. A few comments indicated that the new performance
management system should require more than three rating levels. Since
meaningful performance distinctions are an essential requirement in a
pay-for-performance system, language requiring a multi-level rating
system was retained. While the regulations specify minimum
requirements, the details of the performance management system will be
developed through the implementing issuances. Such details would
include specifying the number of rating levels and providing
descriptions of the different levels of performance.
In regard to Sec. 9901.409(b), some commenters were happy to see
their performance rating of record used as a basis for pay. Most
commenters, however, did not agree with the linkage of pay to
performance and indicated their preference for pay based on longevity.
As stated under the Pay for Performance portion in the Major Issues
Section of the SUPPLEMENTARY INFORMATION, the enabling statute requires
that the Department establish a ``pay-for-performance'' system that
better links individual pay to performance. (See 5 U.S.C.
9902(b)(6)(I).) Also, we believe Congress and the American people want
to see DoD's employees compensated based on performance rather than
longevity. Therefore, we retained the language establishing the rating
of record as a basis for pay determinations.
In addition, commenters expressed concern that the authority to
issue additional ratings may be vulnerable to abuse, especially during
RIF. The authority to issue additional ratings of record enables
management to issue new ratings of record to recognize significant
deterioration or improvement in performance since the previous rating
of record was issued. DoD will include appropriate safeguards in its
implementing issuances.
Similarly, while some commenters were happy that performance would
be used as a basis for determining reduction in force (RIF) standing,
others thought performance should be given equal weight with seniority.
However, most commenters thought seniority should continue to determine
retention standing in the event of a RIF. Length of service does play a
role. However, we believe that it is essential that performance play a
larger role in retention so no change was made in this section of the
regulations.
We received a number of comments concerning Sec. 9901.409(g). The
majority of commenters thought the reconsideration process to challenge
performance ratings should include an opportunity for third-party
review. This issue was also raised during the meet-and-confer process
with participating labor organizations. These organizations indicated
their strong belief and desire that employees must have access to a
negotiated grievance procedure and binding arbitration for the
reconsideration process to be credible. In response to these concerns,
Sec. 9901.409(h) was added to enable bargaining unit employees to
choose to use either an administrative reconsideration process under
this subpart or a negotiated grievance process under Sec. 9901.922(h),
but not both.
In addition to concerns regarding the ability to grieve a rating of
record, many commenters also expressed a similar concern regarding the
ability to have a pay determination reconsidered. This was also a topic
of discussion during the meet-and-confer process. We have made no
changes in the final regulations in this regard. However, we recognize
that changing a rating of record as the result of a reconsideration
could lead to a conforming change in the employee's payout.
A few commenters recommended modification of Sec. 9901.409(i) to
recognize alternative reduction in force procedures for employee groups
not covered by subpart F of these regulations. We agree and have
modified this section accordingly.
Subpart E--Staffing and Employment
General Comments
As previously addressed in the subpart A supplemental information,
commenters expressed concerns about the lack of specificity in subpart
E of the proposed regulations on external recruitment and internal
placement. Although some commenters found the staffing and employment
concepts to be simple and supported our plan, many commenters felt the
proposed regulations were too vague. They did not support issuing
detailed guidance in internal implementing issuances because that
process does not adequately allow for public comment.
Because of the lack of specificity, commenters recommended a number
of different amendments to subpart E of the regulations to provide
detailed criteria and conditions for addressing staffing and employment
issues involving external hiring and internal placement. The commenters
recommended the regulations:
Specify the time limits for probationary periods;
Limit probationary periods to the initial hire and the
first supervisory appointment only;
Include information on crediting time toward completion of
a probationary period and appeal rights;
List the series that will be covered by direct hire
authority and specify who may determine which series will be added or
deleted;
Clarify whether time-in-grade still applies;
Specify what happens to career-conditional employees when
they move into NSPS;
Identify the contemporary hiring practices that are
acceptable, e.g., using headhunters, signing bonuses, newspaper ads;
and
Address how NSPS will streamline the lengthy process of
rating and ranking.
We understand the desire for the regulations to provide more
specificity and assurances regarding NSPS staffing and employment.
However, the regulations must also provide DoD with sufficient
flexibility to design an agile system to attract high quality employees
and the ability to place employees in a manner consistent with mission
requirements and strategic human capital needs. These suggestions and
requests for more detailed information will be considered in developing
the implementing issuances.
Many commenters stated current hiring flexibilities were sufficient
and felt the Department had not demonstrated why changes were needed in
the staffing and employment areas or how our proposals would result in
a less cumbersome or fairer hiring process. Still others indicated they
saw little in our proposal that would substantially alter or improve
management's ability to hire or move employees as mission-related
requirements dictate. We disagree. For example, in Sec. 9901.511(c),
we have removed a time-consuming step in establishing a direct hire
authority by providing DoD with the authority to make severe shortage
and critical need determinations without approval by OPM. In addition,
Sec. 9901.515(a) permits limiting consideration under competitive
examining to highly qualified applicants in a commuting area instead of
having to consider potentially thousands of applications from across
the country. Also, Sec. 9901.511(d) provides DoD the capability to
convert employees on time-limited appointments, which may be necessary
because of funding or organizational issues, to career appointments, if
such a possibility is stated in the vacancy announcement so that
interested persons may apply for
[[Page 66158]]
the potential conversion opportunity. We believe these additional
flexibilities will permit DoD to meet workforce and organizational
goals in a much more timely fashion.
Numerous commenters also believed that management does not
currently fully utilize existing hiring flexibilities. The Department
will continue to provide training on existing hiring flexibilities, and
we are confident that the extensive training planned for NSPS
implementation will educate managers and employees about the new
flexibilities NSPS will offer. Once managers are aware of these
flexibilities, we believe they will utilize them to more effectively
hire and place employees where their skills and knowledge will be most
useful to the Department.
Several comments pointed out our proposals do not address the issue
of lengthy background security checks or other impediments to hiring,
such as funding problems and hiring freezes. While we understand that
the administrative processes involved in completing background security
investigations and resolving funding issues may play a significant role
in the speed of the hiring process, they are outside the scope of the
enabling legislation.
Commenters, including labor organizations participating in the
meet-and-confer process, were concerned about a perceived threat of
involuntary deployment, particularly to hazardous overseas locations.
While they understand the requirement to support our military members
in every way, some believe that NSPS is an attempt to institute a
``backdoor draft.'' Commenters also stressed that management should not
have the ability to reassign or detail employees to perform similar or
different duties at a moment's notice. Our need to institute a flexible
system with the ability to deploy the Department's personnel in a
manner consistent with mission requirements does not mean that
employees will be reassigned in a capricious, arbitrary manner or
totally without warning. Under current law, management already has
authority to assign work to be performed and to accomplish the mission
of the Department, including the authority to reassign or detail
employees. We intend to continue to treat our employees in a fair,
credible, and respectful manner. We will develop the processes and
procedures under NSPS that will help us to achieve this.
Several commenters, including labor organizations participating in
the meet-and-confer process, raised questions about priority placement
programs and how they will work under NSPS. Commenters inquired as to
how pay-banded positions would be dealt with, how hiring flexibilities
will impact the DoD Priority Placement Program, and whether or not the
Governmentwide priority placement mechanism, the Reemployment Priority
List, might be eliminated because it is inconsistent with a
performance-based human resources system. The Department has a
longstanding commitment to protect and assist employees who have been
affected by its workforce shaping initiatives, and we will continue to
honor that responsibility. DoD's Priority Placement Program will be
modified to incorporate NSPS features, just as it has previously been
modified to accommodate other changes throughout the years.
Many commenters referred to the requirement that DoD staffing and
employment regulations be designed in a transparent and credible manner
that involves employees and employee representatives. We agree that
employee representatives should be provided an opportunity to
participate in the development of implementing issuances. This issue is
specifically addressed in the SUPPLEMENTARY INFORMATION in subpart A.
Comments on Specific Sections of Subpart E
Section 9901.501--Purpose
Section 9901.501 of the proposed regulation explains the purpose of
subpart E, which contains regulations for the establishment of
qualification requirements; recruitment for, and appointment to,
positions; and assignment, reassignment, detail, transfer, or promotion
of employees, consistent with 5 U.S.C. 9902(a) and (k). During the
meet-and-confer process, participating labor organizations recommended
that we add paragraphs (d) and (e) to this section, as follows:
(d) The policies and procedures for staffing and employment will be
planned and developed in accordance with 5 U.S.C. 9902(f)(1)(d), and
will be subject to national consultation rights and the duty to bargain
under 5 U.S.C. chapter 71.
(e) Compliance with the policies, procedures, issuances and
provisions of collective bargaining agreements on staffing and
employment will be subject to the negotiated grievance procedure and
binding arbitration before an independent third party, an alternative
dispute resolution process that is mutually agreed to by the parties,
or the Merit Systems Protection Board, as appropriate.
These and other bargaining issues are specifically addressed in
several places in the SUPPLEMENTARY INFORMATION under Major Issues, as
well as in subparts A and I.
Section 9901.502--Scope of Authority
Section 9901.502 of the proposed regulation authorizes the
modification and replacement of certain provisions of title 5 related
to hiring and assigning employees when a specified category of
employees, applicants, and positions is covered by this subpart. This
section also authorizes DoD to prescribe, in accordance with Sec.
9901.105, implementing issuances to carry out the provisions of this
subpart. Commenters objected to the proposed waiver and/or modification
of various provisions of title 5; however, modification and/or
replacement of the specified sections of title 5 is authorized by
enabling legislation (5 U.S.C. 9902(k)) and is essential to the
development of a more flexible system for hiring and assigning
employees.
Section 9901.503--Coverage
Section 9901.503 provides the Secretary the authority to determine
employee eligibility and coverage in accordance with Sec. 9901.102(b).
Several commenters, including labor organizations participating in the
meet-and-confer process, recommended that certain types of positions be
excluded from coverage under the new personnel system, including Police
Officers, Teachers, Civil Service Mariners, and National Guard
Technicians under title 32. These and other coverage issues are
specifically addressed in the SUPPLEMENTARY INFORMATION in subpart A.
Section 9901.504--Definitions
In response to multiple comments requesting an explanation of, and/
or improved distinctions between, similar terms, we have--
Revised the definition of ``temporary employee'' to
clarify the Department's intent. A temporary employee is an individual
not on a career appointment who is employed for a limited period of
time not to exceed 1 year. The appointment may be extended, up to a
maximum established by implementing issuances, to perform the work of a
position that does not require an additional career employee.
Revised the definition of ``term employee'' to clarify the
Department's intent. A term employee is an individual not on a career
appointment who is employed for a period of time of
[[Page 66159]]
more than 1 year. The appointment may be extended, up to a maximum
established by implementing issuances, when the need for an employee's
service is not permanent.
Revised the definition of ``time-limited employee'' to
clarify the meaning. A time-limited employee is an individual appointed
to a position for a period of limited duration (i.e., term or
temporary) in either the competitive or excepted service.
Added a definition of ``initial probationary period'' to
subpart A to clarify the intent of Sec. 9901.512 and ensure
consistency between subpart E and subpart H. An initial probationary
period means the period of time, as designated by the Secretary,
immediately following an employee's appointment during which an
authorized management official determines whether the employee fulfills
the requirements of the position to which assigned.
Added a definition of ``in-service probationary period''
to subpart A to clarify the intent and ensure consistency between
subpart E and subpart H. An in-service probationary period, such as a
supervisory probationary period, means the period of time, as
designated by the Secretary, during which an authorized management
official determines whether the employee fulfills the requirements of
the position to which assigned.
Section 9901.511--Appointing Authorities
Section 9901.511(b)(2) of the proposed regulations provides for DoD
and OPM to jointly publish a notice in the Federal Register when
establishing a new competitive appointing authority or a new excepted
appointing authority that may lead to a subsequent noncompetitive
appointment to a competitive position in the career service. Further,
the section requires a period of public comment prior to the
establishment of such an authority unless a critical mission
requirement exists. Commenters criticized this section stating that
this authority and our lack of specificity will lead to a patronage or
spoils system and corruption of the merit system. They generally
opposed the Department's ability to establish a new appointing
authority, even if a critical mission requirement exists, without first
issuing a notice in the Federal Register allowing for a public comment
period.
During the meet-and-confer process, participating labor
organizations recommended that we add paragraph (iii) to 9901.511(b)(2)
to state: ``In exercising its authority under paragraph (b)(2)(ii) of
this section, DoD will provide reasonable advance notice, where
practicable, to the relevant congressional committees and to the
respective labor organizations, of the reason(s) why the Secretary has
elected to establish a new appointing authority to meet critical
mission requirements or fill a severe shortage/critical hiring need
without a preceding comment period. We do not agree. We recognize that
if these hiring authorities are exercised and conditions of employment
are impacted, local bargaining may occur in accordance with subpart I,
as appropriate. We also agree that labor organizations, and indeed all
employees, should receive notice via well-established processes, such
as publication of notices in the Federal Register.
Some commenters did not understand the need for additional
appointing authorities and viewed this flexibility as diminishing
veterans' preference and as a mechanism for promoting nepotism,
favoritism, and cronyism that will lead to more discrimination
complaints and grievances. In a related issue, one commenter expressed
concern over the lack of any reference to granting 5 or 10 preference
points to veterans.
In establishing new appointing authorities, the regulations provide
for review by OPM and, when an appointment is made using a new
competitive appointing authority or a new excepted appointing authority
that may lead to a subsequent noncompetitive appointment to a
competitive position in the career service, a requirement for public
comment. Implementing issuances will provide additional guidance and
parameters to ensure that these authorities are utilized for specified
purposes in accordance with merit system principles and the principles
of veterans' preference. NSPS does not change or diminish preference as
indicated in Sec. 9901.501(c).
Section 9901.511(c) authorizes the Secretary to exercise direct
hire authority when there is a severe shortage of candidates or a
critical hiring need. One commenter suggested that direct hire
authority should be automatically allowed without extensive
documentation for those positions for which a separate pay schedule is
authorized. We have not adopted this suggestion. Other commenters
wondered if the direct hire authorities could apply to career employees
or if they were meant only for new hires. The specific criteria and
instructions concerning direct hire authorities will be provided in the
implementing issuances; however, generally, a direct hire authority is
used to appoint applicants not currently employed in the civil service.
A technical correction was made to Sec. 9901.511(c)(3) by removing
the reference to paragraph (a).
Section 9901.511(d) authorizes the Secretary to prescribe
procedures for making time-limited appointments and for converting
those employees without further competition to the career service
provided certain conditions are met. Commenters cited unease with our
idea of time-limited appointments that they believe will result in NSPS
evolving into a system based on temporary employment. Some commenters
do not believe temporary employees should have the ability to convert
to permanent appointments without once again going through a
competitive process. During the meet-and-confer process, participating
labor organizations indicated that term employees should not perform
work of permanent positions.
Regarding the comment about NSPS developing a system based on
temporary employment, we have revised definitions for time-limited
appointments, both temporary and term, in Sec. 9901.504 to include
specific information on appropriate timeframes for time-limited
appointments. The Department will provide further guidance in
implementing issuances on the appropriate use of time-limited
appointments to meet mission needs. Regarding the comment about
additional competition before converting a temporary appointment to a
career appointment, we note that Sec. 9901.511(d)(2) requires a time-
limited vacancy announcement to include information about the
possibility of noncompetitive conversion, if applicable, and that the
individual be appointed to the time-limited appointment under NSPS
competitive examining procedures. We believe that additional
competition is not necessary due to the competition required for
initial placement into the time-limited appointment. Also, in response
to the comment during meet-and-confer, we have revised and clarified
Sec. 9901.511(d) to indicate that: (1) Term employment will not be
used for positions that should be filled on a permanent basis; and (2)
term appointments may be used to accomplish permanent work in
circumstances where the position cannot be filled permanently, e.g.,
the incumbent will be out of the position for a significant period of
time, but is expected to return.
One commenter suggested that since there is no clear distinction
between temporary and term employees, we
[[Page 66160]]
should refer to these employees simply as time-limited and delete the
example ``(e.g., an individual employed on a temporary or term basis)''
from Sec. 9901.511(d)(2). We deleted this example as it is not
necessary and we have clarified the distinction between temporary and
term employees with the revised definitions in Sec. 9901.504.
Another commenter suggested that we have only two appointment
types, permanent and temporary, to simplify recruitment. We did not
adopt this suggestion. Different circumstances and needs justify the
use of both temporary employees and term employees.
Section 9901.512--Probationary Periods
Section 9901.512 of the proposed regulations provides that the
Secretary may establish probationary periods, both initial and in-
service, for employees appointed to positions in the competitive and
excepted service covered by the National Security Personnel System. For
clarity, we consolidated all information pertaining to probationary
periods, both initial and in-service, in this section and deleted
references to in-service probationary periods from Sec. 9901.516. We
have also added a definition of initial probationary period to subpart
A of part 9901.
Commenters were disturbed by the lack of specificity on
probationary periods. They pointed out that the opportunity for
multiple or extended probationary periods may result in inconsistencies
and abusive treatment by supervisors who might retain employees in a
perpetual probationary status simply by moving them from one position
to another. Commenters were concerned that managers will be able to
make arbitrary decisions as to who serves an in-service probationary
period and when. Commenters, including labor organizations
participating in the meet-and-confer process, indicated that
probationary periods should not exceed 1 year. Some commenters asserted
that probationary periods of longer than 1 year show a lack of faith in
management to make decisions about an individual's ability to perform
satisfactorily within that timeframe. Commenters wanted to either
retain the Governmentwide probationary periods established by OPM or to
establish specific probationary periods to be published in the Federal
Register. A few commenters supported longer probationary periods, such
as a 3-year probationary period to substitute for the career-
conditional period that currently exists. However, other commenters
expressed concern because probationary periods could be as long as 5 or
10 years. During the meet-and-confer process, labor organizations
indicated that in-service probationary periods should apply to
supervisory positions only.
Based on the comments received, including comments from labor
organizations participating in the meet-and-confer process, we have
revised the final regulations to set parameters on probationary periods
and to indicate the types of circumstances that would lead the
Department to establish longer probationary periods. The Department
will retain the flexibility to create probationary periods of varying
lengths within those overall time frames. Specifically, we revised
Sec. 9901.512 to include that: (1) Probationary periods under NSPS
will be between 1 year and 3 years; (2) probationary periods
established for more than 1 year will be applied to categories of
positions or types of work that require a longer time period to
evaluate the employee's ability to perform the work; (3) in-service
probationary periods will apply to certain groups of positions or
occupations under prescribed specific conditions; and (4) that an
employee who fails to complete an in-service probationary period will
be returned to a grade or band no lower than that held before the in-
service probationary period and the employee will be entitled to have
his or her pay set in accordance with the applicable section of subpart
C. Implementing issuances will clarify that decisions to establish
probationary periods longer than 1 year will be made at the Department
level. In addition, we have clarified that nothing in this section
prohibits an action against an individual serving an in-service
probationary period for cause unrelated to performance.
Section 9901.513--Qualification Standards
Section 9901.513 provides for DoD to either continue to use
qualification standards established or approved by OPM, or to establish
its own for positions covered by NSPS. One commenter wanted to know
what is wrong with the OPM qualification standards and if he/she would
be required to have different qualifications from the position hired
into; another commenter suggested that we obtain OPM approval for all
qualification standards for positions covered by NSPS; several others
suggested possible changes for NSPS qualification standards. One
commenter stated that the first sentence of this section contradicts
the second sentence and suggested we add the following at the end of
the second sentence: ``when OPM standards do not fully cover the
occupation or are not available.''
We believe the Department may have a need to modify existing, or
establish new, qualification standards to meet mission requirements. In
addition, Sec. 9901.105 of subpart A does include the establishment of
alternative or additional qualification standards as an item to be
coordinated with OPM. Therefore, we have not revised this section.
