Miscellaneous Changes in Compensation Regulations

Federal RegisterDec 10, 1999

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OFFICE OF PERSONNEL MANAGEMENT

5 CFR Parts 410, 530, 531, 536, 550, 551, 575, 591, and 610

RIN 3206-AH11

Miscellaneous Changes in Compensation Regulations

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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SUMMARY: The Office of Personnel Management is issuing final

regulations to correct or clarify various regulatory provisions dealing

with the compensation of Federal employees. Many of the changes were

prompted by questions and comments from users of the regulations. The

regulatory changes are intended to assist agencies in administering

compensation programs and to provide clearer information to employees

covered by those programs.

DATES: This rule is effective January 10, 2000.

FOR FURTHER INFORMATION CONTACT: Bryce Baker, (202) 606-2858, FAX:

(202) 606-0824, or email to [email protected].

SUPPLEMENTARY INFORMATION: On November 24, 1998, the Office of

Personnel Management (OPM) published proposed regulations dealing with

a number of miscellaneous changes in OPM's pay administration

regulations. (See 63 FR 64880.) These changes were proposed to correct

various typographical or technical errors or omissions and to codify or

clarify OPM policies. The supplementary information section of the

proposed regulations changes included a table describing each

regulatory change by section number.

OPM received comments from five agencies, one labor union, and four

individuals on the proposed regulations. Several agencies made general

comments supporting the proposed regulations as providing helpful

clarification. We provide below a description of each specific comment

and our response. All references to regulatory sections are in title 5,

Code of Federal Regulations, unless otherwise noted.

Review of Comments on Proposed Regulations

Aggregate Limitation on Pay

Section 530.202--Discretionary Payment

A union questioned the proposed revision of the definition of

discretionary payment in Sec. 530.202. It commented that the change is

described as a clarification without a supporting citation.

In the supplementary information section of the proposed

regulations, we cited the supplementary information section of the

original final regulations on the aggregate pay limitation'i.e., 58 FR

50248, September 27, 1993--which included this statement: ``Retention

allowances are the only payments made on a pay-period-by-pay-period

basis that remain discretionary once they have been authorized.'' Thus,

the proposed revision is consistent with the intent of the original

aggregate pay limitation regulations.

Section 530.202--Estimated Aggregate Compensation

A union opposed the proposal to revise the definition of estimated

aggregate compensation in Sec. 530.202 so that it clearly includes

nondiscretionary payments to which an employee is expected to be

entitled. The union believes that an overestimate of expected

compensation would prevent the employee from receiving a discretionary

payment. It stated that the current regulation is preferable because it

does not allow speculation. The union also stated that if the purpose

is to prevent excess payments, Sec. 530.204 already provided an

adequate mechanism for handling excess payments.

The proposed change merely clarifies that the term estimated

aggregate compensation includes estimated or projected nondiscretionary

payments. (See the supplementary information accompanying the final

aggregate pay limitation regulations at 58 FR 50247 (September 27,

1993).) In the current regulations, the beginning part of the

definition already states that a ``projection'' of what an employee

``will receive during the year'' based on ``known factors'' must be

made. Thus, estimates of projected nondiscretionary payments must take

into account known future changes that will affect the amount payable

to the employee. (Note use of the term ``projected'' in

Sec. 530.203(c). Also, see examples given in the supplementary

information accompanying the proposed rule at 63 FR 64880.) The purpose

is to prevent excess payments, consistent with the intent of the law.

Section 530.204 does not deal with preventing or handling excess

payments, but rather addresses the payment of monies properly withheld

from the employee because of the cap that become payable at the

beginning of the next calendar year. A new paragraph (f) in

Sec. 530.203 addresses the handling of erroneous excess payments.

We note that, with the exception of retention allowances, the

aggregate pay limitation does not control the amount of discretionary

payments agencies may award; however, the cap may result in such

payments being delayed until the beginning of the next calendar year.

If a projection of compensation is found to be high, the agency may

immediately pay any previously deferred amounts as allowed under

current projections, and any unpaid amount would be payable at the

beginning of the next year. In these final regulations, we are revising

the definition of estimated aggregate compensation as proposed, except

that we are substituting the word ``projected'' in place of

``expected'' to emphasize the connection to the introductory part of

the definition.

Section 530.203(f)

An agency suggested that we clarify the tax implications of deeming

erroneous excess payments to be paid on January 1 of the next calendar

year. It noted that, if the payment is treated as taxable income in the

year paid (the normal rule), then the taxable income and the aggregate

compensation for the subsequent year will differ.

OPM does not have authority to regulate tax matters. Our

regulations deem erroneous excess payments to be paid on January 1 of

the next calendar year only for the purpose of applying the aggregate

pay limitation. Thus, it

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may be possible that, in rare cases where the cap is exceeded, agencies

will have to maintain different balances for taxable income and

aggregate pay.

Basic Pay Administration

Section 531.203(d)(3)

An agency noted that the proposed Sec. 531.203(d)(3) should

reference Sec. 531.203(d)(2)(vii) instead of (d)(2)(vi). We agree and

are making the correction in these final regulations.

Section 531.203(d)(3) and 531.204(a)(2)

An agency requested that we add appropriate references to statutory

special rates for law enforcement officers in Secs. 531.203(d)(3) and

531.204(a)(2), consistent with the proposed change in

Sec. 531.203(d)(2).

We agree that law enforcement special rates should be excluded in

applying the rule in Sec. 531.203(d)(3), since that rule has

application only for cases involving other types of special rates that

are not basic pay for all purposes. Also, in Sec. 531.204(a)(2)

(dealing with pay setting upon promotion), a law enforcement special

rate should be included within the term ``existing rate of basic pay.''

We have made appropriate changes in these final regulations.

Pay Retention

Section 536.102

A union opposed the proposed clarification of the definition of

demotion at an employee's request in Sec. 536.102. It stated that the

proposed language referencing management actions ``related to''

personal cause could be broadly interpreted so that employees are

miscategorized as ineligible for grade or pay retention.

The proposed revision of the definition of demotion at an

employee's request is intended to make clear that a management action

that is prompted by an employee's misconduct or unacceptable

performance cannot be the basis for entitlement to grade or pay

retention. By law, an employee is not eligible for grade or pay

retention if demoted for personal cause or at the employee's request.

