# Department of Homeland Security Human Resources Management System > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A04-3670 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** February 20, 2004 - **Citation:** 69 FR 8030 ## Text DEPARTMENT OF HOMELAND SECURITY OFFICE OF PERSONNEL MANAGEMENT 5 CFR Chapter XCVII and Part 9701 RIN 3206-AK31/1601-AA-19 Department of Homeland Security Human Resources Management System AGENCY: Department of Homeland Security; Office of Personnel Management. ACTION: Proposed rule. SUMMARY: The Department of Homeland Security (DHS) and the Office of Personnel Management are issuing proposed regulations to establish a new human resources management system within DHS, as authorized by the Homeland Security Act of 2002. The affected subsystems include the systems governing basic pay, classification, performance management, labor relations, adverse actions ( e.g. , disciplinary actions), and employee appeals. These changes are designed to ensure that DHS' human resources management system aligns with the Department's critical mission requirements and protects the civil service rights of its employees. DATES: Comments must be received on or before March 22, 2004. ADDRESSES: You may submit comments, identified by docket number DHS-2004-001 and/or RIN number 3206-AK31, by any of the following methods: • E-Docket Web Site: http://www.epa.gov/edocket. Follow the instructions for submitting comments at that web site. • Mail: DHS/OPM HR System Public Comments, P.O. Box 14474, Washington, DC 20044-4474. • Hand delivery/Courier: OPM Resource Center, Room B469, Office of Personnel Management, 1900 E Street, NW., Washington, DC. Delivery must be made between 10 a.m. and 2 p.m., Monday through Friday, except Federal holidays. • Federal Rulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. Instructions: All submissions must include the agency name and docket number or Regulation Identifier Number (RIN) for this rulemaking. The online e-docket system is DHS/OPM's preferred method for receiving comments. Mailed or hand-delivered comments must be in paper form. No mailed or hand-delivered comments in electronic form (CDs, floppy disk, or other media) will be accepted. All comments received, whether mailed, hand-delivered, or submitted online, will be posted without change or omission to the e-docket at: http://www.epa.gov/edocket. For detailed instructions on submitting comments and additional information on the rulemaking process, see the “Public Participation” and “Electronic Access and Filing” headings in the Supplementary Information section of this document. Docket: For access to the e-docket to read background documents, submit comments, and read comments received, go to http://www.epa.gov/edocket. To read the hard-copy originals of mailed and hand-delivered comments, visit the OPM Resource Center, Room B469, Office of Personnel Management, 1900 E Street, NW., Washington, DC, between 10 a.m. and 2 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: At OPM: Ronald P. Sanders, (202) 606-9150; at DHS: Melissa Allen, (202) 692-4272. SUPPLEMENTARY INFORMATION: The Department of Homeland Security (DHS or “the Department”) and the Office of Personnel Management (OPM) are proposing to establish a new human resources (HR) management system within DHS under 5 U.S.C. 9701, as enacted by section 841(a)(2) of the Homeland Security Act of 2002 (Public Law 107-296, November 25, 2002). The following information is intended to provide interested parties with relevant background material about (1) the Homeland Security Act, (2) the process used to design options for a new HR system, (3) a summary of the options developed and the review of those options by the DHS Human Resource Management System Senior Review Advisory Committee, (4) an evaluation of the design process, (5) a description of the proposed new HR system, and (6) an analysis of the costs and benefits of the proposed system. The Homeland Security Act of 2002 Background On November 25, 2002, President George W. Bush signed Public Law 107-296, the Homeland Security Act, which established DHS. On March 1, 2003, more than 20 organizations and functions previously assigned to other Federal agencies were merged officially into the new Department, making this the most significant reorganization in the executive branch of the Federal Government in more than 50 years. DHS was created with the overriding mission of protecting the Nation against further terrorist attacks. DHS analyzes threats and intelligence, guards our borders and airports, protects our critical infrastructure, coordinates the response of our Nation to emergencies, and implements other security measures. DHS also is committed to enhancing public services such as natural disaster assistance. Authority To Establish a New HR System In creating the new Department, Congress provided a historic opportunity to design a 21st century HR management system that is mission-centered, fair, effective, and flexible. One of the most important features of the Homeland Security Act was the authority granted jointly to the Secretary of Homeland Security and the Director of OPM under 5 U.S.C. 9701(a) to establish a new HR management system within the Department. By law, this authority is to be exercised through the issuance of regulations prescribed jointly by the Secretary and the Director. Through this authority, DHS may establish a modern, flexible HR system to support its mission and improve employee and organizational performance. In granting this authority, Congress gave DHS flexibility to create an HR system that supports the agency's primary mission of protecting Americans from terrorist attack without compromising fundamental employee rights. In so doing, DHS has the authority to waive or modify the following provisions of title 5, United States Code: • The rules governing performance appraisal systems established under chapter 43; • The General Schedule classification system established under chapter 51; • The pay systems for General Schedule employees, Federal Wage System employees, Senior Executive Service members, and certain other employees, as set forth in chapter 53; • The labor relations system established under chapter 71; • The rules governing adverse actions taken under chapter 75; and • The rules governing the appeal of adverse actions and certain other actions under chapter 77. The “section 9701 authority” does not extend to systems or rules established under an authority outside the above-listed title 5 chapters. ( See 5 U.S.C. 9701(b) and (c).) For example, the authority does not reach to DHS employees covered by a basic pay system authorized by an authority outside title 5 ( e.g. , Secret Service Uniformed Division officers, Coast Guard military personnel, Coast Guard Academy faculty members, Transportation Security Administration employees, and employees of the DHS Emergency Preparedness and Response Directorate appointed under the Robert T. Stafford Disaster Relief and Emergency Assistance Act). In some cases, however, laws authorizing separate pay and classification systems for certain DHS employees not covered by title 5 provide considerable administrative discretion for modification of those systems. For example, the Transportation Security Administration (TSA) generally must adopt the system established for Federal Aviation Administration (FAA) employees, but the Administrator of TSA is authorized to modify that system consistent with 49 U.S.C. 40122. Similar discretionary authority applies to the pay systems for Stafford Act employees and to employees of the U.S. Coast Guard Academy. Thus, it is possible for DHS to extend a new pay system designed for employees currently covered by title 5 to TSA employees, Stafford Act employees, and/or employees of the Coast Guard Academy by administrative action. In contrast, the basic pay system established under the DC Code for Secret Service Uniformed Division (SSUD) officers cannot be altered administratively. Legislative action would be required to modify the basic pay system for SSUD officers. Also, the section 9701 authority does not cover systems or rules in other title 5 chapters, such as the employment provisions in chapters 31 and 33, the premium pay provisions in chapter 55, or the retirement systems in chapters 83 and 84. However, section 881 of the Homeland Security Act does require DHS to review the pay and benefits plans applicable to its employees, identify possible disparities, and submit a plan for eliminating any unwarranted disparities. DHS provided a preliminary report to Congress on possible pay and benefits disparities on March 5, 2003, and continues to review these issues. DHS' authority to modify or waive the six chapters of title 5 cited above (and the associated implementing regulations) is subject to certain limitations set forth in section 9701 of title 5 and elsewhere in the Homeland Security Act. These limitations are designed to ensure that fundamental merit system principles and employee protections are preserved. The limitations include the following: • Any new or modified system must be consistent with the merit system principles in 5 U.S.C. 2301. Similarly, protections against prohibited personnel practices ( e.g. , reprisal against whistleblowing or discrimination) remain in force. • The section 9701 regulations may not modify regulations implementing nonwaivable laws. • DHS may not modify the pay system for Executive Schedule officials, even though that system is authorized under chapter 53. • DHS employees remain subject to the aggregate limitation on pay established under 5 U.S.C. 5307, and the annual rate of pay for employees covered by the pay system proposed here may not exceed the rate for level I of the Executive Schedule. • DHS must ensure that employees may organize, bargain collectively, and participate through labor organizations of their own choosing in decisions which affect them, subject to any exclusion from coverage or limitation on negotiability established by law. • Any modification of chapter 77 appeals procedures must be consistent with the requirements of due process, must provide for expeditious handling of DHS cases to the maximum extent practicable, and must make modifications only insofar as those modifications are designed to further the fair, efficient, and expeditious resolution of DHS cases. • DHS and OPM may not issue new regulations under the section 9701 authority after the 5-year period following the 12-month transition period beginning on the effective date of the Homeland Security Act. Since the Act became effective on January 24, 2003, the section 9701 regulatory authority sunsets on January 23, 2009. Any section 9701 regulations issued before that date will remain in effect. Collaboration With Employee Representatives Section 9701 also prescribes certain procedural requirements in connection with the exercise of the joint DHS/OPM regulatory authority. Section 9701(e) sets forth provisions to ensure collaboration with employee representatives in the planning, development, and implementation of any new or modified HR system. These provisions are described in detail in the “Next Steps” section of this Supplementary Information . In addition to the procedural requirements related to consultation with employee representatives, the Homeland Security Act also requires the Secretary and the Director to consult with the Merit Systems Protection Board (MSPB) before issuing regulations modifying the appeals procedures under chapter 77. Designing Options for a New HR System Design Team Membership and Purpose With the enactment of the Homeland Security Act of 2002, DHS Secretary Tom Ridge and OPM Director Kay Coles James made a commitment that the Department's new HR system would be the result of a collaborative and inclusive process involving managers, employees, the Department's largest unions, and a broad array of stakeholders and experts from the Federal sector and private industry. This commitment went far beyond the strict requirements of the Homeland Security Act, as described above, because the Secretary and the Director felt it was critical to involve employees, the unions that represent them, and DHS managers in a direct and meaningful way throughout the entire design process—not just at the end of the process, as required by law. In April 2003, the Secretary and the Director established a DHS/OPM HR Systems Design Team composed of DHS managers and employees, HR experts from DHS and OPM, and professional staff from the agency's three largest Federal employee unions (the American Federation of Government Employees, the National Treasury Employees Union, and the National Association of Agriculture Employees). The 48 team members were assigned to one of two sub-teams: (1) pay, performance, and classification or (2) labor and employee relations. Each sub-team had two co-leaders, one from DHS and one from OPM. The team was not asked to reach agreement on a single solution or the best approach in any of the six areas where DHS was given flexibility. Instead, the team's mission was to develop a wide-ranging set of options for a new HR system at DHS. To help in this effort, the team conducted extensive research into human capital practices in the public and private sectors, talked with many leading human resources experts, heard directly from DHS employees and managers through a series of town hall meetings and focus groups, and gathered insights from a Field Team composed of DHS managers and local union officials who were asked to provide feedback and a front-line perspective to the Design Team. The lessons learned through these outreach and research efforts helped the Design Team develop a total of 52 options that addressed one or more of the six HR areas under consideration. The options were presented to the DHS Human Resource Management Senior Review Advisory Committee on October 20-22, 2003. (The Senior Review Committee and its review of the options are described in detail below.) Guiding Principles During the Design Team's inaugural meeting in April 2003, Secretary Ridge, Director James, and the presidents of the three largest Federal employee unions at DHS discussed the fundamental elements of a model HR system for the Department. They stated, for example, that any new system must be responsive to the mission of the agency, that it must be performance-based, that it must be a 21st century system agile enough to respond to 21st century threats, and that it must be credible and fair. Building on these requirements, the Design Team developed a set of “guiding principles” that were reviewed by the Field Team and approved by the Senior Review Committee. The Senior Review Committee agreed that options for a new HR system must, first and foremost, be mission-centered. The new system must be performance-focused, contemporary, and excellent. It must generate respect