[Federal Register Volume 65, Number 102 (Thursday, May 25, 2000)]
[Proposed Rules]
[Pages 33785-33787]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-13052]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 65, No. 102 / Thursday, May 25, 2000 / 
Proposed Rules  

[[Page 33785]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 536

RIN 3206-AI88


Grade and Pay Retention

AGENCY: Office of Personnel Management.

ACTION: Proposed rule.

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SUMMARY: The Office of Personnel Management is issuing proposed 
regulations giving agencies discretionary authority to grant pay 
retention to certain employees moving to positions under pay systems 
other than the General Schedule or the Federal Wage System. This new 
flexibility would allow agencies to prevent eligible employees from 
suffering a reduction in pay that would otherwise result from a 
management action. The proposed regulations also provide that grade 
retention will no longer apply to employees moving into the General 
Schedule or the Federal Wage System from noncovered pay systems.

DATES: Comments must be received on or before July 24, 2000.

ADDRESSES: Comments may be sent or delivered to Donald J. Winstead, 
Assistant Director for Compensation Administration, Workforce 
Compensation and Performance Service, Office of Personnel Management, 
Room 7H31, 1900 E Street NW., Washington, DC 20415-8200 (FAX: (202) 
606-0824 or EMAIL: [email protected])

FOR FURTHER INFORMATION CONTACT: Sharon Herzberg (202) 606-2858 or FAX: 
(202) 606-0824 or EMAIL: [email protected].

SUPPLEMENTARY INFORMATION: Under 5 U.S.C. 5361-5365, agencies may grant 
grade or pay retention to employees covered by the General Schedule 
(GS) pay system or the Federal Wage System (FWS) when a reduction in 
grade or pay is caused or influenced by a management action and certain 
other conditions are met. While the law expressly provides that these 
provisions apply to movements within or between those two covered pay 
schedules, the Office of Personnel Management (OPM) has provided by 
regulation that these provisions may also be applied to certain 
employees who move from a noncovered pay schedule to a covered pay 
schedule. (See definition of employee in 5 CFR 536.102.) This 
regulatory extension of the grade and pay retention provisions is 
authorized by 5 U.S.C. 5365(b)(1), which allows OPM to extend the 
application of ``all or portions'' of the grade and pay retention 
provisions to employees under noncovered pay schedules who move to a 
covered pay schedule.
    The Department of Justice has requested that we extend pay 
retention to members of the Senior Executive Service (SES) who move to 
immigration judge (IJ) positions. While there is no provision in 
statute or regulation that permits management to direct the movement of 
a member of the SES to an IJ position, there are circumstances that 
have resulted in the movement of an SES member to a non-SES position 
that has a lower rate of pay. Examples include an SES member who 
voluntarily accepts a non-SES position following receipt of a notice of 
position abolishment or a notice of directed geographic reassignment 
(if there is no mobility agreement), or other management action that 
causes or influences the employee to move to a lower-paid position.
    Prior to the Illegal Immigration Reform and Immigrant 
Responsibility Act of 1996, Public Law 104-208, immigration judges were 
covered by the GS pay system. Before the statute was enacted, the 
Department of Justice was able to offer pay retention to an SES member 
who moved to an IJ position as a result of a management action, as 
described above. However, section 371 of the Act removed IJs from the 
GS pay system and established a unique IJ pay system with a top rate 
set at 92 percent of the rate of basic pay for SES level ES-5. As a 
result of the Act, immigration judges are no longer under a ``covered 
pay system'' and therefore are no longer eligible for pay retention. 
Because the statutory maximum IJ pay rate is less than the rates of pay 
for ES-5 and ES-6, an SES member who moves to an IJ position without 
pay retention could suffer a significant loss in pay. The inability to 
grant pay retention to employees who move between noncovered pay 
systems has deprived the Department of Justice of a needed degree of 
flexibility.
    At the request of the Department of Justice, we reviewed this issue 
and determined that we have authority under the law to extend grade and 
pay retention to employees who move to or within noncovered pay 
schedules. Under 5 U.S.C. 5365(b)(2), OPM is authorized to apply ``all 
or portions'' of the grade and pay retention provisions to 
``individuals to whom such provisions do not otherwise apply.'' We 
further concluded that it would be appropriate as a matter of policy to 
amend our regulations to provide agencies with discretionary authority 
to grant pay retention to employees moving to or within noncovered pay 
schedules. Since these other pay schedules are generally not 
administered by OPM, we concluded that any use of the pay retention 
authority in these circumstances should be discretionary. We note that, 
under some circumstances, grade and pay retention benefits are already 
subject to an agency's discretion. (See 5 CFR 536.103(b) and 
536.104(b).)
    We concluded that this extension should not apply to grade 
retention, since that benefit was designed specifically for retention 
of grades under the GS and FWS pay systems. As explained above, the law 
allows OPM to selectively apply portions of the grade and pay retention 
provisions. Under current regulations, grade retention does not apply 
to members of the Senior Executive Service (SES) or employees in 
senior-level positions under 5 U.S.C. 5376 (SL/ST) even if they move to 
a covered pay schedule. (See 5 CFR 536.105(c).) However, the current 
regulations are silent regarding grade retention for administrative law 
judges (ALJs). Thus, it is possible for an ALJ who moves to a GS-14 
position because of a management action to have GS-15 established as a 
retained grade. For consistency, we are proposing to amend the 
regulations to provide that grade retention does not apply to any 
employee who moves from, between, or within non-GS/FWS schedules--
including the pay schedules for SES members, SL/ST positions, ALJs, and 
IJs.