Section 9901.514--Non-Citizen Hiring
Section 9901.514 of the proposed regulations provides for DoD to
establish procedures for appointing non-citizens to excepted service
positions within the National Security Personnel System. During the
meet-and-confer process, participating labor organizations recommended
that we strike this entire section and also remove references to non-
citizen hiring authority. Several commenters also disagreed with the
hiring of non-citizens citing that such appointments are inconsistent
with ``national security'' or might lead to the outsourcing of DoD
functions. Many were skeptical that qualified U.S. citizens could not
be found or trained. The Department currently has the authority,
delegated by OPM, to hire non-citizens. Therefore, this provision
simply codifies in the regulation the authority already given to the
Department. We have retained the Governmentwide criteria that this
authority can only be used in the absence of qualified U.S. citizens
and when immigration and security requirements are met. Although the
non-citizen hiring authority is rarely used, the Department does
occasionally have situations where there are no qualified U.S. citizens
available for critical positions.
Section 9901.515--Competitive Examining Procedures
Section 9901.515 of the proposed regulations provides DoD authority
to establish procedures for examining applicants for entry into
competitive and excepted service positions in NSPS, including the use
of traditional numerical rating and ranking or alternative ranking and
selection procedures (category rating), and specifies which
applications/applicants the Department must accept and consider after a
period of public notice. In response to comments we received on Sec.
9901.515(a) asking who competitive examining procedures apply to, we
have added wording to clarify that we are referring to applicants from
outside of the civil service when we address who is recruited under
competitive
[[Page 66161]]
examining procedures. We have modified Sec. 9901.515(a)(1) to reflect
that DoD will accept applications for vacant positions from all ``U.S.
citizens,'' as opposed to all ``sources,'' to reflect a commenter's
concern that the term ``sources'' implies we are referring to
noncompetitive sources.
In a related matter, commenters expressed concern about DoD's
ability to narrow the groups of employees who will be considered for
jobs, including the elimination of highly-qualified workers from
various segments of society and the treatment of veterans. The ability
to narrow the area of consideration will not preclude us from opening
any recruitment action as broadly as we choose. However, because
technology has made the Federal Government a more applicant-friendly
employer, it has also increased the administrative burden involved to
efficiently and effectively fill mission-critical jobs. At times, we
are overwhelmed by the volume of applications that must be evaluated
and considered, especially when filling a small number of jobs. In
these instances, we need the ability to narrow the pool of applicants
we consider, and there may be a sufficient number of qualified
applicants within the local commuting area. DoD will continue to
provide equal treatment and equal access and will comply with the merit
system principles.
Section 9901.515(b) of the proposed regulations allows DoD to
establish procedures for the examination of applicants for entry into
competitive and excepted service positions in NSPS. Such procedures
must adhere to the merit system principles in 5 U.S.C. 2301 and
veterans' preference requirements as set forth in 5 U.S.C. 3309 through
3320, and include provisions for employees entitled to priority
consideration in accordance with 5 U.S.C. 8151. In response to a
comment we received suggesting that this paragraph should address
preference eligibility in the competitive service as well as the
excepted service under NSPS procedures, and to provide clarity
regarding the application of veterans' preference, we have revised the
second sentence of this section to include a reference to 5 U.S.C.
1302(b) and (c) concerning veterans' preference in employment. We also
made a technical correction to the third sentence by removing the
reference to 5 U.S.C. 1302(c).
Section 9901.516--Internal Placement
Section 9901.516 of the proposed regulations provides for DoD to
prescribe implementing issuances regarding the assignment,
reassignment, reinstatement, detail, transfer, and promotion of
individuals or employees into or within NSPS. This section also
addressed the establishment of in-service probationary periods by way
of the implementing issuances. For clarity, we moved all references to
probationary periods, to include in-service probationary periods, to
Sec. 9901.512. We made no other changes to this section.
Subpart F--Workforce Shaping
General Comments
Commenters, including comments during the meet-and-confer process,
were concerned that subpart F provides the Department with excessive
rights to make decisions concerning the staffing of organizations, the
abolishment of positions, and the need to implement a reduction in
force (RIF). We disagree. The Department has no greater right to make
restructuring decisions under subpart F than the Department presently
has under section 351.201(a)(1) of OPM's RIF regulations.
Commenters, including comments during the meet-and-confer process,
were also concerned that because subpart F provides more weight to
performance as a retention factor than under OPM's 5 CFR part 351 RIF
regulations, employees' retention standing under subpart F would be
primarily based upon performance ratings rather than upon tenure and
veterans' preference. In fact, subpart F provides that, consistent with
OPM's RIF regulations, tenure remains the most important retention
factor, with veterans' preference the second most important factor.
Subpart F gives performance greater retention weight by providing that
performance is the third most important factor, while creditable
service is the least important of the four factors. Under OPM's RIF
regulations, creditable service is the third most important factor
while performance is the least important factor. The additional weight
on performance is consistent with the Department's implementation of a
performance-based HR system.
Table.--Relative Weight of Retention Factors
------------------------------------------------------------------------
NSPS 5 CFR 9901
Order of retention factors OPM's 5 CFR part 351 subpart F workforce
from highest to lowest RIF regulations shaping regulations
------------------------------------------------------------------------
1........................... Tenure (i.e., type Tenure (i.e., type
of appointment). of appointment).
2........................... Veterans' Preference Veterans'
Preference.
3........................... Creditable Federal Performance Ratings.
Service.
4........................... Performance Ratings. Creditable Federal
Service.
------------------------------------------------------------------------
In order to ensure fairness in RIF actions and an impartial review
of Department decisions, such as abolishing positions and crediting
performance ratings, subpart F provides an appeal right under Sec.
9901.611 for an employee who is reached for a RIF action resulting in
separation, reduction in pay band, or furlough for more than 30
consecutive days (or more than 22 discontinuous workdays), and who
believes that the Department improperly applied subpart F.
Commenters, including labor organizations participating in the
meet-and-confer process, recommended that the design and implementation
of subpart F should be subject to collective bargaining. This would be
inconsistent with the enabling legislation (5 U.S.C. 9902(f)(4)), which
makes the collaborative process the exclusive process for involvement
of employee representatives in the planning, development, and
implementation of the HR system. We have added language at Sec. Sec.
9901.605(f) and 9901.606(e), which further clarifies that competitive
areas and competitive groups are not subject to collective bargaining.
Even so, in developing final subpart F regulations, we did consider all
comments submitted by participating labor organizations, including
comments during the meet-and-confer process.
[[Page 66162]]
Other Comments on Specific Sections of Subpart F
Section 9901.601--Purpose and Applicability
Section 9901.601 specifies that subpart F implements the
Department's system to determine employees' retention rights resulting
from organizational decisions such as realignment, reorganization, and
closure.
As an alternative to the RIF system in the proposed regulation,
commenters suggested that the Department retain or modify OPM's present
5 CFR part 351 retention regulations as an alternative to subpart F.
These suggestions were inconsistent with a performance-based HR system
and were not adopted.
Section 9901.602--Scope of Authority
As authorized by 5 U.S.C. 9902(k), Sec. 9901.602 provides that
subpart F modifies and then applies the statutory retention provisions
in 5 U.S.C. 3501 through 3503, except for the veterans' preference
provisions which are not modified in sections 3501 and 3502. Finally,
the section also provides that the Department will further implement
subpart F through implementing issuances in accordance with Sec.
9901.105.
Section 9901.603--Definitions
Section 9901.603 defines specific terms for purposes of subpart F.
Commenters, including labor organizations participating in the
meet-and-confer process, suggested that subpart F clarify the
definition of ``competing employee.'' The Department will publish
implementing issuances clarifying who is a ``competing employee'' under
subpart F.
In order to clarify how the Department will consider performance as
a retention factor under Sec. 9901.607(a)(3), we added a definition of
``modal rating'' to Sec. 9901.603. For purposes of subpart F, ``modal
rating'' means the rating of record that occurs most frequently in a
particular competitive group. The Department will publish implementing
issuances further clarifying the consideration of performance in RIF
competition under subpart F.
Commenters, including comments during the meet-and-confer process,
on both sections 9901.603 and 9901.607 (``retention list'') suggested
that the definition of ``retention factors'' specifically address the
provision that retention factors includes ``such other factors as the
Secretary considers necessary and appropriate to rank employees within
a particular retention list.'' Commenters were also concerned that this
discretion in the definition could lead to abuse in conducting RIF
actions. After consideration of the comments, we decided to revise the
definition of ``retention factors'' to reflect the actual ranking order
of the four principal retention factors found in Sec. 9901.607(a)
(i.e., tenure first, veterans' preference second, performance third,
and creditable service fourth) without any additional changes to the
definition. The Department will appropriately cover any consideration
given to additional retention factors through implementing issuances.
However, even if the Department chooses to give consideration to
additional factors under authority of this definition, the Department
must still follow the ranking order of the four factors found in Sec.
9901.607(a).
A commenter suggested that a definition of ``tenure'' be added to
Sec. 9901.603. We did not adopt this suggestion. Section 9901.603
defines ``tenure group'' as the initial grouping of employees for RIF
competition on the basis of the type of their appointments. Section
9901.607(a)(1) provides the ranking order of tenure as used in RIF
actions under subpart F. The Department will publish implementing
issuances on ``tenure'' to clarify for purposes of subpart F that
tenure is granted and governed by the type of appointment under which
an employee is currently serving without regard to whether his or her
appointment is in a competitive position or an excepted position.
Section 9901.604--Coverage
Section 9901.604 specifies which employees and which personnel
actions are covered by subpart F.
Commenters suggested that Sec. 9901.604(a) of subpart F
specifically exclude National Guard technicians who have retention
rights under 32 U.S.C. 709. The technicians are not currently covered
by OPM's RIF regulations; therefore, implementing issuances will
similarly exclude the National Guard technicians from subpart F.
Commenters, including comments during the meet-and-confer process,
suggested that the regulations specifically address the provision in
Sec. 9901.604(a)(2) providing that subpart F also applies to other
employees ``designated by the Secretary as DoD may be authorized to
include under 5 U.S.C. 9902.'' We retained the section as originally
proposed. The Department will implement Sec. 9901.604(a)(2) through
implementing issuances.
A commenter suggested that subpart F include term employees, who in
fact compete for retention in the ranking order covered in Sec.
9901.607(a)(1). Other commenters, including comments during the meet-
and-confer process, suggested that subpart F exclude term employees
from RIF competition. We did not adopt this suggestion. The Department
will clarify the coverage of term employees in subpart F through
implementing issuances. In response to another comment, the Department
will also clarify through implementing issuances the retention rights
under subpart F of seasonal employees, employees on other nonpermanent
appointments, and employees on probationary appointments.
Commenters, including comments during the meet-and-confer process,
asked for clarification when subpart F would apply to employees of the
Department. We agree that clarification is necessary. Proposed Sec.
9901.604(b)(1) provided that subpart F applies to the release of a
competing employee from a retention list by actions such as separation
or reduction in band for a reason covered in Sec. 9901.601 (e.g.,
realigning, reshaping, etc). After consideration of the comments, we
revised Sec. 9901.604(b)(1) to clarify that subpart F also applies to
a displacement action affecting a competing employee within a retention
list.
A commenter agreed with the transfer of function provisions in
Sec. 9901.604(b)(2), which provides that the Department applies 5 CFR
part 351, subpart C, of OPM's regulations to a transfer of function
situation. Also, other commenters suggested that the Department develop
its own transfer of function procedures for purposes of subpart F.
After consideration of the comments, we revised Sec. 9901.604(b)(2)
and a conforming change in Sec. 9901.602 to provide that, consistent
with the requirements in section 5 U.S.C. 3503, the Department may
through implementing issuances implement its own transfer of function
procedures under subpart F.
Section 9901.604(b)(3) provides that the Department applies section
351.604 of OPM's regulations to implement a RIF furlough of more than
30 consecutive calendar days. Commenters suggested that the Department
develop its own RIF furlough procedures for purposes of subpart F.
However, we believe that only clarification is necessary. Consistent
with the definition of ``furlough'' in 5 CFR 351.203 and the
regulations in 5 CFR 351.604, we revised Sec. 9901.604(b)(3) to
provide that subpart F applies to the furlough of a competing employee
for
[[Page 66163]]
more than 30 consecutive days or more than 22 discontinuous workdays.
The Department will implement Sec. 9901.604(b)(3) through implementing
issuances covering both continuous and discontinuous furloughs.
Section 9901.604(c)(2) provides that subpart F does not apply to a
reduction in band based upon reclassification due to new classification
standards or the correction of classification error. Demotions
resulting from misclassification or a new classification standard are
similarly excluded from OPM's RIF regulations. Commenters, including
labor organizations participating in the meet-and-confer process,
suggested that Sec. 9901.604(c)(2) be revised to apply subpart F to
both a reduction in band and a reduction in pay resulting from a
classification decision. We did not adopt this suggestion because the
Department believes there is no need to establish rules that differ
from the Governmentwide RIF regulations in this regard.
Section 9901.604(c)(7) provides that, with one exception, subpart F
does not apply to a reduction in band based upon job erosion. The
exception provides that subpart F applies to a reduction in band based
upon job erosion when the agency has formally announced a reduction in
force in the competitive area that will be effective within 180 days.
Demotions resulting from job erosion are similarly excluded from OPM's
RIF regulations, with a comparable exception. Commenters, including
labor organizations participating in the meet-and-confer process,
suggested that Sec. 9901.604(c)(7) be revised to apply subpart F to
both a reduction in band and a reduction in pay resulting from job
erosion. We did not adopt this suggestion because the Department
believes there is no need to establish rules that differ from the
Governmentwide RIF regulations in this regard.
Section 9901.605--Competitive Area
Section 9901.605 covers ``Competitive Area,'' which defines the
organizational and geographic boundaries within which employees compete
for retention under subpart F.
Commenters, including labor organizations participating in the
meet-and-confer process, believed that the minimum competitive area
under Sec. 9901.605(a) was too narrow and could encourage the
Department to target employees for RIF actions. One commenter supported
the competitive area standard under Sec. 9901.605(a). After
consideration of comments on the competitive area standard, we have
retained Sec. 9901.605(a) without revision. Section 9901.605(a)
provides the Department with the option of restricting RIF actions to
organizations and positions directly affected by organizational
decisions such as realignment, reorganization, and closure. The
Department also retains the option to use a competitive area larger
than the minimum standard (e.g., an entire activity could be defined as
a single competitive area).
To ensure fairness in the Department's competitive area decisions,
Sec. 9901.605(e) requires that a competitive area must be established
only on the basis of legitimate organizational reasons. The section
prohibits establishment of a competitive area for the purpose of
targeting an employee for a RIF action because of nonmerit factors. An
employee who is reached for a separation, demotion, or furlough action,
and believes that the Department improperly established a competitive
area under subpart F, may appeal the Department's decision under Sec.
9901.611.
Commenters suggested that subpart F clarify the competitive area
standard and terminology under Sec. 9901.605(a). Commenters also
requested that subpart F clarify the Department's oversight role in
reviewing competitive area decisions. Another commenter suggested that
subpart F clarify whether Sec. 9901.605 potentially authorizes
establishment of a one-person competitive area. Finally, commenters,
including labor organizations participating in the meet-and-confer
process, suggested that subpart F clarify the Department's procedures
for approving a change in the competitive area definition within 90
days of the effective date of the RIF. The Department will clarify the
competitive area standard, its terminology, and related material in
implementing issuances.
Labor organizations participating in the meet-and-confer process
suggested that Sec. 9901.605 be revised to provide that a competitive
area may not include only preference eligibles. This suggestion was not
adopted. Section 9901.605 provides that the Department establishes
competitive areas solely on the basis of organizational and geographic
decisions, not on the basis of the retention standing of individual
employees in the competitive areas.
A commenter was concerned that a competitive area defined under
Sec. 9901.605 could result in the release of an employee with higher
performance ratings than another employee in a different competitive
area. We recognize that this scenario may result from any RIF
situation, and could also occur today under current OPM regulations
where employees compete for retention only within a single competitive
area.
A commenter was concerned that a competitive area defined in Sec.
9901.605 could limit the potential future promotion opportunities of an
employee involved in RIF competition. That scenario, too, may result
from any RIF situation, including actions taken today under OPM's
regulations.
A commenter was concerned that an employee reached for a RIF action
under subpart F could not appeal a competitive area decision. As
previously noted, an employee may appeal the competitive area as part
of a RIF appeal under Sec. 9901.611.
Section 9901.606--Competitive Group
Section 9901.606 covers the ``competitive group,'' which serves as
the basis for ranking employees on the basis of their relative
retention standing. After the Department applies the retention factors
(i.e., tenure, veterans' preference, performance, and creditable
service), the competitive group ranks employees in the order of their
relative standing on a ``retention list'' that is similar to a
``retention register'' under 5 CFR 351.404 of OPM's RIF regulations.
Commenters, including labor organizations participating in the
meet-and-confer process, were concerned that a competitive group
established under Sec. 9901.606(a) provides too narrow a basis for RIF
competition. After consideration of comments on establishment of a
competitive group, Sec. 9901.606(a) is adopted without revision.
Section 9901.606(a) provides the Department with an additional option
to restrict RIF actions to organizations and positions directly
affected by organizational decisions such as realignment,
reorganization, and closure. The Department also retains the option to
establish a larger competitive group that potentially could cover an
entire activity.
A commenter was concerned that a competitive group defined in Sec.
9901.606(a) could limit the potential future promotion opportunities of
an employee involved in RIF competition. That situation could result in
any RIF, including actions taken today under OPM's regulations.
Commenters suggested that subpart F clarify how and when the
Department will establish and/or modify competitive groups. A commenter
also suggested that subpart F clarify competitive group terminology.
The Department will clarify its competitive group policies in
implementing issuances.
[[Page 66164]]
Section 9901.606(c) provides that the Department uses employees'
official positions of record to place employees into a competitive
group. The section also provides that the Department ``may supplement
an employee's official position description by using other applicable
records that document the employee's actual duties and
responsibilities.'' A commenter suggested that the Department place
employees into a competitive group only on the basis of their official
positions of record. Other commenters suggested that subpart F cover
how the Department will use records other than official positions to
establish competitive groups. After consideration of the comments, we
have retained Sec. 9901.606(c) without revision. Section 9901.606(c)
provides the Department with maximum flexibility in establishing
competitive groups based upon employees' actual duties and
responsibilities.
Commenters suggested revision of Sec. 9901.606 to provide that the
Department may not establish a competitive group comprised of fewer
than 25 employees. Commenters, including labor organizations
participating in the meet-and-confer process, also suggested revision
of Sec. 9901.606 to provide that the Department may not establish a
competitive group comprised only of preference eligibles. We did not
adopt these suggestions. The Department makes staffing decisions under
subpart F based upon organizational considerations. Consistent with
this premise, Sec. 9901.606 provides that the Department establishes
competitive groups based upon employees' positions without regard to
the number of employees performing those positions.
Section 9901.607--Retention Standing
Section 9901.607 covers ``retention standing'' on a ``retention
list'' under subpart F. The Department ranks employees on a ``retention
list'' on the basis of their relative retention standing. This section
also covers access by employees and their representatives to the
retention list.
Commenters suggested that subpart F clarify the ranking order of
the factors the Department uses to establish retention lists under
Sec. 9901.607. In fact, sections 9901.607(a)(1)-(4) mandate the
required order and weight of the retention factors (i.e., tenure has
the most weight, creditable service has the least weight). The
Department will publish implementing issuances further clarifying the
ranking order of the retention factors in Sec. 9901.607(a).
Section 9901.607(a)(1) provides that in ranking employees on the
retention list, employees with career tenure, including employees
serving an initial probationary period, are listed first, followed by
employees on term and similar appointments as identified in DoD
implementing issuances. Commenters, including comments during the meet-
and-confer process, suggested that employees serving an initial
probationary period on appointment to the Federal service be listed
below employees with career tenure, and above employees with term or
similar appointments. We agree with this suggestion and have
accordingly revised Sec. 9901.607(a)(1) to incorporate this change.
