This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

49125

Vol. 62, No. 182

Friday, September 19, 1997

OFFICE OF PERSONNEL

MANAGEMENT

5 CFR Part 550

RIN 3206–AF89

Pay Administration (General);

Severance Pay for Panama Canal

Commission Employees

AGENCY: Office of Personnel

Management.

ACTION: Final rule.

SUMMARY: The Office of Personnel

Management (OPM) is issuing final

regulations to exclude certain categories

of employees of the Panama Canal

Commission (PCC) from entitlement to

severance pay. On December 31, 1999,

the Republic of Panama will take over

operation of the Panama Canal under

the terms of the Panama Canal Treaty of

1977. The proposed changes apply to

PCC employees who receive an offer of

reasonably comparable employment

with the successor Panamanian public

entity before separation, accept such

employment within 30 days after

separation, or are hired by PCC 90 days

or more after publication of these

regulations.

EFFECTIVE DATE: October 20, 1997.

FOR FURTHER INFORMATION CONTACT: D.

Bryce Baker, (202) 606–2858, FAX (202)

606–0824, or email to

payleave@opm.gov.

SUPPLEMENTARY INFORMATION: On July 7,

1995, the Office of Personnel

Management published proposed

regulations (60 FR 35342) barring

severance pay for certain PCC

employees who continue in their

positions when the Panama Canal is

transferred to Panamanian control as a

result of the Panama Canal Treaty of

1977. The changes will affect PCC

employees who are offered reasonably

comparable employment with the

successor Panamanian public entity

before separation from PCC employment

or who accept such employment within

30 days after separation. Individuals

hired by the Panama Canal Commission

on or after the 90th day following

publication of these regulations will

also be excluded from severance pay

eligibility.

Severance pay was intended as a

transition benefit for Federal employees

who lost their jobs involuntarily.

Severance pay was intended to ‘‘help

tide Federal employees over difficult

transition periods’’ and to ‘‘help

cushion the readjustment’’ associated

with the loss of employment. (See H.R.

Rep. No. 792, 89th Cong., 1st Sess., at

11, 30 (1965).)

The severance pay law lists certain

categories of employees who are

excluded from coverage and provides

that additional categories of employees

may be excluded by regulation (5 U.S.C.

5595(a)(2)). OPM’s regulations exclude

certain groups and individual

employees because of the nature of their

appointment, type of work schedule,

circumstances of separation, etc. For

example, the regulations bar entitlement

to severance pay for any employee who

declines a ‘‘reasonable offer’’ of another

Federal position before separation. (See

5 CFR 550.701–704.) Severance

payments are discontinued if the

recipient is reemployed by the United

States Government (5 U.S.C. 5595(d)).

Prior to 1990, OPM’s severance pay

regulations provided that an employee

involuntarily separated due to transfer

of a Federal function to a non-Federal

(private or public) successor

organization could be denied severance

pay based on the offer of ‘‘comparable

employment’’ with the successor

organization, or on acceptance of any

employment with such successor

organization within 90 days of transfer.

(These provisions were formerly located

at 5 CFR 550.701(b) (5) and (6) and were

in effect when the Panama Canal Treaty

of 1977 was signed and entered into

force.) OPM deleted those regulatory

provisions in 1990 (54 FR 23215 and 55

FR 6591). This change was made to

make contracting out (i.e., privatization)

of Federal functions more attractive to

Federal employees. It also was intended

to address the problem of some

employees not being offered comparable

jobs by private contractors before

transfer and then delaying acceptance of

jobs until after the expiration of the 90-

day restriction period. We note that the

driving purpose of encouraging

contracting out, which was behind the

deletion of the above severance pay

restrictions, is not relevant to the

Panama Canal situation. We also note

that the rule OPM is adopting in these

regulations differs in several respects

from the above former rules—e.g., a 30-

day period instead of a 90-day period—

as explained in the notice of proposed

rulemaking (60 FR 35342) and in this

notice.

OPM believes it is appropriate, and

consistent with the original purpose of

the severance pay law, to deny

severance pay eligibility for PCC

employees who have the opportunity to

maintain the same job, or a reasonably

comparable one, with the successor

Panamanian public entity and who

furthermore have legally guaranteed

protections with respect to benefits and

working conditions while employed by

that entity. We also believe that it is

reasonable to deny severance pay

eligibility for employees hired by PCC

during the final years of United States

control of the Canal, since the longscheduled transfer is now imminent and

these employees will know when they

are hired that their tenure with PCC will

be of short duration. We believe the

Panama Canal transfer presents a unique

situation that requires special treatment.

PCC estimates that, without these

changes in OPM’s severance pay

regulations, $68 million in severance

pay costs would be incurred, of which

only $7 million is currently funded.

PCC states that the remaining $61

million would need to be prefunded by

a reduction in operating expenses and

the capital program, and possibly a

modest toll increase in fiscal years 1998,

1999, and the first quarter of fiscal year

2000. PCC believes that these measures

would have a negative impact on the

Canal’s competitive and fiscal position.