[[Page 33786]]

    We are proposing that the normal rules for adjusting a retained 
rate not be applied to employees covered by a regulatory extension of 
pay retention under 5 U.S.C. 5365(b) who are not in a GS or FWS 
position while receiving pay retention, or who are in a GS or FWS 
position but receiving a retained rate in excess of the maximum rate of 
the applicable basic pay schedule (GS or FWS). Under the normal rules, 
a GS or FWS employee's retained rate is adjusted by 50 percent of the 
dollar increase in the maximum rate for the employee's grade. However, 
other pay systems may not have the same type of grade-based pay 
structure or are subject to different annual pay adjustments.
    For example, many senior-level pay schedules are linked to the 
Executive Schedule, which sometimes has not been adjusted on an annual 
basis. This can result in anomalous situations. If an SES member at the 
ES-2 level (currently $107,100) moves to a GS-15 position and receives 
a retained rate, that retained rate subsequently could be increased to 
a rate above the ES-2 rate in effect at some future date. (Note: 
Retained rates for GS employees are capped at the rate for level V of 
the Executive Schedule, which limits this problem; however, agencies 
are required to adjust and maintain the ``retained rate of record'' 
without regard to the level V cap.) We are proposing to exercise our 
authority under 5 U.S.C. 5365(b) not to apply the retained rate 
adjustment portion of the statutory pay retention provisions for the 
categories of employees described above. Thus, these employees' 
retained rates would be frozen with no provision for any pay 
adjustment.
    These proposed regulations would not impair any agency's 
independent authority to fix pay for employees under a pay schedule 
administered by that agency. The proposed extension of the pay 
retention provisions would be relevant only if the agency lacks any 
other authority to establish a saved rate for its employees. For 
example, the Department of Justice does not have authority to create a 
saved rate under the IJ pay system based on the former rate received by 
an SES member. The proposed regulations would allow the Department of 
Justice, at its discretion, to extend pay retention to an SES member 
moving to an IJ position. To be entitled to pay retention, an employee 
must also meet all other qualifying conditions (e.g., the pay reduction 
is caused or influenced by a management action, not at the employee's 
request or because of personal cause; there is no break in service; and 
there is no declination of a reasonable offer).
    To effect the policy change proposed here, we propose to add a new 
paragraph (d) to Sec. 536.104 to give agencies discretionary authority 
to provide pay retention to any otherwise eligible Federal 
``employee,'' as defined in 5 U.S.C. 2105. The definition of employee 
in Sec. 536.102 would be broadened to include an ``employee,'' as 
defined in 5 U.S.C. 2105, to whom pay retention is granted under this 
discretionary authority. However, we are also proposing to add a 
sentence to Sec. 530.102 that expressly excludes officials in or moving 
from an Executive Schedule position, since we believe pay retention is 
not appropriate for such officials. In addition, Sec. 536.105(c), which 
excludes certain employees from grade retention, would be revised to 
exclude any employee who moves from a position not under a statutorily 
covered pay schedule to a position under a statutorily covered pay 
schedule. Also, we propose to remove paragraph (3) under the definition 
of representative rate and paragraph (b) of Sec. 536.203, since grade 
retention would no longer apply to employees moving from noncovered pay 
schedules.
    We also propose to revise Sec. 536.205(c) to provide that an 
employee who moves from a noncovered pay schedule to a statutorily 
covered pay schedule and who receives a retained rate in excess of the 
maximum rate of the statutorily covered pay schedule is not entitled to 
any increase in basic pay when there is an increase in the scheduled 
rates. In addition, to clarify and simplify the regulations, we propose 
to delete the language in the existing Sec. 536.205(g), which we 
