Reduction in Force and Performance Management

OFFICE OF PERSONNEL MANAGEMENT

5 CFR Parts 351, 430, and 531

RIN 3206-AH32

Reduction in Force and Performance Management

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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SUMMARY: The Office of Personnel Management (OPM) is issuing final

regulations that enhance the opportunity for Federal employees to

receive reduction in force retention service credit based on their

actual job performance. The regulations also give agencies with

employees who have been rated under different patterns of summary

rating levels a mechanism to take this into account when providing

employees additional retention service credit for reduction in force.

These regulations also clarify certain other retention rights,

including the coverage of employees serving under term appointments.

DATES: Effective date: December 24, 1997. Compliance dates: Subject to

the requirements of 5 U.S.C. 7116(a)(7), agencies may implement revised

Secs. 351.504 and 351.803(a), at any time between December 24, 1997 and

October 1, 1998. For reduction in force actions effective between

December 24, 1997 and September 30, 1998, agencies may use either

Secs. 351.504 and 351.803(a) effective December 24, 1997 or the prior

Secs. 351.504 and 351.803(a) in 5 CFR part 351 (January 1, 1997,

edition).

FOR FURTHER INFORMATION CONTACT: Thomas A. Glennon, Jacqueline Yeatman,

or Edward P. McHugh (part 351); (202) 606-0960, FAX (202) 606-2329; or

Barbara Colchao or Doris Hausser (parts 430 and 531); (202) 606-2720,

FAX (202) 606-2395.

SUPPLEMENTARY INFORMATION: On February 4, 1997, OPM issued proposed

regulations concerning reduction in force and performance management.

These proposed changes were designed to enhance the opportunity for

Federal employees to receive reduction in force retention credit based

on their actual job performance. They proposed changes to the crediting

procedures used when employees are missing performance ratings, as well

as giving agencies the authority to vary performance credit in

reduction in force to take into account ratings given under different

summary level patterns.

We received comments from 21 agencies, 4 unions, and 3 individuals.

Not every commenter mentioned every proposed provision. The key changes

OPM proposed in the regulations are summarized below, along with a

summary of the comments received on that particular proposal.

Providing Retention Service Credit When Employees in the Same Reduction

in Force Competitive Area Have Been Rated Under More Than One Pattern

of Summary Rating Levels

On August 23, 1995, OPM issued final regulations, at 60 FR 43936,

giving agencies the option to determine which of eight permissible

patterns of summary rating levels to use for their performance

appraisal programs. As a result, changes in the crediting of

performance in reduction in force were necessary because this

flexibility in the design of performance appraisal programs can affect

employees' relative retention standing for reduction in force. The

proposed regulations revised 5 CFR 351.504 to require an agency to take

into account different patterns of summary rating levels when providing

employees additional retention service credit in reduction in force

competition based on their performance.

Under the proposed regulations, an agency with employees in a

reduction in force competitive area who have been rated under different

patterns of summary rating levels must decide how many years of

retention service credit within the allowable range of 12 to 20 years

to assign to particular summary rating levels in their patterns. The

specific method selected by the agency to provide retention service

credit for performance will of necessity be specific to the reduction

in force competitive area as the agency takes into account the

combination of rating patterns used and the relative numbers of

employees rated under each pattern.

If an agency has reduction in force competitive areas in which all

employee ratings of record to be credited were given under the same

pattern of summary levels, it is required to follow the current

regulations for crediting performance in a reduction in force which now

appear in paragraph (d) of section 351.504.

In applying the proposed regulations, agencies must treat employees

within the reduction in force competitive area in a uniform and

consistent manner. An agency carrying out a reduction in force may

provide different amounts of additional retention service credit for

ratings of record received in an employee's former agency than were

provided by that former organization.

The majority of comments received on this proposal were very

positive. Most of those who commented felt it was a necessary and

logical outgrowth of performance rating flexibility that would be

helpful to both agencies and employees. This proposal was especially

well-received by those considering, or already using, alternative

performance appraisal programs such as a 2-level (``Pass/Fail'')

program. Some agencies requested even greater flexibility to address

what they see as potential inequities when employees in different

competitive areas are rated under different appraisal programs, even if

there is no inconsistency within each competitive area. This was deemed

especially crucial to agencies having various offices or components

using different summary rating patterns.

One commenter voiced the concern that employees rated as ``Fully

Successful'' under a two-level program could actually be performing at

very different levels. Another suggested that the proposal be modified

in order to prevent an agency from giving less credit to an employee's

ratings of record from their previous agency than to the agency's

``own'' ratings. Several other commenters suggested that specific

mandates be established on how this flexibility is to be used.

OPM has carefully considered these suggestions and decided not to

adopt them. We believe that many of these concerns are rooted in

decisions about

[[Page 62496]]

using various types of performance appraisal programs in the first

place, and most would be addressed by the requirement to provide

uniformity and consistency within each competitive area. For example,

an agency assigning 16 years of credit to a ``fully successful'' rating

of record earned under a two-level program must give ALL employees who

earned a ``fully successful'' rating of record in a two-level program

this credit, no matter what agency or organization actually issued the

rating. Granting additional flexibility, by definition, allows for

decision-making that some may disagree with. Alternatively, an agency

is free to choose a crediting system that mirrors the current 12/16/20

year pattern required for use in single-rating-pattern situations (they

are required to examine the situation when multiple rating patterns

exist, but there is no requirement to adopt any particular crediting

method). In addition, agencies concerned about consistency are free to

establish their own agencywide policies on how this flexibility will be

used.

One commenter suggested that no additional credit beyond 12 years

be provided for performance above the level of ``Fully Successful''. We

have not adopted this suggestion since it goes beyond the scope of the

proposal and because the new regulations would give agencies the

flexibility to assign credit in this way if they choose, as long as

ratings of record are assigned under more than one summary pattern in

the competitive area.

Extending the ``look-back'' period to 6 years

This element of the proposal addressed the circumstance where

employees have received fewer than three actual ratings of record in

the last 4 years, which could occur due to a variety of circumstances.