Our regulations on grade and pay retention cover not only employees who

are subject to purely involuntary reductions in grade or pay (e.g., due

to a reduction in force), but also employees whose reductions in grade

or pay result from an employee's voluntary choice, if that choice was

caused or influenced by a management action. This language is subject

to broad interpretation to the benefit of employees. However, the

interpretation cannot be so broad as to provide grade or pay retention

to employees who voluntarily accept a reduction in grade in lieu of an

adverse action based on misconduct or unacceptable performance.

The proposed revision would clarify that an employee who accepts a

reduction in grade after receipt of a notice of demotion or separation

based on misconduct or unacceptable performance would be considered

demoted at the employee's request. Similarly, an employee who

voluntarily accepts a lower grade as part of a settlement in lieu of an

adverse management action based on personal cause would be considered

demoted at the employee's request. Accordingly, we are making the

proposed revision in these final regulations, except that we are adding

the word ``directly'' before ``related'' to emphasize that the

management action is directly prompted by the employee's misconduct or

unacceptable performance.

Section 536.205(b)(4)

Two agencies questioned the justification for the proposed new

rule, which prevents a retained rate employee's pay from being set

below the maximum rate of the range for the employee's new position.

One agency stated that the provision is contrary to the intent of the

pay retention provision, since it provides for an increase in pay

rather than just keeping the employee from losing money.

The proposed rule is designed to address an inequity that exists

for certain employees entitled to a retained rate who are moved to a

position for which there is a higher basic pay rate range. Under the

pay retention rules, if the employee remains in the same position, the

retained rate will eventually fall below the maximum (step 10) rate,

and the employee will become entitled to that maximum rate. However,

if, while still entitled to a retained rate, the employee is moved to a

different position for which a higher basic pay rate range applies

(e.g., from a regular General Schedule rate range to a special rate

range), the employee's pay could be slotted into the new rate range at

a rate below the maximum rate. (See 5 CFR 536.205(b)(1)-(2).) In

contrast, if the employee had already been at step 10 at the time of

the movement, he would have been entitled to the step 10 rate in the

new rate range. (See 5 CFR 530.306(e).) Since the maximum rate of the

applicable range is the target rate for a retained rate employee, it

makes sense to ensure that the employee is treated no worse than an

employee receiving such maximum rate. We believe the proposed rule is

equitable and appropriate and we are retaining it in these final

regulations.

Overtime and Other Premium Pay

Section 550.103--Administrative Workweek

An individual requested clarification regarding the definition of

administrative workweek-namely, do the seven consecutive 24-hour

periods correspond to seven consecutive ``days'' as defined in this

section? The answer is yes. The same ``day'' (a 24-hour period, not

necessarily a calendar day) used in computing an employee's daily

overtime entitlements must also be used in establishing the employee's

administrative workweek. We have revised the definition of

administrative workweek to directly link to the definition of day.

Section 550.103--Premium Pay

An agency suggested that the word ``earned'' be inserted before

``compensatory time off'' in the definition of premium pay in

Sec. 550.103. We agree that the intent was to include ``earned''

compensatory time off in the definition of premium pay, since the value

of compensatory time off when earned is used in applying premium pay

caps and in determining the value of unused compensatory time off when

an employee becomes entitled to a cash payment (e.g., at separation).

Accordingly, we have revised the definition to clarify this. However,

to assist users of the regulations, we have moved the second sentence

of the definition, which dealt with how to determine the dollar value

of compensatory time off, to the sections of the regulations dealing

specifically with compensatory time off. Thus, a new paragraph is being

added to Secs. 550.114 and 551.531 in these final regulations.

A union objected to the proposal to clarify that compensatory time

off is considered premium pay for purposes of applying biweekly and

annual pay caps. It stated that employees may never receive pay for

compensatory time off earned, since the employee is instead compensated

by time off from his or her regular work schedule at a later date. The

union concluded that other forms of premium pay should not be limited

due to the accumulation of compensatory time off that may never be

converted to pay.

The proposed inclusion of compensatory time off earned in the

definition of premium pay is consistent with the longstanding policy of

the Government. Many years ago, the Comptroller General found that

compensatory time off should be

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assigned a dollar value and used in applying aggregate pay caps. (See

26 Comp. Gen. 750 (1947) and 37 Comp. Gen. 362 (1957).) Compensatory

time off is converted to dollars when an employee separates (or

otherwise becomes eligible) using the overtime rate in effect at the

time the hours were earned.

However, we note that, for employees covered by (nonexempt from)

the Fair Labor Standards Act (FLSA) overtime provisions, overtime pay

and compensatory time off earned in lieu of overtime pay are not

considered to be ``premium pay'' under title 5, United States Code.

This means that overtime pay and earned compensatory time off for FLSA-

covered employees are disregarded when applying various pay caps,

including the premium pay caps in 5 U.S.C. 5547. Thus, the inclusion of

compensatory time off in the definition of premium pay has relevance

only for FLSA-exempt employees. To assist users of the regulations, we

are adding a sentence to the definition of premium pay to clearly state

that FLSA overtime pay and compensatory time off earned in lieu of such

overtime pay are excluded.

Sections 550.112(k)(1) and 551.431(a)(1)

An agency commented that the standards used to determine hours of

standby duty are incomplete. As an example, the agency pointed out that

an employee who is restricted to a ship may still have noncompensable

off-duty hours while so restricted. It recommended that the proposed

Sec. 550.112(k)(1) and a parallel rule in the FLSA regulations at

Sec. 551.431(a)(1) be revised to more clearly consider whether the

employee is restricted to an area because of an agency's need for the

employee to remain in a constant state of readiness to perform work, as

opposed to other reasons. It specifically cited OPM's standby duty

premium pay regulations (5 CFR 550.143(a)(1)) as providing preferred

language.

We agree that clarification is needed. There are situations where

an employee may be relieved from duty but have limited mobility because

of geographic isolation. For example, an employee may be temporarily

assigned to a ship or to a post in a remote wildland area. Also, an

employee may actually reside temporarily or indefinitely on agency

premises adjacent to his or her work site. In such cases, the employee

would be considered officially on duty only when the employee is

required to work or is placed in a standby status by the agency. If an

employee is relieved from duty and free to pursue personal activities

(though, for practical reasons, limited in where he or she may go), the

employee is not in a duty status and the hours are not compensable.