believe is unnecessary in view of other provisions found elsewhere in 
parts 531, 532 and 536.
    Instead, we propose to revise Sec. 536.205(g) to address how the 
rules for administering a retained rate apply to employees under an 
administratively covered pay schedule who were granted pay retention 
under Sec. 536.104(d). Specifically, the proposed change provides that 
the retained rate of such an employee will be frozen and that the 
regular or normal rate to which the employee otherwise would be 
entitled (but for pay retention) must be treated as a single-rate range 
in applying paragraphs (b) and (d) of that section, including the 
provisions governing the 150 percent cap established by 5 U.S.C. 
5363(b)(2).
    As noted above, eligibility for grade and pay retention is subject 
to certain exclusions, as provided in 5 CFR 536.105. Paragraph (a)(1) 
of that section bars grade or pay retention for employees who move from 
a position that is not in an ``agency'' as defined in 5 U.S.C. 5102. 
This definition of ``agency,'' which is located in paragraph (a) of 
section 5102, is used to exclude employees in certain agencies from 
coverage under the GS classification and pay system. Other employees 
are excluded from the GS system if they fall under one of the 
categories of employees listed in paragraph (c) of section 5102 or if 
they are excluded by some other provision of law.
    The exclusion in Sec. 536.105(a)(1) is not statutory, but reflects 
a limitation OPM imposed simultaneous with the regulatory extension of 
grade and pay retention eligibility to employees moving to a covered 
pay schedule from a noncovered pay schedule. Recently OPM approved a 
variation to Sec. 536.105(a)(1) at the request of the Department of 
Defense (DOD). (See Notice of OPM Variation, Notice No. 99-47, November 
3, 1999.) While DOD is a covered agency under 5 U.S.C. 5102, several 
DOD subcomponents are expressly excluded from the definition of 
``agency'' in 5 U.S.C. 5102(a)--namely, the National Security Agency, 
the Defense Intelligence Agency, and the National Imagery and Mapping 
Agency. Therefore, employees in these subcomponents are barred by 
Sec. 536.105(a)(1) from receiving grade and pay retention upon movement 
to a covered pay schedule. DOD requested that OPM approve a variation 
to 5 CFR 536.105(a)(1) to allow otherwise eligible employees who move 
to GS or FWS positions from positions in these DOD subcomponents to 
receive grade or pay retention, even though these DOD subcomponents are 
excluded from the definition of an ``agency'' in 5 U.S.C. 5102(a). OPM 
agreed that a variation was warranted to ensure equal treatment of DOD 
employees.
    Upon further consideration, we believe that the provision in 
Sec. 536.105(a)(1) barring grade or pay retention for employees who 
move from a position that is not is an agency as defined in 5 U.S.C. 
5102 should be removed altogether. The current rule results in 
inequitable treatment of employees by providing different benefits 
based on the specific method used to exclude an employee from coverage 
under the GS system. For pay retention purposes, we believe it should 
not matter whether an employee is excluded from the GS system under 
paragraph (a) or (c) of 5 U.S.C. 5102 or under some other provision of 
law. Therefore, we propose to remove the existing paragraph (a)(1) from 
Sec. 536.105. This will extend pay retention eligibility to certain 
categories of non-GS employees. (Grade retention is not at issue, since 
we are already proposing to

[[Page 33787]]

bar grade retention for all employees in or moving from non-GS/FWS pay 
systems.)

E.O. 12866, Regulatory Review

    This rule has been reviewed by the Office of Management and Budget 
in accordance with Executive Order 12866.

Regulatory Flexibility Act

    I certify that these regulations would not have a significant 
economic impact on a substantial number of small entities because they 
would only apply to Federal agencies and employees.

List of Subjects in 5 CFR Part 536

    Administrative practice and procedure, Freedom of information, 
Government employees, Reporting and recordkeeping requirements, Wages.