Since, under the Panama Canal Treaty

of 1977, the Canal operation must be

transferred to the Republic of Panama in

December 1999 free of any debt or

encumbrances, preventing severance

payments to the employees in question

would help PCC meet its treaty

obligations.

Comments on the proposed

regulations were received from 6 labor

organizations (14 letters), 5 groups of

employees (648 individuals), 10
49126 Federal Register / Vol. 62, No. 182 / Friday, September 19, 1997 / Rules and Regulations

individual employees, 2 agencies, and 1

Member of Congress.

Comments from one labor

organization included a letter

transmitting certain resolutions adopted

at a February 1996 conference of trade

union representatives dealing with the

transfer of the Panama Canal. One of the

resolutions requested that OPM

withdraw the proposed regulations.

Although OPM declines to withdraw the

proposed regulations, we are making

certain changes in response to the

comments we received, as described

below.

Some commenters questioned

whether the proposed limitations on

severance pay for Panama Canal

Commission employees were in keeping

with the United States Government’s

treaty obligations under the Panama

Canal Treaty of 1977. OPM conferred

with the Department of State, which

confirmed that our proposed regulatory

changes do not violate the provisions of

the Panama Canal Treaty and also

expressed the view that the proposed

regulations do not conflict with foreign

policy concerns.

By the terms of the Panama Canal

Treaty, ‘‘pre-Treaty hires’’ —i.e.,

employees who were employed by the

Panama Canal Company or the Canal

Zone Government before the Treaty took

effect in October 1979 and who were

transferred to the newly established

PCC—were entitled to the protection of

certain pre-Treaty employment

conditions and benefits, including

severance pay (as applicable), during

their PCC employment. (See Article X of

the Panama Canal Treaty of 1977 and

section 1231(a) of Public Law 96-70.)

There are no similar treaty provisions

for post-Treaty hires—employees who

knew when they were first hired that

the United States Government would

cease to be their employer no later than

December 31, 1999.

We quote from the letter to OPM from

the Acting Assistant Secretary of State

for Inter-American Affairs regarding this

matter:

‘‘The Department of State concurs

with the view that the Panama Canal

Treaty of 1977 and related agreements

do not prohibit the United States from

adopting the proposed regulation on

severance pay * * *. We understand

that pre-Treaty employees who are the

subject of Article X will not be affected

at all by the proposed regulations.

Because these employees will all be

eligible for an immediate annuity under

U.S. law on or before December 31,

1999, they are and will be ineligible for

any severance pay benefits, whether or

not the proposed regulations go into

effect. Thus, pre-Treaty employees will

not be adversely affected by the

proposed new regulations. The United

States, therefore, will be in full

compliance with its obligations under

Article X of the Panama Canal Treaty.

‘‘In addition, Article X of the Treaty

does not require the United States to

guarantee severance pay to post-Treaty

employees under all circumstances.

Thus, as a legal matter, the Treaty and

related agreements do not prohibit the

United States from adopting the

proposed regulations which realign the

severance pay benefit with its intended

purpose of protecting federal employees

who lose their jobs.’’

As indicated in the Department of

State letter, since all pre-Treaty hires are

or will be eligible for immediate

retirement benefits prior to the

December 1999 Canal transfer and are

excluded from severance pay on that

basis (5 U.S.C. 5595(a)(2)(iv)), these

regulations affect only post-Treaty hires.

Thus, there is no issue with regard to

compliance with the Panama Canal

Treaty terms applicable to pre-Treaty

employees.

Some commenters pointed out that

severance pay was paid to certain PCC

employees whose functions were

transferred some years ago. OPM has

authority to revise the regulations

regarding severance pay coverage (5

U.S.C. 5595(a)(viii)). We believe it is

appropriate for OPM to change the

regulations regarding severance pay

coverage based on periodic

reassessments of personnel policies or

in response to new information or

circumstances. We also note that most

of the employees involved in these

earlier severance pay cases were preTreaty hires.

A number of commenters addressed

the estimated costs that would be

incurred by PCC for severance pay if the

proposed regulations were not adopted.

Several commenters argued that any

such costs could be covered by

increases in future tolls and that the

failure to prefund these costs at an

earlier time should not serve as the basis

for denying severance pay in the future.

While PCC’s cost concerns are a relevant

factor, OPM’s decision to adopt

restrictions on severance pay for PCC

employees is based primarily on our

judgment that payment of severance pay

in these circumstances would be

inappropriate and contrary to the

purpose of the severance pay benefit.

Several commenters stated that the

proposed limitation on severance pay

would have an adverse impact on Canal

operations before and after the transfer.

Concerns were expressed that the

proposed severance pay changes would

interfere with the goal of a smooth and

seamless transition of the operation of

the Panama Canal or that they would in

some way undermine the efficient

operation of the Panama Canal.