Commenters suggested that Sec. 9901.607(a)(1) be revised to clarify
whether, before a RIF, the Department may convert a temporary
noncompeting employee with no retention rights under subpart F to a
permanent position that provides the incumbent with full retention
rights. We did not adopt this suggestion. The Department has the right
to take appropriate personnel actions before, during, and after the
effective date of the RIF. A commenter suggested that Sec.
9901.607(a)(1) be revised to include service as a tenure element. We
did not adopt this suggestion. Creditable service is a separate
retention factor covered by Sec. 9901.607(a)(4).
Commenters noted that Sec. 9901.607(a)(2) erroneously referenced 5
CFR 351.504(c) and (d) rather than 5 CFR 351.501(c) and (d) of OPM's
RIF regulations. We corrected this misprint.
Commenters were concerned that Sec. 9901.607(a)(2) reduces the
relative weight of veterans' preference as a retention factor under
subpart F. In fact, Sec. 9901.607(a)(2) applies veterans' preference
with the same retention weight as under OPM's current RIF regulations,
which are referenced in Sec. 9901.607(a)(2). Specifically, under Sec.
9901.607(a)(2) veterans' preference is considered as a retention
ranking factor immediately after tenure on the same basis as OPM's
regulations consider veterans' preference in the context of tenure.
A commenter suggested that Sec. 9901.607(a)(2) be revised to
include a cite to the statutory basis for veterans' preference in RIF.
This suggestion was not adopted. Section 9901.602 states that, without
modification, subpart F applies the RIF and statutory preference
requirements mandated by 5 U.S.C. 3501 through 3503. Also, Sec.
9901.607(a)(2) references back to the provisions in 5 CFR 351.501(c)
and (d) of OPM's reduction in force regulations that implement the
retention preference requirements.
A commenter suggested that Sec. 9901.607(a)(2) be revised to
increase the relative weight of veterans' preference as a retention
factor. This suggestion was not adopted. Section 9901.607(a)(2)
provides veterans' preference with the same weight in determining RIF
retention standing as under OPM's regulations.
As noted in the General Comments section above, commenters,
including labor organizations participating in the meet-and-confer
process, were concerned that Sec. 9901.607(a)(3) excessively increases
the relative weight of performance as a retention factor under subpart
F. Section 9901.607(a)(3) considers performance as the third most
important retention factor after tenure and veterans' preference. Under
OPM's RIF regulations, performance receives the least weight as a
retention factor. As we noted in the General Comments, the additional
retention weight for performance is fully consistent with the goal of
increasing the likelihood that higher-performing employees will be
retained in the event of a RIF.
Commenters, including labor organizations participating in the
meet-and-confer process, asked that Sec. 9901.607(a)(3) clarify how
the Department will provide additional weight to performance as a
retention factor. The Department will publish implementing issuances
clarifying the consideration of performance in RIF competition under
subpart F. Other commenters requested clarification on how the
Department will ensure that ratings are impartial and objective, as
well as how an employee may contest a rating within the Department.
These concerns are discussed in subpart D.
Commenters, including labor organizations participating in the
meet-and-confer process, suggested that Sec. 9901.607(a)(3) be revised
to clarify that the Department will not always use a single rating of
record to determine the weight of performance upon an employee's
retention standing. We agree with this suggestion. The Department's
implementing issuances covering the consideration of performance in RIF
competition under subpart F will explain how employees will receive
retention credit for their multiple ratings under the Department's
personnel system. In a conforming change, Sec. 9901.603 includes a
definition of ``modal rating'' that the Department will use to
determine retention credit for employees who do not have any ratings of
record under the Department's personnel system.
[[Continued on page 66165]]
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[[Continued from page 66164]]
[[Page 66165]]
Commenters suggested that Sec. 9901.607(a)(3) be revised to
provide that performance receive the same or no greater retention
weight than creditable service. This suggestion was not adopted.
Consistent with the Department's personnel system that emphasizes
performance, Sec. 9901.607(a)(3) provides that performance receives
greater weight as a retention factor than creditable service.
A commenter suggested that performance receive less weight under
subpart F than veterans' preference. As previously noted, Sec. Sec.
9901.607(a)(2) and (a)(3) provide that veterans' preference is
considered as a retention factor before performance under subpart F.
Commenters suggested that Sec. 9901.607(a)(3) be revised to
increase the relative weight of performance over veterans' preference
as a retention factor. This suggestion was not adopted. Section
9901.607(a)(2) considers veterans' preference on the same basis as
under OPM's regulations determining RIF retention standing, while Sec.
9901.607(a)(3) provides less weight to performance than veterans'
preference as a retention factor.
Commenters suggested that subpart F provide retention credit for
performance on the same basis as OPM regulations. This suggestion was
not adopted. The additional weight for performance as a retention
factor under subpart F is consistent with the increased emphasis on
performance in the Department's new personnel system.
Commenters, including labor organizations participating in the
meet-and-confer process, were concerned that Sec. 9901.607(a)(4)
excessively decreases the relative weight of creditable service as a
retention factor under subpart F. Section 9901.607(a)(4) considers
service as the fourth and least important retention factor. Under OPM's
RIF regulations, service is the third most important retention factor,
while performance receives the least weight as a factor. Again, the
decreased retention weight on service and the additional weight for
performance are consistent with the increased emphasis on performance
in the Department's performance-based personnel system.
A commenter suggested that subpart F clarify ``length of service.''
Section 9901.607(a)(4) provides that employees receive retention credit
for creditable civilian and Armed Forces service on the basis of 5
U.S.C. 3502(a)(A) and (B), and OPM's regulations in 5 CFR 351.503.
However, we believe that clarification is necessary. We revised Sec.
9901.607(a)(4) to provide that in calculating creditable civilian and
uniformed service under subpart F, the Department uses 5 CFR 351.503 of
OPM's RIF regulations, but without regard to provisions covering
additional service credit for performance in 5 CFR 351.503(c)(3) and
(e) of OPM's regulations. The Department will publish implementing
issuances clarifying RIF service credit under subpart F.
In a clarifying edit, we added Sec. 9901.607(a)(5), which provides
that the Department may establish tie-breaking procedures when two or
more employees have the same retention standing. This sentence was
included in Sec. 9901.607(a)(4) of the proposed regulations.
Commenters, including labor organizations participating in the
meet-and-confer process, suggested that Sec. 9901.607(c) be revised to
provide that all employees have access to a retention list established
under Sec. 9901.607(a)(1). We did not adopt this suggestion because
Sec. 9901.607(c) provides that employees who have received a specific
written RIF notice have access to a retention list in accordance with 5
CFR 351.505 of OPM's RIF regulations. However, we believe that
clarification is necessary. We revised Sec. 9901.607(c) to provide
that in allowing access to retention records, the Department uses
section 5 CFR 351.505 of OPM's reduction in force regulations, but
substitutes ``retention list'' for ``competitive level'' or ``retention
register.'' The Department will publish implementing issuances
clarifying access to retention lists under 9901.607(c).
Section 9901.608--Displacement, Release, and Position Offers
Section 9901.608 covers personnel actions that result in
displacement within the retention list or the release of an employee
from a retention list under subpart F. A qualified employee reached for
release from his/her present position because of position abolishment
or displacement by a higher-standing employee on the retention list may
potentially displace a lower-standing employee on the list before
separation or furlough by RIF.
A commenter suggested that Sec. 9901.608(a) be revised to clarify
how the Department determines that a higher-standing employee is
qualified to displace a lower-standing employee on the retention list.
Another commenter suggested that Sec. 9901.608(a)(1)(i) be revised to
eliminate a requirement that the Department only uses 5 CFR 351.702 of
OPM's retention regulations to determine employees' qualifications for
displacing a lower-standing employee on the retention list under
subpart F. We agree that clarification is necessary. We revised Sec.
9901.608(a)(1)(i) to provide that in determining the qualifications of
a higher-standing employee to displace a lower-standing employee under
subpart F, the Department uses, as applicable, 5 CFR 351.702 of OPM's
retention regulations, or its own qualifications, consistent with other
requirements in 5 CFR 351.702. The Department will publish implementing
issuances clarifying qualification determinations for displacement
within a retention list under Sec. 9901.608(a). We also added Sec.
9901.608(a)(1)(iii) to clarify that a displaced employee must be in the
same or lower pay band as the higher-standing employee who displaced
him/her.
Commenters suggested that Sec. 9901.608(a) be revised to clarify
terminology such as ``status'' and ``undue interruption.'' The
Department will publish implementing issuances clarifying terminology
under 9901.608(a).
A commenter suggested that Sec. 9901.608(a) be revised to require
the Department to provide positive efforts that would increase the
likelihood of higher-standing employees being qualified to displace
employees with lower retention standing. We did not adopt this
suggestion. We believe it would be unfair for the Department to pursue
a program whose purpose is to increase the likelihood of one category
of employees displacing a different category of employees in a RIF.
Commenters suggested that Sec. 9901.608(b)(1) be revised to
clarify the order in which employees are released from the retention
list. Section 9901.608(b)(1) provides that, consistent with the order
of retention required by Sec. 9901.607(a), employees with the lowest
retention standing are released before higher standing employees on the
retention list.
Commenters also suggested that Sec. 9901.608(b)(2) clarify
displacement rights involving time-limited positions. We agree that
clarification is necessary. We revised Sec. 9901.608(b)(2) to provide
that under subpart F a competing employee may not be released from a
retention list containing a position held by a temporary employee when
the competing employee is qualified for the position under Sec.
9901.608(a)(1)(i). The Department will publish implementing issuances
clarifying release from retention lists under 9901.608(b).
A commenter suggested that Sec. 9901.608(b) clarify the procedures
that the Department uses to break ties in employees' relative retention
standing. The Department will publish implementing issuances clarifying
tie-
[[Page 66166]]
breaking procedures in releasing employees from retention lists.
Section 9901.607(a)(5) of the final regulations covers the Department's
right to establish tie-breaking procedures.
A commenter suggested that Sec. 9901.608(b)(3) clarify how the
Department will use exceptions to the regular order of release from the
retention list. We agree that clarification is necessary. We revised
Sec. 9901.608(b)(3) to provide that in temporarily postponing the
release of an employee from the retention list, the Department uses 5
CFR 351.506, 351.606, 351.607, and 351.608 of OPM's RIF regulations,
but substitutes the term ``retention list'' for the term ``competitive
level'' where part 351 uses that term in the four identified sections.
The Department will publish implementing issuances further clarifying
exceptions to the usual order of release under Sec. 9901.608(b)(3).
Commenters suggested that Sec. 9901.608(c) clarify whether the
Department will consider employees' retention standing in offering
vacant positions under subpart F. We agree that clarification is
necessary. Section 9901.608(c) provides that the Department must use
retention standing in offering a vacant position in the same
competitive area to an employee released from a retention list under
subpart F. We revised Sec. 9901.608(c) to clarify that the Department
must use retention standing when offering a vacancy in the same
competitive area to an employee who is competing on the retention list
under Sec. 9901.608(a)(1) because of either position abolishment or
displacement by an employee with higher retention standing. The
Department will publish implementing issuances clarifying offers of
vacancies under Sec. 9901.608(c).
A commenter asked whether a released employee who is offered a
vacancy under Sec. 9901.608(c) has any potential rights to pay
retention. The Department will publish implementing issuances
clarifying employees' entitlements to pay retention under Sec.
9901.608(c). However, in a conforming change, we have revised Sec.
9901.355 of subpart C to provide additional information on pay
retention.
Commenters, including labor organizations participating in the
meet-and-confer process, suggested that Sec. 9901.608(d) be revised to
provide that, in lieu of RIF separation or furlough, an employee
released from a retention list would have potential displacement rights
to positions held by lower-standing employees on other retention lists
similar to ``bump'' and ``retreat'' regulations provided to released
employees under subpart G of part 351 of OPM's RIF regulations. This
suggestion was not adopted. Section 9901.608(d) provides the Department
with flexibility to restrict RIF actions to organizations and positions
directly affected by organizational decisions such as realignment,
reorganization, and closure. In a related clarification, we revised
Sec. 9901.608(d)(2) to provide that the furlough of an employee
released from a retention list is covered by Sec. 9901.604(b)(3). The
Department will publish implementing issuances clarifying actions
following the release of employees from a retention list under Sec.
9901.608(d).
Section 9901.609--Reduction in Force Notices
Section 9901.609 covers the notice that the Department must issue
to each employee before release from the retention list under subpart
F. The Department must issue a specific written notice a minimum of 60
days before the employee is reached for release from the retention list
by a RIF action (e.g., separation or furlough).
Commenters suggested that Sec. 9901.609 be revised to provide 120
days written notice. This suggestion was not adopted. The requirement
for a minimum 60 days notice of a RIF action is consistent with the
requirements of 5 U.S.C. 3502(d)(1)(A) for OPM's regulations published
in 5 CFR 351.801(a)(1). The Department will publish implementing
issuances clarifying the content of RIF notices issued under Sec.
9901.609.
In a clarifying change consistent with management flexibilities
provided by 5 CFR 351.801(b), Sec. 9901.609 is revised to provide that
when the Department applies subpart F because of circumstances not
reasonably foreseeable, the Secretary, at the request of a component
head or designee, may approve a RIF notice period of less than 60 days.
The notice period must cover at least 30 days before the date of
release from the retention list. The Department will publish
implementing issuances covering a RIF notice period of less than 60
days under Sec. 9901.609.
Section 9901.610--Voluntary Separation
Section 9901.610 covers voluntary separation from the Department as
a RIF action. Under this option, the Department may allow an employee
to volunteer for separation from the service by reduction in force when
the action avoids the RIF separation of another employee.
One commenter suggested that the Department use the voluntary
separation option to avoid RIF actions. The Department will publish
implementing issuances clarifying the applicability of voluntary RIF
separations under Sec. 9901.610.
Section 9901.611--Reduction in Force Appeals
Section 9901.611 covers RIF appeals. An employee who is reached for
a RIF action resulting in separation, reduction in band, or furlough
under Sec. 9901.604(b), and who believes that the Department
improperly applied subpart F, has the right to appeal to the Merit
Systems Protection Board. Also, commenters during the meet-and-confer
process suggested, as an alternative to appealing RIF actions to the
Board, employees should instead have the right to file a grievance. We
did not adopt this suggestion. Section 9901.611(a) references 5 CFR
351.901 of OPM's regulations in providing the same impartial right to
appeal a RIF action under subpart F as provided to an employee under
OPM's retention regulations.
For clarification, we revised Sec. 9901.611(a)(3) to provide that
an employee has the right under subpart F to appeal a furlough of more
than 30 days, as defined in Sec. 9901.604(b)(3).
Commenters, including labor organizations participating in the
meet-and-confer process, suggested that Sec. 9901.611(a) be revised to
provide a right to appeal a RIF action under subpart H of part 9901
(``Appeals''). This suggestion was not adopted. Subpart H of part 9901
only covers appeals of certain adverse actions taken under subpart G of
part 9901 (e.g., removals, suspensions for more than 14 days, furloughs
of 30 or less consecutive days, and reductions in pay band--or a
comparable reduction). The procedures in subpart H are appropriate for
reviewing an adverse action appeal (i.e., an appeal of a personnel
action that the Department took for cause). In contrast, Sec.
9901.611(a) provides for the right to appeal a RIF action (i.e., an
appeal of a personnel action that the Department took for an
organizational reason) on the same basis as under OPM's RIF
regulations.
Commenters suggested revision of Sec. 9901.611(a) to provide for
expedited Board review of appeals under subpart F. This suggestion was
not adopted. Section 9901.611 provides for the right to appeal a RIF
action to the Board using the same procedures as an appeal under OPM's
regulations.
Commenters, including labor organizations participating in the
meet-and-confer process, suggested revision of Sec. 9901.611(b) to
provide for the right
[[Page 66167]]
to appeal to the Board, or another third-party appellate body, an
action taken under internal Department placement programs. This
suggestion was not adopted. Section 9901.611(b) does not provide the
right to appeal an internal placement action (including a placement
under the Priority Placement Program). An employee who believes that
the Department failed to properly effect an internal placement action
may contest the action through a grievance or other remedy available
for the review of the Department's internal staffing decisions.
Subpart G--Adverse Actions
General Comments
Many commenters, including labor organizations participating in the
meet-and-confer process, objected to the provisions in subpart G. They
felt that the proposed regulations would adversely impact due process
rights, discrimination and whistleblowing claims, and the ability to
retain staff. We disagree. Under the enabling legislation, DoD is
prohibited from waiving or modifying any provision relating to
prohibited personnel practices or merit system principles, including
reprisal for whistleblowing or unlawful discrimination. The regulations
therefore do not modify these protections in any way. The enabling
legislation also requires DoD to ensure that employees are afforded the
protections of due process, which we have done. In accordance with U.S.
Supreme Court decisions, the regulations ensure employees notice, a
right to reply, a final written decision, and a post-decision review
when the Secretary proposes to deprive them of constitutionally
protected interests in their employment. Although we have made changes
to the proposed regulations, due process and other legal protections
are preserved as required by Congress, and we do not believe the
regulations in this subpart will have any negative effect on retention
efforts.
Section 9901.701--Purpose
This section outlines the purpose of this subpart and provides for
the development and publication of DoD implementing issuances. During
the meet-and-confer process, the participating labor organizations
stated that DoD does not have the authority to prescribe implementing
issuances to carry out the provisions of this subpart. We disagree. The
enabling legislation expressly states that the Secretary and the
Director will jointly prescribe regulations for the system. This
carries with it the authority for the Secretary to provide further
clarification, guidance, and instruction on these regulations through
implementing issuances. It is also consistent with the continuing
collaboration process described in Sec. 9901.106 which implements 5
U.S.C. 9902(f)(1)(D).
Section 9901.702--Waivers
This section specifies the provisions of title 5, U.S. Code, that
are waived for employees that are covered by the NSPS adverse action
system established under subpart G. During the meet-and-confer process,
the participating labor organizations recommended that this provision
be deleted. We do not agree with this recommendation because it is
inconsistent with the enabling legislation, which allows waiver of
certain provisions of title 5, U.S. Code, and the creation of new
adverse action procedures. We have made no changes to this section.
Section 9901.703--Definitions
This section defines terms relevant to this subpart. The labor
organizations participating in the meet-and-confer process recommended
that the definition of ``adverse action'' be amended to include
``demotion'' and exclude the words ``or other comparable reduction.''
We disagree. The term ``demotion'' is not used in the regulations. The
concept of demotion is covered through reduction in pay band (or
comparable reduction). The term ``comparable reduction'' is taken
directly from the enabling legislation. These labor organizations also
recommended that a definition be added for ``band.'' Commenters, and
labor organizations during the meet-and-confer process, recommended
that a definition be added for ``day.'' We agree and have added
definitions for those terms. A definition of ``reduction in pay'' has
also been added to clarify that nonreceipt of a pay increase (such as a
rate range adjustment, supplemental adjustment, or a performance pay
increase) does not constitute a reduction in pay and therefore is not
an adverse action.
During the meet-and-confer process, labor organizations also
suggested that the definitions of ``indefinite suspension,'' ``pay,''
and ``suspension'' be modified. Since the definitions for these terms
are essentially identical to current statutory and regulatory
definitions, we see no basis for making the suggested modifications.
Finally, labor organizations, as well as commenters, recommended the
deletion of ``mandatory removal offenses'' (MROs). We disagree because
of that term's relevance to this section and the fact that the concept
of MROs is retained.
Section 9901.704--Coverage
Section 9901.704 describes the types of actions and employees
covered by and excluded from coverage under the subpart. Commenters, as
well as labor organizations participating in the meet-and-confer
process, recommended that employees who are serving in-service
probationary periods be given appeal rights. We have clarified that
employees who are serving an in-service probationary period will have
appeal rights if they are not returned to a grade or band and pay rate
no lower than that held before the in-service probationary period. The
labor organizations, during the meet-and-confer process, also
recommended that we add a provision stating that employees who are
excluded from the enabling legislation are not covered by this
provision. Such a provision is unnecessary because employees excluded
from coverage under the enabling legislation are not covered by any
provision of the NSPS regulations.