For example, an employee on a ship is not in a duty status if he or

she is relieved from duty, released from his specific work station or

post of duty, and allowed to pursue personal activities elsewhere on

the ship. The fact that some restrictions may be placed on an

employee's personal activities does not mean that the employee must be

placed in duty status. For instance, certain work-related limitations

such as restrictions on alcohol consumption or use of medication are

not a basis for finding that an employee's activities are substantially

limited. Accordingly, we are revising the proposed Sec. 550.112(k) and

making parallel changes in Sec. 551.431(a) to provide appropriate

clarification. (Note: If an employee in a nonduty status is called back

to the work station to perform irregular or occasional overtime work,

the employee is entitled to a minimum of 2 hours of overtime pay,

consistent with 5 U.S.C. 5542(b)(1).)

Section 550.112(l)

A union commented that time in an ``on-call'' status should be

considered hours of work because of the significant restrictions placed

on the employee. The union stated that standby status and on-call

status are not distinguishable.

The proposed rule in Sec. 550.112(l) reflects the Government's

longstanding policy and practice. (See Comptroller General decisions B-

190369, February 23, 1978, and B-205118, March 8, 1982, and Federal

Labor Relations Authority decision 51 FLRA No. 105, May 24, 1996.) We

believe there is a discernible distinction between on-call status and

standby status based on the nature of the restrictions placed upon the

employee. We further believe that on-call hours during which the

employee is under limited restrictions should not be compensable as

hours of work. We are including the proposed Sec. 550.112(l) without

change in these final regulations.

Section 550.112(m)(3)

An individual inquired regarding OPM's policy on when sleep time

constitutes compensable hours of work. In referencing the proposed rule

in Sec. 550.112(m), we realized that the use of the term ``tours of

duty'' in paragraph (3) is inappropriate, since it is a defined term in

subpart A (see Sec. 550.103) that encompasses only regularly scheduled

hours. The sleep time rule operates based on the length of the

employee's work shift, without regard to whether the hours involved are

regularly scheduled or irregular. Therefore, we have substituted the

term ``work shifts'' in place of ``tours of duty'' in

Sec. 550.112(m)(3). For consistency, parallel changes are made in

Sec. 551.432 of OPM's FLSA overtime regulations.

Section 550.162(f)

A union stated its agreement with the proposed new paragraph (f) in

Sec. 550.162, which protects the status of employees receiving annual

premium pay (i.e., administratively uncontrollable overtime pay and

standby duty premium pay) who suffer an on-the-job injury resulting in

entitlement to workers' compensation benefits. An agency requested

clarification of the proposed provision in paragraph (f)(3) since some

agency reviewers incorrectly interpreted the language to require

payment of annual premium pay during periods of leave without pay. It

recommended that paragraph be reorganized to distinguish between

``authorization'' of premium pay (which has an impact on retirement

benefit computations, but no pay implications) and actual payment of

premium pay.

While this matter was explained in the supplementary information

section of the notice of proposed regulations, we agree that the

regulatory text should be further clarified. We have made appropriate

changes in these final regulations.

Section 551.423(a) and Section 410.402(d)

We received questions regarding how to reconcile apparent

inconsistencies between Sec. 551.423(a)(2) and Sec. 410.402(d). In the

proposed regulations, we had modified Sec. 551.423(a)(2) by adding a

cross reference to Sec. 410.402(d). We agree that the two sections

appear to be inconsistent with respect to the relationship between

performance improvement and creditability of training hours as hours of

work. Section 410.402(d) requires that, for training hours outside

regular working hours to be considered hours of work, the training in

question must be intended to improve an employee's performance up to

the fully successful level or to help the employee to perform newly

assigned duties. In contrast, Sec. 551.423 uses less limiting language,

saying that the training is intended to improve the employee's

performance in his or her current position.

To address this inconsistency, we are removing the specific rules

in Sec. 410.402(d) and replacing them with a cross reference to

Sec. 551.423 and a

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sentence clarifying that the part 410 prohibitions on premium pay

during training do not apply to FLSA overtime pay. In addition, we are

revising the definition of directed to participate in

Sec. 551.423(b)(1) to clarify that the fact that an agency pays for all

or part of the expenses of training is not a basis for deciding whether

the training was directed. In many cases, an agency may fund training

that is requested by the employee on his or her own initiative. If the

training is voluntary, as opposed to being required by the agency, the

employee may not be credited with overtime hours of work for time spent

in that training.

Section 551.501(a)(5)

An agency commented that the supplementary information section of

the proposed regulations included an incorrect citation in the

description of the proposed revision of Sec. 551.501(a)(5).

Specifically, the referenced title 4 is in the D.C. Code, not the

United States Code.

We agree that the citation was incorrect. The pay provisions for

Secret Service Uniformed Division and Park Police officers are

contained in title 4 of the D.C. Code. (There was no error in the

regulatory text.)

Section 551.512

An individual commented that the language describing the ``boosted

hour method'' in proposed Sec. 551.512(d)(3) was confusing.

We agree. When we reviewed the proposed new paragraph (d) in

Sec. 551.512, we realized that the instructions on computing Fair Labor

Standards Act (FLSA) overtime pay in cases involving nondiscretionary

bonuses were flawed. In these final rules, we provide clarification by

addressing the distribution of a group bonus separately from the

computation of overtime pay in an individual bonus situation. We are

providing the rules for computing FLSA overtime pay in cases involving

nondiscretionary bonuses in a separate, new section, Sec. 551.514.

Paragraph (b) of that section covers individual computation methods,

while paragraph (c) covers the distribution of a group bonus. We

revised the provisions generally to use more precise language. In

addition, for individual bonus situations, we have added a bonus hourly

rate method in Sec. 551.514(a)(2), which is based on a method found in

the Department of Labor's FLSA regulations. (See 29 CFR 778.209.)