and trust; it must be based on the principles of merit and fairness embodied in the statutory merit system principles; and it must comply with all other applicable provisions of law. In addition, the Design Team and the Senior Review Committee agreed that the process for developing HR options must be collaborative, reflecting the input of managerial and non-managerial employees at all levels in DHS and of employee unions. These guiding principles served as the basis for conducting research and outreach activities and, later, for evaluating options for a new HR system. Research and Outreach Activities The research phase of the design process took place from April until July 2003. The pay, performance, and classification (PPC) sub-team focused its work on those chapters of title 5 which cover pay systems, performance management, and classification. The labor relations/employee relations (LR/ER) sub-team focused its research on those chapters of title 5 dealing with labor relations, adverse actions, and appeals. Both sub-teams researched promising and successful practices and systems in their respective areas. Both also sought to understand the reasons for less-than-successful practices and systems. The two sub-teams followed the same methodology in conducting research by identifying sources of information and devising and implementing methods of collecting, categorizing, and storing the information so that it was available to the entire team. In addition, the Design Team collected and analyzed statistical information about the DHS workforce. To understand what employees thought about the current systems, team members also attended DHS town hall meetings and employee focus groups at various locations around the country, as described in greater detail below. The PPC sub-team identified 25 areas of interest and assigned groups to research each area. The areas of interest included the structure of pay ranges, methods for categorizing types of work, and different appraisal and rating methods. The PPC sub-team identified research sources from State and local governments, international organizations, non-profit organizations, other Federal agencies with different pay systems, and private sector organizations. These sources were asked to give presentations to the sub-team or full team, as appropriate. Some sources, who could not meet with the Design Team, were interviewed by team members. The LR/ER sub-team followed similar practices and identified similar groups. However, since Federal sector labor relations are conducted differently than in the private sector and in State and local governments, few outside sources were identified by the LR/ER sub-team as suitable models in the labor relations area. Instead, the LR/ER sub-team identified experts in the field of Federal sector labor relations to be interviewed or to give presentations to the sub-team. There were, however, a number of sources in the private sector and in State and local governments that had innovative or promising processes for handling adverse actions and appeals. Both sub-teams made an effort to ensure that their fact-finding and data-gathering activities were balanced. For instance, in the labor relations area, the LR/ER sub-team identified organizations with strong labor relations programs, as well as those with restricted programs or no labor relations programs at all. The Design Team also conducted a literature review to identify articles, reports, and other publications, which added to the body of information on current HR practices. Altogether, the Design Team contacted and received information from almost 200 individuals. A summary of the research conducted by the Design Team can be found at http://www.epa.gov/edocket. Town Hall Meetings and Focus Groups As noted above, Design Team members, along with senior DHS and OPM officials, attended a series of town hall meetings and focus groups sponsored by DHS. Consistent with the team's collaborative approach, these meetings were planned jointly with employee representatives and were conducted to inform employees about the design process and to solicit employees' perceptions of current HR policies. To ensure that each town hall meeting and focus group meeting was attended by a diverse group of DHS employees, careful consideration was given to participant selection methodology. Diverse representation was sought and achieved by DHS component; geographic location; job/series; bargaining unit and non-bargaining unit status; and age, gender, and ethnicity demographics. Town hall meetings with DHS employees were held between May and July 2003 in El Paso, Texas; Los Angeles, California; Seattle, Washington; Detroit, Michigan; New York, New York; Norfolk, Virginia; Miami, Florida; and Atlanta, Georgia. Senior DHS and OPM officials, including Janet Hale, DHS' Under Secretary for Management, Asa Hutchinson, Under Secretary for Border and Transportation Security, and Mike Brown, Under Secretary for Emergency Preparedness and Response, presided over each town hall meeting, with senior union officials joining them in some locations. Concurrent with the town hall meetings, 54 focus groups—44 with non-supervisory employees and 10 with supervisors—were held in the same 8 locations, as well as in Baltimore and Washington, DC. One of the Baltimore focus groups was composed entirely of blue-collar (“wage grade”) employees. In addition, two focus groups were conducted with DHS HR professionals. In total, more than 2,000 DHS employees participated in these town hall meetings and focus groups. Each focus group was professionally facilitated and included several Design Team members as observers, note takers, and/or technical experts. For each of the six HR areas under review, focus group participants were asked, among other things, what they thought worked well in the current HR systems and what they thought should be changed. The information received from focus group participants was summarized and made a part of the Design Team's research. A comprehensive and detailed report on the focus group process and findings can be found at http://www.epa.gov/edocket . Communications Strategy A comprehensive communications strategy is essential for designing and implementing a new HR system. DHS therefore developed a communications strategy in order to build and sustain high levels of respect and trust among DHS employees—one of the guiding principles for the design process—and to gain insight and support and address the concerns of stakeholders inside and outside of DHS. The objectives of DHS' communications strategy were to (1) raise awareness, disseminate information, and promote a clear understanding of the purpose for designing a new HR system; (2) manage stakeholder expectations and address their concerns; (3) provide opportunities for two-way dialogue between the Design Team and the stakeholders; and (4) generate a flow of timely, accurate, and consistent messages. DHS identified channels for disseminating relevant, timely, and consistent information (including a wide variety of print and electronic media, e-mail, town hall meetings, focus groups, speeches, and briefings) and developed an action plan for communicating with each stakeholder. The Design Team also developed key messages to include in stakeholder communications to reinforce the guiding principles of the DHS HR systems design process. Finally, the Design Team developed mechanisms for providing feedback to ensure an on-going two-way dialogue between the design team and its stakeholders and to evaluate the effectiveness of communication activities in meeting the communication strategy objectives. Outreach to Stakeholders In addition to reaching out to DHS employees and to organizations and individuals of interest to the Design Team as part of its research activity, the Design Team reached out to stakeholders who were thought to be keenly interested in the design of new HR systems for DHS. As part of the communications strategy developed by DHS, the Design Team invited selected stakeholders to participate in two stakeholder briefings held at OPM in late August 2003. The first stakeholder briefing was for Federal employee unions not represented on the Design Team. Seven individuals representing six employee unions attended this briefing. The second stakeholder briefing was for other stakeholders identified by DHS through its communications strategy. About 20 individuals representing 13 organizations or other Federal agencies participated in the second briefing. Attendees at both briefings received background information about the Homeland Security Act, an update on the Design Team's work plan, a presentation on the guiding principles developed by the Design Team, and updates on the research activities of the team, including town hall meetings and focus groups. Attendees were afforded an opportunity to participate in a question-and-answer session following these presentations. Both before and after the stakeholder briefings, the Design Team also responded to requests from other stakeholders, including the General Accounting Office and the Coalition for Effective Change (an umbrella organization consisting of more than 30 Federal management associations), to bring them up to date on the team's activities. Design Team leaders also briefed the staff of key congressional committees regarding the progress of the design process, and officials from DHS and OPM testified before the House Committee on Government Reform's Subcommittee on Civil Service and Agency Organization and the Senate Committee on Governmental Affairs. Options Development Process The options development process was grounded in the extensive research described above. The resulting product was a set of 52 options that cover a broad range of variations on the six areas of focus. The options development process was collaborative and inclusive, with ample opportunity for input from employees and their representatives. To ensure that the options reflected the wide range of views and concerns expressed by various entities, the Design Team did not attempt to reach consensus regarding the merits of the options. Consequently, none of the 52 options presented represents a consensus view of the Design Team. Some of the options integrate approaches to developing new HR systems across two or more of the six subject matter areas under consideration. This is especially true of many of the pay, performance, and classification options, which were intended to illustrate how various pay, performance, and classification system elements might work in combination. The pay, performance, and classification options also tended to cluster around several distinct themes, such as “time-focused” options, “performance-focused” options, and “competency-focused” options. The initial draft options were reviewed by the Field Team to capture feedback prior to finalizing them for submission to the Senior Review Committee. The options presented to the Senior Review Committee do not exhaust all of the possible combinations of subsystems, nor were the options intended to imply that there might not be other possible ways of combining the approaches incorporated in the different options. In addition, the Secretary and the Director remain free to suggest and adopt other ways of combining various design elements to establish a new HR system for DHS. Summary and Review of Options Overview of Pay, Performance Management, and Classification Options The pay, performance, and classification sub-team developed a total of 27 options. The majority of these options attempted to present an integrated set of proposals across the pay, performance management, and classification areas. Among these options, four were traditional, time-focused graded systems under which pay progression would be based primarily on time in grade. Under these options, any general adjustments to the pay structure would be passed on automatically to all employees whose performance is at least acceptable. (The status quo General Schedule option provides across-the-board and locality pay increases to all employees, regardless of performance.) The eight performance-focused options would link individual base pay and bonuses to individual, team, and/or organizational performance. Several of these options do not provide for any automatic pay increases. They usually (but not always) make use of a streamlined classification and paybanding system that groups similar occupations together in “clusters” that contain up to four pay bands each. The four competency-focused options would make use of a set of competencies ( i.e. , knowledge, skills, and abilities) developed for specific positions or occupations as a key component in classifying jobs, setting basic pay, and managing performance. Each of these options would use competencies to some degree, but most also would have a strong performance component, with pay progression based on the acquisition and application of competencies or the evaluation of performance. Among the remaining pay, performance management, and classification options, there was one “rank-in-person” option that would make use of a person-based, rather than position-based, pay and classification system (similar to military or Foreign Service systems) and one collective bargaining option, under which all aspects of pay, performance management, and classification systems would be subject to collective bargaining for all DHS bargaining unit employees. Finally, the pay, performance, and classification sub-team developed five “stand-alone” performance management or classification options and four “plug-and-play” options. A “stand-alone” option is one that provides a self-contained alternative to one of the three major components of an integrated pay/performance management/classification option. For example, a “stand-alone” performance management option could be substituted in its entirety for the performance management portion of an integrated option. A “plug-and-play” option, in contrast, generally addresses only one feature or aspect of a pay/performance management/classification system and cannot be substituted in its entirety for any of the major components of an integrated option. For example, a gainsharing/goalsharing program could be added to an integrated pay/performance management/classification option without altering the basic character of that option Overview of Labor Relations, Adverse Action, and Appeals Options Labor Relations The labor and employee relations sub-team developed seven labor relations options that describe, among other things, the parties' bargaining obligations and how the labor relations program would be administered. One of the options would retain the status quo as codified in chapter 71 of title 5, United States Code, which sets out the rights and obligations of labor and management and authorizes the three-member Federal Labor Relations