We received many comments suggesting we add reduction in force
(RIF) actions to coverage. We believe the NSPS appeal system should be
limited to removals, suspensions for more than 14 days, furlough for 30
days or less, and reduction in pay or pay band (or comparable
reduction) as set forth in 5 U.S.C. 9902(h)(4)(A). Employees subject to
RIF actions will continue to have the same appeal rights as they do
today and that is made clear in subpart F of the regulations.
Commenters recommended clarification as to whether adverse actions
resulting from agency suitability determinations are excluded. We
believe such clarification is unnecessary since agency suitability
actions, including removals, are taken under 5 U.S.C. chapter 73.
Suitability actions under chapter 73 are by definition not adverse
actions. Moreover, the enabling legislation expressly excludes from its
coverage suitability actions taken under 5 U.S.C. chapter 73. See 5
U.S.C. 9902(d)(2). Other commenters recommended that term employees be
excluded from coverage. The Department wishes to maintain the status
quo with respect to term employees' appeal rights. One commenter
suggested that the movement of an employee to a lower pay band not be
considered an adverse action under NSPS when such movement is the
result of a less than fully successful performance rating. We disagree.
The enabling legislation identified a reduction in pay band as an
appealable action.
[[Page 66168]]
Section 9901.711--Standard for Action
This provision describes the standard for taking an action against
an employee as ``for such cause as will promote the efficiency of the
service.'' During the meet-and-confer process, participating labor
organizations, as well as most commenters, agreed with this provision.
However, some commenters stated that this standard provides management
too much discretion. We have retained this long-standing and well
established ``efficiency of the service'' standard.
Section 9901.712--Mandatory Removal Offenses
This provision gives the Secretary the authority to identify
Mandatory Removal Offenses (MROs), which are offenses that have a
direct and substantial impact on the Department's national security
mission. An employee who commits such an offense must be removed from
Federal service, unless the Secretary determines in his or her sole and
exclusive discretion that a lesser penalty is appropriate. Commenters
as well as participating labor organizations during the meet-and-confer
process stated that this provision should be deleted in its entirety
because in their view, the establishment of MROs exceeds DoD's
authority under the enabling legislation and is open to abuse. Some
commenters stated that MROs should be defined and subject to public
comment through the formal rule-making process. Commenters expressed
concern that the Secretary can issue and change the list at will. Some
commenters stated that the Secretary should not be the only mitigating
authority for MROs and that his non-reviewable discretion is
inappropriate for a political appointee. In addition, commenters stated
MROs do not leave any room for flexibility based on individual
circumstances or mitigating factors and takes the flexibility away from
DoD supervisors. Other commenters expressed concern that if an MRO
offense is not sustained, an employee can still be charged with a non-
MRO offense based on the same facts.
We disagree that the establishment of MROs exceeds the Department's
authority. The enabling legislation expressly provides authority to
waive the current statutory provision governing adverse action in
establishing the HR system. Although no MROs have been established, the
provision that allows for the establishment of MROs must be retained to
support the vital mission of the Department. We have revised the
proposed regulations to provide, at a minimum, that MROs will be (1)
identified in advance as part of the Department's implementing
issuances, (2) publicized upon establishment via notice in the Federal
Register, and (3) made known to all employees on a periodic basis, as
appropriate, through means determined by the Department. Examples of
potential MROs are provided under Major Issues: Adverse Actions and
Appeals. The offenses that may be identified as MROs will be so
egregious as to have a direct and substantial adverse impact on the
Department's national security mission, and therefore would not
properly be subject to mitigation except in unusual circumstances as
determined by the Secretary. Employees who commit such offenses must be
removed from the Department and the Federal service. The support of the
national security mission outweighs any loss of flexibility in the
system. We disagree that it is inappropriate for the Department to have
the ability to take a subsequent action if the offense is found to not
be an MRO. We believe that if an employee's misconduct is found to
qualify as an MRO, it does not mean that the misconduct should not be
addressed. For misconduct amounting to an MRO, mitigation of penalties,
review of notice letters, and designation of offenses must be at the
highest levels of the Department to prevent abuse, ensure judicious use
of the authority, and provide maximum transparency for employees. In
light of the above, we believe that MROs need not be subject to public
comment through the formal rule-making process. They will, however, be
subject to continuing collaboration with employee representatives. This
ensures transparency in the process of establishing MROs.
Section 9901.714--Proposal Notice
This provision outlines procedures for issuing proposal notices,
including a shorter advance notice period of at least 15 days.
Commenters and labor organizations participating in the meet-and-confer
process recommended retaining the current 30-day written notice of a
proposed adverse action. Other commenters argued that due process is
denied because of the potential inability to gather and review evidence
within the proposed time frame. We disagree that the advance written
notice period should be 30 days. The shortened notice supports the NSPS
goal of streamlining the adverse action process and provides adequate
time for consideration of evidence. We have clarified in the
regulations that the 15-day notice period represents the minimum period
of time for advance notice to the employee. We have further modified
this section to clarify that notice of proposed adverse action or
opportunity to reply are not required in the event of a furlough of 30
days or less without pay due to unforeseeable circumstances.
This provision also shortens the minimum notice period from 7 to 5
days in situations where there is reasonable cause to believe a crime
has been committed. Commenters and labor organizations participating in
the meet-and-confer process recommended retaining the current crime
provision notice period of 7 days. We believe that 5 days is the
appropriate amount of time to allow for notice and reply in such
situations given the need to take action in these situations.
Commenters expressed concern over the lack of an explicit requirement
that the Department have actual knowledge of a criminal investigation
or criminal charges being filed against an employee before imposing the
5-day notice period. Commenters also recommended that ``reasonable
cause'' be defined. The criteria under which the crime provision may be
invoked is well established in current statute, regulation, and case
law and was not changed in the proposed regulations. We do not believe
it necessary to define reasonable cause in these regulations. Each case
is unique and considerable guidance is provided in existing case law.
Labor organizations during the meet-and-confer process recommended
including a requirement for DoD to provide employees copies of all
evidence including exculpatory evidence during the notice period. While
the regulations do not require that copies of evidence be delivered to
the employee, the Department will ensure that the employee is informed
of his or her right to review the Department's evidence supporting the
proposed action. There is no need to specifically require DoD to make
exculpatory evidence available to the employee during the notice period
since all evidence relied upon by the decision-maker must be made
available to the employee.
Labor organizations during the meet-and-confer process also
recommended modifying the proposed regulations with regard to the
status of an employee during the notice period. Under current law and
regulation, an employee is normally entitled to be in a pay status
during the notice period. A Component may place an employee in a
different position or even in a non-duty status, but the employee must
continue to be
[[Page 66169]]
paid. The labor organizations recommended that the Department's
authority to assign an employee to other duties or to place the
employee in a non-duty pay status should be substantially limited, even
if the Department determines that the employee's continued presence
would have an adverse impact on the Department's mission. The labor
organizations recommended deleting ``the Department's mission'' as a
possible justification for assigning an employee to a different status
or position. We do not believe such modification is appropriate.
Deleting ``the Department's mission'' as a reason for reassigning an
employee to other duties or placing him or her in a non-duty pay status
would adversely impact the Department's flexibility in accomplishing
the mission.
Commenters stated the Department should not be allowed to require
an employee to use personal leave during the notice period. We disagree
with the labor organizations' recommended deletion of language in this
area. We do not envision requiring an employee to use personal leave
during a notice period; however, an employee may voluntarily elect to
request leave. If, in the exceptional case, the Department places an
employee on personal leave involuntarily, such action would constitute
an adverse action and be subject to the procedural requirements of
subpart G and, depending on the facts of the case, could potentially be
appealed under subpart H. This is consistent with current law and the
proposed language is not intended to modify the status quo.
Section 9901.715--Opportunity to Reply
This provision outlines procedures related to the opportunity to
reply and provides that employees be granted at least 10 days to reply
(or 5 days when there is reasonable cause to believe the employee has
committed a crime). Commenters and labor organizations participating in
the meet-and-confer process recommended employees be provided at least
30 days to reply instead of 10 days, and at least 7 days when there is
reasonable cause to believe the employee has committed a crime for
which a sentence of imprisonment may be imposed. They believe the
minimum 10-day (or 5-day, under the crime provision) reply period is
not sufficient time for the employee to provide a response and that the
shortened time period limits managers' ability to fully consider the
employee's reply. Other commenters stated the regulations should allow
for the extension of time limits. Commenters and labor organizations
participating during the meet-and-confer process also recommended
deletion of the requirement that a reply period run concurrently with a
notice period.
We disagree that the reply period should be increased and believe
the proposed minimum 10-day reply period (or 5 days when the ``crime
provision'' is invoked) is ample time for an employee to prepare a
response. We also believe that such a period provides sufficient time
for a manager to consider an employee's reply. Furthermore, both the
15-day notice period and the 10-day reply period represent minimums and
may be extended as necessary at the Department's discretion. We believe
that the reply period should run concurrently with the notice period.
This is consistent with the goal of streamlining the procedure and is
unchanged from current law. The reply period does end prior to the end
of the notice period; however, this is necessary to allow time for
managers to consider the reply and make a timely decision.
Commenters and labor organizations participating in the meet-and-
confer process requested clarification of provisions in this section
which refer to an employee being represented by an individual ``at the
employee's expense.'' The circumstances under which the employee will
be responsible for paying for his or her own representation (e.g., non-
Federal employee representative) were clarified during the meet-and-
confer process and are reflected in the final regulations. They also
recommended deletion of the provision that covers disallowing an
individual to serve as the employee's representative, stating that the
exclusion of representative standard is too broad and should not be
within the discretion of the Department. We disagree with this
recommendation because such procedures are necessary for the orderly
and fair resolution of the action. We disagree that the standard is too
broad, as the criteria are specifically related to the Department's
mission.
During the meet-and-confer process, the participating labor
organizations also recommended extending the reply period when the
Department is considering an employee's medical condition in regard to
a proposed adverse action. We disagree that extending the reply period
in such situations is necessary in regulation. The 10-day reply period
set forth in Sec. 9901.714 represents a minimum and may be increased
at the Department's discretion.
Commenters stated that regulations do not allow duty time for the
employee to prepare a response and one commenter suggested that we
clarify what is meant by a ``reasonable amount of official time'' to
review the evidence. Commenters stated the regulations do not discuss
whether the employee's representative will be allowed official time to
assist the employee. We disagree that the regulations do not allow duty
time for the employee to prepare a response. The employee may receive
official time to review the Department's supporting evidence and to
furnish affidavits and other documentary evidence, if the employee is
otherwise in an active duty status. With regard to an employee's
representative being allowed official time, the proposed regulation is
essentially the same as current law.
Section 9901.716--Decision Notice
This provision outlines procedures for issuance of decision
notices. During the meet-and-confer process, participating labor
organizations gave alternative proposals regarding the delivery of the
decision notice to the employee. One proposal recommended providing the
decision notice to the employee on or before the effective date and
deleting all language providing guidance if unable to deliver the
notice in person. The other proposal recommended delivery by electronic
mail and certified mail, return receipt requested if unable to deliver
the notice in person. During the meet-and-confer process, participating
labor organizations also stated that the Department had no legal
authority to mail a decision letter to the last known address. We
believe that in circumstances when the Department is unable to deliver
the decision notice in person, there must be guidelines provided to
ensure all parties understand their responsibilities; therefore, we did
not delete the guidance contained in the subsection. However, in
response to discussions with labor organizations during the meet-and-
confer process and public comments received, the language was modified
to broaden delivery methods to include mail, overnight or express
delivery service or the use of a messenger service. The regulations
will retain the language that the Department will deliver the decision
letter to the last known address of record, if unable to deliver in
person, as the method of last resort.
Section 9901.717--Departmental Record
This provision describes the Departmental Record. During the meet-
and-confer process, participating labor organizations recommended that
we amend this provision to be consistent
[[Page 66170]]
with 5 U.S.C. 7513(e) by deleting the requirement to retain documents
pursuant to the General Records Schedule and the Guide to Personnel
Recordkeeping. Additionally, they recommended that this provision be
amended to require the retention of exculpatory evidence and any
material relevant to the action. Some commenters stated that the
Department should retain any information that the employee requests to
be retained as a part of the official record of any adverse action. We
did not revise this provision. This provision establishes sound
recordkeeping procedures which are substantively the same as those in 5
U.S.C. 7513(e) except that the proposed provision provides more
guidance regarding recordkeeping procedures. Any and all directly
relevant evidence will be retained regardless of whether the employee
requests the Department do so. One commenter suggested that notation be
made in an employee's official records in cases where an employee under
investigation for misconduct resigns prior to issuance of a proposal
notice. The commenter argued that such documentation could prevent the
future employment of an employee who might present a security risk. We
do not believe such a notation, based on an ongoing investigation,
would be appropriate.
Subpart H--Appeals
General Comments
Subpart H modifies current MSPB appellate procedures for certain
adverse actions taken under subpart G. Such changes include
establishment of streamlined appellate procedures, providing for
Department review of initial decisions, limited discovery, summary
judgment, and expedited timeframes. Commenters, including labor
organizations participating in the meet-and-confer process, objected to
the provisions in subpart H, stating that DoD does not have the
authority to make changes in MSPB appellate procedures. They argued
that there was no evidence that current procedural protections or the
decisions of an arbitrator or MSPB jeopardize national security/defense
and there is no need to improve efficiency of the MSPB process. They
asserted that it is not necessary for MSPB to provide greater deference
to DoD than to any other agency. We disagree. Section 9902(h) expressly
authorizes the Secretary to establish an appellate process for
employees covered by NSPS, including establishing legal standards and
procedures, including standards for applicable relief. In addition,
section 9902(d) makes waivable the current statutory requirements for
the appeals process. Section 9902(b)(5) also states that the system
established under section 9902(a) is not to be limited by any law or
authority that is waived in the NSPS regulations. The modifications in
this subpart were made following consultation with MSPB officials, as
called for in the enabling statute.
In addition, some commenters argued that any modification of
current rules regarding an employee's ability to make and have an
allegation of discrimination reviewed was beyond the authority of NSPS.
We believe these regulations do not impermissibly modify existing EEO
procedures and fully retain the right of employees to have allegations
of discrimination fully and fairly reviewed and adjudicated. Under
these regulations, employees can raise allegations of discrimination as
part of any appeal or grievance of an adverse action and, if
dissatisfied with the final DoD decision, obtain full MSPB and EEOC
review of such allegations.
Commenters also stated that the current personnel system already
allows separation or removal to be effected rapidly if in the interest
of national security under 5 U.S.C. 7532. Section 7532 is limited in
its scope regarding the basis for action and employee appeal channels;
therefore we don't believe it appropriately addresses the broad range
of offenses and penalties that are necessary to ensure the well
disciplined workforce needed to carry out the Department's mission.
Finally, many commenters objected to the Department's review of AJ
decisions, questioning the neutrality and impartiality of the review
process, as well as its negative impact on due process. While the
Department has the authority to review initial AJ decisions, that
authority will be limited to those decisions for which either party has
timely filed a request for review. The Department may remand, modify or
overturn the AJ's decision only based on the criteria in Sec.
9901.807(g)(2)(ii)(B) of these final regulations.
We will continuously monitor and evaluate the appeals process to
ensure that these changes are fair.
Other Comments on Specific Sections of Subpart H
Section 9901.802--Applicable Legal Standards and Precedents
These regulations state that in applying existing legal standards
and precedents, MSPB and arbitrators are bound by the legal standard
set forth in Sec. 9901.107(a)(2). Section 9901.107(a)(2) provides that
these regulations must be interpreted in a way that recognizes the
critical national security mission of the Department. Each provision
must be construed to promote the swift, flexible, effective day-to-day
accomplishment of this mission as defined by the Secretary; DoD's and
OPM's interpretation of NSPS regulations must be accorded great
deference. During the meet-and-confer process, the participating labor
organizations recommended that we delete the requirement that the MSPB
consider DoD's mission when applying legal standards not inconsistent
with this subpart. Some commenters also recommended DoD and OPM not be
given deference in their interpretations of NSPS regulations.
The authority to require MSPB to give deference to DoD's and OPM's
interpretation of NSPS regulations derives from 5 U.S.C. 9902,
including section 9902(h)(3), which authorizes establishment of legal
standards. It is also based on longstanding standards of legal
interpretation, which provides that considerable weight be given to an
agency's interpretation of its own regulations. Accordingly, we have
not modified this section. We believe that the Department's and OPM's
interpretation of the regulations in part 9901 must be given great
deference to ensure that appropriate recognition is given to
accomplishment of the Department's national security mission when
appeals decisions are made. Also during the meet-and-confer process,
the participating labor organizations recommended that we modify the
language of this section to include references to 5 U.S.C. 2301 and
9902(h)(2) and (3). The suggested additional citations are not
necessary as the law and citations noted in this subpart adequately
provide for all requirements.
Section 9901.803--Waivers
This section specifies the provisions of title 5, U.S. Code, that
are waived for employees covered by the NSPS appeals process
established under subpart H. This section also specifies that the
appellate procedures in subpart H replace those of the Merit Systems
Protection Board (MSPB) to the extent MSPB's procedures are
inconsistent with these regulations, and that MSPB must follow these
regulations until it issues conforming regulations. Some commenters
recommended we delete the reference to modification of 5 U.S.C. 7702
stating this was beyond the authority of NSPS. During the meet-and-
confer process, the participating labor organizations also voiced
concern that NSPS does not give DoD the authority
[[Page 66171]]
to waive or modify discrimination complaint procedures.
The Department's authority to modify 5 U.S.C. 7702 is found in 5
U.S.C. 9902(h), which authorizes the establishment of a new appeals
process. Consistent with section 9902(h)(7), we may modify or adapt the
mixed case process in these regulations, provided employee rights and
remedies are preserved. The final regulations modify some of the
procedures for processing mixed cases, while preserving the rights and
remedies as required by Sec. 9902(h)(7). These rights include the
right to seek EEOC review of an MSPB decision in a mixed case pursuant
to 5 U.S.C. 7702(b), which has not been modified. They also preserve
judicial review in such cases. Consistent with the enabling
legislation, these regulations assure due process and appropriately
streamline the procedures of the appeals process dealing with mixed
cases.
Section 9901.804--Definitions
During the meet-and-confer process, the participating labor
organizations recommended that we amend or delete a number of
definitions, such as ``request for review'' and ``mandatory removal
offense.'' We did not accept these recommendations because the proposed
changes would alter the essence of underlying procedural concepts that
are critical to the successful implementation of NSPS.
Section 9901.805--Coverage
This section of the proposed regulation provided that the appeals
process covers employee appeals of certain adverse actions taken under
subpart G. Commenters and labor organizations participating in the
meet-and-confer process suggested we add reduction in force (RIF) and
demotions as covered actions. Commenters also recommended that
suspensions of 14 days or less be a covered action. Commenters, as well
as labor organizations participating in the meet-and-confer process,
stated that exclusion of RIF actions from NSPS coverage under the NSPS
appeals process contradicts Sec. 9901.611 which states that RIF
actions are appealable to the MSPB under 5 CFR 351.901. We disagree
that these are contradictory. The provisions indicate that RIF actions
are not included as appealable actions under NSPS but are independently
appealable to the MSPB. We believe the NSPS appeal system should be
limited to those actions set forth in the enabling legislation.
Inclusion of additional actions (such as suspensions of 14 days or
less) goes beyond the intent of the enabling legislation. ``Demotions''
in NSPS are covered by the concept of reduction in pay band (or
comparable reduction), which is covered under Sec. 9901.805(a).
One commenter recommended that we specify when appeal rights are
granted or denied based on failure to maintain a condition of
employment and explain why appeal rights vary depending on whether the
condition of employment was specified at the time of appointment or
subsequent to appointment. The applicability of appeal rights when an
adverse action is based on failure to maintain a condition of
employment requires an individualized assessment of an employee's
status and the specific facts of the case. It is not possible to
specify a broad rule that would cover all such actions.