As part of our efforts to clarify the treatment of bonuses under

the FLSA overtime regulations, we have made one other conforming

change. We are amending Sec. 551.511(b)(3) to reference the term

``discretionary cash awards or bonuses.'' (In Sec. 551.514, we refer to

Sec. 551.511(b)(3) to contrast nondiscretionary bonuses to

discretionary bonuses.)

Severance Pay

Section 550.703--Immediate Annuity

A union commented regarding the proposal to revise the definition

of immediate annuity to clarify that it includes any voluntarily

postponed annuity (such as a Minimum Retirement Age (MRA) plus 10 years

(MRA + 10) postponed annuity under the Federal Employees Retirement

System (FERS)). The union recommended that an annuity entitlement

should bar severance pay only if the employee is actually beginning to

receive annuity payments within 1 month after separation.

The current definition of immediate annuity in Sec. 550.703 already

provides that a postponed MRA+10 FERS annuity under Sec. 842.204 is

considered an immediate annuity. This rule is based on the law, which

requires that severance pay be barred to any individual who has

``fulfilled the requirements for immediate annuity.'' The proposed

revision makes clear that the term immediate annuity for severance pay

purposes also encompasses any deferred annuity (i.e., an annuity where

eligibility is reached after separation) that begins to accrue within 1

month after separation, including such a deferred MRA+10 annuity under

Sec. 842.212(b) whose commencing date is postponed. (Paragraph (a) of

the current definition already encompasses deferred annuities that

begin accruing within 1 month after separation. However, paragraph (b),

which deals with MRA+10 annuities with postponed commencing dates,

specifically references only non-deferred MRA+10 annuities. Thus,

clarification is needed.) Accordingly, we have decided to go forward

with the proposed revision of the definition of immediate annuity in

these final regulations.

Section 550.703--Nonqualifying Appointment

An individual pointed out that paragraph (f)(5) in the definition

of nonqualifying appointment referenced an obsolete appointing

authority-namely, limited executive assignments under part 305.

Accordingly, we are deleting that paragraph and renumbering the

succeeding paragraphs.

Section 550.703--Qualifying Appointment

An agency proposed revising the definition of qualifying

appointment to clarify that the voluntary movement from a qualifying

permanent appointment to a time-limited appointment does not adversely

affect an otherwise eligible employee's entitlement to severance pay

upon expiration of the time-limited appointment.

We do not believe further clarification is needed. The current

definitions of involuntary separation and qualifying appointment both

clearly state that a separation resulting from the expiration of a

time-limited appointment that took effect within 3 calendar days after

a separation from a qualifying permanent appointment is qualifying,

without any condition that the first separation be on an involuntary

basis. Prior to 1990, OPM regulations did provide that a time-limited

appointment could be qualifying only if it followed an involuntary

separation from a permanent appointment. However, as the result of a

court case, OPM revised the severance pay regulations (i.e., the above-

mentioned definitions). The current rules have been in effect since

March 1990. (See 54 FR 23215, May 31, 1989, and 55 FR 6591, February

26, 1990, for explanations given in proposed and final rules.)

Section 550.704

An agency requested that Sec. 550.704 (dealing with eligibility for

severance pay) be amended to reference the provisions in 5 U.S.C.

5595(h) that prohibit payment of severance pay to certain employees

transferring to nonappropriated fund positions.

We already addressed this issue in the proposed regulations in

Sec. 550.709(f). We placed the provision in Sec. 550.709 (dealing with

the payment of severance pay) because we believe the bar on severance

pay during an employee's time in a nonappropriated fund position is

more properly viewed as a suspension of payments. Under 5 U.S.C.

5595(h), severance payments may, under certain conditions, be

``resumed'' upon involuntary separation from the nonappropriated fund

position.

Section 550.706

An agency requested that we further clarify the rule in

Sec. 550.706 regarding when a resignation may be treated as an

involuntary separation for severance pay purposes. The agency was

concerned about resignations following notice of a proposed removal for

(1) failure to accept a directed reassignment

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to a new location and (2) medical inability to perform duties. It asked

whether a final removal action needed to be issued before such a

resignation could be qualifying for severance pay purposes.

The answer is that a final involuntary removal action is not

necessary to qualify for severance pay if an employee resigns after

receipt of the specific written notice of proposed removal. This is no

different from resignation after receipt of a proposed removal as part

of a reduction in force. Since we believe that it is clear that the

broad language in Sec. 550.706(a)(1) encompasses all specific notices

of proposed involuntary separations (as defined in Sec. 550.703),

including involuntary separations involving the circumstances cited by

the agency, we are making no change in the proposed regulation.

A union opposed the proposed changes in Sec. 550.706, stating that

the changes add unnecessary barriers to getting severance pay for

employees who resign in the face of a separation and meet the

``substantive requirements.'' We disagree. The proposed changes merely

provide a clearer definition of what constitutes a formal, official

notice that would trigger entitlement to severance pay, consistent with

current OPM policies. By law, severance pay entitlement is based on an

involuntary separation. In regulating the law, OPM does allow

resignations to be treated as involuntary separations for severance pay

purposes if an official notice informs the employee that an involuntary

separation will occur. If a notice does not contain the elements (e.g.,

nature of action, effective date of separation) described in the

proposed revision, that shows that the involuntary separation decision

has not been finalized. An uncertain separation decision cannot be the

basis for severance pay upon resignation, since that would be contrary

to the law's requirements. The types of specific notices of involuntary

separation that commonly trigger severance pay-e.g., a reduction-in-

force separation notice or a notice of separation for failure to accept

a geographic reassignment--already routinely include the required

elements.

Section 550.709-710

An agency suggested further revising Sec. 550.710 to clarify which

agency is responsible for making severance payments when (1) an

employee has a qualifying temporary appointment (i.e., appointed within

3 days following a qualifying permanent appointment) and (2) an

employee's severance pay resumes following a temporary suspension

during one or more nonqualifying temporary appointment.