Current regulations require the substitution of an assumed rating of

``Fully Successful'' for each missing rating of record. To minimize the

use of assumed ratings and to maximize the extent to which additional

retention service credit is based on actual job performance, OPM

proposed to lengthen the period of time from which ratings of record

are taken into account from 4 years to 6 years prior to the reduction

in force. This change would have been phased in to allow agencies time

to change their recordkeeping procedures.

Several of those who commented supported this proposal, believing

that the potential for increasing the use of actual performance

appraisals earned by employees outweighed the additional record-keeping

requirements it would impose on agencies. Some even suggested that we

modify the proposal to allow agencies to go back longer than 6 years

when necessary. However, the majority of commenters disagreed with the

proposed lengthening of the ``look-back'' period from 4 years to 6

years, even with the phase-in provisions. The objections centered on

the view that a 6-year-old appraisal is too dated to serve as an

accurate indicator of current employee performance, and that allowing

older appraisals to be used in reduction in force might discourage

supervisors from preparing current appraisals when required. Some were

also concerned that these additional administrative requirements were

unduly burdensome, especially in light of the current emphasis on

simplification, paperwork reduction, and streamlining. We have

considered these comments, as well as the possibility of providing

agencies with flexibility to determine what the length of their ``look-

back'' period should be for specific reductions in force. We concluded

that the significant additional administrative requirements resulting

from a 6-year ``look-back'' do not justify the results, especially

since the other changes provided for in this regulatory package would

significantly reduce the number of assumed ratings. For these reasons,

we concluded that the current ``look-back'' period of 4 years should be

retained.

Averaging actual ratings received if fewer than three

To further enhance the use of actual performance in determining

reduction in force service credit, OPM proposed to remove the

requirement to fill in missing ratings of record with assumed ``fully

successful'' ratings when an employee has received only one or two

actual ratings of record. Under the proposal, the actual rating(s) of

record available would serve as the sole basis of the employee's

credit, and no assumed ratings would be used. Consequently, if an

employee has received only two actual ratings of record during this

period, the value assigned to each rating would be added together and

divided by two to determine the amount of additional retention service

credit.

Among those who commented on this proposal, there was an almost

equal number of those who supported it and those who did not. Most of

those opposing the proposed change cited the greater weight that would

necessarily be placed on the one or two actual ratings of record

received. One commenter was concerned that supervisors would be less

likely to complete ratings of record as a result of this proposal. A

number of commenters, however, supported this proposal because it

simplifies the process and allows an employee's actual demonstrated

performance to take the place of an artificially prescribed level of

credit (assumed ``Fully Successful''). In considering the comments

received on this issue, we were persuaded that this change would serve

to simplify the procedure and would increase the emphasis on actual

performance, a stated goal of the proposed regulations. Therefore, we

are adopting this proposal in the final regulations.

Crediting performance for employees with no actual ratings

OPM had proposed two methods of providing performance credit for

reduction in force in cases where an employee would have no actual

ratings of record at all. Under the proposed regulations, an employee

with at least one year of current continuous service would be given the

additional retention service credit for the most common, or ``modal'',

summary rating level, as defined in 5 CFR 351.203, for the summary

level pattern that applies to the employee's position at the time of

the reduction in force. The proposal would allow agencies to determine

the modal rating using ratings of record in the competitive area, in a

larger subdivision of the agency, or agencywide, as long as the

applicable modal rating(s) was applied uniformly and consistently

within the competitive area to all employees with no ratings of record.

Under the proposal, the modal rating would not be used for

employees who have completed less than one year of current continuous

service. Instead, additional retention service credit would be given

based on a Level 3 (Fully Successful or equivalent) rating of record

under the summary level pattern that applies to the employee's position

at the time of reduction in force.

Those who commented negatively on this proposal disliked the idea

of using a modal rating because it did not represent performance

actually demonstrated by the employee. Some felt the use of a modal

rating was arbitrary and unfair, and potentially vulnerable to appeal

or other challenge, while others saw it as more fair to employees than

an assumed ``fully successful'' rating that now falls below the

Governmentwide average rating. Several agencies were also concerned

with how this requirement would be incorporated into existing automated

systems.

[[Page 62497]]

One commenter suggested that the regulations be revised to require

that all employees with at least one year of service must have a rating

of record before a reduction in force can be conducted. We have not

adopted this suggestion because we feel it is impossible to require a

rating of record in all circumstances, given the various rating cycle

dates and other circumstances that can occur.

One of those who commented suggested that employees who have

received no ratings of record should receive no performance credit for

reduction in force. We have not adopted this suggestion because we

believe it unfairly and severely penalizes an employee who has no

ratings of record due to factors completely outside his/her control. We

believe that some reasonable and fair method of constructing

performance credit is necessary to deal with these circumstances.

It is important to note that the modal rating would only be used in

cases where the employee has no ratings of record of his/her own to

credit. Since no rating of record exists, some form of ``assumed''

rating is the only recourse available. Because the modal rating is the

summary level that was given most often to employees in the

organization conducting the reduction in force, we believe it is the

best way to assign credit with the least disadvantage to an individual

employee who has no rating of record reflecting his/her actual

performance.

Much of the opposition to the modal rating proposal focused on the

complexity for personnelists in administering two different types of

formulae based on length of service (less than one year means use

assumed ``Fully Successful'; more than one year requires tabulation of

modal rating). Some saw this as contradictory to ongoing simplification

initiatives. In addition, several commenters pointed out that this

distinction could result in an employee with 364 days of service being

treated differently (in terms of performance credit for reduction in

force) than another employee with 366 days of service. We agree that

the distinction based on length of service adds greater complexity to

the process, and we have therefore eliminated this distinction in the

final regulations. Instead, the modal rating will be used to grant

performance credit in reduction in force for all employees who have no

ratings of record. We feel this better supports the principles of

uniformity and consistency in the reduction in force treatment of

employees.

Several commenters requested that OPM designate the basis used by

agencies to determine their modal ratings (i.e., agencywide; agency

subdivision; or competitive area). They also asked that agencies not be

allowed to change this basis once it is selected without OPM and/or

union approval. However, agencies have different data systems and not

all will have a great deal of flexibility in terms of tabulating modal

ratings. Some may only have agencywide performance appraisal data to

work with. We felt that it was necessary to preserve this flexibility

for determining the basis used for tabulating modal ratings to ensure

that all agencies are able to implement this requirement. However, we

would encourage agencies to consider making this determination in

partnership with employees and their representatives.