Authority (FLRA) to administer the labor relations program. Some of the labor relations options proposed to narrow the scope of bargaining and/or place additional limitations on when the duty to bargain would arise. Some also would place time limits on bargaining over term and mid-term agreements. All of the options (except for the status quo) would replace FLRA and the Federal Service Impasses Panel with an internal DHS labor relations panel or administrator that would assume all or some of the functions performed by those two bodies. All of the options also would, for homeland security reasons or to meet operational needs, permit DHS management to act quickly with no bargaining at all or bargaining only after the action is taken. Adverse Actions and Appeals The sub-team developed 16 adverse action and/or appeals options, including a status quo option. The current adverse action process is found in chapter 75 of title 5, U.S. Code, which identifies the procedures for proposing and taking adverse actions against certain categories of employees. The current appeals process is found in chapter 77 of title 5, which identifies the procedure that covered employees must follow to appeal certain adverse actions to MSPB. Some of the adverse action options would provide protections to more employees than are covered today under chapter 75, while others would narrow employee coverage. Similarly, some options would expand the range of matters that would be considered adverse actions ( e.g. , any suspension) while others would narrow that range ( e.g. , adverse actions limited to removals and suspensions of more than 30 days). All options (except the status quo) would replace the two current statutory processes for handling misconduct and poor performance with a single process. Some of the appeals options would provide appeal rights to more employees than have such protections today ( e.g. , appeal rights for probationary employees), while other options provide appeals rights to fewer employees ( e.g. , appeal rights only for employees who complete 2 years or more of Federal service). Some of the options would replace MSPB with an internal DHS panel that would adjudicate adverse action appeals. Some options would raise management's burden or standard of proof required to win an appeal, while other options would lower that burden. There were also two “plug-and-play” LR/ER options. One provides for a bargaining impasse standard that third parties would use to resolve impasse disputes between management and labor, and the other would establish alternative dispute resolution programs to address employee claims arising from adverse actions. Review of Options by Senior Review Committee In June 2003, DHS appointed 13 individuals to the DHS Human Resource Management System Senior Review Advisory Committee, which was chartered as a Federal advisory committee under the Federal Advisory Committee Act (FACA). Members included six top officials from DHS, four top officials from OPM, and the presidents of the three largest employee unions representing DHS employees. In addition, five non-Federal experts in public administration were designated as technical advisors to the Senior Review Committee. A complete listing of Senior Review Committee members and technical advisors follows: Members From the Department of Homeland Security: Janet Hale, Under Secretary for Management (Co-Chair); Robert Bonner, Commissioner of Customs and Border Protection; James Loy, Administrator, Transportation Security Administration; Eduardo Aguirre, Director, Bureau of Citizenship and Immigration Services; J. Michael Dorsey, Chief of Administrative Services; Ralph Basham, Director, United States Secret Service. Members From the Office of Personnel Management: Steven R. Cohen, Senior Advisor for Homeland Security (Co-Chair); Doris L. Hausser, Senior Policy Advisor to the Director and Chief Human Capital Officer; Ronald P. Sanders, Associate Director for Strategic Human Resources Policy; Marta B. Perez, Associate Director for Human Capital Leadership and Merit System Accountability. Members From Unions: John Gage, President, American Federation of Government Employees; Colleen Kelley, President, National Treasury Employees Union; Michael Randall, President, National Association of Agricultural Employees. Technical Advisors: Robert Tobias, Distinguished Adjunct Professor, American University; Patricia Ingraham, Professor of Public Administration, Maxwell School, Syracuse University; Maurice McTigue, Visiting Scholar, Mercatus Center, George Mason University; Bernard Rosen, Distinguished Adjunct Professor in Residence Emeritus, American University; Pete Smith, President and Chief Executive, Private Sector Council. The Senior Review Committee held its first meeting on July 25, 2003, in Washington, DC. The meeting was open to the public and was conducted in accordance with FACA rules and regulations. At this meeting, the Committee heard presentations from Design Team leaders about the team's research strategy and methods, the guiding principles developed by the Design Team, and the options development process. The Committee agreed to a slightly modified version of the guiding principles and an options template developed by the Design Team for the purpose of presenting options in a consistent fashion. The Senior Review Committee held its second and last meeting on October 20-22, 2003, in Washington, DC. Once again, this meeting was open to the public and conducted in accordance with FACA rules and regulations. The purpose of the meeting was to discuss possible options for new HR systems in the areas of pay, performance management, classification, labor relations, adverse actions, and appeals and to express views that would inform decisions to be made subsequently by DHS Secretary Ridge and OPM Director James regarding which systems should be implemented within DHS. The October 2003 meeting, in downtown Washington, DC, was professionally facilitated and well-attended. Following opening statements on the first day, the Committee members and technical advisors received a presentation from Design Team leaders about the pay, performance management, and classification options developed by the Design Team. The facilitator then asked Committee members for their views on the various categories of options presented. The second day followed a similar pattern, with presentations by Design Team leaders on the labor relations, adverse actions, and appeals options developed by the Design Team, followed by a facilitated discussion of those options. On the final day of the meeting, Committee members and technical advisors were afforded an opportunity to summarize their views for the benefit of the Secretary and the Director. Over the course of this 3-day meeting, discussion and debate centered on the best design for DHS' HR system. Several topics evoked wide-ranging perspectives, but core areas and principles related to system design and the design process drew a great deal of consensus among the members. For example, the members agreed that— • Above all else, any new HR system for DHS must be mission-focused, and its design must facilitate mission performance; • the future system should be fair, transparent, and credible; • establishing broad general principles as a foundation for the future system will be important to ensure integration, but HR options might have to be tailored to specific parts of DHS; • employee and union participation, as well as effective communication, will be critical to creating, implementing, and operating a successful HR management system; • creating a new system will take time and require a substantial investment of resources, including training and development, particularly for managers who must implement the changes in a manner that is seen by employees and the public as fair and credible. Discussion of the various Design Team options revealed a wide range of opinions, with some options evoking greater discussion than others. A comprehensive summary of the October Senior Review Committee meeting can be found at http://www.epa.gov/edocket. Summary of Public Comments on Options Comments regarding the options discussed at the October Senior Review Committee meeting were received from a total of 16 organizations and individuals, including 5 employee organizations and 1 organization representing senior executives. Some of these comments were presented orally during the public comment period on October 21. Other comments were submitted to the Senior Review Committee in writing. The comments reflected a range of views that included strong support for flexibility, as well as some concern for preserving due process for employees. It was suggested that inequities should not be permitted under the guise of national security and that it is not necessary to “fix” systems that are working well. At the same time, some comments stressed that DHS would need considerable HR flexibility to carry out its mission efficiently. Comments also addressed the importance of recognizing and rewarding excellence. Some commenters expressed trepidation about implementing a pay-for-performance system, noting a potential for favoritism which can discourage teamwork. Others expressed support for the concept, while urging that such a system be adequately funded and ample training be provided. The importance of good communication with employees throughout the design and implementation of the new system was also noted. Evaluation of Design Process The creation of DHS is the largest undertaking of its kind since the creation of the Department of Defense in the late 1940s. The success of merging more than 20 agency components and more than 180,000 employees into a single organization with a clear mission and focus will depend to a considerable degree on how effectively and efficiently the Department addresses its human capital issues. Accordingly, the General Accounting Office (GAO) evaluated the DHS/OPM HR systems design process. GAO's findings and recommendations are found in GAO report #GAO-03-1099 (September 2003). The report praises the collaborative and inclusive process developed for designing new DHS HR systems and for “reflecting important elements of effective transformation.” Specifically, the report indicates that the design process incorporated the following essential ingredients to successful transformation: • Leadership—on-going commitment of both DHS and OPM leadership to stimulate and support the design effort. • Key Principles—the guiding principles of the design process reflected support for the mission and the employees of the new department, protection of basic merit system principles, and the commitment to incorporate employee accountability for performance. • Employee Involvement—collaboration with employee representatives and employee involvement through the focus group interviews, town hall meetings, and Field Team participation. The report further states that the analysis of DHS' effort to design a human capital system “can be particularly instructive in light of legislative requests for agency-specific human capital flexibilities at the Department of Defense and the National Aeronautics and Space Administration.” The report also includes some valuable recommendations for ensuring effective implementation of the new system. These recommendations include effective communication characterized by two-way dialogue, integration of the human capital policy into the strategic plan and programmatic goals, and continued employee feedback. Summary of Proposed HR System for DHS The Department of Homeland Security was created in recognition of the paramount responsibility to safeguard the American people from terrorist attack and other threats to homeland security. Congress stressed that any HR system established by DHS and OPM must be “flexible” and “contemporary” (5 U.S.C. 9701(b)(1) and (2)). The Secretary of Homeland Security and the Director of OPM are determined to create a new HR system for DHS that is, first and foremost, mission-centered. In other words, the most important objective of the new system must be to serve and advance the Department's critical homeland security mission. At the same time, DHS and OPM remain committed to ensuring that the new DHS HR system generates respect and trust and that it is based on the principles of merit and fairness embodied in the statutory merit system principles. Secretary Ridge and Director James have determined that the best way to achieve these goals is to create a system that is performance-focused, flexible, and contemporary, since these qualities are critical to freeing the DHS workforce to focus on the Department's mission. For example— • The proposal to establish a pay-for-performance system for DHS is designed to ensure that employees have a clear understanding of their expected performance and to reinforce and reward high-performing employees who advance and support the Department's mission by, for example, guarding our Nation's borders, protecting our Nation's critical infrastructure, and enhancing the security of air travel. • Providing for greater flexibility in collective bargaining within DHS allows the Department to take action against terrorist threats, secure the Nation's borders and ports of entry, and meet other critical mission needs without unnecessary delay. We have narrowed the duty to bargain over core management rights where flexibility and swift implementation are most critical to achieving the mission, while preserving the right to bargain over important HR polices. • Authorizing the Secretary to designate offenses that merit mandatory removal and establishing a special independent DHS panel to review such actions is designed to recognize both the harm certain acts of misconduct can inflict on the Department's critical mission and to permit DHS to move quickly to address and resolve very serious misconduct. • The adoption of a single, lower standard of proof (“substantial evidence” rather than “preponderance of the evidence”) for all adverse actions, whether based on performance or conduct, is designed to recognize the appropriate deference that should be granted to DHS officials responsible for overseeing the Department's critical operations and to ensure consistency in the review of all adverse actions involving DHS employees, thus reinforcing the single overarching mission of the new Department. • The streamlined process for adverse action appeals and the creation of a DHS Labor Relations Board will balance employee rights with critical mission needs. As explained previously, the Secretary of Homeland Security and the Director of OPM are authorized by the Homeland Security Act of 2002 to waive specified chapters of title 5, United States Code, to create a new HR system for DHS. The Secretary and the Director have reviewed and given full consideration to all of the options developed by the DHS/OPM HR