We agree that clarification in this area would be helpful. The

answer is that severance payment responsibility rests with the agency

employing the individual at the time of the involuntary separation that

triggered the severance pay entitlement. (See 5 U.S.C. 5595(b).) In the

case of an employee with a qualifying temporary appointment, the

severance pay entitlement is based on the separation from the temporary

appointment, not on the separation from the preceding permanent

appointment. (See definition of involuntary separation in

Sec. 550.703.) Accordingly, we are adding language in paragraphs (b)

and (c) of Sec. 550.709 to make clear that the agency employing the

employee in a qualifying temporary appointment is responsible for

making severance payments. We are also adding a sentence in

Sec. 550.710 to make clear that, when severance payments resume after a

period of suspension during a nonqualifying temporary appointment,

severance pay liability continues to rest with the agency originally

responsible for the severance payments. In addition, we have corrected

several erroneous regulatory citations in the proposed Sec. 550.709(a).

We are also making changes in Sec. 550.709(g) because of recent

changes in law. Under section 1104(a) of the National Defense

Authorization Act for Fiscal Year 2000 (Public Law 106-65, October 5,

1999), the authority of the Department of Defense to pay lump-sum

severance payments to certain employees under 5 U.S.C. 5595(i) was

extended to cover employees separating through September 30, 2003. The

authority had been scheduled to expire on September 30, 1999. In

addition, section 3243 added a new paragraph (j) to section 5595, which

provides that the Department of Energy may pay severance pay in a lump

sum to certain employees whose entitlement derives from the

establishment of the National Nuclear Security Administration. We are

amending Sec. 550.709(g) to provide a general reference to lump-sum

severance payments expressly authorized by law, rather than attempting

to include specific references to such laws.

Back Pay

Section 550.803

A union opposed the proposed changes in the definitions of pay,

allowances, and differentials and employee. It specifically objected to

the proposed exclusion of retirement investment fund contributions and

of post-separation payments (such as lump-sum payments for annual

leave, severance payments, and retirement annuity payments). The union

stated that no explanation was given for excluding employee and agency

contributions to a retirement investment fund and that this would

prevent the employee from being made financially whole. The union also

stated that OPM provided no rationale or legal support for the

exclusion of post-separation payments.

Regarding the exclusion of retirement investment fund

contributions, we explained in the supplementary information section of

the proposed regulations (63 FR 64883) that the correction of agency

errors affecting an employee's Thrift Savings Plan account is subject

to specific and independent laws and regulations. (See 5 U.S.C. 8432a

and 5 CFR parts 1605 and 1606.) Furthermore, the Comptroller General

considered this issue and found that pay, allowances, and differentials

under the back pay law do not include earnings on contributions to the

Thrift Savings Fund. (See 68 Comp. Gen. 220 (1989).) Therefore, we

believe the exclusion of retirement investment fund contributions is

necessary and appropriate.

Regarding the exclusion of post-separation benefits, the proposed

definition reflects OPM's interpretation of the back pay law. Section

5596(b)(1) of title 5, United States Code, states that the back pay

provisions apply to an ``employee of an agency'' who is affected by an

unjustified or unwarranted ``personnel action'' resulting in the

withdrawal or reduction of ``pay, allowances, or differentials of the

employee.'' Also section 5596(b)(1)(A) refers to the ``period for which

the personnel action was in effect'' and to the amount the ``employee''

normally would have received during that period. We believe the term

``employee'' clearly refers to an individual currently employed by a

Federal agency, consistent with the definition in 5 U.S.C. 2105. (This

would include both an individual who was actually employed or who was

deemed to be employed based on a retroactive reinstatement.)

Furthermore, the terms ``personnel action'' and ``pay, allowances, and

differentials'' are commonly used in connection with individuals in an

active employment status.

In addition, section 5596(b)(1)(B) states that an employee who is

entitled to back pay during a period when an erroneous personnel action

was in effect ``is deemed to have performed service for the agency

during that period.''

[[Page 69170]]

Clearly, Congress would not have included such a requirement if it

intended the back pay law to cover benefits to which an employee is

entitled after a valid separation from service.

It is true that the existing back pay regulations define the term

employee to mean an ``employee or former employee of an agency.''

However, OPM understands the reference to a ``former employee'' as

merely making clear that an individual separated from Federal service

may file a claim for and receive back pay for periods of actual or

deemed employment. (Deemed employment refers to periods during which an

individual is retroactively placed in an employment status and is

deemed to have been performing service as part of a corrective action

by an authorized authority--for example, a period during which an

erroneous separation was in effect or an individual was erroneously

denied reinstatement based on a statutory reemployment right.) We note

that the existing regulatory definition of pay, allowances, and

differentials includes ``monetary and employment benefits'' to which an

employee is entitled based on the ``performance of a Federal

function,'' which OPM understands to refer to compensation for work by

an active employee. In the supplementary information for the final

regulations on back pay published in 1981 (46 FR 58271, December 1,

1981), we referred to the definition of pay, allowances, and

differentials and stated that ``benefits received following retirement

are not included because they are not received for the period covered

by the corrective action.'' Finally, we point to the former Federal

Personnel Manual, which clarified the definition of employee as

follows:

``Employee'' means an employee or former employee of an agency.

The back pay law applies to employees or former employees who, while

employed by the Federal Government [emphasis in original], were

affected by an unjustified or unwarranted personnel action that

resulted in a loss of pay and to former employees who are improperly

denied a statutory reemployment right. [See former Federal Personnel

Manual Supplement 990-2, S8-3, page 550-57, April 20, 1984.]

Accordingly, as we proposed, we are clarifying the definitions of

employee and pay, allowances, and differentials consistent with OPM's

past practice and policy. The defining of these statutory terms is

within OPM's broad regulatory authority in 5 U.S.C. 5596. We note that

this does not mean an individual is not entitled to corrective payments

if it is found that he or she was paid less than the amount due the

individual for severance pay, for a lump-sum payment for annual leave,

or for retirement benefits. Under the law governing the payment in

question, the individual is entitled to be paid correctly, if a timely

claim is filed. However, the provisions of section 5596, including that

section's interest provisions, are not applicable in such cases.

Appendix A

An agency suggested that, in appendix A to subpart H of part 550,

we clarify the definition of basic pay--e.g., whether it includes

locality pay.

We did not intend that appendix A contain a restatement of all the

rules governing the various deductions that might apply to a back pay

award. While the deduction table in appendix A uses the term basic pay

in reference to retirement and life insurance deductions, it is

expected that readers would understand that they must use the normal

definition of that term as set forth in the applicable retirement and

life insurance laws and regulations. For example, locality pay is

included under those definitions. The second sentence of appendix A

already states: ``To compute these deductions, an agency must determine

the appropriate base or follow other rules.'' We have revised this

sentence by adding the words ``consistent with applicable law.''