Section 9901.806--Alternative Dispute Resolution
This section of the proposed regulations encouraged the use of
alternative dispute resolution (ADR) methods to address employee-
employer disputes arising in the workplace, including those which may
involve disciplinary actions. The proposed regulations also recognize
that these methods may be subject to collective bargaining to the
extent permitted by subpart I of part 9901. During the meet-and-confer
process, participating labor organizations endorsed the concept.
Commenters endorsed the concept of ADR and urged a stronger statement
on the use of ADR. Commenters suggested that we establish ombudsman
offices at each component in order to follow the ``best practices''
noted elsewhere by the Government Accountability Office, and to
facilitate resolution of disputes at the lowest possible level. We
believe that the proposed regulations adequately stress the importance
of ADR and have made no changes to this section.
Section 9901.807--Appellate Procedures
This section established streamlined appellate procedures and
provided for such things as Department review of initial decisions,
limited discovery, summary judgment, and expedited timeframes.
Commenters and labor organizations participating in the meet-and-confer
process stated that this section of the proposed regulations was not
organized well and was difficult to follow. We agree and have
reorganized the material as indicated below with the previous section
designation in brackets. For example, ``9901.807(a)(1) [9901.807(a)]''
indicates that ``9901.807(a)(1)'' is the new designation in the final
rules and ``[9901.807(a)]'' is the old designation in the proposed
rules. Some commenters recommended that the entire section be deleted,
stating DoD does not have the authority to make the changes set forth
in this section. We disagree. Section 9902(h) expressly authorizes the
Secretary to establish an appeals process. In addition, Sec. 9902(d)
expressly authorizes the waiver of the current statutory appeals
process. Commenters noted that Sec. 9901.807 does not include a
provision for MSPB to re-open a decision of its AJs. This is consistent
with the enabling legislation which limits MSPB review to the
Department's final decisions which have been appealed to the Board and
thus does not authorize Board reopening of initial AJ decisions.
Adequate and appropriate review of AJ decisions will result from the
Request for Review (RFR) and Petition for Review (PFR) processes.
Section 9901.807(a)(1) [9901.807(a)]
There was no change in this provision. It was merely redesignated.
Section 9901.807(a)(2)(i) [9901.807(b)(1)]
There was no change in this provision. It was merely redesignated.
This provision of the proposed regulations is introductory in nature.
The actual changes are set forth in later provisions. While there was
discussion during the meet-and-confer process and comments on the
system elements, we will discuss those comments in the applicable
sections.
Section 9901.807(a)(2)(ii) [9901.807(b)(2)]
This provision provides that the AJ will adjudicate appeals and
deliver his or her decision to each party and to OPM. During the meet-
and-confer process, participating labor organizations recommended that
NSPS processing rules be deleted and that the full MSPB have overall
and exclusive authority in adjudicating appeals. We disagree. As
written, the regulations meet the goals of ensuring appropriate
deference to DoD's decisions and penalty determination in adverse
actions and streamlining the way such cases are handled while
continuing to preserve and safeguard employee due process protections.
Section 9901.807(a)(3) [9901.807(e)]
This provision allows OPM to participate or intervene in the appeal
at any time it believes that an erroneous decision may result which
will have a substantial impact on civil service law, rule, regulation
or policy directive.
[[Page 66172]]
During the meet-and-confer process, participating labor organizations
stated that this provision should be deleted. We do not agree with the
recommendation, as we believe this provision is consistent with current
law and is necessary for OPM to carry out its mission.
Section 9901.807(a)(4)(i) and (ii) [9901.807(g)(1) and (2)]
There were no changes in these provisions. They were merely
redesignated.
Section 9901.807(a)(5) [9901.807(j)]
There was no change in this provision. It was merely redesignated.
Section 9901.807(a)(6) [9901.807(k)(1)]
This provision sets the time limit for an employee to file an
initial appeal through the NSPS appeal system at 20 days. Commenters
noted that EEOC regulations provide complainants 30 days to file an
appeal with the MSPB after agency decision in mixed cases. Other
commenters and labor organizations during the meet-and-confer process
expressed concern because the employees were given less time in the
appeal process. In regard to the comments on EEOC regulations, we note
that the 30-day period provided in EEOC regulations simply reflects the
Commission's adoption of the time limit provided in the Board's current
regulations.
Section 9901.807(a)(7) [9901.807(k)(2)]
This provision covers disqualification of a party's representative
at any time during the appeal process. During the meet-and-confer
process, participating labor organizations stated that this provision
should be deleted. Commenters stated it was not necessary to provide
for procedures to disqualify a party's representative. Some commenters
expressed concern that there are no listed criteria for
disqualification. We believe this provision is necessary in order to
ensure an orderly and fair adjudication. Decisions regarding
disqualification will be at the discretion of the AJ and should be
consistent (to the degree not inconsistent with these regulations) with
current Board rules at 5 CFR 1201.31(b) which provide criteria under
which a representative may be disqualified. One commenter requested
that we clarify that Department representatives will avoid the
appearance of conflict of interest, but may not be disqualified solely
on the basis of having advised management on the processing of
underlying matters where such advice was within the scope of their
responsibilities. For purposes of these regulations, we believe the
proposed language adequately covers the disqualification issue.
Section 9901.807(b) [9901.807(k)(4)]
This provision allows the AJ to suspend processing a case only if
jointly requested by the parties. During the meet-and-confer process,
participating labor organizations recommended that a joint case
suspension request requirement be deleted. Commenters recommended
allowing the AJ to suspend the case if a single party shows good cause
since appellants might need extra time to hire an attorney or locate
witnesses. We believe the proposed regulations provide sufficient time
to prepare a case, provide an appropriate means to suspend a case, and
comport with the goals of NSPS. No changes have been made to this
section.
Section 9901.807(c)(1) and (2) [9901.807(i)(1) and (2)]
These provisions discuss settlements. They prohibit the presiding
MSPB AJ from requiring settlement discussions. Where the parties agree
to participate in formal settlement discussions, these discussions will
be conducted by an official other than the presiding AJ. During the
meet-and-confer process, participating labor organizations recommended
deletion of Sec. 9901.807(i)(1). Commenters were in favor of
settlement discussions; however, some believe that the proposed
regulations do not encourage such discussions. Some commenters stated
that settlement discussions being conducted by the presiding AJ allows
the AJ latitude in this area to facilitate settlement and eliminate
additional formal settlement procedures. The regulations do encourage
settlement; however, we believe strongly that settlement should be
completely voluntary and based on the parties' individual interests.
Also, we believe that settlement proceedings should be conducted by an
official who is not adjudicating the case to avoid actual or perceived
conflicts of interest on the part of MSPB adjudicating officials. We
have made no change in this section.
Section 9901.807(d)(1), (2), and (3) [9901.807(k)(3), (i), (ii), and
(iii)]
These sections modify discovery procedures by placing limits on the
extent of discovery. During the meet-and-confer process, participating
labor organizations stated that the limits are too restrictive and may
be easily abused. Commenters stated the limits would prevent adequate
methods to gather evidence necessary for the case and that the limits
are arbitrary, placing the employee at a disadvantage. Commenters
stated the regulations are unfair, hamper due process, and limit
employee defense. We believe these limits will usually allow adequate
methods for discovery of evidence, are fair, and do not violate due
process. Additionally, we have clarified in these regulations that the
AJ may grant additional discovery for necessity and good cause. One
commenter requested that we clarify whether the new limitations on
discovery replace or augment the existing motion to compel process. To
the extent existing rules on discovery, including provisions regarding
motions to compel process, are inconsistent with these new limitations
on discovery, the existing provisions are modified. Another commenter
requested that we limit the number of all requests for production to a
total of 50 per case. The regulations already limit the number of
requests for production to 25 per pleading. However, the AJ may grant a
party's motion for additional discovery upon a showing of necessity and
good cause. We believe that this provides appropriate limits on
requests for production while providing an avenue for additional
discovery if appropriate. Therefore, we choose not to adopt the
suggestion.
Section 9901.807(e)(1), (i), (ii), and (iii) [9901.807(d)(1), (i),
(ii), and (iii)]
These provisions describe the standard of proof, which must be met
by the Department for a decision to be sustained. Preponderance of the
evidence is the single standard of proof under NSPS. Commenters have
stated the burden of proof for employees has been increased; however,
this is inaccurate. The only change in the level of proof is that the
regulations adopt a single burden of proof--preponderance of the
evidence--for cases based on performance and/or misconduct. (Under
current law, agencies must only meet a substantial evidence burden of
proof in performance cases taken under chapter 43 of title 5. This is a
lower burden than preponderance of the evidence.) The burden remains
the same for an appellant. Other commenters stated that the differences
between conduct and performance should be acknowledged by maintaining
the previous standard (``substantial evidence'') for performance cases.
We do not believe the differences warrant different standards and note
that under current title 5 provisions, actions taken under chapter 75
based on unacceptable performance are subject to the higher standard of
proof. The single (``preponderance'') standard for all
[[Page 66173]]
cases, whether taken for reasons of performance, or conduct, or a
combination of both, simplifies the appeals process and assures
consistency without compromising fairness or burdening the employee. No
changes have been made to these provisions.
Section 9901.807(e)(2) [9901.807(k)(5)]
This provision covers the AJ's ability, when some or all materials
facts are not in dispute, to issue an order to limit the scope of the
hearing or issue a decision without holding a hearing. During the meet-
and-confer process, participating labor organizations stated that they
accepted the use of summary judgment where the facts of the case are
not in dispute; however, they recommended the AJ not be able to render
such a decision on his or her own initiative. They also recommended
that credibility determinations should not be made absent a hearing.
Commenters stated that the burden of proof for the employee has been
increased before the employee is allowed a hearing. Other commenters
stated a hearing should be held if a material fact is in dispute and
there is a credibility question. Some commenters also stated summary
judgments have not worked in other forums. Additionally, there were
concerns that the employee entitlement to a hearing has been
diminished. We did not revise this provision. We believe that the AJ
should have the authority to rule in this area on his or her own
initiative when some or all material facts are not in dispute. Allowing
summary judgment when no material facts are in dispute eliminates the
requirement for unnecessary and time-consuming hearings, expediting the
process for both parties. Similarly, when a hearing is appropriate,
limiting the scope of such hearing to matters in dispute serves the
interests of all parties. Both of these measures will streamline the
appeals process without compromising due process. Summary judgments are
a well-established and effective way of fairly handling cases where
material facts are not in dispute. When material facts are in dispute,
the normal hearing process will be followed.
Section 9901.807(f)(1) [9901.807(k)(7)]
This provision covers the 90-day time limit in which an AJ must
make an initial decision. During the meet-and-confer process,
participating labor organizations stated that they accepted expediting
the process to require that decisions be issued within 90 days by the
MSPB AJ. Commenters expressed concern these time limits, with no
provisions for extension, will result in inadequate time for case
preparation, settlement discussions, and discovery, and fail to take
into account unavoidable witness unavailability. Other commenters
suggested that this section be modified to require AJs to issue
decisions within 30 or 45 days of the last day of a hearing, or the
last written response to a summary judgment motion. We did not revise
this provision as we believe the 90-day time frame provides ample time
for the AJ to make a fair decision and for appropriate pre-hearing and
witness arrangements. The new time frame also facilitates the efficient
and expeditious resolution of an appeal without impairing due process
protections.
Section 9901.807(f)(2)(i)-(v) [9901.807(k)(6)]
These provisions cover mitigation of a penalty and require great
deference to the Department's penalty determination. While mitigation
is allowed, it is allowed under a limited standard. The labor
organizations participating in the meet-and-confer process objected to
the deference being shown to the Department in penalty determination
and the wholly without justification mitigation standard. They further
stated that the proposed language placing a standard for review on the
full MSPB is not permissible and stated that the fact finder or
reviewing entity should consider the factors as set forth in Douglas v.
VA, 5 MSPR 280, 305-06 (1981), in determining whether the proposed
penalty is appropriate. We also received numerous comments expressing
concern regarding the mitigation standard of wholly without
justification and the appearance that the Department will have to meet
a lower threshold to sustain the penalty. Commenters expressed concern
that MSPB has less latitude to modify decisions and protect employee
rights. Commenters objected to the fact that adjudicators would be
required to give deference to the Department's penalty determination.
Based on these comments and concerns we have reconsidered this
provision and have removed the full MSPB from coverage by this
standard. The standards for review for the full MSPB are provided in 5
U.S.C. 9902(h)(5). We will also consider placing pertinent
circumstances in an implementing issuance to be used for consideration
in penalty determination. Furthermore, we agree to revise the ``wholly
without justification'' standard for MSPB AJs that are used as part of
the Department's appeals process, as well as arbitrators. Since Sec.
9901.922(f)(2) broadly provides that arbitrators hearing a matter
appealable under 5 U.S.C. 7701 or subpart H are bound by the rules in
part 9901 (which include the standard for mitigation), we have deleted
the references to arbitrators in Sec. 9901.807(f)(2) as superfluous.
The standard has been revised to preclude mitigation except when the
action is ``totally unwarranted in light of all pertinent
circumstances.'' This standard is similar to that recognized by the
Federal courts and is intended to limit mitigation of penalties by
providing deference to an agency's penalty determination. The
Department has statutory authority to establish new legal standards.
(See 5 U.S.C. 9902(h)(2).) In this case, the Department is electing to
adopt a legal standard that meets the need of the Department by
ensuring deference is provided to the Department's penalty
determinations along with the requirement that AJs give consideration
to the Department's national security mission. The Department bears
full accountability for national security; therefore, it is in the best
position to determine the most appropriate penalty for misconduct or
unacceptable performance. In the past, MSPB has exercised considerable
latitude in modifying agency penalties, sometimes to the detriment of
DoD's mission. The MSPB AJ and arbitrator may still mitigate penalties
for all types of offenses, except mandatory removal offenses. The
intent is to restrict the breadth of their discretion to mitigate
penalties to only those situations where the penalty is totally
unwarranted in light of all pertinent circumstances. When mitigating a
penalty, MSPB AJs and arbitrators must apply the maximum justifiable
penalty, using the applicable agency table of penalties or other
internal guidance.
Section 9901.807(f)(3) and (4) [9901.807(d)(2) and (3)]
These provisions cover the review of charges and performance
expectations. They provide that neither the MSPB AJ nor the full MSPB
may reverse the Department's action based on the way in which the
charge is labeled or the conduct characterized, provided the employee
is on notice of the facts sufficient to respond to the factual
allegations of the charge. Similarly, an MSPB AJ or full MSPB may not
reverse the Department's action based on the way a performance
expectation is expressed, provided the performance expectation would be
clear to a reasonable person. The labor organizations participating in
the meet-and-confer process stated that the AJ or the full Board should
have the authority to consider the way in which the charge
[[Page 66174]]
is labeled, the conduct is characterized, or the way the performance
expectation is expressed in determining whether the agency's penalty is
appropriate. We received many comments stating that the elimination of
the requirement to clearly articulate the charge is unfair, does not
provide the employee sufficient information to prepare a defense, and
should not be permitted. Other commenters expressed concern over
whether the AJ would be allowed to mitigate the penalty if the AJ found
that the stated charge was mischaracterized or mislabeled. These
commenters also questioned whether ``factual allegations'' meant the
same as ``basis for the action.'' We did not revise this provision, as
we believe that as long as the employee has sufficient notice to
respond to the allegations of a charge, the Department will have
complied with the notice and due process requirements of these
regulations. The Department must prove by preponderance of the evidence
that an action taken against an employee promotes the efficiency of the
service. Mitigation may also be appropriate in such cases provided it
meets the standards established in these regulations. Additionally,
this section requires that performance expectations be clearly conveyed
in a manner understandable to a ``reasonable person.'' MSPB AJs and the
full MSPB will judge the Department's expression of performance
expectations by a ``reasonable person'' standard. These provisions are
written to eliminate overly technical and legalistic aspects of the
current appeals process, while preserving employees' due process
rights.
Section 9901.807(f)(5), (i) and (ii) [9901.807(c), (1) and (2)]
These provisions covered the granting of interim relief. They
stated the full MSPB may not grant interim relief until after the
Department's final decision. During the meet-and-confer process,
participating labor organizations recommended that interim relief be
granted by the full MSPB as a matter of course if the AJ finds in favor
of the appellant. We received comments stating that the enabling
legislation does not specifically allow DoD to limit the full MSPB's
authority to grant interim relief in this way. Commenters also stated
this limitation might impermissibly alter EEO procedures. Commenters,
including labor organizations during the meet-and-confer process,
stated DoD should not have discretion to temporarily place an employee
in a different position when interim relief is ordered by the full
MSPB. Commenters also questioned what the employee's pay status would
be while on excused absence. Other commenters recommended we allow the
AJ to grant interim relief or, in the alternative, establish a
procedure for interlocutory appeal to allow a stay until the Board
hears the full case. Commenters objected to attorney fees not being
paid until a final MSPB decision. We believe the limitation on the AJs'
authority to grant interim relief is necessary. In addition, it is
consistent with the enabling legislation, which prohibits granting
interim relief unless it is specifically ordered by the full Board (5
U.S.C. 9902(h)(4)). It is premature for the AJ to grant interim relief
when DoD has filed a request for review. To provide for the efficient
accomplishment of the mission and to avoid disruption in the workplace,
DoD should have discretion in determining the placement of an employee
during the period of interim relief. Explanation of the pay status of
employees in a period of excused absence is not required because, by
definition, excused absence is an absence from duty without loss of pay
and without charge to leave. Finally, the provision relating to
attorney fees represents no change from current law.
Section 9901.807(f)(6)(i) and (ii) [9901.807(h)(1) and (h)(2)]
These provisions of the proposed regulations established a new
standard for recovering attorney fees, which was intended to simplify
the process. Comments received on the proposed regulations and labor
organizations, during the meet-and-confer process, argued that the new
standard was unreasonable, unfair, would discourage employees from
challenging wrongful terminations, violated the Back Pay Act, and would
result in uneconomical, piecemeal litigation. After consideration of
these comments, we have revised the NSPS regulations to retain the pre-
NSPS statutory standard under which such fees may be awarded;
therefore, all objections to proposed changes have been addressed.
Section 9901.807(g) [9901.807(k)(8)]
This provision covers the procedures utilized to arrive at the
Department's final decision in appeals of adverse actions. Commenters,
and participating labor organizations during the meet-and-confer
process, stated that the provisions for the RFR process and the
Department's review of AJ decisions should be deleted from the
regulations. Commenters also recommended simplifying the process and
placing deadlines in the Department's review of AJ decisions. Further,
commenters stated that the RFR process is unwarranted, fails to
preserve due process protections, and detracts from the goals of
streamlining the appeals process. These provisions will not be deleted
from the regulations. Though somewhat detailed, the Secretary is
expressly authorized by 5 U.S.C. 9902(h) to establish an appeals
process. The process contained in this regulation is necessary to
assure that the Department's national security mission is appropriately
considered in adverse action appeals decisions. The Department will be
constrained in the exercise of this authority by the provisions of
Sec. 9901.807(g)(2)(ii). We anticipate that relatively few cases will
be reviewed by the Department under this authority.