Systems Design Team. In addition, they have given due weight to the views and opinions expressed by DHS employees in the town hall meetings and focus groups hosted by DHS from May to July 2003. They have given special consideration to the thoughtful review of the options conducted by the DHS HRMS Senior Review Advisory Committee in October 2003 and to all public comments received in connection with that meeting. Finally, as required by law, they have consulted with MSPB regarding possible changes in the appeals procedures established under chapter 77 of title 5, United States Code. They also consulted with many other Federal officials and external stakeholders. The proposed regulations reflect authorities that are extended to the Secretary and the Director through January 23, 2009. During that period, DHS and OPM are committed to conducting an ongoing evaluation of the HR system described here—overall, as well as with regard to its separate elements—to ensure that it is achieving its intended purposes. Further, DHS and OPM are committed to making appropriate modifications to that system as circumstances warrant, particularly with respect to any unanticipated consequences that may emerge during its implementation. To that end, these regulations will be issued in interim final form, so as to provide the Secretary and the Director with sufficient flexibility (subject to appropriate consultation with stakeholders) to make additional changes to the HR system that may result from initial evaluations. Subsequent evaluations may result in further changes in the regulations. The proposed regulations in part 9701 of title 5, Code of Federal Regulations, are organized into six subparts that correspond to the specific chapters in title 5, United States Code, which DHS and OPM are authorized to waive, plus an opening subpart (subpart A) that sets forth general provisions applicable throughout part 9701. Subpart B sets forth a new job evaluation (classification) system for DHS that waives chapter 51 of title 5 for most purposes. Subpart C sets forth a new pay and pay administration system that waives substantial portions of chapter 53. Subpart D sets forth new performance management provisions that replace chapter 43. Subpart E sets forth new labor-management relations provisions that replace chapter 71. Subpart F sets forth new rules for adverse actions that replace the rules set forth in chapter 75. And subpart G sets forth new rules governing appeals that replace the rules set forth in chapter 77. General Provisions—Subpart A Subpart A of the proposed regulations sets forth their purpose, establishes general provisions governing coverage under the new DHS HR system, and defines terms that are used throughout the new part 9701. Part 9701 will apply to DHS employees who are identified under the regulations as eligible for coverage and who are approved for coverage, as of a specified date, by the Secretary of Homeland Security. This will enable DHS to phase in coverage of particular groups of employees or components of the Department. Subpart A also allows DHS to issue internal Departmental regulations that further define the design characteristics of the new HR system. (See the “Next Steps” section at the end of this Supplementary Information .) Finally, subpart A clarifies the relationship of these regulations to other provisions of law and regulation outside those that are being waived with respect to DHS. A New Job Evaluation, Pay, and Performance Management System for DHS DHS and OPM have determined that a performance-focused job evaluation and pay system best meets the critical operations and mission-focused needs of DHS and that changes are needed in the current performance management provisions to support a new, performance-focused job evaluation and pay system. DHS and OPM have concluded that the current GS classification and pay system, as a whole, does not focus sufficiently on creating and sustaining a high performance culture within DHS and that other “time-focused” options considered during the design process rely too much on longevity and not enough on recognizing and rewarding high performance at all levels of the workforce. DHS and OPM found some aspects of “competency-focused” options to be attractive, particularly for employees early in their careers, who are still acquiring the competencies, skills, and knowledge needed to make significant contributions to the mission of DHS. DHS and OPM agree that a new job evaluation and pay system should focus primarily on encouraging the development of a high performance culture. All DHS employees currently covered by the job evaluation and pay systems established under chapter 51 or 53 of title 5, United States Code, are eligible for coverage under this job evaluation and pay system at the discretion of DHS, in coordination with OPM, except for (1) Executive Schedule officials (who, by law, remain covered by subchapter II of chapter 53) and (2) administrative law judges paid under 5 U.S.C. 5372. At present, DHS plans to cover only GS employees and employees in senior-level (SL) and scientific or professional (ST) positions. SES members employed by DHS will be eligible for coverage under the new DHS pay system. However, the proposed regulations provide that any new pay system covering SES members must be consistent with the performance-based features of the new Governmentwide SES pay-for-performance system authorized by section 1125 of the National Defense Authorization Act for Fiscal Year 2004 (Public Law 108-136, November 24, 2003). If DHS wishes to establish an SES pay system that varies substantially from the new Governmentwide SES pay-for-performance system, DHS and OPM will issue joint authorizing regulations consistent with all of the requirements of the Homeland Security Act, as set forth in 5 U.S.C. 9701. In addition, DHS and OPM will involve SES members and other interested parties in the design and implementation of any new pay system for SES members employed by DHS. As explained in the “Background” section, above, the new job evaluation and pay system proposed in these regulations cannot apply directly to DHS employees covered by a basic pay system authorized by an authority outside title 5. However, it is possible for DHS to extend this job evaluation and pay system by administrative action to Transportation Security Administration (TSA), Stafford Act, Coast Guard Academy, and other similarly situated employees under authorities provided to the Secretary or other DHS officials. The transitional provisions in subparts B and C include a special authority to deal with the possibility that DHS may transfer Federal Air Marshal Service positions from TSA to another DHS component before a new DHS job evaluation and pay system is in place. This special authority allows DHS to establish a temporary job evaluation and pay system for any such transferred Federal Air Marshal Service positions that parallels the system established for TSA employees. Absent this authority, these transferred positions generally would be covered by the GS classification and pay system. Thus, without the transitional authority in subparts B and C, this would mean that Air Marshals could be moved from the TSA job evaluation and pay system to the GS system, and then to the new DHS system, all in a relatively short period of time. This would be far too disruptive to these critical employees, and the proposed regulations minimize this disruption. The regulations authorize DHS to modify the TSA-parallel system after coordination with OPM. For example, DHS may adjust the rate ranges to be more consistent with the ranges that apply to other employees in the same DHS component. By necessity and design, the proposed regulations on job evaluation, pay, and performance management provide considerable discretion to design many of the detailed features of the new system, by DHS at its sole and exclusive discretion and/or in coordination with OPM. What follows, therefore, is intended to provide a general description of the system DHS and OPM will establish under the authority provided by 5 U.S.C. 9701 and the regulations set forth in the proposed 5 CFR part 9701. DHS is committed to a high degree of employee involvement in developing the details of the new job evaluation, pay, and performance management system. Throughout the development and implementation of the new DHS job evaluation, pay, and performance management system, DHS will coordinate with OPM to ensure the flexibilities afforded by the Homeland Security Act are exercised in a manner that takes Governmentwide impact into account. This coordination role is consistent with OPM's institutional responsibility, as codified in 5 U.S.C. chapter 11 and Executive Order 13197 of January 18, 2001, to provide Governmentwide oversight in human resources management programs and practices. Job Evaluation (Classification)—Subpart B Subpart B will provide DHS with the authority to replace the current 15-grade structure of the GS classification and qualifications system with a new method of evaluating or classifying jobs to determine their relative value to the organization by grouping them into occupational categories and levels of work for pay and other related purposes. Under this new “job evaluation” system, DHS will have the authority to establish qualifications for positions and to assign occupations and positions to broad occupational “clusters” and pay levels (or “bands”). (Note: “Job evaluation” is a common term of art used among HR professionals. It is separate and distinct from the evaluation or appraisal of an employee's performance, which is addressed as part of the performance management system established under subpart D of the proposed regulations.) In coordination with OPM, DHS will establish broad occupational clusters by grouping occupations and positions that are similar in terms of type of work, mission, developmental/career paths, competencies, and/or skill sets. These occupational clusters will serve as the basic framework for the DHS job evaluation system. DHS may elect to phase in the coverage of specific categories of employees or occupations under the new job evaluation and pay system established under these proposed regulations. Within each occupational cluster, DHS (in coordination with OPM) will establish broad salary ranges, commonly referred to as “bands.” DHS may use OPM-approved occupational series and titles to identify and assign positions to a particular cluster and band. Occupational clusters typically will include the following bands, each with progressively higher pay ranges: • Entry/Developmental—Employees in positions assigned to this band focus on gaining the competencies and skills needed to perform successfully at the full performance level. • Full Performance—Employees in positions assigned to this band have completed all necessary entry-level training and/or developmental activities and have demonstrated they are capable of performing the full range of non-supervisory work required for positions in that occupation. Employees assigned to positions in this band will be evaluated primarily on their contributions to the mission of DHS. • Senior Expert—Positions assigned to this band will be reserved for a relatively small number of non-supervisory employees who possess an extraordinary level of technical knowledge or expertise upon which DHS relies for the accomplishment of critical mission goals and objectives. Typically, entry will be controlled and/or competitive. • Supervisory—Positions assigned to this band will be reserved primarily for first-level supervisors of employees in the same occupational cluster. Typically, entry will be competitive. This typical structure will provide a clearly-defined career path for each occupation within a cluster. DHS also will establish a separate cluster for higher-level managers. The accompanying table (table 1) illustrates the occupational cluster structure concept. EP20FE04.011 Employees will be permitted to request reconsideration as to whether their job has been placed in the appropriate series or whether their job is covered by the system itself. An employee's assignment to a particular cluster or band within a cluster will not be subject to this reconsideration process. The new job evaluation system for DHS will result in a streamlined method of evaluating jobs that no longer relies on lengthy classification standards and position descriptions or requires fine distinctions among closely related levels of work, as is now required under the GS classification system, without compromising internal equity and the merit system principle of equal pay for work of equal value. In addition, the system described here, together with the new DHS pay system described below, will provide DHS with greater flexibility to adapt the Department's job and pay structure to meet present and future DHS mission requirements. Pay and Pay Administration—Subpart C DHS, in coordination with OPM, will set the minimum and maximum rates for each band in each occupational cluster based on factors such as labor market rates, recruitment and retention information, mission requirements, operational needs, and overall budgetary constraints. The bands will have open pay ranges, with no fixed step rates. OPM will manage cross-agency consistency, competition, and movement within the Federal Government. Pay adjustments under the new system will fall into three general categories: market-related adjustments comprising annual rate range adjustments and locality pay supplements, annual performance-based pay increases, and other individual adjustments. In keeping with the desire of the Secretary and the Director to achieve and sustain a culture of high performance, the proposed regulations provide that these pay adjustments will be provided only to employees who meet or exceed performance expectations. Under criteria to be developed by DHS, an employee whose performance is unacceptable and who does not receive annual market adjustments may have those adjustments granted prospectively if performance improves to the fully successful level or better. Annual rate range adjustments and locality pay supplements will be determined by DHS, considering mission requirements, labor market conditions, availability of funds, pay adjustments received by employees in other Federal agencies, and other relevant factors. Annual rate range adjustments and locality pay supplements may differ by occupational cluster or band. DHS will determine locality pay areas in coordination with OPM. DHS will determine the timing of these annual pay adjustments. If DHS finds that recruitment and/or retention efforts are, or are likely to become, significantly handicapped for particular subcategories of employees within a band or cluster because of insufficient pay, DHS may, in coordination with OPM, establish special basic pay supplements