Commuting Area

Sections 550.703, 575.103, and 575.203

A union objected to the proposed revision of the definition of

commuting area in various regulatory parts dealing with severance pay,

recruitment bonuses, and relocation bonuses. The union stated four

objections, which we will review and respond to in the following

paragraphs.

First, the union stated that the proposed regulation would remove

existing language referring to the commuting area as the area that

``normally is considered one area for employment purposes.'' The union

believes this language is helpful in establishing that a commuting area

should be based on ``normal objective expectations'' or ``common

general understandings,'' not defined arbitrarily.

We agree that agencies should take into account common general

expectations and understandings of what a normal commuting trip is for

the particular work site in question, and we will revise the proposed

definition to include language stating that an agency must define a

commuting area based on the generally held expectations of the local

community. However, we believe it does not make sense to use a single

commuting area for a metropolitan area that includes multiple Federal

work sites that can be at opposite ends of the metropolitan area. For

example, both Leesburg, Virginia, and Columbia, Maryland, could be

considered to be within the Washington, DC, commuting area. An

individual could live in Baltimore and work in Columbia and have a

reasonable commuting trip. However, if the work site were changed to

Leesburg, an agency could appropriately find that Baltimore is outside

the normal commuting area for the Leesburg work site. This example

shows that it is essential to base commuting areas on the specific work

site in question and to consider the location of the employee's

residence relative to that work site. We note that the term

``employee's commuting area'' is used in the definition of reasonable

offer in the existing severance pay regulations, showing that the

location of the individual employee's residence is intended to be a

consideration.

Second, the union stated that the proposed regulation gives

agencies sole and unfettered discretion in establishing the commuting

area. The union stated that the definition of the commuting area should

be reached in negotiation with the affected employees' exclusive

representatives.

Under existing regulations, it is the employing agency that must

make a determination regarding the boundaries of the commuting area in

order to apply the applicable law and regulations. The proposed

regulation merely makes this responsibility clear. The proposed

regulation does not give agencies unlimited discretion in establishing

the commuting area. These decisions may not be made on an arbitrary or

capricious basis. We note that the proposed regulation requires that

the commuting area be an area surrounding the work site that

``encompasses the localities where people live and reasonably can be

expected to travel back and forth daily.'' As previously stated, we

will add language referencing the need to base decisions about

commuting areas on the generally held expectations of people in the

local community to emphasize that the interpretation of what is

reasonable should be consistent with those expectations. The proposed

language does not limit the normal application of the laws governing

employees' bargaining rights.

Third, the union stated that the proposed regulation added a

``subjective'' element by using the ``significantly more burdensome''

standard in judging whether an employee who lives outside the

[[Page 69171]]

standard commuting area for a new work site should be considered to

live within or outside the commuting area for the purpose of the

benefit in question. It pointed out that the proposed regulation is

based on the employee's current commuting trip, even if the current

residence happens to be only a temporary one.

It is necessary to take into account where an employee lives

relative to a new work site to ensure equitable treatment of employees.

For example, an employee may work in Washington, DC, but choose to live

in and commute from Fredericksburg, Virginia, which would be outside

the normal commuting area for a work site in DC. If the agency changed

the employee's duty station from Washington, DC, to Fredericksburg, it

would not be reasonable to award a benefit like severance pay based on

a finding that the employee's new work site is outside the commuting

area for the old work site. In this example, the employee is closer to

the new work site than the old work site and would not be compelled to

move in order to accept the job at the new work site. Under a different

but less common scenario, an employee may live outside the standard

commuting area for a new work site but still be as close or closer in

terms of commuting time and distance to the new work site than to the

old work site. If a commuting trip is not significantly more burdensome

than before the duty station change, we believe the employee should not

be considered to be outside the commuting area for the new work site.

We agree with the union's point that these decisions should not be

based on an employee's temporary residence. We are adding language to

address this. We note that reasoned judgment will have to be applied by

the authorized agency official in determining whether or not a

residence is truly temporary.

Fourth, the union objected to the criterion relating to whether an

employee would be compelled to change his or her place of residence

because of a change in duty station. It stated that this is too high a

standard. The union was concerned that an agency may argue that a 2-

hour commute each way does not compel an employee to move. It was also

concerned about the vagueness of the term ``other relevant factors''

and the lack of specific mention of factors such as traffic patterns,

location of a child's school or day care, and location of medical

facilities.

The proposed compelled-to-move rule is not a new rule, but is based

on longstanding policy. OPM and its predecessor, the Civil Service

Commission, have long used this rule to ensure that severance pay is

not awarded in cases where duty station changes did not actually compel

an employee to move. (For example, see Comptroller General decisions B-

182300 (January 16, 1975, and December 4, 1975) and B-2105424 (June 6,

1983), in which the compelled-to-move criterion was used in

adjudicating severance pay claims.)

A similar rule is used under the Civil Service Retirement System

(CSRS) and the Federal Employees Retirement System (FERS) for employees

filing for discontinued service retirement (i.e., early retirement

based on involuntary separation). An employee's separation is

considered involuntary for discontinued service retirement purposes if

he or she refuses to accept a directed reassignment outside the

commuting area. Under the retirement rules, it must be determined that

complying with the duty station change would ``compel the employee to

change his or her residence in order to continue employment.'' (See

CSRS and FERS Handbook for Personnel and Payroll Offices, chapter 44,

sections 44A2.1-3 and 44B1.1-1C.)

We acknowledge that reasoned judgment is necessary to apply this

rule. Since a variety of interrelating factors may come into play in

deciding whether an employee would be compelled to move depending on

the specific area and the specific employee, it is not possible to

prescribe a precise, works-in-every-situation rule. The ``other

relevant factors'' language is necessary to allow the agency official

to consider all possibly relevant factors, including the factors cited

by the union and others that may work to the employee's benefit. Any

review of an agency official's decision regarding the compelled-to-move

issue will certainly be based on whether it is consistent with what a

reasonable person would conclude. We expect that agencies will apply

this rule in a fair and equitable way.