Section 9901.807(g)(1) [9901.807(k)(8)(i)]
This provision covers who will receive and act on an RFR. During
the meet-and-confer process, participating labor organizations stated
that the proposed regulations did not specify the official who would
remand, modify, or reverse the MSPB AJ's initial decision. We also
received comments regarding the extension of the strict time frames
within the NSPS appeals process. DoD will establish the process for
receiving and acting on an RFR, including time limits for the
Department to take action on an RFR, in implementing issuances. We have
clarified that in light of the expedited time frames in the appellate
process, an extension for the request for review will be granted if a
good reason for the delay is shown. `
Section 9901.807(g)(2)(i), (ii), (A), (B) and (C) [9901.807(k)(8)(ii),
(iii), (A), (B), and (C)]
These provisions cover the RFR process where, under limited
circumstances, the Department may affirm, remand, modify, or reverse an
AJ's initial decision for which an RFR has been filed. Commenters and
labor organizations during the meet-and-confer process stated that this
review authority is arbitrary, capricious and a violation of due
process. Comments were received regarding additional complexity,
expense, and length added to the appeal process by the internal DoD
review. We agree that the internal appellate process must be credible
and preserve due process. It preserves due process for reasons stated
in the general comments on adverse actions and appeals. To that end,
the Department is committed to establishing an internal entity that
adheres to merit system principles. This process provides the
Department the necessary authority to
[[Page 66175]]
review initial AJ decisions to ensure that such decisions interpret
NSPS and these regulations in a way that recognizes the critical
mission of the Department and to determine which of those cases are of
a precedent-setting nature. Although the process may be lengthened in
some aspects, we have gained efficiencies and mission-related benefits
in other areas that more than offset any potential increases in time or
costs at any step of the process. Moreover, we anticipate relatively
few cases will be reviewed by DoD, since DoD may reverse or modify
initial AJ decisions only under the limited criteria specified in Sec.
9901.807(g), thus minimizing any increase in processing time.
Some commenters questioned two of the bases for modifying or
reversing an AJ decision: The Department's national security mission
and conflict with Governmentwide rules. These commenters stated that
impact on national security mission alone, regardless of the
appellant's guilt or innocence, would not be grounds to modify or
reverse an AJ decision. The second point the commenters made was that
the Department lacked expertise to interpret Governmentwide
regulations. We recognize that the wording of the regulation regarding
the Department's modification or reversal of an AJ's decision based on
national security fails to specifically reference the employee's guilt
or innocence. However, an employee's culpability is a prerequisite to
sustaining an action. Additionally, the requirement for all actions to
promote the efficiency of the service and further review by the full
MSPB provide additional safeguards for employees. We believe the
Department has sufficient expertise to determine compliance with
Governmentwide regulations.
Lastly, we received comments regarding vague remand provisions and
lack of time for the AJ to make a decision if a summary judgment was
remanded with a direction to hold a hearing. We will establish
timelines and remand provisions for the Department's review of the AJ's
decision in an implementing issuance. Further, we have revised the
regulation to allow the AJ more time, 45 days versus 30 days, to make a
decision in those instances where they are directed to hold a hearing
in a case involving summary judgment.
Section 9901.807(g)(3)(A) and (B) [9901.807(k)(8)(ii), (A) and (B)]
This provision covers the precedential effect of a Department
decision. Commenters and labor organizations participating in the meet-
and-confer process stated that the Department should not be allowed to
determine which cases would set precedent, and they recommended
revising the regulation to state that any AJ decision is precedential
unless it is reversed or modified by the full MSPB. Commenters stated
that Departmental decisions should be considered precedential even if
subsequently overturned by the full MSPB. We believe the Department
should be able to determine that some Department decisions are
important enough to serve as precedent even though not acted upon by
the full MSPB. Further, we believe that the Department must be governed
by the rulings of the full MSPB, if the Department's decision is
reversed or modified by the full MSPB, unless overturned by a court.
Section 9901.807(g)(4) [9901.807(k)(8)(ii)]
This provision covers the publication of precedential decisions.
During the meet-and-confer process, participating labor organizations
stated that there were not any details regarding the publication of
decisions. Commenters echoed this concern. We agree with the labor
organizations and have added clarifying language regarding publication
of DoD precedential decisions, the details of which will be provided in
implementing issuances.
Section 9901.807(h)(1) [9901.807(f)]
This provision provides for filing for a Petition for Review by a
party or the Director of OPM. During the meet-and-confer process,
participating labor organizations stated that the Department should
delete the provision which allows OPM to petition MSPB for review. We
disagree. While OPM is responsible for providing guidance and
assistance to DoD in developing a new human resources management
system, it also has responsibility for protecting Governmentwide
institutional interests regarding the civil service system. Therefore,
we believe that OPM must have the authority to act if it believes a
decision will have substantial impact on civil service law, rule,
regulation, or policy directive. One commenter requested that we
clarify whether this provision eliminates MSPB's right to reopen an
appeal on its own motion. In accordance with Sec. 9901.807, MSPB may
only review those decisions for which a petition for review has been
filed by the Department, OPM, or an employee.
Section 9901.807(h)(2)(i), (ii), and (iii)(A)(B)(C) and (iv)
[9901.807(k)(9) and (10)]
These provisions cover the petition for review process to the full
MSPB. Further, these provisions cover the standards for the full MSPB
review as stated in 5 U.S.C. 9901(h). During the meet-and-confer
process, participating labor organizations accepted expediting the
process to require decisions be issued within 90 days by the full MSPB.
However, these provisions have been clarified by including the review
standards as stated in 5 U.S.C. 9901(h).
Section 9901.807(h)(3) [9901.807(k)(11)]
This provision covers OPM's request for reconsideration of an MSPB
decision. During the meet-and-confer process, participating labor
organizations recommended that this provision be deleted. We did not
accept this recommendation because this provision is consistent with
current law. This provision is necessary for OPM to carry out its
mission, which includes protecting Governmentwide institutional
interests regarding the civil service system.
Section 9901.807(h)(4) [9901.807(l)]
This provision addresses the failure of MSPB to meet established
deadlines and the reporting requirements. Commenters recommended that
this reporting requirement be deleted while other commenters
recommended that MSPB submit quarterly or annual reports. We did not
accept the recommendations to change the provisions as we consider the
timelines placed on MSPB as being an integral part of streamlining the
Department's appellate process. This reporting requirement is only
imposed if a deadline is missed. We are confident that MSPB will
rarely, if ever, fail to meet the required deadlines. As a result, any
report required by this provision will rarely be necessary.
Section 9901.807(i) [9901.807(m)]
This provision covers the Department's authority to seek judicial
review of MSPB decisions. We made a technical correction to delete the
reference to the Department seeking reconsideration by MSPB of a final
MSPB decision because the Department has that ability under current
MSPB rules.
Section 9901.808--Appeals of Mandatory Removal Actions
This provision covers appeals of mandatory removal actions (MROs).
It states that only the Secretary may mitigate the penalty for a
sustained MRO. Additionally, it states that if the
[[Page 66176]]
MSPB AJ or the full MSPB sustains an employee's appeal based on a
finding that the employee did not commit an MRO, the Department is not
precluded from subsequently proposing an adverse action based in whole
or in part of the same or similar evidence. During the meet-and-confer
process, participating labor organizations stated that this provision
should be deleted in its entirety. Commenters and labor organizations
in the meet-and-confer process stated that the Secretary should not be
the only authority to mitigate MROs and that limiting the full Board's
ability to mitigate MROs is contrary to the enabling legislation.
Commenters also stated that the proposed provisions inappropriately
give DoD ``two bites at the apple'' when an action is not found to
amount to an MRO since the Department may take a subsequent action on
the same evidence. Other commenters were concerned that an employee
might not be entitled to attorney fees even if the employee prevailed
on the MRO issue, but failed in prevailing in a subsequent action based
on the same facts. We disagree that this provision should be deleted.
The Secretary is expressly authorized under 5 U.S.C. 9902(h) to
establish appeals procedures and standards for relief, including
standards for mitigation of penalties. This process is necessary to
support the national security mission of the Department. We do agree,
however, that the enabling legislation allows mitigation of MRO
penalties by the full MSPB and have modified the provision accordingly.
We disagree that it is inappropriate for the Department to have the
ability to take a subsequent action if the offense is found to not be
an MRO. Though an employee's misconduct may not be found to qualify as
an MRO, it does not mean that the misconduct should not be addressed.
Subsequent proposal of an adverse action based in whole or in part on
the same or similar evidence is consistent with what can occur today
under current law. Finally, we believe attorney fees will be fairly
awarded based on the latest change to these regulations.
Section 9901.809--Actions Involving Discrimination
This provision outlines the processes for handling appeals of
actions in which discrimination is alleged. During the meet-and-confer
process participating labor organizations stated that this provision
should be deleted because it inappropriately modifies processes for
discrimination claims. We disagree. Section 9902(h) expressly
authorizes the Secretary to establish legal standards and procedures
for employee appeals. Consistent with section 9902(h)(7), we may modify
or adapt the mixed case process in these regulations, provided employee
rights and remedies are preserved. The final regulations modify some of
the procedures for processing mixed cases, while preserving the rights
and remedies as required by section 9902(h)(7).
Some commenters stated this provision is unclear and suggested that
we delete the provision or rewrite it. Several commenters stated that
the provision should be modified to eliminate potential confusion over
language that appears to require the Department to forward to MSPB a
non-appealed action. We agree with this comment and have amended the
regulations to provide that an appellant may choose to pursue his or
her allegation of discrimination even when no PFR is filed with the
Board. In such cases, the appellant can request the Department to refer
the discrimination issue to the Board, the Board will then issue a
final decision on the discrimination allegation which may then be
pursued to EEOC or district court. Some commenters recommended we
delete the reference to modifying 5 U.S.C. 7702 stating this was beyond
the authority of NSPS. We believe the proposed regulations do not
impermissibly modify existing EEO rights and remedies. To clarify this
section, we have modified some of the proposed language without
altering any of the proposed intent.
Subpart I--Labor-Management Relations
General Comments
Commenters, including, labor organizations participating in the
meet-and-confer process, objected to subpart I in its entirety arguing
that Congress did not authorize the Secretary and Director to modify 5
U.S.C. 71 beyond providing for bargaining above the level of unit
recognition and the establishment of a new independent third party to
review and resolve labor management disputes. We disagree. In enacting
chapter 99, Congress expressly recognized the need for the Department
to design a labor relations system that both addresses the unique role
that the Department's civilian workforce plays in supporting the
Department's national security mission and allows for a collaborative
issued-based approach to labor management relations. The labor
relations system established in subpart I does this by creating a new,
tailored approach to labor relations. While the scope of bargaining is
reduced in some areas, such as management rights, to enable the
Department to better utilize its civilian workforce to support rapidly
changing national security challenges, such as the Global War on
Terrorism and supporting humanitarian assistance missions here and
abroad, employee representatives are given opportunities to participate
in new areas that have a substantive impact on the daily lives of the
workers they represent. However, through continuing collaboration
(Sec. 9901.107), employee representatives will have the opportunity to
participate in the planning, development, and implementation of the
Department's implementing issuances, which will cover subjects ranging
from the pay and performance management systems to staffing and
classification.
The labor relations system is consistent with the general
parameters Congress provided, including the process for involving
employee representatives (see 5 U.S.C. 9902(m)(3) and (4)). It mandated
that the new system may not expand the scope of collective bargaining
beyond the scope of bargaining available today under chapter 71, even
where provisions of title 5 are waived or waivable (5 U.S.C.
9902(m)(7)), and required that employees be authorized to organize and
bargain collectively within the framework established in chapter 99,
that is, within the framework of a system that promotes a collaborative
issue-based approach to labor relations and which is developed,
established, and implemented to enable the Department's civilian
workforce to better support the Department's national security mission
(5 U.S.C. 9902(b)(4)).
These commenters also argued that there is no legal authority to
invalidate provisions in collective bargaining agreements with
implementing issuances or issuances. Again, we disagree. First,
Congress authorized the Department to establish and implement the HR
system by providing an alternative to collective bargaining for
involving employee representatives in the planning, development, and
implementation of that system and making this the exclusive process for
their involvement (5 U.S.C. 9902(f)). It would be impossible to
implement the HR system authorized by Congress without overriding
conflicting provisions of existing collective bargaining agreements.
Moreover, in taking the steps necessary to establish and adjust the
labor relations system, Congress specifically recognized that the
provisions of this system will supersede existing collective bargaining
agreements covering Department employees and negotiated pursuant to
[[Page 66177]]
the provisions of chapter 71 except as otherwise determined by the
Secretary (5 U.S.C. 9902(m)(8)). The proposed regulations stopped well
short of this authority by providing for a process that would not
supersede collective bargaining agreements in their entirety. Instead,
the proposed regulations provided a much more constrained approach,
providing only that those specific provisions of collective bargaining
agreements conflicting with these NSPS regulations or NSPS implementing
issuances would be superseded. This very narrow authority is essential
to enable the Department to establish and implement one NSPS across the
Department. Absence of this authority would effectively defeat the
intent of Congress by denying the Department the ability to have a
single HR system to support the Department's national security mission.
During the meet-and-confer process, it became clear that there was
confusion over which type of issuance would supersede conflicting
provisions of collective bargaining agreements. Some commenters, and
labor organizations participating in the meet-and-confer process,
recommended that collective bargaining agreements should not be
superseded before their expiration. Participating labor organizations
effectively argued that the Department did not need the authority to
immediately supersede collective bargaining provisions with issuances
not implementing NSPS. We agree and have amended the final regulations
to provide that conflicting collective bargaining agreement provisions
will not immediately be superseded by issuances, although such
provisions must be brought into conformance with the issuance upon
expiration of the agreement or renegotiation of the provision during
the term of the agreement.
However, to ensure consistent implementation of NSPS across
organizations with representation by different bargaining units, we
continue to believe that implementing issuances must take effect
immediately and thus supersede any conflicting provisions of collective
bargaining agreements for NSPS-covered employees. While DoD plans to
implement the labor relations system DoD-wide immediately, the HR
system will be implemented in spirals. The implementing issuances for
the HR system will only apply to employees who are covered by the NSPS
HR system.
Commenters, including labor organizations during the meet-and-
confer process, also recommended that the design and implementation of
every aspect of the proposed NSPS, including the pay, performance, and
classification system and appeals process, be subject to collective
bargaining. Congress expressly prohibited expanding the scope of
collective bargaining in 5 U.S.C. 9902(m)(7) which provides that
nothing in section 9902 will be construed to expand the scope of
bargaining with respect to provisions in title 5 that may be waived,
modified, or otherwise affected under section 9902. In lieu of
bargaining, Congress charged OPM and DoD to establish the mechanism for
continuing involvement of employee representatives in 5 U.S.C.
9902(f)(1)(d) and (m)(2). With this in mind, we provided a number of
mechanisms to ensure the substantive involvement of labor organizations
in such things as the development of implementing issuances, the
administration of the Department's new pay system, and the nomination
of members to the National Security Labor Relations Board (NSLRB or
Board). Other concerns related to the scope of bargaining are addressed
in the discussion of the related sections of subpart I that follow.
We also expressly provided two specific mechanisms to address the
mandate that the labor relations system should allow for a
collaborative, issue-based approach to labor relations. National level
bargaining, as provided for in this regulation, and which is expressly
authorized in the enabling legislation (5 U.S.C. 9902(g)), allows for
an issue-based approach to addressing matters of significance to the
Department as a whole. Multi-unit bargaining, as provided for in these
regulations, allows for a collaborative, issue-based approach to
addressing matters of interest to specific communities of interest
within DoD, such as military installations that house multiple
organizations and multiple bargaining units.
Other Comments on Specific Sections of Subpart I
Section 9901.901--Purpose
The proposed regulation restates the enabling legislation's purpose
to provide DoD and OPM with a labor-management relations system that
addresses the unique role that Department employees have in supporting
the Department's national security mission and to promote a
collaborative issue-based approach to labor management relations. In
their comments and during the meet-and-confer process, participating
labor organizations recommended that we include in this section a
statement that labor organizations and collective bargaining are in the
public interest, consistent with the enabling legislation's
preservation of collective bargaining rights.
We have decided to retain the originally proposed language, while
adding an express reference to the collaborative issued-based approach
authorized by the enabling legislation. This section of the regulations
recognizes and stresses the fundamental purpose underlying the enabling
legislation and the statutory mandate to build a flexible HR system
that supports the unique mission of DoD and the role of DoD civilian
employees as a critical part of the Department's Total Force.
Consistent with the enabling legislation, the labor relations system
specifically recognizes the right of employees to organize and bargain
collectively subject to limitations established by law, including these
regulations, applicable Executive orders, and any other legal
authority.
Section 9901.902--Scope of Authority
A number of commenters, including labor organizations participating
in the meet-and-confer process, presented their views that the enabling
legislation did not authorize the Department and OPM to modify
provisions of 5 U.S.C. chapter 71. We disagree. The enabling
legislation authorizes the Secretary, together with the Director, to
establish and adjust a labor relations system in support of the overall
HR system notwithstanding the provisions of the current system, as set
forth in chapter 71 (5 U.S.C. 9902(d)(2) and 5 U.S.C. 9902(m)(1) and
(2)). In addition, as discussed in General Comments, Congress provided
the parameters for that system, including, for example, prohibiting the
expansion of the scope of bargaining; requiring that the system address
the unique role that the Department's civilian force work plays in
supporting the Department's national security mission; authorizing the
system to allow for a collaborative issue-based approach to labor
management relations; requiring that employees be authorized to bargain
collectively, as provided for in chapter 99 (not as provided for in
chapter 71); mandating that the system provide for third party review
of decisions; and authorizing the system to utilize national level
bargaining (an authority separately established in 5 U.S.C. 9902(g)).
Section 9901.903--Definitions
In their comments and during the meet-and-confer process,
participating labor organizations recommended that the current
definition of ``conditions of
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employment'' be expanded to include the classification of any position.
A number of commenters, including labor organizations participating in
meet-and-confer process, also recommended that we modify the definition
of conditions of employment to eliminate the exclusion of pay. As a
general matter, the classification or pay of Federal employees is not
subject to negotiation today. This restriction is consistent with the
prohibition on any expansion of the scope of bargaining in 5 U.S.C.
9902(m)(7). Therefore, we have not adopted this suggestion.
Some commenters, including labor organizations participating in
meet-and-confer process, also raised concerns that the revised
definition of ``confidential employee'' was overbroad and could be
subject to misapplication. They recommended that we retain the
definition of ``confidential employee'' contained in 5 U.S.C. 7103. We
agree with the recommendation and have modified the regulation
accordingly.
During the meet-and-confer process, the impact of issuances on the
collective bargaining process and existing collective bargaining
agreements was discussed. During these discussions it became apparent
that there was confusion surrounding the distinction between
``implementing issuances'' and ``issuances.'' To address these
concerns, we have modified the definitions, including the definition of
``implementing issuance'' as it appears in subpart A. In addition, we
have cross-referenced the definitions of both ``issuance'' and
``implementing issuance'' that appear in subpart A so that the
differences in the two types of issuances will be readily apparent.
The labor organizations participating in the meet-and-confer
process expressed concerns that any manager could simply sign an
issuance or implementing issuance and thereby invalidate legitimate
provisions of a collective bargaining agreement. They recommended that
we restrict the authority to sign such issuances to the Secretary or
Deputy Secretary alone. We believe that restricting this authority to
the Secretary or Deputy Secretary is far too restrictive for such a
large and diverse Department. Therefore, we have revised the language
to make clear that only the Secretary, Deputy Secretary, Principal
Staff Assistants, or Secretaries of the Military Departments may sign
an ``implementing issuance.'' In addition, we have revised the language
to make clear that only these same officials may sign an ``issuance,''
which may limit the scope of collective bargaining as provided for in
this regulation. This is a very high level of approval and requires
extensive coordination within the Department. We believe that this
change addresses the legitimate concerns of the commenters while
providing the Department the necessary flexibility to meet changing
national security requirements and to efficiently manage its workforce.
A number of commenters and labor organizations participating in the
meet-and-confer process recommended that we not change the definition
of ``supervisor'' with regard to nurses and firefighters. We agree, and
have revised the definition of ``supervisor'' as it relates to
firefighters and nurses to be consistent with what is in chapter 71
today. Commenters also expressed a range of concerns regarding the
portion of the definition of ``supervisor'' dealing with supervision of
members of the armed forces. A number of commenters questioned if the
intent was that military technicians who supervise members of the
reserves, such as on drill weekends, would be considered supervisors.
While we believe this language is clear, the comments lead us to
believe that it has been misunderstood. This provision only affects
civilian employees and was intended to apply to those situations where
a civilian is exercising supervisory control over military members.
