Pay Administration (General); Severance Pay for Panama Canal Commission Employees

SUMMARY: The Office of Personnel Management (OPM) proposes to amend its

regulations to exclude certain categories of employees of the Panama

Canal Commission from entitlement to severance pay. On December 31,

1999, the Republic of Panama will take over operation of the Panama

Canal under the terms of the Panama Canal Treaty of 1977. The proposed

changes would eliminate entitlement to severance pay for Panama Canal

Commission employees who are offered reasonably comparable employment

with a successor entity or who are hired more than 90 days after the

publication of final regulations making these changes.

DATES: Comments must be received on or before September 5, 1995.

ADDRESSES: Send or deliver written comments to Donald J. Winstead,

Assistant Director for Compensation Policy, Office of Personnel

Management, Room 6H31, 1900 E Street NW., Washington, DC 20415.

FOR FURTHER INFORMATION CONTACT:

Frank Derby, (202) 606-2858.

SUPPLEMENTARY INFORMATION: Federal employees employed by the Panama

Canal Commission will be affected by the transfer of control over the

Panama Canal from the United States to the Republic of Panama under the

terms of the Panama Canal Treaty of October 1, 1977. These proposed

regulatory changes, requested by the Panama Canal Commission, address

this unique transfer of function as it pertains to severance pay

entitlements for certain Federal employees.

Under the proposed regulations, severance pay under title 5, United

States Code, would not be payable to those Panama Canal Commission

employees who are offered ``reasonably comparable employment'' by one

of the successor public or private entities that the government of the

Republic of Panama vests with responsibility for performing functions

previously performed by the Commission. In addition, severance pay

would not be payable to employees who are appointed as Commission

employees after the 90th day following publication of final regulations

making these changes.

The severance pay statute (5 U.S.C. 5595) permits the Office of

Personnel Management (OPM) to exclude by regulation any employees,

officers, or agencies that are not otherwise excluded by law. For

example, under OPM's regulations, involuntarily separated employees are

not entitled to severance pay if they are given a ``reasonable offer''

of continued Federal employment by the employing agency or a successor

agency (5 CFR 550.704(b)(2)). Similarly, the regulations now being

processed would eliminate entitlement to severance pay when Panama

Canal Commission employees are offered ``reasonably comparable

employment'' by an entity assuming the functions formerly performed by

the Panama Canal Commission. This would prevent a windfall to

Commission employees who are able to continue their Canal-related

employment.

The concept of ``reasonably comparable employment'' generally

parallels the concept of ``reasonable offer'' found in OPM's current

regulations. A ``reasonable offer'' is defined at 5 CFR 550.703 as one

in which the position is--

(1) In the employee's agency, including an agency to which the

employee is transferred with his or her function;

(2) Within the employee's commuting area;

(3) Of the same tenure and work schedule;

(4) Not lower than two grade or pay levels below the employee's

current grade or pay level.

The positions that will be offered to Panama Canal Commission

employees will be in the successor entities to which the Canal

functions are being transferred under the terms of the treaty. The

proposed regulations also provide that a ``reasonably comparable''

offer of employment to Panama Canal Commission employees must be (1)

Within the employee's commuting area, (2) of the same tenure and work

schedule, and (3) not more than 20 percent below the employee's Panama

Canal Commission rate of basic pay. (The 20-percent maximum pay

differential is based on the current ``reasonable offer'' provision

regarding pay levels. Ten percent represents the approximate difference

in pay levels between most General Schedule grades (e.g., GS-8, step 1,

and GS-7, step 1). Thus, 20 percent would be the approximate difference

in pay between a grade and the grade two grades lower (e.g., GS-9, step

1, compared to GS-7, step 1).) Therefore, the definition of

``reasonably comparable employment'' contains all of the elements of a

``reasonable offer'' in the current regulations.

Under the proposed regulations, a Panama Canal Commission employee

is also excluded from entitlement to severance pay if he or she accepts

reasonably comparable employment within 30 days after separation from

Commission employment. If severance payments are made before an

individual's entitlement to severance pay is invalidated by post-

separation acceptance of reasonably comparable employment, those

payments would be considered erroneous and subject to recovery as a

debt due the United States Government. The 30-day rule ensures that

employees who have only a short break in their Canal-related employment

do not obtain an unwarranted windfall. We believe 30 days is sufficient

to prevent abuse. At the same time, 30 days is a short enough period

that the amount of erroneous payments should be minimal, keeping the

administrative problems associated with recovery efforts to a minimum

as well.