In summary, we are proceeding with the proposed change in the

definition of commuting area as used in the regulations for severance

pay, recruitment bonuses, and relocation bonuses; however, we have made

some modifications in the proposed language to provide clarification

and to respond to comments.

Changes Related to New Firefighter Regulations

On November 23, 1998, we published interim regulations to implement

statutory changes affecting the pay of Federal firefighters. (See 63 FR

64589.) Some of those interim regulations affected the proposed

regulations that are being made final through this notice. We are

making appropriate changes consistent with the interim firefighter pay

regulations.

The proposed regulations added a new paragraph (g) to Sec. 550.111;

however, the interim firefighter pay regulations added a different

paragraph (g) and a subsequent regulation added a paragraph (h) (64 FR

4520, January 29, 1999). Therefore, we are redesignating the proposed

paragraph (g) as paragraph (i).

The proposed regulations revised Sec. 550.707(b), but did not

include a provision related to computing severance pay for firefighters

with variable workweeks. The interim firefighter regulations included a

change to address such firefighters in Sec. 550.707(b)(4). We are

revising the proposed Sec. 550.707(b) to incorporate the firefighter

provision.

The proposed regulations included changes in Secs. 550.112(m) and

551.432, which deal with when sleep time is considered hours of work

for overtime purposes. These sections of the proposed regulations do

not address firefighters paid under the new firefighter pay computation

method established by 5 U.S.C. 5545b. Our position is that, for

firefighters compensated under 5 U.S.C. 5545b, all official duty hours,

including all sleep hours during official duty hours, are compensable

hours for all pay purposes. The 2756-hour factor used in computing

firefighter hourly rates under 5 U.S.C. 5545b already takes into

account the existence of compensable sleep hours. We are revising

Secs. 550.112(m) and 551.432 accordingly.

The proposed regulations revised Sec. 551.501(a)(5), but did not

include a reference to firefighters paid under 5 U.S.C. 5545b, as

reflected in the interim firefighter pay regulations. We are revising

Sec. 551.501(a)(5) to incorporate that reference.

Other Changes

We are making some additional technical changes not included in the

proposed regulations. These changes involve correction of obvious

errors.

In Sec. 550.1104(c)(2), we are inserting the word ``contesting,''

which was inadvertently left out when revisions were recently made in

the salary offset regulations in subpart K of part 550. (See 63 FR

72100, December 31, 1998, and compare to 5 U.S.C. 5514(a)(3).)

In Sec. 550.1104(d)(2), we are correcting a typographical error.

(The word ``account'' was misspelled as ``accont.'')

[[Page 69172]]

Regulatory Flexibility Act

I certify that these regulations will not have a significant

economic impact on a substantial number of small entities because they

will apply only to Federal agencies and employees.

List of Subjects in 5 CFR Parts 410, 530, 531, 536, 550, 551, 575,

591, and 610

Administrative practice and procedure, Claims, Education, Freedom

of information, Government employees, Holidays, Law enforcement

officers, Reporting and recordkeeping requirements, Travel and

transportation expenses, Wages.

U.S. Office of Personnel Management.

Janice R. Lachance,

Director.

Accordingly, OPM is amending parts 410, 530, 531, 536, 550, 551,

575, 591, and 610 of title 5 of the Code of Federal Regulations as

follows:

PART 410--TRAINING

1. The authority citation for part 410 continues to read as

follows:

Authority: 5 U.S.C. 4101, et seq.; E.O. 11348, 3 CFR, 1967

Comp., p. 275.

Subpart D--Paying for Training Expenses

2. In Sec. 410.402, paragraph (d) is revised to read as follows:

Sec. 410.402 Paying premium pay.

* * * * *

(d) Regulations governing overtime pay for employees covered by

Fair Labor Standards Act (FLSA) during training, education, lectures,

or conferences are found in Sec. 551.423 of this chapter. The

prohibitions on paying premium pay found in paragraph (a) of this

section are not applicable for the purpose of paying FLSA overtime pay.

* * * * *

PART 530--PAY RATES AND SYSTEMS (GENERAL)

3. The authority citation for part 530 continues to read as

follows:

Authority: 5 U.S.C. 5305 and 5307; E.O. 12748, 56 FR 4521, 3

CFR, 1991 Comp., p. 316;

Subpart B also issued under secs. 302(c) and 404(c) of the

Federal Employees Pay Comparability Act of 1990 (Pub. L. 101-509),

104 Stat. 1462 and 1466, respectively;

Subpart C also issued under sec. 4 of the Performance Management

and Recognition System Termination Act of 1993 (Pub. L. 103-89), 107

Stat. 981.

Subpart B--Aggregate Limitation on Pay

4. In Sec. 530.202, the definition of estimated aggregate

compensation is amended by removing the words ``is entitled'' and

adding in their place the words ``is or is projected to be entitled'',

and the definition of discretionary payment is revised to read as

follows:

Sec. 530.202 Definitions.

* * * * *

Discretionary payment means a payment that an agency has discretion

to pay or not to pay to an employee, including a retention allowance

but excluding any other payment that is preauthorized to be paid to an

employee at a regular fixed rate each pay period.

* * * * *

5. In Sec. 530.203, paragraph (c) is amended by removing the word

``proved'' and adding in its place the word ``provided'', and a new

paragraph (f) is added to read as follows:

Sec. 530.203 Administration of aggregate limitation on pay.

* * * * *

(f) If an agency makes an incorrect estimate of aggregate

compensation at an earlier date in the calendar year, the sum of an

employee's remaining payments of basic pay (which may not be deferred)

may exceed the difference between the aggregate compensation the

employee has actually received to date in that calendar year and the

rate for level I of the Executive Schedule. In this case, the employee

will become indebted to the Federal Government for any amount paid in

excess of the level I aggregate limitation. To the extent that the

excess amount is attributable to amounts that should have been deferred

and would have been payable at the beginning of the next calendar year,

the debt will be extinguished on January 1 of the next calendar year.

As part of the correction of the error, the excess amount will be

deemed to have been paid on January 1 of the next calendar year (when

the debt was extinguished) as if it were a deferred excess payment as

described in Sec. 530.204 and must be considered part of the employee's

aggregate compensation for the new calendar year.