Use of Non-430 Ratings in Reduction in Force

OPM proposed language in the revised section 351.504 that would

require agencies to use all ratings of record given to employees for

assigning additional retention service credit during a reduction in

force, including a performance evaluation given to an employee under an

appraisal system not covered by the provisions of 5 CFR part 430,

subpart B, if it meets the conditions specified in the new paragraph

(c) of section 430.201.

Those who commented in support of this proposal felt it was

appropriate to give credit for such ratings in a reduction in force if

they were equivalent to those given under part 430.

One commenter disagreed with the proposal, believing it would be

too difficult for agencies to establish the equivalent summary pattern

and rating level for these non-430 ratings. We have considered this

objection; however, we feel that agencies should be able to make these

determinations with help from the agency that gave the rating and/or

members of OPM's performance management staff.

Implementation Date Issues

(1) Performance in Retention Service Credit Determinations

The new agency authority to determine retention service credit when

employees in a competitive area are rated under multiple rating

patterns described in Sec. 351.504(e) would apply only to ratings of

record that are put on record, as defined in paragraph (b)(3) of

Sec. 351.504, on or after October 1, 1997. The agency credits any

ratings of record put on record on or before September 30, 1997, based

on the Governmentwide 12-, 16-, and 20-year formula for additional

retention service credit currently in effect.

Agencies were divided on their preference for which ratings of

record could be assigned credit using the new flexibility. While some

wanted to be able to establish credit for ratings of record given since

1995 (when performance management was deregulated), others wished to

establish credit only for ratings of record given under cycles begun

after October 1, 1997. OPM originally proposed that the flexibility

would apply to ratings of record put on record on or after October 1,

1997, and has decided to retain this provision in the final regulation.

A related issue was the effective date of the regulations and its

effect on the implementation of some of the provisions, particularly

those affecting the flexible assignment of service credit and

situations where fewer than three ratings of record are available.

Concerns such as the lead time required for changes in the automation

of RIF processing programs, and the need to meet collective bargaining

requirements prior to the implementation of these regulations were also

raised during the comment process. OPM originally proposed

implementation on October 1, 1997. We have considered the suggestions

received on this issue and have determined that overall fairness is

best managed through giving agencies the flexibility to implement the

provisions of Sections 351.504 (crediting performance) and 351.803

(notice of eligibility for reemployment and other placement

assistance), at any time between the effective date of these

regulations and October 1, 1998. Agencies are required to apply the

provisions used in a uniform and consistent manner to all employees in

a given RIF competitive area.

When crediting performance in a reduction in force, agencies would

have the option to implement immediately as of the effective date of

these regulations the provisions for establishing credit when ratings

of record were given under mixed summary level patterns (351.504(e))

and the use of the modal value for missing ratings as well as averaging

only actual ratings of record found during the 4-year ``look-back''

period (351.504(c)). At its discretion, an agency could decide to delay

implementation of these provisions until no later than October 1, 1998,

and continue to use the performance crediting provisions in the current

Sec. 351.504 (i.e., those in effect on January 1, 1997).

[[Page 62498]]

The effect of the provisions in paragraphs 351.504 (b) and (d)

remain unchanged by the new regulations. When applying paragraph

351.504(a), the context created by the new definition for rating of

record and other regulatory changes will permit the use of non-430

ratings under the conditions specified even when an agency is using the

older version of 5 CFR 351.504.

This gives agencies able to proceed immediately the opportunity to

do so, without forcing others that need time to complete more extensive

preparations into an unrealistic time frame. However, for reduction in

force actions effective after September 30, 1998, the new provisions

for crediting mixed-pattern ratings of record and handling situations

where ratings are missing must be applied by all agencies.

(2) Implementation of Provisions During Ongoing Reductions

Several commenters mentioned their concern that ongoing reductions

in force would be disrupted by the requirement to implement these

provisions. Revising the procedures for handling missing ratings of

record and crediting performance under multiple rating patterns could

result in changed reduction in force outcomes, new notices, and

additional delays due to notice period requirements. We agree that this

would prove unnecessarily disruptive to both agencies and employees.

However, we believe that giving agencies the option to implement the

provisions of sections 351.504 and 351.803 at any time up until October

1, 1998, will allow them to take into account any upcoming reduction in

force activity and plan accordingly.

Technical Amendments

OPM proposed a number of technical changes in parts 351, 430 and

531, which served to clarify existing regulations in various areas.

These included redefinition of rating of record under part 351 to refer

to the part 430 definition, provisions for handling employees with a

written notice of pending action under part 752 similarly to those with

action pending under part 432, changes to the critical element

definition, barring non-critical elements in two-level appraisals, and

clarifications of: appraisal period, acceptable level of competence

determinations, competitive area, competitive level, procedures for

determining grade intervals for assignment, expiration and amendment of

reduction in force notices, assignment rights optionally provided to

excepted service employees, and coverage of term employees under

retention subgroups.

We received comments on some of these proposed clarifications. One

suggested rewording of the definition of rating of record to better

reflect that this rating belongs to the employee rather than the

agency. We agree and have adopted this suggestion.

Several commenters asked what date should be used as the effective

date of a rating of record. Perhaps contributing to their confusion are

changes to the way ratings of record are reported to the Central

Personnel Data File. While a rating of record is a personnel action,

OPM no longer requires that it be reported separately with its own

distinct nature of action code (009). Rating of record information is

now transmitted to OPM via other standard reporting procedures. When a

separate nature of action code was used, the previous reporting

procedures specified that the effective date for a rating of record was

the ending date of the appraisal period to which the rating applied.

The new procedures capture this same information as an isolated data

element and eliminate the need for separate processing of many

thousands of actions. It is OPM's view that the ending date of the

applicable appraisal period is the effective date of the rating of

record, and this date should be used to determine whether or not a

rating of record falls within the 4-year ``look-back'' period.