that provide higher pay levels for those subcategories of employees. Employees also will receive annual performance-based pay increases. For employees in a Full Performance or higher band, this pay increase will be based on their rating of record. The performance-based pay increase for a given rating of record will be expressed as a dollar amount or percentage of basic pay, and that amount or percentage will be the same for all employees assigned to a given “performance pay pool.” A performance pay pool consists of the money allocated for performance-based pay increases for a defined group of employees. Generally speaking, performance pay pools will be established by occupational cluster and by band within each cluster, but may also be further divided by organizational unit and/or location. In response to concerns expressed by employees and employee representatives during the DHS HR system design process, managers will not have complete discretion regarding the amount of performance-based pay increases. Instead, performance-based pay increases will be a function of the amount of money in the performance pay pool, the relative point value placed on performance ratings, and the distribution of performance ratings within that performance pay pool. The relative point value of a performance rating will be established in advance through DHS implementing regulations or instructions. A performance-based pay increase may be calculated as a dollar amount or as a percentage of basic pay. For example, consider a group of 100 employees for whom the performance pay pool is determined to be $84,390. If 30 employees receive a “fully successful” rating valued at 1 point, 46 employees receive an “exceeds fully successful” rating valued at 2 points, and 24 employees receive an “outstanding” rating valued at 3 points, then the total number of points for this group would be 194: (30 × 1) + (46 × 2) + (24 × 3) = 194. Therefore, the value of 1 point is $435 ($84,390÷194 = $435). In this example, a “fully successful” rating would result in a $435 performance-based pay increase ($435 × 1), an “exceeds fully successful” rating would result in an $870 pay increase ($435 × 2), and an “outstanding” rating would result in a $1,305 pay increase ($435 × 3). A similar calculation could be made to determine the amount of performance-based pay increases in terms of a percentage of salary. Under this method, employees who receive a specific rating of record would receive the same percentage increase in basic pay, though the actual dollar amount of that increase would vary in proportion to each employee's rate of basic pay. The proposed regulations allow DHS to adopt either of these methods. In addition, DHS could adopt different point values for ratings of record than those used in this example. If a performance-based pay increase would cause an employee's salary to exceed the band maximum, the proposed regulations allow DHS to grant a lump-sum payment in lieu of that portion of the pay increase that otherwise would exceed the band maximum. In addition, the proposed regulations allow DHS to establish a “control point” within a band, beyond which basic pay increases may be granted only for meeting criteria established by DHS, such as an “outstanding” performance rating. If a performance-based pay increase would cause an employee's salary to exceed such a control point, DHS could grant a lump-sum payment in lieu of that portion of the pay increase that otherwise would exceed the control point. Lump-sum payments in lieu of a basic pay increase generally will be granted at the same time as performance-based pay increases. Employees in a Senior Expert band generally will move through the band range by means of the performance-based pay increases described above. In addition to those pay increases, however, DHS reserves the discretion to grant additional pay increases to those employees having specified mission-critical skills or those who make exceptional contributions to the DHS mission. Such additional payments will be limited to employees in the Senior Expert band and will not affect the performance pay pool associated with that band. Employees in an Entry/Developmental band will receive pay adjustments as they acquire the competencies, skills, and knowledge necessary to advance to the target Full Performance band. The training program and competencies required for a given occupation will not change as a result of the new DHS pay system. Under the new system, DHS will be able to advance an employee through the Entry/Developmental band to the target Full Performance band without regard to the limits and constraints of the GS system, such as time-in-grade restrictions and rigid salary setting rules. Other individual pay adjustments may be granted by DHS. These payments will not be considered part of basic pay. They include special skills payments for specializations for which the incumbent is trained and ready to perform at all times, such as proficiency in foreign languages or dog-handling; special assignment payments for assignments of greater difficulty or complexity within the same cluster and band; and special staffing payments to address recruitment and retention difficulties in particular occupations and/or locations. Some of these payments may require that employees enter into a service agreement as a condition of receiving additional pay. Promotion pay increases (from a lower band to a higher band in the same cluster or to a higher band in a different cluster) generally will be fixed at 8 percent of the employee's rate of basic pay or the amount necessary to reach the minimum rate of the higher band, whichever is greater. (This amount is roughly equivalent to the value of a promotion to a higher grade within the GS system.) As with the current system, in the case of a demotion to a lower band for performance or conduct reasons, pay may be set at any lower rate within the lower band at management's discretion. Where pay retention is applicable ( e.g. , following a reduction in force), the employee's pay will be frozen until such time as the maximum rate of the applicable band catches up to the frozen rate. Upon implementation of the new system, employees will be converted based on their official position of record. Employees on temporary promotions will be returned to their official position of record prior to conversion. GS employees will be converted at their current rate of basic pay, including any locality payment, adjusted on a one-time, pro-rata basis for the time spent towards their next within-grade increase. Employees in career-ladder positions below the full performance level generally will be placed in the Entry/Developmental band in the appropriate cluster. The new DHS pay system will provide DHS with an enhanced ability to establish and adjust overall pay levels in keeping with changes in national and local labor markets. It is designed to adjust individual pay levels based on the acquisition and assessment of competencies, skills, and knowledge for employees below the Full Performance band and on the basis of performance or contribution to mission for employees in the Full Performance band or higher. Above all, the new DHS pay system will be capable of adapting to changing circumstances and mission requirements. Performance Management—Subpart D DHS and OPM have decided to waive the provisions of chapter 43 of title 5, United States Code, in order to design a performance management system that will complement and support the Department's proposed performance-based pay system described above. The proposed system will also ensure greater employee accountability with respect to individual performance expectations, as well as organizational results. Over the past 25 years, legal interpretations of the current chapter 43 have produced a system that is procedurally complex, inflexible, and paper-intensive, requiring a manager to set an employee's specific written elements and standards at the beginning of an annual appraisal period. In so doing, the manager must anticipate the myriad work assignments (each potentially with its own unique performance expectations) the employee will receive during the course of that appraisal period. These static, often generic standards make it difficult for managers to adjust performance requirements and expectations in response to the Department's rapidly changing work environment, hold individual employees accountable for those general and/or assignment-specific work requirements and expectations, and make meaningful distinctions in employee performance as they accomplish those assignments. The proposed regulations are designed to address these deficiencies. They continue to require that managers establish and communicate performance expectations to employees; however, they no longer require that this be accomplished exclusively through written performance elements and standards set at the beginning of the appraisal period. Instead, they give managers the option of establishing and communicating performance expectations during the course of the appraisal period through specific work assignments or other means (including standard operating procedures, organizational directives, manuals, and other generally established job requirements that apply to employees in a particular occupation and/or unit). However, managers may also continue to use performance plans, elements, and standards. By providing managers more realistic alternatives for setting employee expectations and assessing their performance against those expectations, the Department will be better able to hold its employees accountable and to recognize and reward those who exceed expectations. By the same token, managers will also be held accountable for clearly and effectively communicating those expectations, giving employees feedback regarding their performance in relation to those expectations, making meaningful performance distinctions in support of the Department's new performance-based pay system, and identifying and addressing unacceptable performance. Finally, in order to enable managers to make meaningful distinctions in performance, the regulations provide for a single level of unacceptable performance, a fully successful level, and at least one level above fully successful. The regulations do not permit two-level (“pass/fail”) ratings for employees above the entry/developmental level, nor do they allow any type of rating quotas or forced ratings distribution. The regulations also provide for DHS to appoint Performance Review Boards to provide oversight and ensure consistent application of the performance management system. Further, the regulations provide managers with a broad range of options for dealing with poor performance, including remedial training, an improvement period, reassignment, verbal warnings, letters of counseling, written reprimands, and/or adverse actions as defined in subpart F of the regulations. Adverse actions will include the reduction of an employee's pay within a band, giving managers another means of dealing with poor performance, short of demotion or removal. The proposed regulations also streamline and simplify the procedures involved in taking an adverse action without compromising an employee's right to due process (described below and in subpart F). In this regard, the proposed regulations require a manager to take the nature and consequences of the poor performance into account in deciding among these options. As provided in subpart C of the proposed regulations, performance ratings of record will be used to make individual pay adjustments under the new DHS pay system. In recognition of these pay consequences, the regulations permit employees to grieve their ratings of record. Non-bargaining unit employees may grieve such ratings through the Department's internal administrative grievance procedure; bargaining unit employees will have access to negotiated grievance procedures. In the latter case, an exclusive representative may seek arbitration of an appraisal grievance, but the rating of record will be sustained unless the union is able to prove that it was arbitrary or capricious. Either party may file exceptions to an arbitration award with the DHS Labor Relations Board established under subpart E of these proposed regulations. Generally, DHS employees who are currently covered by chapter 43 of title 5, U.S. Code, are eligible for coverage under the new performance management provisions in subpart D of the proposed regulations. Therefore, administrative law judges and Presidential appointees will not be eligible for coverage, because they are currently excluded from chapter 43 of title 5. However, certain categories of employees are currently excluded from chapter 43 by OPM administrative action, as authorized by 5 CFR 430.202(d), such as those hired under the Stafford Act; these employees are eligible for coverage under the new DHS performance management provisions. DHS will decide which of those categories of otherwise eligible employees will be covered by the Department's new performance management system or systems. The proposed regulations also allow DHS to develop, implement, and administer performance management systems tailored to specific organizations and/or categories of employees (for example, in a particular occupational cluster). These proposed regulations lay the foundation for a performance management system that is fair, credible, and transparent, and that holds employees and managers accountable for results. However, a performance management system is only as effective as its implementation and administration. To that end, DHS is committed to providing its employees and managers with extensive training on the new performance management system and its relationship to other HR policies and programs, as well as on effective performance management generally. A New Labor Relations, Adverse Actions, and Appeals System for DHS Labor-Management Relations—Subpart E As noted previously, the Department of Homeland Security was created in recognition of the paramount responsibility to safeguard the American people from terrorist attack and other threats to homeland security. In enacting the Homeland Security Act, Congress stressed that any HR system established by DHS and OPM must be “flexible” and “contemporary,” enabling a swift response to the ever-evolving threats to our homeland. The labor-management regulations in this part are designed to meet these compelling concerns. 