The restriction on severance pay entitlement for those individuals

hired by the Panama Canal Commission after the 90th day following

publication of final regulations making these changes is similar in

concept to the restriction in Sec. 550.704(b)(3) of the current

regulations. That section denies eligibility for severance pay to

[[Page 35343]]

individuals who are appointed in an agency within 1 year before the

date the agency is scheduled by law or Executive order to be

terminated. A longer period of time is being established for the Panama

Canal Commission employees to ensure that the Panama Canal Commission

can determine its severance pay liabilities well in advance of the

transfer of Canal operations.

Under the Panama Canal Treaty of 1977, the Canal operation must be

transferred to the Republic of Panama free of any debt or encumbrances.

Thus, severance pay liabilities must be estimated in advance and

prefunded. This prefunding would require increasing Canal tolls paid by

the world shipping community. Furthermore, we believe a special rule is

justified for this unique situation. In this case, an organization or

operation is not being ``terminated'' in the normal sense, but instead

is being transferred to a foreign government under a treaty signed over

20 years before the transfer. (It should be noted that, prior to 1990,

OPM regulations provided for a 5-year rule instead of the current 1-

year rule in Sec. 550.704(b)(3).)

The proposed regulations provide that those employees who resign

before receiving notice of the successor entity's intention not to

offer them reasonably comparable employment will be considered

voluntarily separated and not entitled to severance pay. This is

consistent with the current regulatory provision at Sec. 550.706, which

provides that an employee who resigns is considered voluntarily

separated unless he or she has received definite notice of involuntary

separation (5 CFR 550.706). In the case of Panama Canal Commission

employees, there is no loss of continued employment unless the employee

is not offered a job with one of the Canal successor entities. If an

employee is officially notified that he or she will not be offered

reasonably comparable employment and subsequently resigns, the

resignation would be considered to be an involuntary separation under

Sec. 550.706.

Since the transfer of control of the Panama Canal is a unique

situation, the special severance pay rules we are proposing are

consolidated in a separate section at the end of subpart G

Sec. 550.714.

Regulatory Flexibility Act

I certify that these regulations would not have a significant

economic impact on a substantial number of small entities because they

would apply only to Federal agencies and employees.

List of Subjects in 5 CFR Part 550

Administrative practice and procedure, Claims, Government

employees, Wages.

Office of Personnel Management.

James B. King,

Director.

Accordingly, OPM proposes to amend part 550 of title 5, Code of

Federal Regulations, as follows:

PART 550--PAY ADMINISTRATION (GENERAL)

Subpart G--Severance Pay

1. The authority citation for subpart G is revised to read as

follows:

Authority: 5 U.S.C. 5595; E.O. 11257, November 13, 1965, 3 CFR

1964-1965 Comp., p357.

2. Section 550.714 is added to read as follows:

Sec. 550.714 Panama Canal Commission Employees.

(a) Notwithstanding any other provisions of this subpart, an

employee separated from employment with the Panama Canal Commission as

a result of the implementation of any provision of the Panama Canal

Treaty of 1977 and related agreements shall not be entitled to

severance pay if he or she--

(1) Receives a written offer of reasonably comparable employment

when such offer is made before separation from Commission employment;

(2) Accepts reasonably comparable employment within 30 days after

separation from Commission employment; or

(3) Was hired by the Commission on or after (date to be inserted is

the date 90 days after publication of final regulations in the Federal

Register).

(b) The term reasonably comparable employment means a position that

meets all the following conditions--

(1) The position is with a public or private entity assuming

functions previously performed by the Panama Canal Commission for or on

behalf of the Republic of Panama;

(2) The rate of basic pay of the position is not more than 20

percent below the employee's rate of basic pay as a Panama Canal

Commission employee;

(3) The position is within the employee's commuting area;

(4) The position carries no fixed time limitation as to length of

appointment; and

(5) The work schedule (that is, part-time or full-time) of the

position is the same as that of the position held by the employee at

the Panama Canal Commission.

(c) A Panama Canal Commission employee who resigns prior to

receiving an official written notice that he or she will not be offered

reasonably comparable employment shall be considered to be voluntarily

separated. Section 550.706(a) shall be applied, as appropriate, to any

employee who resigns after receiving such notice.

(d) Except as otherwise provided by paragraphs (a) through (c) of

this section, the provisions of this subpart remain applicable to

Panama Canal Commission employees.

[FR Doc. 95-16546 Filed 7-6-95; 8:45 am]

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