Section 5 CFR 351.402(b) clarifies OPM's longstanding policy on the

minimum standard for a reduction in force competitive area. All of the

comments on this proposed revision supported the change, and the

proposed regulation is adopted without further modification.

To conduct a reduction in force, section 5 CFR 351.402(a) provides

that the agency must establish the applicable competitive area that is

the boundary within which employees compete for retention under

reduction in force procedures.

Section 5 CFR 351.402(b) provides that employees in a competitive

area compete for retention under OPM's reduction in force regulations

only with other employees in the same competitive area. Employees do

not compete for retention with employees of the agency in another

competitive area.

Section 5 CFR 351.402(b) provides that the agency must define each

competitive area solely in terms of organizational unit and

geographical location. The competitive area then includes all employees

within the organizational unit and geographical location that is

included in the competitive area definition. Each employee competes

with all other employees in the competitive area for positions under

OPM's retention regulations. There is no minimum or maximum number of

employees in a competitive area. Also, in any one reduction in force,

an agency may not use one competitive area for the first round of

competition and a different competitive area for second rounds of

competition.

Section 5 CFR 351.402(b) clarifies that the minimum competitive

area for any agency component is a subdivision of the agency within the

local commuting area that is under separate administration. An agency

may establish separate competitive areas for different components in

the same local commuting area if each component is under separate

administration, which includes that each is independent of the other in

operation, work function, and staff.

As used for purposes of establishing a minimum competitive area

consistent with section 5 CFR 351.402(b), ``separate administration''

is the administrative authority to take or direct personnel actions

(i.e., the authority to establish positions, abolish positions, assign

duties, etc.) rather than the issuance or processing of the documents

by which these decisions are effected. This separate administration is

evidenced by the agency's organizational manual and delegations of

authority that document where, in the organization, final authority

rests to make these decisions. (The competitive area standard also

recognizes that many agencies retain certain personnel-related actions

such as classification authority or final approval of higher-graded

positions to a central authority above the organizational standard

required for a minimum competitive area).

The same standard is used for a minimum competitive area in a local

commuting area in both a headquarters organization or field component.

Former references in 5 CFR 351.402(b) to organizational units that

could comprise a minimum competitive area in a headquarters

organization or field component were examples of where separate

administration is often found in agencies. These references were

deleted in final 5 CFR 351.402(b) to clarify that the same minimum

competitive area standard is applicable whether the organizational unit

is headquarters, a field activity, a duty station, or other applicable

organization.

Under 5 CFR 351.402(b), an agency may establish a competitive area

that is larger than the minimum standard. However, a competitive area

may not be smaller than the minimum standard.

[[Page 62499]]

The fact that several activities may be serviced by the same

personnel office does not, of itself, require that they be placed in

the same competitive area. The personnel office merely processes

personnel actions rather than having final responsibility to make

decisions on whether to establish positions, abolish positions, assign

duties, etc.

Another commenter felt that the proposal did not go far enough in

dealing with employees who have received written decisions under part

752, and suggested that those employees be excluded from reduction in

force competition altogether. There is, however, no basis in law to

eliminate the right of these employees to remain in reduction in force

competition until they are actually removed from Federal service.

Therefore, this suggestion was not adopted.

OPM had also proposed changes to the requirements for reduction in

force separation notices to include an estimate of severance pay if

applicable, and information on benefits available under new subparts F

and G (Career Transition Assistance Programs) of part 330 of this

chapter and from the applicable State dislocated worker unit(s), as

designated or created under title III of the Job Training Partnership

Act. To increase placement opportunities for employees affected by

downsizing, the proposed section also required that agencies give

employees receiving a reduction in force separation notice a release to

authorize, at their option, the release of their resumes for employment

referral to State dislocated worker unit(s) and potential public and

private sector employers. OPM is developing material for this purpose.

A few commenters were concerned that these requirements would place

a greater burden on personnel offices and reduce the emphasis on

employee empowerment that is central to successful career transition

programs. One felt the role of obtaining authorization for release of

resumes belonged solely with the placement coordinator, and that this

did not belong with the reduction in force notice since placement

efforts would already be well underway by the time reduction in force

notices are issued.

We agree that, ideally, placement efforts should begin long before

reduction in force notices are issued. However, this is not always

possible. We have considered these comments carefully and feel that

providing a release that can be completed entirely at the employee's

option remains within the spirit of empowerment and simply serves as

another vehicle for coordination between Federal Government and other

public and private employers that will hopefully aid employees in the

transition process. Many agencies have personnel office staff who serve

in dual roles, both conducting the reduction in force and assisting

employees in placement. Since a reduction in force notice is issued to

all employees being separated, it provides a unique opportunity for the

agency to give employees career transition information and to ensure

that all employees being separated will receive it. However, in

recognition of the fact that agencies will need time to modify their

reduction in force notices, we have made this provision one of those

which may be implemented at any time between the effective date of

these regulations and October 1, 1998. All notices issued on or after

October 1, 1998, must meet the requirements of these regulations.

One commenter was concerned that the severance pay estimate

calculation might be open to challenge if it was later found to be in

error. They suggested instead that agencies provide information on how

to compute severance pay and let employees do the calculations

themselves. We have not adopted this suggestion because we believe

agency-developed severance pay estimates are much more likely to be

accurate than those done by employees. Further, we would emphasize that

agencies should clearly indicate that their severance pay calculations

are merely estimates, as many agencies do now, but that employees are

ultimately responsible for verifying these estimates.

Several commenters suggested that we add a requirement that

specific information on the employee's competitive level, including the

names of employees in various levels, be added to the notice.

Information of this type is normally discussed during reduction in

force counseling sessions between affected employees and knowledgeable

personnel specialists. Releasing this type of information in a

reduction in force notice has serious privacy implications and would

not be useful in isolation, nor would it serve to help the employee

better understand his/her reduction in force rights without counseling.

Therefore, we have not adopted this suggestion.