1. Purpose DHS has a unique mission not duplicated elsewhere in the Federal Government. When Congress passed the Homeland Security Act and created DHS, it could have relied upon the current labor-management relations statute at 5 U.S.C. chapter 71 with respect to the Department's labor relations obligations. However, Congress chose not to maintain the status quo and gave the Secretary and the Director of OPM clear authority to waive or modify the provisions of chapter 71. ( See 5 U.S.C. 9701(c).) In so doing, Congress provided DHS the option of exploring and implementing new and innovative human resources management systems that would be more responsive to the unique and critical mission of DHS. ( See 5 U.S.C. 9701(a) and (c).) These regulations define the purpose of the labor relations system. They implement the requirements of 5 U.S.C. 9701(b) by ensuring the right of employees to organize, bargain collectively, and participate through labor organizations of their own choosing in decisions which affect them, subject to the limitations on negotiability established in law, including the authority that Congress delegated to OPM and DHS to promulgate these regulations. Chapter 71 of title 5, United States Code, enacted in 1978, recognizes that the “special requirements and needs of the Government” demand special procedures and that its provisions must be interpreted in a manner consistent with the requirement of “an effective and efficient Government.” These regulations state that every provision of this subpart must be interpreted in a way that recognizes the critical mission of the Department, and each must be interpreted to promote the swift, flexible, effective, and efficient day-to-day accomplishment of that mission as defined by the Secretary. 2. Definitions Unless otherwise provided, these regulations leave intact many of the definitions contained in chapter 71 of title 5. The regulations adopt the following terms and their associated definitions from that chapter and apply them to DHS: “employee,” “labor organization,” “exclusive representative,” “supervisor,” “collective bargaining,” and “management official.” The term “agency,” as referenced in chapter 71, will be replaced by the term “Department” and refers to the Department of Homeland Security. The term “components” applies to the major entities under the Department, e.g. , Customs and Border Protection. The regulations revise other definitions from chapter 71 as they would apply to DHS. The term “conditions of employment” has been redefined to exclude matters specifically provided for by Department-wide personnel regulations and to exclude pay, pay adjustments, and job evaluation under subparts B and C. The term “grievance” has been modified somewhat to mean any claimed violation, misinterpretation, or misapplication of any law, rule, or regulation only if the law, rule, or regulation was issued for the purpose of affecting the working conditions of employees—not one that does so indirectly or incidentally. To this extent, DHS and OPM adopt the D.C. Circuit's interpretation of what constitutes a “grievance.” Chapter 71 of title 5, U.S. Code, defines employees who are excluded from coverage in a bargaining unit. In addition to managers and supervisors, “confidential employees” are excluded from coverage under chapter 71 if the employee acts in a confidential capacity with respect to an individual who “formulates or effectuates management policies in the field of labor relations.” We believe this definition is drawn too narrowly. There are many management officials who do not formulate labor relations policy but who have labor-management relations responsibilities. For example, officials who resolve grievances at the second or third step of a negotiated grievance procedure or who serve on negotiating teams or help decide the position management takes in negotiating labor agreements. We propose to exclude from coverage any employees who work for such managers in a confidential capacity because of the sensitive nature of the information they might be privy to and the potential for real or perceived conflicts of interest. 3. Administration The Department will create a Homeland Security Labor Relations Board (Board) composed of three external members appointed to fixed terms. These three members will be appointed by the Secretary, and one member will be nominated by the Chair of the Federal Labor Relations Authority (FLRA) from among the current members of FLRA. Members will be chosen not only for their background in labor-management relations, but also for their knowledge of the DHS mission and their leadership experience in comparable organizations. The Board must interpret the regulations in subpart E and related decisions and policies in a way that recognizes the critical mission of the Department and the need for flexibility. The Board will issue decisions in the following types of cases: bargaining unit determinations; unfair labor practice claims arising out of the duty to bargain; information request disputes; bargaining impasses and negotiability disputes; and exceptions to arbitration awards. In order to maintain the integrity of the Governmentwide labor relations program and preserve DHS resources, FLRA will continue to supervise and conduct representation elections and retain jurisdiction over the processing of unfair labor practice charges concerning the rights and obligations of individual employees and labor organizations ( i.e. , 5 U.S.C. 7116 (a)(1)-(4) and (b)(1)-(4)). In evaluating the merits of a separate Homeland Security Labor Relations Board that would largely replace FLRA, DHS and OPM put a high premium on the Board members' understanding of and appreciation for the unique challenges the Department faces in carrying out its homeland security mission. Given its responsibilities to administer a Governmentwide labor relations program for over 1 million Federal employees, FLRA is less likely than an independent DHS Labor Relations Board to develop the mission-focus and homeland security expertise that the Department and its unions will need, nor will it be as able to dedicate its resources to prioritize DHS cases. However, to ensure independence and impartiality, the DHS Labor Relations Board will not report to the Secretary; rather, its members will be appointed to fixed terms and subject to removal only for inefficiency, neglect of duty, or malfeasance. DHS and OPM also gave great weight to the benefits of a unified, expeditious process to resolve bargaining issues and disputes. Under the current system, a bargaining dispute can be investigated and pursued by FLRA's Office of General Counsel to determine whether there was an obligation to bargain; by FLRA itself to determine whether the matter is within the scope of bargaining; and by the Federal Service Impasses Panel to resolve the bargaining issue on its merits. This division of critical adjudicatory functions causes excessive delays and repeated litigation and contributes significantly to the cost of collective bargaining. OPM and DHS concluded that there are significant advantages to be gained from “one-stop shopping” to resolve bargaining disputes. In sum, we determined that the Department should establish a separate Labor Relations Board focused on the DHS mission but completely independent. In addition, we concluded that the Board should oversee a unified dispute resolution process that will decide bargaining disputes more efficiently and effectively than is possible today under FLRA and chapter 71. However, the fragmentation and overlapping jurisdiction that makes resolving bargaining disputes so complex and protracted is not a problem in the way employee appeals are adjudicated by MSPB. As a single forum with a unified statutory process, MSPB already employs the “one-stop shop” approach to adverse action appeals that OPM and DHS will apply to bargaining disputes. That is why OPM and DHS are creating the DHS Labor Relations Board to resolve bargaining matters while preserving MSPB for deciding most employee appeals, subject to streamlined rules and new substantive standards, discussed more fully in the “Appeals” section of this Supplementary Information. OPM and DHS also concluded that an understanding of the Department's mission is essential to resolving bargaining disputes, which involve general conditions of employment affecting most or all bargaining unit employees. Except for offenses designated as “mandatory removal offenses” under subpart G, which will be resolved by an independent DHS panel, an appreciation for the Department's unique mission, while important, is not as essential for resolving individual employee appeals to MSPB. Both the DHS Labor Relations Board and FLRA must interpret the regulations in subpart E in a way that promotes the swift, flexible, effective, and efficient day-to-day accomplishment of the Department's mission as defined by the Secretary. In addition, the Board is authorized to promulgate its own operating procedures and issue advisory opinions on important issues of law. These opinions will help both labor and management understand how key provisions of the regulations will be interpreted without the time and expense of years of litigation. Matters that come before the DHS Labor Relations Board may be reviewed de novo, which means that the Board will have the discretion to reevaluate the evidence presented by the record and reach its own independent conclusions with respect to the matters at issue. Under chapter 71, FLRA reviews issues of law de novo. The Board will have the same authority, but it may also employ a de novo review to factual findings and contract interpretation. Given the inherently executive branch nature of decisions relating to homeland security and the Department's unique responsibilities in this area, the Board is authorized to conduct a thorough review of all matters, including factual determinations by its adjudicators or arbitrators, to safeguard the Department's homeland security mission. Under 5 U.S.C. 7123, the United States courts of appeals have jurisdiction over appeals filed from final orders of FLRA, with limited exceptions. Similar judicial review in the U.S. Court of Appeals for the Federal Circuit exists for MSPB pursuant to 5 U.S.C. 7703. Ideally, these regulations would have applied the same standards and procedures as set forth in 5 U.S.C. 7123 and 7703 to the decisions of the DHS Labor Relations Board and the DHS Panel that will decide “mandatory removal offenses.” This would have been the most efficient way in which to accord the right of judicial review to individuals adversely affected or aggrieved by a decision of the Board or the Panel. However, DHS and OPM currently lack the statutory authority to confer jurisdiction to hear such appeals in the United States courts of appeals or the U.S. Court of Appeals for the Federal Circuit. In light of these issues, the proposed regulatory language is silent on judicial review of decisions of the Board or the Panel. DHS and OPM seek comments on available options, including (1) remaining silent on judicial review and (2) retaining the current statutory judicial review provisions by permitting FLRA and MSPB to review decisions of the Board and the Panel. Option 1. Under this option, DHS and OPM would not include appeal language in the regulation addressing any form of judicial review, but would allow existing governing legal principles to determine the circumstances under which there would be judicial review. Option 2. Under 5 U.S.C. 7123, the United States courts of appeals have jurisdiction over appeals filed from final orders of FLRA, with limited exceptions. Under this option the final regulations would provide that Board decisions are appealable to the three-member FLRA but with a deferential standard of review appropriate for an appellate procedure of this type. FLRA would be required to decide an appeal from a final decision of the Board within 20 days. All decisions of FLRA, including those decisions on appeals from the Board, would be subject to judicial review in accordance with 5 U.S.C. 7123. Under this option, judicial deference would be given to the decisions of the Board because the Board is charged by regulation with interpreting and implementing the Homeland Security Act and was created to apply its specialized expertise in homeland security matters. 4. Employee Rights The regulations retain the statement of employee rights enumerated in chapter 71. Employees, as defined in the regulations, will have the right to form, join, or assist any labor organization, or to refrain from any such activity. Each employee will be protected in the exercise of any rights under the regulations through existing FLRA procedures. 5. Union Rights and Obligations As in chapter 71, these regulations provide that recognized unions are the exclusive representatives of the employees in the unit and act for and negotiate on their behalf, consistent with law and regulation. This section also preserves what has come to be known as the “Weingarten” right, which permits union representation at the employee's request when management examines an employee during an investigation and the employee reasonably believes that discipline will follow. The proposed regulations provide that representatives of the Office of the Inspector General, Office of Security, and Office of Internal Affairs are not representatives of the Department for this purpose. Under current law, a union has the right to send a representative to a “formal meeting” called by management to discuss general working conditions with employees. Determining what is and is not a “formal meeting” as the FLRA and courts have interpreted that term requires managers to balance numerous factors concerning the relative formality of the meeting and the precise subject matter discussed. Front-line managers and supervisors are expected to be familiar with and know how to apply these complicated, nuanced criteria, and they get it wrong at their legal peril. This can have a chilling effect on discussions between management and employees concerning everyday workplace issues and can inhibit creative thinking and problem solving. This is particularly disruptive to the mission at ports of entry, where there are often multiple unions. The rights associated with “formal meetings” were intended to safeguard against management efforts to bypass the union and deal directly with employees in ways that undermine the union's status as exclusive representative. We agree that such protections are needed, but these regulations eliminate the concept of a formal meeting. Instead, the regulations treat management efforts to bypass the union as a breach of the duty to bargain in good faith and an unfair labor practice. This change does not affect or limit the union's right to attend meetings at which an employee's grievance is discussed. In conjunction with the regulation concerning grievances, this regulation resolves any uncertainty resulting from litigation about whether unions are entitled to participate in EEO proceedings, including mediation, after a formal EEO complaint has been filed. Under these regulations, unions do not have such a right unless the complainant requests union representation. This change will preserve the informality and confidentiality of the entire EEO complaint process. Under these regulations, the Department will hold employee representatives to the same conduct requirements as any other DHS employees. The intent is to not bind the Department to FLRA's “flagrant misconduct” standard or any other test developed through case decisions which may immunize union representatives engaged in otherwise actionable misconduct. The regulations clarify that the Department may address the misconduct of any employee, including employees acting as union representatives, as long as the agency does not treat employees more severely because they are engaging in union activity. The regulation is not intended to target the content of ideas; rather, it applies to misconduct in any manner expressed. 