With regard to military technicians who are required to hold military
reserve positions in addition to their civilian positions, this
definition would only be applicable while serving in their civilian
capacity. Thus, an individual who is not a supervisor in his or her
civilian status, but supervises reservists while in military status,
would not meet the definition of ``supervisor'' for purposes of subpart
I. If an individual is exercising supervisory duties and authorities
over military personnel, as defined in the regulation, we believe that
individual is a member of the management team, and his or her inclusion
within a bargaining unit would create an inherent conflict of interest.
Therefore, we have retained that portion of the definition of
``supervisor'' with respect to the supervision of members of the armed
forces.
Section 9901.904--Coverage
During the meet-and-confer process, the participating labor
organizations recommended that the labor relations system be phased in
spirals like the HR system rather than implemented concurrently
Department-wide. In fact, the participating labor organizations
asserted that the requirement to phase in the HR system was equally
applicable to the labor relations system. We disagree. The provisions
authorizing the establishment of a labor relations system (5 U.S.C.
9902(m)) are clearly separate from the authority to establish an HR
system (5 U.S.C. 9902(a)) and the requirement for phased implementation
in 5 U.S.C. 9902(l) is not applicable to the labor relations system. We
have therefore not adopted this recommendation.
We also received comments that certain groups of employees were
unique and therefore should not be covered by the labor relations
system. Specifically, commenters suggested that teachers should be
excluded from coverage as they do not play a combat support role and
already sign mobility agreements giving management all the flexibility
it needs. We disagree. Their contributions in teaching the children of
our service men and women and the civilian employees who support them
are absolutely critical to the successful accomplishment of the
Department's national security mission. Thus, the final regulations
continue to cover teachers in the labor relations system. Another group
of employees that commenters recommended for exclusion from the labor
relations system based on their unique characteristics are employees
covered under the Civilian Mariner or CIVMARS program. While we agree
that some of the rules governing these employees are unique within the
Department, these employees are presently covered by chapter 71. Given
that fact, we find no compelling argument that these employees should
not now be covered under the labor relations provisions of these
regulations and we have therefore not adopted the recommendation.
Some commenters, including participating labor organizations,
stated that there was no indication in the proposed regulations that
DoD or OPM responded to the intent of Congress that ``in designing the
labor relations system the Secretary should take into consideration the
unique requirements and contributions of public safety employees in
supporting the national security mission of the Department.'' The
commenters are referring to the Conference Report on H.R. 1588, the
``National Defense Authorization Act for Fiscal Year 2004,'' H. Rpt.
108-354, page 760. While the proposed regulations were silent regarding
this provision in the conference report, we have taken into
consideration the unique requirements and contributions of public
safety employees in supporting the national security mission of the
Department. The role of public safety employees was considered
throughout the design process for the
[[Page 66179]]
labor relations system. While we agree that these employees are unique
within the Department, they are presently covered by chapter 71 and we
found no compelling reason that these employees should not now be
covered under the labor relations provisions of these regulations.
Section 9901.905--Impact on Existing Agreements
Commenters, including labor organizations participating in the
meet-and-confer process, expressed concern that Congress did not intend
the Department to have the authority to supersede valid provisions of
collective bargaining agreements through the promulgation of
implementing issuances and issuances. These commenters argued that
conflicting provisions of collective bargaining agreements should
remain intact until renegotiated regardless of the extension of a new
Department policy through implementing issuances or issuances. We
disagree with respect to ``implementing issuances,'' but agree as to
``issuances,'' for the reasons explained under General Comments. We
have added a new subparagraph, Sec. 9901.905(c) to make clear that any
provision of a collective bargaining agreement that is inconsistent
with issuances that do not implement NSPS will remain in effect until
the expiration, renewal, or extension of the agreement, whichever
occurs first.
Commenters also expressed concern that 60 days is not sufficient
time to bring into conformance the remaining negotiable provisions of a
collective bargaining agreement, following invalidation as authorized
by Sec. 9901.905 of the regulations. We disagree. This bargaining will
be limited to only those specific contract provisions that are rendered
unenforceable, or require changes to their language to conform to the
implementing issuance or these regulations. Therefore, we believe that
60 days is sufficient time for bargaining, given the limited scope. For
these reasons, we have not adopted the recommended changes.
We received several comments that this section is confusing. We
agree with these comments and have revised the language in Sec.
9901.905(b) to make clear that it is only those collective bargaining
agreement provisions that are directly affected by the collective
bargaining agreement provisions rendered unenforceable by this
regulation or an implementing issuance that must be brought into
conformance.
We have also substantively modified the provisions in Sec.
9901.905(b) in response to concerns raised during the meet-and-confer
process that the language in the proposed regulations would have the
effect of forcing the parties to wait until expiration of the 60-day
period to seek assistance with any bargaining impasse. We agree with
this concern and have modified the language in the final regulation to
permit the parties to utilize Sec. 9901.920 impasse procedures to
obtain assistance at any time.
Section 9901.906--Employee Rights
Commenters recommended that we delete this section as it is
essentially identical to 5 U.S.C. 7102 and, thus, unnecessary. We
disagree. Although this provision is essentially the same as the
chapter 71 provision, we believe that it is important to clearly
restate these rights in subpart I to provide employees notice of their
statutory rights. Therefore, we have not adopted the recommended
change.
Section 9901.907--National Security Labor Relations Board
Commenters raised the concern that the NSLRB will not be fully
staffed and operational before the onset of bargaining disputes arising
from implementation of subpart I. We agree with this concern and have
modified the regulation to provide the Secretary with the authority to
determine the effective date for the establishment of the NSLRB.
Commenters objected to the creation of the NSLRB, and recommended
that the regulations preserve the authority of FLRA, FMCS, and FSIP.
They remarked that these agencies, which are independent, impartial,
and already funded, currently adjudicate the labor disputes that the
proposed regulations authorize the NSLRB to resolve. In this regard,
they challenged the independence and impartiality of any NSLRB member
appointed by the Secretary. Therefore, they objected to any change to
the status quo.
We disagree that the NSLRB will not be an independent and impartial
third party. The proposed regulations provide that NSLRB members may
only be removed by the Secretary for inefficiency, neglect of duty, or
malfeasance in office. This is the same standard that currently applies
to members of the FLRA. Since this standard and the establishment of
the NSLRB itself are provided for in these enabling regulations, they
are beyond the scope of the Secretary's authority to change
unilaterally. In addition, these regulations authorize the NSLRB to
issue its own rules and operational procedures. The concatenation of
these provisions assures the NSLRB's independence. Moreover, while
there will be costs associated with the establishment of the NSLRB, we
believe these costs will be offset by the increased efficiency in the
resolution of labor disputes.
Commenters recommended that the final regulations set strict tenure
requirements and limit the tenure for NSLRB board members to one term,
with no possibility for renewal or extension. We note that the proposed
regulations set the term of NSLRB member appointments at 3 years, but
we do not agree that there should be a prohibition on members serving
an additional term. These individuals may be viewed as exemplary
adjudicators not only to management, but also to the labor
organizations. To unilaterally exclude members from serving additional
terms would limit the applicant pool and possibly lead to extended
vacancies. We therefore have not accepted the recommendation.
However, commenters, including labor organizations participating in
the meet-and-confer process, recommended that we provide for more union
involvement in the appointment of NSLRB members. We agree with these
commenters and, thus, have modified the regulations to provide a
process whereby employee representatives may submit a list of nominees
for the Secretary's consideration for appointment of non-chair members
of the NSLRB. We have also provided that the Secretary may consult with
employee organizations to obtain additional information regarding any
nominee submitted.
Other commenters approved of the proposal to establish the NSLRB,
indicating that the NSLRB would afford the Department greater
regularity and consistency in case processing than currently provided
by FLRA. Labor organizations participating in the meet-and-confer
process noted that the ``one-stop shop'' concept of the NSLRB was
preferable to the division of prosecutorial, adjudicatory, and
mediation responsibilities provided for in the current system. We
agree.
Commenters suggested that we pursue a new statutory authority for
direct judicial review of NSLRB decisions. While such a proposal is
reasonable, enactment would be time consuming, uncertain, and subject
to significant revision during the legislative process. Our proposed
process as authorized by section 9902(m)(6) subjects certain final
NSLRB decisions to FLRA review, which in turn would be subject to
judicial review as it is under chapter 71. We believe this is a more
expeditious and appropriate approach. This process affords the parties
the opportunity to
[[Page 66180]]
obtain review of an NSLRB decision without the need for court
proceedings and, in many cases, the FLRA review may be sufficient to
resolve the dispute. Therefore, we have not adopted this suggestion.
However, comments related to judicial review revealed confusion
regarding the process for judicial review, and we have, therefore,
eliminated the reference to judicial review in Sec. 9901.907. We have
instead added a new paragraph (c) in Sec. 9901.909 that describes the
process for appellate review of NSLRB decisions. To be absolutely
clear, Sec. 9901.909 provides the mechanism for obtaining judicial
review beginning with the appellate review of the FLRA. We have also
modified paragraph (d) (paragraph (c) in the proposed regulation) of
Sec. 9901.909 by adding language reflecting our intent that judicial
review of FLRA decisions is obtained pursuant to 5 U.S.C. 7123, which
is modified only to conform relevant citations in chapter 71 to the
corresponding provisions in subpart I.
Although many commenters, including labor organizations
participating in the meet-and-confer process, did not support its
establishment, we have decided to retain the NSLRB. As we indicated in
the Preamble accompanying the proposed regulations, it ensures that
those who adjudicate the most critical labor disputes in the Department
do so quickly and with an understanding and appreciation of the unique
challenges that the Department faces in carrying out its mission.
Section 9901.908--Powers and Duties of the Board and Section 9901.909--
Powers and Duties of the Federal Labor Relations Authority
Commenters recommended that FLRA retain greater jurisdiction over
the Department's labor disputes. Specifically, they expressed the view
that not all labor relations disputes arising under NSPS will
significantly impact the DoD's mission enough to warrant their removal
from FLRA jurisdiction. We disagree. It is imperative that the NSLRB
retain jurisdiction over matters that require efficient review and
understanding of the Department's mission. This is consistent with the
requirement in 5 U.S.C. 9902(m)(1) that the system OPM and DoD
establish address the unique role that the Department's civilian
workforce plays in support of the Department's national security
mission. As a result, the final regulations give the NSLRB jurisdiction
over disputes concerning the duty to bargain, the scope of bargaining,
negotiation impasses, and related exceptions to arbitration awards. In
addition, the final regulations clarify that the FLRA will review Board
decisions on unfair labor practices (except when the Board declines to
adjudicate the matter), arbitration awards under Sec. 9901.908, and
negotiability disputes.
Commenters further inquired about the NSLRB's authority to
investigate unfair labor practices and other labor disputes. We agree
that the NSLRB should have the authority to investigate and have
modified the regulations to provide the NSLRB with authority to
establish procedures for investigations in their regulations. In
addition, we have clarified that the Board has the authority, similar
to that exercised today by the FLRA General Counsel, to exercise
unreviewable discretion to dismiss unfair labor practice allegations.
Commenters expressed concern that the Board would not be fully
equipped to handle the extreme workload related to the implementation
of the labor relations system at stand up. We agree. We have added a
new Sec. 9901.908(a), to reflect the change discussed under Sec.
9901.907, National Security Labor Relations Board, which provides the
Secretary with the authority to determine the date of establishment of
the NSLRB. Pending establishment of the NSLRB, the regulations also
provide the Secretary discretion, in consultation with the Director, to
designate another third party to exercise the authority of the Board in
the interim.
Commenters questioned why the proposed regulations authorized the
NSLRB to issue, at the request of any party, binding opinions on
matters within its jurisdiction that would be subject to FLRA and
judicial review. They further questioned who would have standing to
seek review, other than the initial requester, since there would be no
specific labor dispute at issue, and recommended the deletion of this
provision. In response to these concerns, we have revised the language
to strike the phrase ``binding Department-wide opinions'' and replaced
it with ``guidance,'' thus allowing the NSLRB to issue non-binding
guidance. While we have struck the language that would have allowed
FLRA and judicial review of this guidance, we anticipate that the
guidance will be accorded deference by other third parties in the cases
before them. We also received a comment suggesting that the procedures
to request an opinion under this provision are confusing. We disagree
and have made no changes to this process.
Commenters raised concerns about the NSLRB's authority under Sec.
9901.908(a)(3) of the proposed regulations to resolve disputes
concerning requests for information under Sec. 9901.914(b)(5).
Accordingly, we have deleted this provision. Disputes concerning denial
of information requests are processed as unfair labor practices, which
are included in Sec. 9901.908(b)(1).
Commenters, including labor organizations participating in the
meet-and-confer process, expressed concern with the NSLRB's authority
to resolve national consultation disputes. We agree and have amended
the regulations to retain FLRA jurisdiction over disputes regarding the
granting of National Consultation Rights. Accordingly, we have deleted
Sec. 9901.908(a)(8) of the proposed regulations, which had reserved
this authority to the NSLRB.
Some commenters expressed concern with the limitation on the
Board's authority to issue status quo ante awards. These commenters
argued that the authority to order status quo ante remedies to make
aggrieved employees whole was essential for employees to perceive the
NSLRB as legitimate. We disagree. We believe that the limitations on
the award of status quo ante remedies appropriately recognize and
correctly balance the Department's national security mission and the
unique role that DoD civilian employees play in supporting that
mission. We believe the limitations provided in the regulations are
appropriate and have not accepted the recommendations.
A labor organization expressed concern that the Board's de novo
review authority of an arbitrator's findings of fact made the proposed
system illegitimate. We disagree. We believe it is necessary for the
Board to review the underlying facts in any dispute to ensure that a
correct determination has been rendered.
Commenters also recommended that we define the Board's remedial
authorities. We do not believe that this is necessary, just as it was
unnecessary to define the FLRA's remedial authorities under chapter 71.
Commenters also raised concerns regarding the Board's authority
under Sec. 9901.908(a)(1) and (a)(5) of the proposed regulations to
decline jurisdiction over individual labor disputes. We share their
concerns and have amended the proposed language to give the Board the
added authority to reject unfair labor practices and negotiation
impasses.
Section 9901.910--Management Rights
Commenters, including labor organizations participating in the
meet-and-confer process, recommended that
[[Page 66181]]
we retain the current language in 5 U.S.C. chapter 71 with regard to
management rights, arguing that the proposed regulations unduly limited
the scope of bargaining. Specifically, commenters expressed concern
that limiting collective bargaining over the assignment of equipment
and shifts could compromise public safety. These commenters recommended
that management retain the right to permissively bargain certain
subjects when appropriate, rather than replacing the requirement to
bargain with a requirement to consult with the labor organizations
concurrent with taking action. Moreover, commenters suggested that
labor organizations should be able to bargain appropriate arrangements
prior to management taking an action that potentially could adversely
affect bargaining unit employees rather than providing for post
implementation bargaining. Commenters, most notably labor
organizations, objected to the prohibition of bargaining procedures
concerning management rights at Sec. 9901.910(a)(1) and (2). Labor
organizations also suggested that the right to negotiate procedures for
management rights at Sec. 9901.910(a)(3) is illusory. Labor
organizations suggested that no justification has been provided to
restrict bargaining over procedures and this restriction is contrary to
law. Finally, commenters objected to the provision that allowed
management to deviate from established procedures because they believe
such an action is unreasonable.
Although these issues were discussed during the meet-and-confer
process, the employee and management representatives were unable to
fashion a recommendation to resolve these differences that would be
acceptable to all parties. The labor organizations participating in the
meet-and-confer process, while willing to discuss some modifications to
the procedures in chapter 71, held fast to their position that the
existing labor relations system only needed slight modifications to
meet the Department's need for flexibility and agility to support its
national security mission. We disagree with the labor organizations'
suggestion that implementing issuances and issuances should be subject
to an adaptation of the FLRA's compelling need standard, which requires
a link between the policy to be implemented and national security, to
override collective bargaining agreements. Furthermore, we believe
that, even with modifications discussed with the labor organizations
during the meet-and-confer process, to interpret the emergency
provisions of chapter 71 more liberally and to allow post-
implementation bargaining in certain limited situations, the current
statute does not give the Department the flexibility necessary to carry
out its vital national security mission. Today, the Department is
increasingly faced with an enemy that can attack with little or no
advance warning. The Department must be agile enough to respond to the
emerging and rapidly evolving threats inherent in 21st century warfare.
Finally, we have modified the regulations to permit bargaining, in
the sole, exclusive, unreviewable discretion of the Secretary, over the
procedures that would be followed in exercising the expanded
operational management rights. We have also modified the regulations to
permit bargaining, at the election of the Secretary, over appropriate
arrangements on the routine matters related to the expanded operational
management rights. The Secretary may authorize such bargaining to
advance the Department's mission accomplishment or promote
organizational effectiveness. Mid-term agreements on appropriate
arrangements and procedures for (a)(1) and (a)(2) management rights are
not precedential or binding on subsequent acts, or retroactively
applied, except at the Secretary's sole, exclusive, and unreviewable
discretion. Procedures and appropriate arrangements in term agreements
are binding, except that nothing will delay or prevent the Secretary
from exercising his or her authority under subpart I. For example, the
Secretary may authorize deviation from such agreements when it is
necessary to carry out the Department's mission. This authority is
comparable to what occurs today when an emergency exists.
We have also made some minor changes to the section to make
technical corrections and to clarify intent. Specifically, in Sec.
9901.910(e) we have corrected the citation from ``Sec. 9901.913'' to
the correct citation of ``Sec. 9901.917.'' In response to another
commenter, we have removed the ``foreseeable, substantial, and
significant'' standard from Sec. 9901.910(e)(2)(i) because it is
unnecessary given the language in Sec. 9901.917(d)(2). We have also
added references to sections 9901.918 and 9901.919 to conform to the
authorities in those sections for multi-unit bargaining and bargaining
above the level of recognition, respectively.
Section 9901.911--Exclusive Recognition of Labor Organizations
Labor organizations recommended that we delete the section as it is
duplicative of the introductory provisions in 5 U.S.C. 7111. We
disagree. Although labor organization recognition remains unchanged
from 5 U.S.C. chapter 71, we believe that it is important to
affirmatively state in these regulations that labor organizations will
be recognized under subpart I in the same manner as they are under
chapter 71.
Section 9901.912--Determination of Appropriate Units for Labor
Organization Representation
The proposed regulations under Sec. 9901.912(b)(3) and (4) would
exclude all employees engaged in personnel work and individuals
employed in attorney positions. In response to comments received,
particularly from labor organizations participating in the meet-and-
confer process, which opposed these exclusions as unnecessary and
overbroad, we have revised the language to reflect the current language
in 5 U.S.C. chapter 71.
Although the proposed regulations did not explicitly provide
special rules for bargaining unit inclusion or exclusion for employees
holding security clearances, there were multiple comments on the
subject. Commenters suggested that employees with security clearances
should be excluded from bargaining units because of national security
concerns. Labor organizations participating in the meet-and-confer
process recommended an alternative approach that would require an
employee with a security clearance to be excluded if that employee's
duties required independent judgment in the formulation of national
security policy. While we understand the complexity of the issue, we
disagree with both recommendations because we believe the existing
approach of case-by-case exclusion is appropriate. Given the
sensitivity of the issue, we believe a universal approach to security
clearance exclusion would be inflexible and ineffective.
Section 9901.913--National Consultation
Commenters, including labor organizations participating in the
meet-and-confer process, recommended deleting these provisions because,
in their view, they are unlawful deviations from chapter 71. We
disagree for the reasons stated under General Comments. Commenters
further recommended that the FLRA should retain jurisdiction over
national consultation issues. We have adopted this recommendation and
modified the language accordingly. We also received comments suggesting
that the phrases
[[Page 66182]]
``substantial number of employees'' and ``reasonable time'' are vague.
However, this is the exact language that appears in chapter 71 and the
FLRA has a long history of interpreting this language. Therefore, we
have retained the language.