Another commenter questioned the restriction in the definition of

critical elements to individual performance only, especially in light

of the workplace trends toward team performance. We do not disagree

with the observation that team work is becoming more prevalent in the

workplace and should be captured when measuring performance. In

recognition of the importance of team work in many organizations, the

performance management regulations specifically provide for the use of

non-critical elements that can address performance measured at the team

level and that impact the summary level, which can be particularly

useful in making performance distinctions above the Fully Successful

(or equivalent) level. In addition, the regulations permit the use of

critical elements to measure the individual's contribution to the

team's success or failure. However, it would be inappropriate to allow

a single team failure (i.e., failed team critical element) to result

automatically in every individual on the team being designated as

Unacceptable when some of the individual performance within the team is

probably Fully Successful or better.

Critical elements are the cornerstone of individual accountability

in employee performance. Therefore, they should not be used to measure

performance over which the employee is not intended or expected to

exercise individual control or authority. In addition, there is the

prohibition that non-critical elements cannot be used with a two-level

summary pattern (i.e., pass/fail). Organizations that summarize

performance at only two levels can choose to incorporate additional

performance elements to identify and measure team accomplishments. We,

therefore, made no change to this proposal.

One commenter suggested that a within-grade increase following a

delay, based on the circumstances stated in the regulations and a

subsequent rating of record of Level 3 or higher, should be paid

retroactively. Because no change was, or is, proposed to the current

language at 5 CFR 531.409(c)(2)(iii) that addresses a retroactive

within-grade increase following a delay in the acceptable level of

competence determination, that paragraph had not appeared in the

proposed regulations as printed in the Federal Register. Because that

current language will remain in effect, the commenter's concern is

already accommodated.

One commenter suggested that within-grade delay procedures should

be incorporated into agency performance management plans and, thereby,

be subject to OPM review and approval. Within-grade delay is prescribed

by regulation because it is a procedure where Governmentwide

consistency is appropriate. There is no value added to having OPM

review agency procedures implementing such uniform regulations.

Furthermore, the Performance Management Plan alluded

[[Page 62500]]

to is no longer required because, in part, the 1995 revision was

designed to eliminate needless repetition of regulatory language.

Therefore, this suggestion was not adopted.

Several other suggestions for minor wording changes to provide

greater clarification were adopted where we felt they were warranted.

Most of the requests for clarification or additional discussion would

be more appropriately handled through individual discussions between

OPM staff and agency personnelists, which we are happy to provide upon

request. In addition, some comments were provided that addressed

reduction in force and performance management issues that were outside

the scope of these proposed regulations, such as changing the way

performance is used relative to the other reduction in force factors;

these suggestions were not adopted since they were not pertinent to the

specific proposals made in these regulations. Suggestions for wording

changes to 5 CFR part 293 were not adopted because we felt there was no

basis for issuing revised regulations in this area as long as we were

eliminating the proposal to lengthen the ``look-back'' period for

ratings of record.

To the extent practicable, these regulations should be implemented

by agencies in partnership with management and employees' union

representatives.

Regulatory Flexibility Act

I certify that this regulation will not have a significant economic

impact on a substantial number of small entities because it only

affects Federal employees.

Executive Order 12866, Regulatory Review

This rule has been reviewed by the Office of Management and Budget

in accordance with Executive Order 12866.

List of Subjects

5 CFR Part 351

Administrative practice and procedure, Government employees.

5 CFR Part 430

Decorations, medals, awards, Government employees.

5 CFR Part 531

Government employees, Law enforcement officers, Wages.

Office of Personnel Management.

Janice R. Lachance,

Acting Director.

Accordingly, OPM is amending parts 351, 430, and 531 of title 5,

Code of Federal Regulations, as follows:

PART 351--REDUCTION IN FORCE

4. The authority citation for part 351 continues to read as

follows:

Authority: 5 U.S.C. 1302, 3502, 3503.

5. In Sec. 351.203, the definition of ``Annual Performance rating

of record'' is removed, and the definitions of Current rating of

record, Modal rating, and Rating of record are added in alphabetical

order, to read as follows:

Sec. 351.203 Definitions.

* * * * *

Current rating of record is the rating of record for the most

recently completed appraisal period as provided in Sec. 351.504(b)(3).

* * * * *

Modal rating is the summary rating level assigned most frequently

among the actual ratings of record that are:

(1) Assigned under the summary level pattern that applies to the

employee's position of record on the date of the reduction in force;

(2) Given within the same competitive area, or at the agency's

option within a larger subdivision of the agency or agencywide; and

(3) On record for the most recently completed appraisal period

prior to the date of issuance of reduction in force notices or the

cutoff date the agency specifies prior to the issuance of reduction in

force notices after which no new ratings will be put on record.

Rating of record has the meaning given that term in Sec. 430.203 of

this chapter. For an employee not subject to 5 U.S.C. Chapter 43, or

part 430 of this chapter, it means the officially designated

performance rating, as provided for in the agency's appraisal system,

that is considered to be an equivalent rating of record under the

provisions of Sec. 430.201(c) of this chapter.

* * * * *

7. In Sec. 351.402, paragraph (b) is revised to read as follows:

Sec. 351.402 Competitive area.

* * * * *

(b) A competitive area must be defined solely in terms of the

agency's organizational unit(s) and geographical location, and it must

include all employees within the competitive area so defined. A

competitive area may consist of all or part of an agency. The minimum

competitive area is a subdivision of the agency under separate

administration within the local commuting area.

* * * * *

8. In Sec. 351.403, paragraph (c) is added to read as follows:

Sec. 351.403 Competitive level.

* * * * *

(c) An agency may not establish a competitive level based solely

upon:

(1) A difference in the number of hours or weeks scheduled to be

worked by other-than-full-time employees who would otherwise be in the

same competitive level;

(2) A requirement to work changing shifts;

(3) The grade promotion potential of the position; or

(4) A difference in the local wage areas in which wage grade

positions are located.

9. In Sec. 351.404, paragraph (a) introductory text, and paragraph

(b)(2), are revised to read as follows:

Sec. 351.404 Retention register.

(a) When a competing employee is to be released from a competitive

level under this part, the agency shall establish a separate retention

register for that competitive level. The retention register is prepared

from the current retention records of employees. Upon displacing

another employee under this part, an employee retains the same status

and tenure in the new position. Except for an employee on military duty

with a restoration right, the agency shall enter on the retention

register, in the order of retention standing, the name of each

competing employee who is:

* * * * *

(b) * * *

(2) The agency shall list, at the bottom of the list prepared under

paragraph (b)(1) of this section, the name of each employee in the

competitive level with a written decision of removal under part 432 or

752 of this chapter.