6. Information Disclosure Under chapter 71, a union has the right to information maintained by the agency if the information is necessary and relevant to the union's representational responsibilities. This right is maintained with some modifications under these regulations. Under the regulations, disclosure of information is not required if adequate alternative means exist for obtaining the requested information, or if proper discussion, understanding, or negotiation of a particular subject within the scope of collective bargaining is possible without recourse to the information. This change was made to relieve management of the administrative burden of producing information that can readily be obtained some other way or information that the union does not really need to fulfill its representational obligations. The regulations further provide that information may not be disclosed if the Secretary or his designee determines that disclosure would compromise the Department's mission, security, or employee safety. The proposed regulations specify that sensitive information such as home addresses, home telephone numbers, e-mail addresses, and other personal identifiers, may not be disclosed to unions without employees' express written consent. While this is not a change in existing statutory interpretation, it is necessary to specify these limitations in the regulations, given the extremely sensitive nature of the Department's mission and the serious consequences if such information fell into the wrong hands. 7. Management Rights The Department's ability to respond rapidly to a variety of critical challenges, ranging from terrorist threats to natural disasters, is vital. To carry out its wide ranging mission, the Department must have the authority to move employees quickly when circumstances demand; it must be able to develop and rapidly deploy new technology to confront threats to security; and it must be able to act without unnecessary delay to properly secure the Nation's borders and ports of entry. Actions such as these involve the exercise of management's reserved rights and lie at the very core of how DHS carries out its mission. Under chapter 71 of title 5, the obligation to notify the union well ahead of any changes in the workplace and complete all negotiations before making any changes could seriously impede the Department's ability to meet mission demands. For example, before the Department could redeploy personnel from one border to another, it could be required to bargain over the procedures it would have to follow in deciding how assignments are made, who gets deployed, and for how long. Based on these negotiations, the Department may have to spend valuable time canvassing for volunteers or considering seniority before moving people from one location to another. In the face of a committed and unpredictable enemy, these excessive limitations on the Department's authority to act where and when needed would significantly impede the Department's ability to accomplish its mission. To ensure that the Department has the flexibility it needs, we propose to revise the management rights provisions of chapter 71. We will expand the list of nonnegotiable subjects in section 7106 to include what are now permissive subjects of bargaining—the numbers, types, and grades of employees and the technology, methods, and means of performing work. The Department will not be required to bargain over the Department's exercise of these rights or over most of the other rights enumerated in chapter 71, including the right to determine mission, budget, organization, and internal security practices, and the right to hire, assign and direct employees, and contract out. The Department can take action in any of these areas without advance notice to the union and without bargaining. After the Department acts, it will have discretion to bargain over procedures and appropriate arrangements. The regulations also provide for consultation with employee representatives both before and after implementation when circumstances permit. The Department will have the same bargaining obligation it has today concerning the exercise of the remaining management rights in chapter 71. These include the right to lay-off and retain employees, to take disciplinary action, and to promote. With respect to these rights, management will be obligated to bargain over procedures and arrangements prior to implementation, as provided under chapter 71. These changes were carefully crafted to meet the operational needs of DHS. We focused on those areas where flexibility and swift implementation are most critical to preserving and safeguarding our Nation. We concluded that the Department's mission could not be met merely by setting time limits on how long the Department would have to bargain before taking action or by streamlining the system in other ways. DHS must have flexibility in these core management right areas to respond without delay to an evolving and ever changing threat. We believe these proposed rules accommodate the collective bargaining rights provided by the Homeland Security Act without compromising the Department's paramount responsibility to protect the lives and security of the American people. 8. Bargaining Unit Determinations In determining bargaining units, the Board will continue to apply the same factors set forth under chapter 71 ( i.e. , do the employees in a proposed unit have a clear and identifiable community of interest, and does the unit promote effective and efficient dealings with the Department?). However, in applying these criteria, the Board will give the most weight to effectiveness and efficiency and determine bargaining units based on what is “an appropriate unit consistent with the Department's organizational structure.” Using this standard will help align the Department's bargaining units as closely as possible with the agency's mission and organizational structure, reduce the threat of fragmented bargaining units, provide for more uniform conditions of employment, and facilitate contract administration, all of which contribute to more efficient and effective agency operations. 9. Duty To Bargain In order to ensure a consistent approach to managing the Department within a multi-union, multi-bargaining unit environment, the proposed regulations specify that there is no duty to bargain over DHS-wide personnel policies and regulations including the human resources management system established by OPM and DHS (management must bargain over personnel policies and regulations issued by the Department's components). In addition, proposals that do not significantly impact a substantial portion of the bargaining unit are outside the duty to bargain. This will focus bargaining on those matters that are of significant concern and relieve the parties of potentially lengthy negotiations over matters that are limited in scope and effect. If parties bargain over an initial term agreement or its successor and do not reach agreement within 60 days, the parties will be able to agree to continue bargaining or either party may refer the matter to the Board for resolution. Mid-term bargaining over proposed changes in conditions of employment must be completed within 30 days or management will be able to implement the change after notifying the union. As is currently the case, collective bargaining provisions that are contrary to law, regulation, or the exercise of reserved management rights cannot be enforced; the Secretary may disapprove any collective bargaining provision whenever he determines that a provision is contrary to law, regulation, or management rights; and matters reserved to the sole and exclusive discretion of the Secretary or his designee will be non-negotiable. 10. Grievance/Arbitration DHS' grievance and arbitration process generally follows the contours of chapter 71. Under DHS' system, matters excluded from the grievance procedure under 5 U.S.C. 7121(c) will remain excluded from coverage in the DHS system. However, in order to enhance consistency, discourage forum shopping, and provide for faster and more consistent resolution of appeals, the regulations propose to eliminate those adverse actions that are appealable to MSPB ( e.g. , removals, suspensions of more than 14 days, and demotions) from the scope of the grievance procedure. To ensure fairness, these actions will be appealable under subpart G. Lesser disciplinary and adverse actions will still be covered by the negotiated grievance procedure. Employees alleging discrimination may file a grievance under a negotiated grievance procedure or a complaint with the Equal Employment Opportunity Commission (EEOC), but not both. Performance appraisal grievances will be handled in a similar manner. An employee can file a grievance and the union can pursue arbitration regarding a performance rating. However, if management subsequently takes an appealable adverse action based on the rating and the employee files an appeal with MSPB under subpart G, any grievance or arbitration will be merged with the MSPB appeal and adjudicated under subpart G. Finally, subpart E includes a savings provision to make clear that the procedures established under these regulations will not apply to grievances and other administrative proceedings that were already in progress when the affected employee(s) became covered by subpart E. Adverse Actions—Subpart F The regulations propose several revisions and additions to the current adverse actions system. These changes are directed at the cumbersome and restrictive requirements for addressing and resolving unacceptable performance and misconduct. The proposed changes streamline the rules and procedures for taking adverse actions, to better support the mission of the Department while ensuring that employees receive due process and fair treatment guaranteed by the Homeland Security Act. The following sections identify the major changes proposed by this subpart and briefly describe the purpose of each change. 1. Employees Covered All DHS employees are eligible for coverage under subpart F of the proposed regulations, except where specifically excluded by law or regulation. For example, employees of the Transportation Security Administration are not eligible for coverage under subpart F because they are excluded from coverage under 5 U.S.C. chapter 75, and 5 U.S.C. 9701 does not allow the joint regulations issued by DHS and OPM to cover such employees. The regulations provide an “initial service period” of one-to-two years for all employees upon appointment to DHS. Prior Federal service counts toward this requirement. Employees who are on time-limited appointments and those serving in an “initial service period” are not covered by this subpart. However, so as to ensure that the rights currently granted preference eligible employees are not diminished, all preference eligible employees are covered by the adverse action protections of subpart F after completing one year of an “initial service period.” Furthermore, employees who are in the competitive service and who are removed during an “initial service period” are covered by the adverse action protections of 5 CFR 315.804 and 315.805. The specific length of the “initial service period” will be tied to specific occupations to reflect varying job demands and training needs. For example, certain occupations have long periods of formalized training which impact the ability of management to assess employee job performance. Other occupations require employees to demonstrate skills and competencies that also cannot be adequately measured or assessed within 1 year. 2. Actions Covered Adverse actions will continue to be defined as they are now in chapter 75 of title 5, U.S. Code, to include removals, suspensions of any length, demotions, and reductions in pay. These regulations propose to change the coverage from furloughs for 30 days or less to furloughs for 90 days or less. A small number of Federal agencies are covered under the national security provisions of 5 U.S.C. 7532. Under these provisions, an employee may be immediately suspended without pay or removed if the agency head considers the action “necessary in the interests of national security.” Before taking such an action, however, the agency head must afford the employee procedural rights as set forth in the statute. An agency head's decision in these cases is not subject to appeal or judicial review. This regulation incorporates the current provisions of the law and makes them applicable to DHS. 3. Mandatory Removal Offenses This subpart permits the Secretary or designee to identify offenses that have a direct and substantial impact on the ability of the Department to protect homeland security” for example, accepting or soliciting a bribe that would compromise border security or willfully disclosing classified information. These offenses carry a mandatory penalty of removal from Federal service. This change allows management to act swiftly to address and resolve misconduct or unacceptable performance that would be most harmful to the Department's critical mission. These mandatory removal offenses will be identified in advance and made known to all employees. Employees alleged to have committed these offenses will have the right to advance notice, an opportunity to respond, a written decision, a review by an adjudicating official, and a further appeal to an independent DHS panel, as set forth in subpart G of this part. However, only the Secretary or his or her designee can mitigate the penalty for committing a mandatory removal offense. The regulations do not list the infractions that will constitute mandatory removal offenses. DHS has not yet identified a list of such offenses, and it is important to preserve the Secretary's flexibility to carefully and narrowly determine the offenses that will fall into this category and to make changes over time. The absence of this flexibility has been problematic at the Internal Revenue Service (IRS) where the IRS Restructuring Act codified mandatory disciplinary offenses in law and limited the agency's ability to make needed changes. The Department will identify mandatory removal offenses well in advance and make sure that employees know what these offenses are. The Department invites public comment on the best and most effective way to provide such notice to employees. 