U.S. Office of Personnel Management.
Janice R. Lachance,
Director.
    Accordingly, OPM is proposing to amend part 536 of title 5 of the 
Code of Federal Regulations as follows:

PART 536--GRADE AND PAY RETENTION

    1. The authority citation for part 536 continues to read as 
follows:

    Authority: 5 U.S.C. 5361-5366; sec. 7202(f) of the Omnibus 
Budget Reconciliation Act of 1990 (Pub. L. 101-508), 104 Stat. 1338-
336; sec. 4 of the Performance Management and Recognition System 
Termination Act of 1993 (Pub. L. 103-89), 107 Stat. 981; 
Sec. 536.307 also issued under 5 U.S.C. 552, Freedom of Information 
Act, Pub. L. 92-502.

Subpart A--Definitions; Coverage and Applicability

    2. In Sec. 536.102, the definition of Representative rate is 
amended by adding ``or'' after the semicolon at the end of paragraph 
(1), removing the ``or'' at the end of paragraph (2), and replacing the 
semicolon with a period, and removing paragraph (3); and the definition 
of employee is revised to read as follows:


Sec. 536.102  Definitions.

* * * * *
    Employee means an employee as defined in 5 U.S.C. 5361 and also an 
individual who moves from a position which is not under a statutorily 
covered pay schedule to a position which is under a statutorily covered 
pay schedule, provided that the individual's employment immediately 
prior to the move was not on a temporary or term basis. Employee also 
means an employee as defined in 5 U.S.C. 2105 who is granted pay 
retention under Sec. 536.104(d), subject to the limitations set forth 
in this part. However, employee does not include an official in or 
moving from an Executive Schedule position.
* * * * *
    3. In Sec. 536.104, a new paragraph (d) is added to read as 
follows:


Sec. 536.104  Coverage and applicability of pay retention.

* * * * *
    (d) The head of an agency may apply the pay retention provisions of 
this part to an individual not under a statutorily covered pay schedule 
(as defined in 5 U.S.C. 5361) whose rate of basic pay would otherwise 
be reduced as the result of a management action, provided that 
individual is an employee as defined in 5 U.S.C. 2105 (excluding an 
official in or moving from an Executive Schedule position). Coverage is 
subject to all other qualifying conditions and limitations established 
in this part.
    4. In Sec. 536.105, paragraph (a)(1) is removed, paragraphs (a)(2) 
through (a)(5) are redesignated as (a)(1) through (a)(4), respectively, 
and paragraph (c) is revised to read as follows:


Sec. 536.105  Exclusions.

* * * * *
    (c) Grade retention under Sec. 536.103 does not apply to an 
employee who--
    (1) Moves to a position not under a statutorily covered pay 
schedule; or
    (2) Moves from a position not under a statutorily covered pay 
schedule to a position under a statutorily covered pay schedule.
    5. Section 536.203 is revised to read as follows:


Sec. 536.203  Determination of retained grade.

    An employee who is in a position under a statutorily covered pay 
schedule immediately prior to the action that gives entitlement to 
grade retention shall retain the grade held immediately prior to the 
action.
    6. In Sec. 536.205, paragraphs (c) and (g) are revised to read as 
follows:


Sec. 536.205  Determination of rate of basic pay.

* * * * *
    (c) When an increase in the scheduled rates of the grade of the 
employee's position occurs while the employee is under pay retention, 
the employee is entitled to 50 percent of the amount of the increase in 
the maximum rate of basic pay payable for the grade of the employee's 
current position. This paragraph does not apply to employees who move 
from a noncovered pay schedule to a statutorily covered pay schedule 
and who are receiving a retained rate in excess of the maximum payable 
rate of the applicable covered pay schedule.
* * * * *
    (g) Notwithstanding paragraphs (b), (c), and (d) of this section, 
for an employee who is not in a position under a statutorily covered 
pay schedule while receiving a retained rate (as allowed by 
Sec. 536.104(d))--
    (1) The retained rate is compared to the rate of basic pay that 
otherwise would apply to the employee but for the retained rate 
(instead of comparing it to the maximum rate of the rate range for the 
employee's position) and is terminated when the retained rate falls 
below the employee's otherwise applicable rate;
    (2) The retained rate is capped at 150 percent of the rate of basic 
pay that otherwise would apply to the employee but for the retained 
rate (instead of 150 percent of the maximum rate of the rate range for 
the employee's position); and
    (3) The retained rate is frozen and may not be increased.

[FR Doc. 00-13052 Filed 5-24-00; 8:45 am]
BILLING CODE 6325-01-P