10. Section 351.405 is revised to read as follows:

Sec. 351.405 Demoted employees.

An employee who has received a written decision under part 432 or

752 of this chapter to demote him or her competes under this part from

the position to which he or she will be or has been demoted.

11. In Sec. 351.501, paragraph (b)(3) is revised to read as

follows:

Sec. 351.501 Order of retention--competitive service.

* * * * *

(b) * * *

(3) Group III includes all employees serving under indefinite

appointments, temporary appointments pending establishment of a

register, status quo appointments, term appointments, and

[[Page 62501]]

any other nonstatus nontemporary appointments which meet the definition

of provisional appointments contained in Secs. 316.401 and 316.403 of

this chapter.

* * * * *

12. Section 351.504 is revised to read as follows:

Sec. 351.504 Credit for performance.

Note to Sec. 351.504: Compliance dates: Subject to the

requirements of 5 U.S.C. Section 7116(a)(7), agencies may implement

revised Sec. 351.504 at any time between December 24, 1997 and

October 1, 1998. For reduction in force actions effective between

December 24, 1997 and September 30, 1998, agencies may use either

Sec. 351.504 effective December 24, 1997, or the prior Sec. 351.504

in 5 CFR part 351 (January 1, 1997 edition).

(a) Ratings used. (1) Only ratings of record as defined in

Sec. 351.203 shall be used as the basis for granting additional

retention service credit in a reduction in force.

(2) For employees who received ratings of record while covered by

part 430, subpart B, of this chapter, those ratings of record shall be

used to grant additional retention service credit in a reduction in

force.

(3) For employees who received performance ratings while not

covered by the provisions of 5 U.S.C. Chapter 43 and part 430, subpart

B, of this chapter, those performance ratings shall be considered

ratings of record for granting additional retention service credit in a

reduction in force only when it is determined that those performance

ratings are equivalent ratings of record under the provisions of

Sec. 430.201(c) of this chapter. The agency conducting the reduction in

force shall make that determination.

(b)(1) An employee's entitlement to additional retention service

credit for performance under this subpart shall be based on the

employee's three most recent ratings of record received during the 4-

year period prior to the date of issuance of reduction in force

notices, except as otherwise provided in paragraphs (b)(2) and (c) of

this section.

(2) To provide adequate time to determine employee retention

standing, an agency may provide for a cutoff date, a specified number

of days prior to the issuance of reduction in force notices after which

no new ratings of record will be put on record and used for purposes of

this subpart. When a cutoff date is used, an employee will receive

performance credit for the three most recent ratings of record received

during the 4-year period prior to the cutoff date.

(3) To be creditable for purposes of this subpart, a rating of

record must have been issued to the employee, with all appropriate

reviews and signatures, and must also be on record (i.e., the rating of

record is available for use by the office responsible for establishing

retention registers).

(4) The awarding of additional retention service credit based on

performance for purposes of this subpart must be uniformly and

consistently applied within a competitive area, and must be consistent

with the agency's appropriate issuance(s) that implement these

policies. Each agency must specify in its appropriate issuance(s):

(i) The conditions under which a rating of record is considered to

have been received for purposes of determining whether it is within the

4-year period prior to either the date the agency issues reduction in

force notices or the agency-established cutoff date for ratings of

record, as appropriate; and

(ii) If the agency elects to use a cutoff date, the number of days

prior to the issuance of reduction in force notices after which no new

ratings of record will be put on record and used for purposes of this

subpart.

(c) Missing ratings. Additional retention service credit for

employees who do not have three actual ratings of record during the 4-

year period prior to the date of issuance of reduction in force notices

or the 4-year period prior to the agency-established cutoff date for

ratings of record permitted in paragraph (b)(2) of this section shall

be determined under paragraphs (d) or (e) of this section, as

appropriate, and as follows:

(1) An employee who has not received any rating of record during

the 4-year period shall receive credit for performance based on the

modal rating for the summary level pattern that applies to the

employee's official position of record at the time of the reduction in

force.

(2) An employee who has received at least one but fewer than three

previous ratings of record during the 4-year period shall receive

credit for performance on the basis of the value of the actual

rating(s) of record divided by the number of actual ratings received.

If an employee has received only two actual ratings of record during

the period, the value of the ratings is added together and divided by

two (and rounded in the case of a fraction to the next higher whole

number) to determine the amount of additional retention service credit.

If an employee has received only one actual rating of record during the

period, its value is the amount of additional retention service credit

provided.

(d) Single rating pattern. If all employees in a reduction in force

competitive area have received ratings of record under a single pattern

of summary levels as set forth in Sec. 430.208(d) of this chapter, the

additional retention service credit provided to employees shall be

expressed in additional years of service and shall consist of the

mathematical average (rounded in the case of a fraction to the next

higher whole number) of the employee's applicable ratings of record,

under paragraphs (b)(1) and (c) of this section computed on the

following basis:

(1) Twenty additional years of service for each rating of record

with a Level 5 (Outstanding or equivalent) summary;

(2) Sixteen additional years of service for each rating of record

with a Level 4 summary; and

(3) Twelve additional years of service for each rating of record

with a Level 3 (Fully Successful or equivalent) summary.

(e) Multiple rating patterns. If an agency has employees in a

competitive area who have ratings of record under more than one pattern

of summary levels, as set forth in Sec. 430.208(d) of this chapter, it

shall consider the mix of patterns and provide additional retention

service credit for performance to employees expressed in additional

years of service in accordance with the following:

(1) Additional years of service shall consist of the mathematical

average (rounded in the case of a fraction to the next higher whole

number) of the additional retention service credit that the agency

established for the summary levels of the employee's applicable

rating(s) of record.

(2) The agency shall establish the amount of additional retention

service credit provided for summary levels only in full years; the

agency shall not establish additional retention service credit for

summary levels below Level 3 (Fully Successful or equivalent).