Section 9901.914--Representation Rights and Duties
Commenters, including labor organizations participating in the
meet-and-confer process, strongly objected to the elimination of the
right of an employee to request representation when examined by
representatives of the Office of the Inspector General and other
independent Department and Component organizations whose mission
includes criminal investigations. These commenters argued that such
representation protects employees against abusive or illegal interview
techniques and provides reassurance and guidance to employees. We
agree, and have revised the regulations to eliminate these restrictions
on representation.
We also received comments, including comments from labor
organizations participating in the meet-and-confer process, that
opposed the restrictions on the union's right to attend formal EEO
proceedings. Alternatively, other commenters strongly supported this
restriction. We have carefully considered the comments and have come to
the conclusion that the often sensitive nature of discrimination
complaints, coupled with the fact that the employee has exercised an
option to not use the negotiated grievance procedure, supports this
limitation on a labor organization's right to attend such discussions.
We believe the procedures as described in the proposed regulations
provide the best balance between the unions' institutional interest in
the matter and the employee's right to privacy. Consistent with this
determination, we have added clarifying language in Sec.
9901.915(a)(2)(C).
Commenters, including labor organizations participating in the
meet-and-confer process, expressed the view that there is no valid
reason to restrict the union's right to attend formal discussions over
operational matters. Some of these comments appear to confuse this
right as it currently exists under chapter 71. Some commenters suggest
that any formal meeting with employees requires an invitation for union
attendance. This is clearly not the case today, and case law is clear
that it must be a formal meeting where a change to existing conditions
of employment is discussed. Many meetings where operational matters are
discussed, such as the routine assignment of work, do not rise to the
level of requiring union participation. Furthermore, we believe that
allowing managers to respond to basic questions regarding conditions of
employment, such as a routine question by a newer employee regarding
how an overtime roster operates, should not require union participation
as the manager is merely reiterating existing policy. Management and
employees must be able to freely communicate on such routine matters if
the Department is to operate efficiently. Furthermore, such a
communication in no way diminishes the role of the union, and does not
in any way authorize a manager to discuss changing these procedures
without union participation. For the forgoing reasons, we have not
accepted the recommendation and have retained the language as it
appeared in the proposed regulation.
Labor organizations participating in the meet-and-confer process
and other commenters also recommended that we retain the ``flagrant
misconduct'' standard for employee conduct while serving as union
officials. Commenters argued that union representatives are different
than other employees because they have the right to speak, write,
associate, and petition for the redress of wronged employees. However,
all employees, regardless of whether they are union representatives,
are expected to express their concerns in an appropriate manner,
particularly in scenarios where there could be a safety or security
violation. The intent is not to prevent honest and open discussion, but
rather to ensure that such discussions are undertaken in a professional
and courteous manner. Under the proposed standard, there is no
requirement that a union representative not assert the union's
position. The only conduct the revised standard is intended to stop is
the rare, but utterly unacceptable use of vulgar or sexually explicit
language, as well as physical intimidation by union officials. We
believe the revised standard is appropriate, particularly in a military
organization that has a longstanding tradition of professionalism and
courtesy. We have therefore not accepted this recommendation.
Commenters, including labor organizations participating in the
meet-and-confer process, objected to the limitations on management's
obligation to provide information to a union under the proposed
regulations. Generally these comments focused on the provisions
allowing an authorized official to block the release of information if
that official determines the release would compromise mission,
security, or employee safety. These provisions generally codify current
case law in which the right of the union to information is weighed
against the rights of employees and management. This language simply
clarifies the existing state of affairs. Thus, we have not adopted the
recommendations to eliminate these provisions.
Several commenters also suggested that the 30-day period for agency
head review was unreasonably short. The process of agency head review,
including the 30-day limitation, as provided for in Sec.
9901.914(d)(1)-(4) is based on, and adopts, the authority of heads of
agencies that exists today under 5 U.S.C. 7114(c). This standard has
been in effect for many years under 5 U.S.C. chapter 71 and has worked
efficiently. Thus, we believe that this is sufficient time for agency
head review to occur and we have retained the 30-day time frame. We
have modified Sec. 9901.914(d)(2) and (3) to conform the provisions to
the revised definition of ``issuances'' that could serve as the basis
for disapproval of conflicting provisions of collective bargaining
agreements upon agency head approval. We have also adopted a comment to
revise Sec. 9901.914(d)(5) to clarify that agreements are
unenforceable because they conflict with applicable law, rule or
regulation, or issuance, rather than because an authorized agency
official has made such a determination. We have added clarifying
language to this paragraph in response to numerous comments regarding
the impact of issuances on collective bargaining agreements. The
revised language clarifies that collective bargaining agreement
provisions that conflict with issuances remain in effect until
expiration of the agreement at which time the agreement must be brought
into conformance with the issuance.
Section 9901.916--Unfair Labor Practices
Commenters, including labor organizations participating in the
meet-and-confer process, recommended that DoD should not be permitted
to enforce a rule or regulation that is in conflict with a collective
bargaining agreement if the agreement was in effect prior to the
issuance of the rule or regulation. We agree with these recommendations
to the extent that the rule or regulation is not implementing NSPS and
have amended the regulations to reflect the current 5 U.S.C. 7116(a)(7)
unfair labor practice with a modification to exclude implementing
issuances, which under these regulations, will immediately
[[Page 66183]]
supersede conflicting provisions of collective bargaining agreements.
Commenters, including labor organizations participating in the
meet-and-confer process, suggested that employees or employee
representatives should have more than 90 days to file an unfair labor
practice with the Board. We concur and have revised the regulation to
provide six months, which is consistent with the current filing limits
under chapter 71. Finally, to conform this section to the changes made
to Sec. 9901.908 and to clarify the Board's authority with respect to
unreviewable discretion, we have eliminated reference to the term
``charge'' and inserted instead the generic term ``allegation.'' This
also supports our goal for the Board to use a single, integrated,
streamlined process for resolving labor relations disputes, including
unfair labor practices.
Section 9901.917--Duty To Bargain and Consult
Commenters, including labor organizations participating in the
meet-and-confer process, objected to the establishment of a 30-day time
limit to complete mid-term bargaining, as proposed in Sec.
9901.917(c). We have modified this section to allow the parties, by
mutual consent, to continue mid-term negotiations beyond the proposed
30-day limitation. This change to Sec. 9901.917(c) parallels identical
language in Sec. 9901.917(b).
Additionally, based on comments made during the meet-and-confer
process that it was illogical to restrict the parties' ability to seek
bargaining assistance early in the process, we changed the proposed
language in Sec. 9901.917(b) and (c) to allow either party, at any
time prior to going to the Board, to refer matters at impasse to FMCS
or, if mutually agreeable, to another third party.
We made technical changes to the language in Sec. 9901.917(d)(1)
to conform it to the revised definitions of ``implementing issuance''
and ``issuance.'' Commenters found the Sec. 9901.917(d)(2) limitation
on bargaining to be unnecessary and unclear. First, commenters
suggested that the lead phrase, ``except as otherwise provided in
910(c),'' was unnecessary. We disagree. The phrase is intended to
convey that labor organizations will have a right to consult on
procedures in exercising management rights at Sec. 9901.910(a)(1) and
(2) even though Sec. 9901.917(d)(2) limits consultation to otherwise
negotiable changes in conditions of employment subject to the
foreseeable, substantial and significant standard. In other words, this
requires consultation on procedures for these particular management
rights although ``bargaining'' on procedures is prohibited at Sec.
9901.910(b). Commenters also raised concerns about the application of
the Sec. 9901.917(d)(2) standard, given that it contains a number of
undefined words and phrases, e.g., ``foreseeable, substantial, and
significant in terms of both impact and duration on the bargaining
unit, or on those employees in that part of the bargaining unit
affected by the change.'' Commenters fear that, absent a definition of
these terms and phrases, DoD management could interpret them in a way
that would render employee and union rights meaningless. Commenters
recommended that we delete the provision altogether and rely on the
FLRA's existing de minimis standard. We have not adopted these
suggestions. While we agree that the standard is subject to
interpretation, we anticipate that a body of case law will develop to
guide the parties in applying this standard, just as there is a body of
case law regarding the FLRA's de minimis standard.
Section 9901.918--Multi-unit Bargaining
Commenters expressed concern that while unions could request multi-
unit bargaining, the Secretary has sole and exclusive authority to
grant such request. While we recognize this concern, we believe that
the Secretary is in a unique position to determine when an issue is
appropriate for multi-unit bargaining given variations in mission and
organization across the Department. We are also unclear as to how one
union could require another union to participate in multi-unit
bargaining. We have therefore rejected recommendations to allow unions
to require multi-unit bargaining. However, we have modified the
language to clarify the Secretary's authority to require multi-unit
bargaining.
Commenters, including labor organizations participating in the
meet-and-confer process, expressed strong opinions regarding the
prohibition on ratification of contracts. While we understand that
ratification is an internal union process, we believe it would be
untenable to give each individual bargaining unit veto power over a
multi-unit agreement after the parties have reached agreement. Thus, we
have adopted the recommendation to eliminate the prohibition on
ratification, but added a provision that when an agreement is reached
under this section, individual bargaining units may not opt out of or
veto that agreement.
Section 9901.919--Collective Bargaining Above the Level of Recognition
Several comments questioned the procedures that will be used for
bargaining above the level of recognition, such as the approval process
for official time requested by union officials who may be under
different Military Departments. In response, we have added a provision
that the Department will prescribe implementing issuances on the
procedures associated with collective bargaining above the level of
recognition.
Commenters, including labor organizations participating in the
meet-and-confer process, acknowledged that bargaining at the national
level could be appropriate, under certain circumstances. They objected,
however, to giving the Secretary the sole and exclusive discretion over
the use of this special bargaining authority as well as the provisions
requiring these negotiations to supersede all conflicting provisions of
existing collective bargaining agreements. We disagree. These
provisions are required by 5 U.S.C. 9902(g)(2). In addition, we believe
they are necessary for effective national level bargaining.
Commenters also objected to the prohibition on ratification in
Sec. 9901.919(b)(5). Based on the same rationale relating to this
issue with regard to multi-unit bargaining, we have adopted the
recommendation to delete the proposed ratification language. In its
place, Sec. 9901.919(b)(5) now provides that individual labor
organizations cannot opt out of, or veto, a final national level
bargaining agreement.
Section 9901.920--Negotiation Impasses
Labor organizations objected to the NSLRB adjudicating negotiation
impasses because they assert that the NSLRB is not an independent third
party. We disagree with this assertion for the reasons discussed in the
Major Issues section. During the meet-and-confer process, the
participating labor organizations recommended using arbitrators to
resolve negotiation impasses. We disagree because such a system would
lead to inconsistent and inefficient results. Use of the NSLRB will,
over time, result in an established body of precedent upon which both
management and unions may rely.
We have made a conforming change by adding Sec. 9901.905 to the
list of sections for which the parties may submit disputed issues to
the Board. We
[[Page 66184]]
also made a technical correction deleting a reference to judicial
review for unfair labor practices involving negotiation impasses since
this is already provided for in Sec. 9901.909.
Section 9901.921--Standards of Conduct for Labor Organizations
Labor organizations objected to this section as duplicative of 5
U.S.C. chapter 71. However, we have decided to retain it to ensure that
labor organizations are cognizant of applicable standards of conduct.
Section 9901.922--Grievance Procedure
Commenters recommended that the term ``administrative'' be
reinserted into the description of the negotiated grievance procedure
in order to retain access to judicial review. As the Government's brief
in the pending case Whitman v. DOT (S. Ct. No. 04-1131) demonstrates,
we do not believe the inclusion of the word ``administrative'' in
chapter 71 was intended to authorize judicial review of grievances.
Nonetheless, since some courts and parties have taken the position that
the addition of the word ``administrative'' authorized judicial review,
we have removed that term from the regulation to avoid any suggestion
that this regulation would authorize judicial review. Because this
change clarifies that judicial review over many issues is not
available, it does not restrict an employee's right to obtain MSPB or
EEOC review of adverse actions and subsequent judicial review of those
decisions. Therefore, we have rejected the recommendation and retained
that language as proposed.
Commenters, including the labor organizations participating in the
meet-and-confer process, recommended that classification issues should
be subject to the grievance procedure. However, the classification of
positions generally has been excluded from the grievance procedure. We
believe that consistency of classification, while always important,
becomes critical as we move into a pay-for-performance environment.
Subjecting classification decisions to inconsistent interpretations by
arbitrators would undermine the system. This would result in a
fragmented classification system throughout the Department with
similarly situated employees being treated differently. Such a result
would be inconsistent with the NSPS Guiding Principles and KPPs, which
require that the system be credible and trusted. Therefore, we have not
adopted this recommended change.
Commenters, including labor organizations participating in the
meet-and-confer process recommended that pay be subject to the
grievance procedure. We note that pay has almost exclusively been
excluded from the grievance procedure as it has historically been
covered by Governmentwide regulation or law. The exclusion of pay from
the grievance procedure is in keeping with this longstanding practice
as we move into a pay for performance system. As with classification,
subjecting pay determinations to inconsistent arbitrator
interpretations would undermine the pay system and be inconsistent with
statutory requirements that the pay system be fair, credible, and
transparent. Thus, we have retained the language as proposed.
Many commenters, including labor organizations participating in the
meet-and-confer process, presented strong arguments that employee
ratings of record should continue to be subject to the grievance
procedure and binding arbitration. Most commenters expressed concern
that receiving an accurate performance rating was crucial to employees
because that rating will be used in determining an employee's pay.
Thus, employees need a credible system to challenge ratings of record
that they believe are inaccurate. We agree and have provided employees
the right to grieve their performance ratings of record through the
negotiated grievance procedure. Moreover, during the meet-and-confer
process, the unions agreed that the use of panels, consisting of an
arbitrator, a management official and a union official, to decide
grievances regarding ratings of record should be an option for
employees. Thus, we have modified the regulations to provide that an
employee may challenge a rating of record either through the negotiated
grievance procedure using either a panel or traditional arbitration.
Employees also have the option of using the administrative
reconsideration process as set out in Sec. 9901.409(g).
We have also added language to reflect case law which prevents an
arbitrator, or a panel, from conducting an independent evaluation of
performance or otherwise substituting his or her judgment for that of a
manager. We have made clear that the arbitrator or panel has no
authority to determine appropriate share payouts under the pay-for-
performance system, as such determinations are made by management based
on the rating of record. We believe that these changes address the
concerns of commenters and will serve to instill confidence in the
performance rating process.
Finally, a commenter recommended that appealable adverse actions be
removed from the scope of the negotiated grievance procedure because of
other available forums for redress. We agree that there is a statutory
right to file an appeal with the Merit Systems Protection Board (MSPB),
but the option to grieve these adverse actions as an alternative to the
MSPB is a well established employee right. To address the requirement
that the appeals process be fair and to ensure that the Department's
national security mission is considered, we have retained regulatory
language ensuring uniform review and interpretation of arbitral awards
and AJ decisions. Thus, we have rejected this comment.
We also made a technical change to Sec. 9901.922(e) to assure that
mixed cases processed through a negotiated grievance procedure can
properly be reviewed by the Equal Employment Opportunity Commission.
Section 9901.923--Exceptions to Arbitration Awards
Labor organizations participating in the meet-and-confer process
suggested that we reconsider subjecting exceptions from arbitration
decisions on appealable adverse actions to the Merit Systems Protection
Board for appellate review. We disagree. The Secretary must retain full
authority to review an arbitrator's decision on an appealable adverse
action, similar to the need to review decisions of MSPB Administrative
Judges, to ensure that the arbitrator interprets NSPS and these
regulations in a way that recognizes the critical mission of the
Department and to ensure that deference is provided to the Department's
interpretation of these regulations. This provision is designed to
ensure uniformity of interpretation and application of NSPS and these
regulations. Allowing direct judicial review of arbitration decisions
would create an inconsistent approach in how MSPB Administrative Judges
and arbitrator decisions are treated on identical matters.
Section 9901.924--Official Time
Commenters found the proposed regulations to be unclear as to how
official time would be allocated among union officials from different
locals when they are engaged in multi-unit and/or national level
bargaining. We note that the proposed regulations provide that the
Secretary will prescribe implementing issuances on the procedures and
constraints associated with multi-unit bargaining. These issuances will
address a variety of issues including the granting of official time.
However, the comment revealed that a parallel provision for collective
[[Page 66185]]
bargaining above the level of recognition has been inadvertently
omitted for Sec. 9901.919. Although multi-unit bargaining may also be
at the level of recognition, there are situations where it could occur
above the level of recognition. Therefore, to ensure clarity, we have
amended this section to provide that the Secretary will prescribe
implementing issuances on the procedures and constraints associated
with bargaining above the level of recognition.
Section 9901.925--Compilation and Publication of Data
Commenters recommended that this section be deleted as its sole use
and purpose, in their view, is to facilitate the Board's unlawful
functioning. We disagree for the reasons explained under General
Comments, and have retained this section.
Section 9901.926--Regulations of the Board
Commenters recommended that this section be deleted as its sole
purpose, in their view, is to facilitate the Board's unlawful
functioning. Commenters asserted that the Board must develop its own
regulations and that the Department does not have the authority to
issue interim regulations for an independent Board's operation. We
agree that the Board should issue its own regulations and have provided
the Board with that authority. However, we believe that it would be
impractical for the Board to operate without interim rules until such
time as the Board issues its own regulations. Thus, we have retained
the Secretary's authority to develop interim NSLRB regulations.
Section 9901.927--Continuation of Existing Laws, Recognitions, and
Procedures
Commenters recommended deletion of this section on the basis that
invalidation of collective bargaining agreements provisions before the
expiration of their term is, in their view, unlawful. Again, we
disagree for the reasons explained under General Comments.
Commenters also suggested that the statements concerning the
continuation of existing collective bargaining agreements and labor
organization recognitions are unnecessary. We disagree because we want
to ensure that there is no misunderstanding that these regulations will
not dissolve established bargaining units within the Department nor
cancel entire collective bargaining agreements.
Section 9901.928--Savings Provisions
We received comments recommending deletion of this section because
the commenters believe that excluding administrative remedies for
pending grievances is contrary to law. We disagree. To the extent that
an award is prospective in nature, it must comply with the applicable
procedures, whether established through law, rule, regulation or
collective bargaining agreement.
Next Steps
A. NSPS Implementation
1. Employee Transition Plan (Spiral Strategy)
The Secretary adopted an ``acquisition model'' to design and
implement NSPS. Eligible employees will transition to NSPS in phases or
``spirals.'' The spiral concept allows the Department to introduce NSPS
in successive waves--to initially deploy the new personnel system to a
number of organizations so that we can manage implementation and
troubleshoot, evaluate, and report on the results in a timely manner.
As with any new system, especially one with the size and complexity of
NSPS, we may need to make refinements as we roll it out to the rest of
the workforce. The first spiral, spiral one, is limited to General
Schedule (GS and GM), Acquisition Demonstration Project, and certain
alternative personnel system employees. As required by 5 U.S.C.
9902(l), the NSPS HR system under 5 U.S.C. 9902(a) may be implemented
to a maximum of 300,000 employees without having to make a
determination that the Department has in place a performance management
system that meets the criteria in 5 U.S.C. 9902(b). Spiral one will
cover up to the statutory limit of 300,000 employees.
After the assessment cycle and certification of the performance
management system are completed, the second spiral will deploy. Spiral
two includes Federal Wage System employees, overseas employees, and
other eligible employees. Spiral three will comprise the DoD labs,
currently excluded by 5 U.S.C. 9902(c), should the Secretary make the
determination required by that section.
2. HR and Labor Relations Transition
Transition to the HR system occurs when employees convert or spiral
into NSPS. Employees covered by the HR system are under the appeals
process. Upon conversion, employees will be covered by the NSPS
performance management, classification, pay, reduction in force,
adverse action, and appeals regulations.
The labor relations provisions will be implemented DoD-wide for all
eligible DoD employees at the same time. The labor relations provisions
apply to all eligible employees even if the HR system does not cover
them.
B. Development of Imp