Subpart C--Special Salary Rate Schedules for Recruitment and

Retention

6. In Sec. 530.303, paragraphs (d) and (i) are revised to read as

follows:

Sec. 530.303 Establishing and adjusting special salary rate schedules.

* * * * *

(d) All requests to establish or adjust special salary rate

schedules must be transmitted directly to OPM's central office by the

agency's headquarters. Each request must include a certification by the

head of the agency (or another official designated to act on behalf of

the head of the agency with respect to the given schedule) that the

requested special salary rates are considered necessary to ensure

staffing adequate to the accomplishment of the agency's mission.

* * * * *

(i) The determination as to whether an employee is covered by a

special salary rate schedule must be based on the employee's position

of record and the official duty station for that position. For the

purpose of this subpart, the employee's position of record and

corresponding official duty station are the position and station

documented on the employee's most recent notification of personnel

action, excluding a notification associated with a new assignment that

is followed immediately (i.e., within 3 workdays) by a reduction in

force resulting in the employee's separation before he or she is

required to report for duty at the new location. For an employee who is

authorized to receive relocation allowances under 5 U.S.C. 5737 in

connection with an extended assignment, the position and duty station

associated with that assignment are the employee's position of record

and official duty station.

PART 531--PAY UNDER THE GENERAL SCHEDULE

7. 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.

Subpart B--Determining Rate of Basic Pay

8. In Sec. 531.203:

[[Page 69173]]

A. Paragraph (d)(3) is amended by removing ``5303'' and adding in

its place ``5305'', by removing ``Sec. 532.231'' and adding in its

place ``part 532'', by adding ``(other than section 403 of FEPCA)''

after ``other legal authority'' and by removing ``(d)(2)(vi)'' and

adding in its place ``(d)(2)(vii)'';

B. Paragraph (c)(1)(ii) is amended by adding a new sentence at the

end of the paragraph;

C. The introductory text of paragraph (d)(2)(vii) is revised; and

D. Paragraph (f) is revised.

The addition and revisions read as follows:

Sec. 531.203 General provisions.

* * * * *

(1) * * *

(ii) * * * If the employee's highest previous rate was greater than

the maximum rate for the grade in which pay is being fixed, the maximum

rate of basic pay that may be paid to the employee is the maximum rate

for that grade.

* * * * *

(d) * * *

(2) * * *

(vii) A special rate established under 5 U.S.C. 5305 and part 530

of this chapter, part 532 of this chapter, or other legal authority

(other than section 403 of the Federal Employees Pay Comparability Act

of 1990 (FEPCA) (Pub. L. 101-509, 104 Stat. 1465), unless, in a

reassignment to another position in the same agency--

* * * * *

(f) Simultaneous actions. (1) General pay adjustments must be

processed before any individual pay action that takes effect at the

same time. General pay adjustments include annual adjustments under 5

U.S.C. 5303, adjustments in locality rates of pay under subpart F of

this part, adjustments in special law enforcement adjusted rates of pay

under subpart C of this part, adjustments in special salary rates under

5 U.S.C. 5305 or similar provision of law (including section 403 of

FEPCA), increases in retained rates under part 536 of this chapter, and

increases in continued rates under subparts C and G of this part.

(2) Pay adjustments (other than general pay adjustments) that take

effect at the same time must be processed in the order that gives the

employee the maximum benefit. When a position or appointment change and

entitlement to a higher rate of pay occur at the same time, the higher

rate of pay is deemed to be the employee's existing rate of basic pay.

* * * * *

9. In Sec. 531.204, paragraph (a)(2) is revised to read as follows:

Sec. 531.204 Special provisions.

(a) * * *

(2) For the purpose of section 5334(b) of title 5, United States

Code, an employee's ``existing rate of basic pay'' includes any

applicable special rate established under section 5305 of title 5,

United States Code, or law enforcement special rate established under

section 403 of the Federal Employees Pay Comparability Act of 1990

(FEPCA) (Pub. L. 101-509, 104 Stat. 1465).

* * * * *

Subpart C--Special Pay Adjustments for Law Enforcement Officers

10. In Sec. 531.301, the definition of official duty station is

revised to read as follows:

Sec. 531.301 Definitions.

* * * * *

Official duty station means the duty station for an employee's

position of record as indicated on his or her most recent notification

of personnel action, excluding a new duty station for an assignment

that is followed immediately (i.e., within 3 workdays) by a reduction

in force resulting in the employee's separation before he or she is

required to report for duty at the new location. For an employee who is

authorized to receive relocation allowances under 5 U.S.C. 5737 in

connection with an extended assignment, the temporary duty station

associated with that assignment is the employee's official duty

station.

* * * * *

11. In Sec. 531.304:

A. Paragraph (b)(4) is amended by removing the word ``and';

B. Paragraph (b)(5) is amended by removing the period at the end of

the paragraph and adding a semicolon and the word ``and'' in its place;

and

C. A new paragraph (b)(6) is added.

The addition reads as follows:

Sec. 531.304 Administration of special law enforcement adjusted rates

of pay.

* * * * *

(b) * * *

(6) Basic pay that a career appointee in the Senior Executive

Service elects to continue while serving under certain Presidential

appointments, as provided by 5 U.S.C. 3392(c)(1) and Sec. 317.801 of

this chapter.

* * * * *

Subpart D--Within-Grade Increases

12. In Sec. 531.407, paragraph (d) is revised to read as follows:

Sec. 531.407 Equivalent increase determinations.

* * * * *

(d) Merit increases. For the purpose of applying section 5335 of

title 5, United States Code, and this subpart, all or any portion of a

merit increase, or a zero merit increase, authorized under former

section 5404 of title 5, United States Code (which was repealed as of

November 1, 1993, by Public Law 103-89), is an equivalent increase.

Subpart F--Locality-Based Comparability Payments

13. In Sec. 531.602, paragraph (1) of the definition of employee

and the definition of official duty station are revised to read as

follows:

Sec. 531.602 Definitions.

* * * * *

Employee means--

(1) An employee in a position to which subchapter III of chapter 53

of title 5, United States Code, applies and whose official duty station

is located in a locality pay area within the continental United States,

including a GM employee (as defined in Sec. 531.202); and