(3) When establishing additional retention service credit for the

summary levels at Level 3 (Fully Successful or equivalent) and above,

the agency shall establish at least 12 years, and no more than 20

years, additional retention service credit for a summary level.

(4) The agency may establish the same number of years additional

retention service credit for more than one summary level.

(5) The agency shall establish the same number of years additional

retention service credit for all ratings of record with the same

summary level in the same pattern of summary levels as set forth in

Sec. 430.208(d) of this chapter.

[[Page 62502]]

(6) The agency may establish a different number of years additional

retention service credit for the same summary level in different

patterns.

(7) In implementing paragraph (e) of this section, the agency shall

specify the number(s) of years additional retention service credit that

it will establish for summary levels. This information shall be made

readily available for review.

(8) The agency may apply paragraph (e) of this section only to

ratings of record put on record on or after October 1, 1997. The agency

shall establish the additional retention service credit for ratings of

record put on record prior to that date in accordance with paragraph

(d) of this section.

13. In Sec. 351.602, paragraph (c) is revised to read as follows:

Sec. 351.602 Prohibitions.

* * * * *

(c) A written decision under part 432 or 752 of this chapter of

removal or demotion from the competitive level.

14. In Sec. 351.701, paragraph (f) is added to read as follows:

Sec. 351.701 Assignment involving displacement.

* * * * *

(f)(1) In determining applicable grades (or grade intervals) under

Secs. 351.701(b)(2) and 351.701(c)(2), the agency uses the grade

progression of the released employee's position of record to determine

the grade (or interval) limits of the employee's assignment rights.

(2) For positions covered by the General Schedule, the agency must

determine whether a one-grade, two-grade, or mixed grade interval

progression is applicable to the position of the released employee.

(3) For positions not covered by the General Schedule, the agency

must determine the normal line of progression for each occupational

series and grade level to determine the grade (or interval) limits of

the released employee's assignment rights. If the agency determines

that there is no normal line of progression for an occupational series

and grade level, the agency provides the released employee with

assignment rights to positions within three actual grades lower on a

one-grade basis. The normal line of progression may include positions

in different pay systems.

(4) For positions where no grade structure exists, the agency

determines a line of progression for each occupation and pay rate, and

provides assignment rights to positions within three grades (or

intervals) lower on that basis.

(5) If the released employee holds a position that is less than

three grades above the lowest grade in the applicable classification

system (e.g., the employee holds a GS-2 position), the agency provides

the released employee with assignment rights up to three actual grades

lower on a one-grade basis in other pay systems.

15. In Sec. 351.705, paragraph (a)(3) is revised to read as

follows:

Sec. 351.705 Administrative assignment.

(a) * * *

(3) Provide competing employees in the excepted service with

assignment rights to other positions under the same appointing

authority on the same basis as assignment rights provided to

competitive service employees under Sec. 351.701 and in paragraphs (a)

(1) and (2) of this section.

* * * * *

16. In Sec. 351.802, paragraph (a)(2) is revised to read as

follows:

Sec. 351.802 Content of notice.

(a) * * *

(2) The employee's competitive area, competitive level, subgroup,

service date, and three most recent ratings of record received during

the last 4 years.

* * * * *

17. In Sec. 351.803, paragraph (a) is revised to read as follows:

Sec. 351.803 Notice of eligibility for reemployment and other

placement assistance.

(a) An employee who receives a specific notice of separation under

this part must be given information concerning the right to

reemployment consideration and career transition assistance under

subparts B (Reemployment Priority List), F and G (Career Transition

Assistance Programs) of part 330 of this chapter. The employee must

also be given a release to authorize, at his or her option, the release

of his or her resume and other relevant employment information for

employment referral to State dislocated worker unit(s) and potential

public or private sector employers. The employee must also be given

information concerning how to apply both for unemployment insurance

through the appropriate State program and benefits available under the

State dislocated worker unit(s), as designated or created under title

III of the Job Training Partnership Act, and an estimate of severance

pay (if eligible).

Note to Sec. 351.803(a): Compliance dates: Subject to the

requirements of 5 U.S.C. 7116(a)(7), agencies may implement revised

Sec. 351.803(a) at any time between December 24, 1997 and October 1,

1998. For reduction in force actions effective between December 24,

1997 and September 30, 1998, agencies may use either Sec. 351.803(a)

effective December 24, 1997, or the prior Sec. 351.803(a) in 5 CFR

part 351 (January 1, 1997 edition).

* * * * *

18. Section 351.804 is revised to read as follows:

Sec. 351.804 Expiration of notice.

(a) A notice expires when followed by the action specified, or by

an action less severe than specified, in the notice or in an amendment

made to the notice before the agency takes the action.

(b) An agency may not take the action before the effective date in

the notice; instead, the agency may cancel the reduction in force

notice and issue a new notice subject to this subpart.

19. Section 351.805 is revised to read as follows:

Sec. 351.805 New notice required.

(a) An employee is entitled to a written notice of, as appropriate,

at least 60 or 120 full days if the agency decides to take an action

more severe than first specified.

(b) An agency must give an employee an amended written notice if

the reduction in force is changed to a later date. A reduction in force

action taken after the date specified in the notice given to the

employee is not invalid for that reason, except when it is challenged

by a higher-standing employee in the competitive level who is reached

out of order for a reduction in force action as a result of the change

in dates.

(c) An agency must give an employee an amended written notice and

allow the employee to decide whether to accept a better offer of

assignment under subpart G of this part that becomes available before

or on the effective date of the reduction in force. The agency must

give the employee the amended notice regardless of whether the employee

has accepted or rejected a previous offer of assignment, provided that

the employee has not voluntarily separated from his or her official

position.

PART 430--PERFORMANCE MANAGEMENT

20. The authority citation for part 430 continues to read as

follows:

Authority: 5 U.S.C. chapter 43.

21. In Sec. 430.201, paragraph (c) is added to read as follows:

Sec. 430.201 General.

* * * * *

(c) Equivalent ratings of record. (1) If an agency has

administratively adopted and applied the procedures of this

[[Page 62503]]

subpart to evaluate the performance of its employees, the ratings of

record resulting from that evaluation are considered ratings of record

for reduction in force purposes.