4. Adverse Action Procedures This subpart retains an employee's right to representation and a written decision but provides shorter advance notice periods and reply periods than are currently required for appealable adverse actions. Except where a mandatory removal offense is involved, employees are entitled to a minimum of 15 days advance notice. In cases involving a mandatory removal offense, the advance notice period is a minimum of 5 days. In all cases, employees are granted a minimum of 5 days to reply, which runs concurrently with these notice periods. These changes facilitate timely resolution of adverse actions while preserving employee rights. 5. Single Process and Standard for Action for Unacceptable Performance and Misconduct This subpart establishes a single system for taking adverse actions based on misconduct or unacceptable performance. This change represents a return to a simplified approach that existed prior to the 1978 passage of the Civil Service Reform Act and chapter 43 of title 5, U.S. Code. Congress enacted chapter 43 in part to create a simple, dedicated process for agencies to use in taking adverse actions based on unacceptable performance. Since that time, however, chapter 43 has not worked as Congress intended. In particular, interpretations of chapter 43 have made it difficult for agencies to take actions against poor performers and to have those actions upheld. As a result, agencies have consistently preferred to use the procedures available under chapter 75 of title 5 rather than chapter 43 when taking actions for unacceptable performance. The regulations eliminate the requirement for a formal, set period for an employee to improve performance before management can take an adverse action. Management selects employees for their positions because the employees are well qualified. In addition, employees must complete an “initial service period” during which they will have learned the specific requirements of their positions. As set forth in subpart D, management must explain to employees what is expected of them when it comes to performance. If an employee fails to perform at an acceptable level, management may use a variety of measures, including training, regular feedback, counseling and, at management's discretion, an improvement period, to address and resolve performance deficiencies. If an employee is still unable or unwilling to perform as expected, it is reasonable for management to take an action against the employee. We revised the standard for taking an adverse action to require that the Department establish a factual basis for any adverse action and a connection between the action and a legitimate Departmental interest. We replaced the current title 5 “efficiency of the service” standard for action to allay any confusion that might arise from case law linking this standard with the authority to review and mitigate penalties, an authority we generally do not provide third parties in adjudicating DHS cases. We intend no substantive change to the efficiency of the service standard. Appeals—Subpart G Subpart G of part 9701 covers employee appeals of certain adverse actions taken under subpart F. As is currently the case, these appealable adverse actions include removals, suspensions of 15 days or more, demotions, and reductions in pay. In addition, the regulations provide for appeals of reductions in pay band and substantially increase the length of furloughs that may be appealed. Suspensions shorter than 15 days and other lesser disciplinary measures are not appealable to MSPB, but may be grieved through a negotiated grievance procedure or agency administrative grievance procedure, whichever is applicable. Furthermore, employees who are in the competitive service and who are removed during the first year of an “initial service period” are provided the appeal rights found in 5 CFR 315.806. Section 9701 of title 5, U.S. Code, requires that these new appeal regulations provide DHS employees fair treatment, are consistent with the protections of due process, and, to the maximum extent practicable, provide for the expeditious handling of appeals. The law also specifies that modifications to the current chapter 77 of title 5 should further the fair, efficient, and expeditious resolution of appeals. This subpart establishes procedures and timeframes for filing appeals with MSPB and modifies rules that MSPB will use to process appeals from DHS employees. These regulations are intended to ensure appropriate deference to the adverse actions taken by DHS and to streamline the way MSPB cases are handled while continuing to preserve and safeguard employee due process protections. In addition, they provide for an internal appeals process for “mandatory removal offenses.” As noted earlier in the Supplementary Information, the Secretary and the Director will conduct an ongoing evaluation of the DHS HR system to ensure that it is achieving its intended purposes. As part of this evaluation, the Department and OPM will pay particular attention to the proposed adverse action and appeal procedures established by these regulations. As noted (and discussed in more detail below), those proposed procedures continue to permit employees to appeal most adverse actions to MSPB, despite the fact that DHS and OPM could have established a separate appellate body for all such actions. In proposing these appellate procedures, the Secretary and the Director were especially mindful of 5 U.S.C. 9701(f)(2), which requires that they consult with MSPB on changes to chapter 77 of title 5. This requirement was met through extensive consultations between members and staffs of MSPB, DHS, and OPM. During those consultations, DHS and OPM officials described specific concerns with existing procedures and discussed the range of appellate options and alternatives that were under consideration. For their part, MSPB officials were particularly constructive in responding to those concerns, offering numerous suggestions to address them, including several modifications to their own rules and regulations. The appellate procedures proposed below reflect many of those suggestions, as well as the constructive dialogue that gave rise to them. Indeed, the proposal to retain MSPB was predicated on the results of that dialogue. However, the cumulative effect of these changes can be assessed only as they are actually implemented and administered by MSPB. Accordingly, DHS and OPM, with MSPB, intend to conduct a formal evaluation of these appellate procedures after they have been in effect for 2 years in order to determine whether the procedures have given the Department's critical mission due weight and deference and whether additional modifications to 5 U.S.C. chapter 77 and/or these regulations need to be proposed. 1. Appeals to MSPB The proposed regulations retain MSPB as the adjudicator of employee appeals of adverse actions, except as described below for mandatory removal offenses. At the same time, the regulations propose new substantive standards that MSPB will apply to DHS cases to improve the appeals process and accommodate and support the agency's critical homeland security mission. The regulations also propose new case-handling procedures to facilitate the efficient and expeditious resolution of appeals. We gave serious consideration to establishing a DHS internal appeals board to replace MSPB. However, we concluded that the advantages of creating an internal DHS appeals board—greater efficiency of decisionmaking and deference to agency mission and operations among them—could be achieved if MSPB were retained as the appeals body for adverse actions but with substantive and significant procedural modifications. However, for mandatory removal offenses, we decided to establish an internal appeals process that fully preserves due process because we believe that, for these offenses, it is critical that the adjudicator of the appeal be intimately familiar with the mission of DHS in order to understand the particular impact of these offenses on the Department's ability to carry out its mission. 2. Appeals of Mandatory Removal Offenses An employee will be able to appeal a DHS removal action based on a mandatory removal offense to an adjudicating official, who may conduct a full evidentiary hearing and will issue a written decision. Either party may appeal that decision to an independent DHS Panel. Option 1 Under this option, DHS and OPM would not include appeal language in the regulation addressing any form of judicial review, but would allow existing governing legal principles to determine the circumstances under which there would be judicial review. Option 2 We are proposing to adopt the same procedures and standards for review of Panel decisions that we developed for Board decisions. Specifically, under 5 U.S.C. 7703, the United States Court of Appeals for the Federal Circuit has jurisdiction over appeals filed from final orders of MSPB. Under this option the final regulations would provide that Panel decisions are appealable to the three-member MSPB but with a deferential standard of review appropriate for an appellate procedure of this type. MSPB would be required to decide an appeal from a final decision of the Panel within 20 days. All decisions of MSPB, including those decisions on appeals from the Panel, would be subject to judicial review in accordance with 5 U.S.C. 7703. Under this option, judicial deference would be given to the decisions of the Panel because the Panel is charged by regulation with interpreting and implementing the Homeland Security Act and was created to apply its specialized expertise in homeland security matters. 3. MSPB Appellate Procedures MSPB will continue to have the authority to review and adjudicate actions covered by this subpart (except for mandatory removal offenses) as prescribed in chapter 12 of title 5, U.S. Code. However, these regulations propose to modify certain case processing rules and substantive standards. The initial review and adjudication of adverse action appeals will be governed by current title 5 provisions and MSPB regulations, as well as the modifications identified in this section. The modifications being made to current MSPB requirements will further the mission of DHS without impairing fair treatment and due process protections. Key procedural modifications include the following: • When there are no material facts in dispute, the adjudicating official must grant a motion for summary judgment without an evidentiary hearing. Currently, appellants are entitled to a hearing. • The appeal filing deadline, including the deadline for class appeals, is decreased from 30 days to 20 days. • The adjudicating official's initial decision must be made no later than 90 days after the date on which the appeal is filed. Moreover, if MSPB reviews an initial decision, MSPB must render its final decision no later than 90 days after the close of record. Also, if OPM seeks reconsideration of a final MSPB decision or order, MSPB must render its decision no later than 60 days after receipt of the opposition to OPM's petition in support of such reconsideration. • Currently, the parties to an appeal may submit unilateral requests for additional time to pursue discovery or settlement. The ability of the parties to unilaterally submit a request for case suspension is eliminated. • The parties may seek discovery regarding any matter that is relevant to any of their claims or defenses. However, by motion to MSPB, either party can seek to limit any discovery being sought because it is privileged; not relevant; unreasonably cumulative or duplicative; or can be secured from some other source that is more convenient, less burdensome, or less expensive. Discovery can also be limited through such a motion if the burden or expense of providing a response outweighs its benefit. Prior to filing such a motion with MSPB, the parties must confer and attempt to resolve any pending objections. Further, when engaging in discovery, either party can submit only one set of interrogatories, requests for production, and requests for admissions. Additionally, the number of interrogatories or requests for production or admissions may not exceed 25 per pleading, including subparts, and each party may not conduct more than two depositions. However, either party may file a motion requesting MSPB to allow more discovery. A motion will be granted only if MSPB determines that good cause has been shown to justify additional discovery. All of these modifications will expedite and streamline the appeals process so that both employees and the Department will be able to resolve appeals more quickly and efficiently than is possible today. The proposed regulations also retain due process protections—notice, an opportunity to respond, and a post-action review, either in person or on the record—for removal actions. We provide the same procedural protections for all actions covered in subpart F. Further, these regulations retain the statutory requirement that the appealability of a removal be unaffected by the individual's status under any retirement system. Section 7701 of title 5, U.S. Code, currently authorizes the Director of OPM to intervene in an MSPB proceeding or to petition MSPB for review of a decision if the Director believes that an erroneous decision will have a substantial impact on a civil service law, rule, or regulation under OPM's jurisdiction. Given OPM's responsibility for Governmentwide personnel management, these regulations authorize OPM to intervene in such situations regardless of whether the law, rule or regulation is one that falls under OPM jurisdiction. A similar authority is provided to OPM with respect to decisions of the independent Panel that will decide appeals of removals based on mandatory removal offenses. 4. Standard of Proof Currently, actions taken under chapter 75 are sustained if supported by a preponderance of the evidence, and performance actions taken under chapter 43 are sustained if supported by substantial evidence, a lower standard of proof than preponderance. In all cases arising under this subpart, dealing either with performance or conduct, the Department's decision will be sustained if it is supported by substantial evidence. Changing the standard of proof to a single, lower standard regardless of the nature of the action simplifies the appeal process, grants appropriate deference to DHS officials in recognition of the critical nature of the agency mission, and assures consistency without compromising fairness. 5. Affirmative Defenses The Department's action will not be sustai [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A04-3670. Public record. Not legal advice.