(2) Other performance evaluations given while an employee is not

covered by the provisions of this subpart are considered ratings of

record for reduction in force purposes when the performance

evaluation--

(i) Was issued as an officially designated evaluation under the

employing agency's performance evaluation system,

(ii) Was derived from the appraisal of performance against

expectations that are established and communicated in advance and are

work related, and

(iii) Identified whether the employee performed acceptably.

(3) When the performance evaluation does not include a summary

level designator and pattern comparable to those established at

Sec. 430.208(d), the agency may identify a level and pattern based on

information related to the appraisal process.

22. In Sec. 430.203, the definitions of Critical element,

Performance rating, and Rating of record are revised to read as

follows:

Sec. 430.203 Definitions.

* * * * *

Critical element means a work assignment or responsibility of such

importance that unacceptable performance on the element would result in

a determination that an employee's overall performance is unacceptable.

Such elements shall be used to measure performance only at the

individual level.

* * * * *

Performance rating means the written, or otherwise recorded,

appraisal of performance compared to the performance standard(s) for

each critical and non-critical element on which there has been an

opportunity to perform for the minimum period. A performance rating may

include the assignment of a summary level within a pattern (as

specified in Sec. 430.208(d)).

* * * * *

Rating of record means the performance rating prepared at the end

of an appraisal period for performance of agency-assigned duties over

the entire period and the assignment of a summary level within a

pattern (as specified in Sec. 430.208(d)), or (2) in accordance with

Sec. 531.404(a)(1) of this chapter. These constitute official ratings

of record referenced in this chapter.

23. In Sec. 430.206, paragraphs (a)(2) and (b)(4) are revised,

paragraphs (b)(6) and (b)(7) are redesignated as paragraphs (b)(7) and

(b)(8) respectively, and a new paragraph (b)(6) is added to read as

follows:

Sec. 430.206 Planning performance.

(a) * * *

(2) Each program shall specify a single length of time as its

appraisal period. The appraisal period generally shall be 12 months so

that employees are provided a rating of record on an annual basis. A

program's appraisal period may be longer when work assignments and

responsibilities so warrant or performance management objectives can be

achieved more effectively.

(b) * * *

(4) Each performance plan shall include all elements which are used

in deriving and assigning a summary level, including at least one

critical element and any non-critical element(s).

* * * * *

(6) A performance plan established under an appraisal program that

uses only two summary levels (pattern A as specified in

Sec. 430.208(d)(1)) shall not include non-critical elements.

* * * * *

24. In Sec. 430.208, the introductory text to paragraph (d)(2) is

revised, paragraph (d)(4) is revised, and a new paragraph (d)(5) is

added to read as follows:

Sec. 430.208 Rating performance.

* * * * *

(d) * * *

(2) Within any of the patterns shown in paragraph (d)(1) of this

section, summary levels shall comply with the following requirements:

* * * * *

(4) The designation of a summary level and its pattern shall be

used to provide consistency in describing ratings of record and as a

reference point for applying other related regulations, including, but

not limited to, assigning additional retention service credit under

Sec. 351.504 of this chapter.

(5) Under the provisions of Sec. 351.504(e) of this chapter, the

number of years of additional retention service credit established for

a summary level of a rating of record shall be applied in a uniform and

consistent manner within a competitive area in any given reduction in

force, but the number of years may vary:

(i) In different reductions in force;

(ii) In different competitive areas; and

(iii) In different summary level patterns within the same

competitive area.

* * * * *

PART 531--PAY UNDER THE GENERAL SCHEDULE

25. The authority citation for part 531 continues to read as

follows:

Authority: 5 U.S.C. 5115, 5307, and 5338; sec. 4 of Pub. L. 103-

89, 107 Stat. 981; and E.O. 12748, 56 FR 4521, 3 CFR, 1991 Comp., p.

316;

Subpart B also issued under 5 U.S.C. 5303(g), 5333, 5334(a), and

7701(b)(2);

Subpart C also issued under 5 U.S.C. 5304, 5305, and 5553;

sections 302 and 404 of FEPCA, Pub. L. 101-509, 104 Stat. 1462 and

1466; and section 3(7) of Pub. L. 102-378, 106 Stat. 1356;

Subpart D also issued under 5 U.S.C. 5335(g) and 7701(b)(2);

Subpart E also issued under 5 U.S.C. 5336;

Subpart F also issued under 5 U.S.C. 5304, 5305(g)(1), and 5553;

and E.O. 12883, 58 FR 63281, 3 CFR, 1993 Comp., p. 682;

Subpart G also issued under 5 U.S.C. 5304, 5305, and 5553;

section 302 of the Federal Employees Pay Comparability Act of 1990

(FEPCA), Pub. L. 101-509, 104 Stat. 1462; and E.O. 12786, 56 FR

67453, 3 CFR, 1991 Comp., p. 376.

26. In Sec. 531.409, paragraphs (c)(1), (c)(2)(i), and (c)(2)(ii)

are revised to read as follows:

Sec. 531.409 Acceptable level of competence determinations.

* * * * *

(c) Delay in determination. (1) An acceptable level of competence

determination shall be delayed when, and only when, either of the

following applies:

(i) An employee has not had the minimum period of time established

at Sec. 430.207(a) of this chapter to demonstrate acceptable

performance because he or she has not been informed of the specific

requirements for performance at an acceptable level of competence in

his or her current position, and the employee has not been given a

performance rating in any position within the minimum period of time

(as established at Sec. 430.207(a) of this chapter) before the end of

the waiting period; or

(ii) An employee is reduced in grade because of unacceptable

performance to a position in which he or she is eligible for a within-

grade increase or will become eligible within the minimum period as

established at Sec. 430.207(a) of this chapter.

(2) * * *

(i) The employee shall be informed that his or her determination is

postponed and the appraisal period extended and shall be told of the

specific requirements for performance at an acceptable level of

competence.

(ii) An acceptable level of competence determination shall then be

made based on the employee's rating of record

[[Page 62504]]

completed at the end of the extended appraisal period.

* * * * *

[FR Doc. 97-30428 Filed 11-21-97; 8:45 am]

BILLING CODE 6325-01-U