Specifically, possible staffing-up

problems at the time of transfer were

cited—e.g., the possibility that

individual employees may wait 30 days

after separation to accept employment

with the successor agency in order to

qualify for severance pay. However, any

employee who has already received an

offer of reasonably comparable

employment before separation from PCC

employment would already be ineligible

for severance pay and would have no

incentive to postpone accepting a job.

Furthermore, an employee who does not

receive an offer until after separation

would be at risk of being passed over

and not securing a position at all should

he or she delay accepting the offer.

Accordingly, we do not believe the

regulations will cause problems in

staffing up the successor entity.

We believe that not providing

severance pay to employees who retain

their positions after transfer is

consistent with the goal of a seamless

transition. These employees will be

treated as if there were no interruption

in their public employment, which is in

fact the reality of the situation.

Some commenters referred to the

adverse effect the proposed severance

pay limitation would have on the

Panamanian economy. We do not

believe this regulation will have a

significant impact on the general

economy of the Republic of Panama.

Any individual who would be denied

severance pay because of an offer of

reasonably comparable employment

will continue to receive a paycheck in

his or her new position unless he or she

chooses to reject that offer. Thus, the

income received by affected employees

should remain at about the same level

when Panama Canal operations are

transferred to the Republic of Panama.

Some commenters characterized the

proposed changes as an unfair labor

practice (ULP) because conditions of

employment were changed without

consultation. The labor organizations

have brought that issue before the

Federal Labor Relations Authority for

adjudication. We do not believe the

Office of Personnel Management’s legal

authority to regulate severance pay

entitlement is in any way affected by the

dispute between PCC and the labor

organizations.

One labor organization commented

that employees already employed by the

PCC should be grandfathered into

severance pay entitlement. Such a

grandfathering approach would defeat

the primary purposes of the regulatory
Federal Register / Vol. 62, No. 182 / Friday, September 19, 1997 / Rules and Regulations 49127

changes—namely, to prevent severance

payments to employees who maintain

the same or comparable jobs with the

successor Panamanian authority and to

ensure that the Canal operation can be

transferred in a healthy fiscal condition,

free of debts and encumbrances.

Several commenters expressed their

belief that the successor entity will be

unable to make a ‘‘reasonably

comparable offer’’ of continued

employment. The commenters cited the

Panamanian economy, wage structure,

past treatment of transferred employees,

and inequality of benefits (including

severance pay). Two commenters also

listed a number of fringe benefits and

employment protections which they

maintain are not available under

Panamanian law. In addition, two

commenters cited the treatment of PCC

Ports and Railroad employees whose

wages were frozen after their transfer in

1979. For these reasons, they contend

that there can be no comparability of

employment.

A number of commenters also pointed

out that the United States can offer no

guarantees to former PCC employees

after December 31, 1999. Therefore, they

contend that ‘‘reasonably comparable’’

employment cannot be offered beyond

the date of transfer. However, on

November 25, 1994, the Panamanian

Constitutional Assembly approved a

new Panamanian Constitutional Title,

which, among other things, subjects the

‘‘Panama Canal Authority’’ to a special

merit-based employment regime under

which permanent employees are to

maintain, at a minimum, the same

benefits and working conditions they

enjoy up to December 31, 1999. (See

Article 316 of Title XIV, ‘‘The Panama

Canal,’’ of the Political Constitution of

Panama.) The PCC, in its comments,

characterized this new constitutional

provision as a ‘‘substantial commitment

on the part of Panama, made expressly

to assure PCC employees continuity of

the terms of their employment across

the transition.’’

In addition, on June 11, 1997, the

government of the Republic of Panama

enacted an organic law creating the

basic legal framework under which the

Panama Canal Authority will operate.

(This organic law, Law 19, was passed

by the Republic of Panama Legislative

Assembly on May 14, 1997, by

unanimous vote and signed by Panama

President Ernesto Perez Balladares on

June 11, 1997.) The law implements the

constitutional title approved in 1994

and specifically reaffirms the protection

of current PCC employees’ working

conditions and benefits. (See Chapter V

of Law 19.) The Panama Canal

Authority will promulgate detailed

regulations to ensure that specific

employment provisions and protections

applicable to PCC employees on

December 31, 1999, will be carried over

into the new system.

Several commenters brought up a

perception that non-U.S. citizen

employees of PCC would be treated

differently from U.S. citizen employees

under the proposed regulations. PCC

informs us that, in conformance with

the terms of the Canal treaty, almost all

employees hired after October 1, 1979,

are Panamanian citizens and that the

workforce is now over approximately 90

percent Panamanian. Therefore, it is

unavoidable that the regulatory change

will affect primarily Panamanian

citizens.

We are making changes in the

proposed definition of the term

‘‘reasonably comparable employment’’

in section 550.714(b) of the regulations.

PCC recommended that the requirement

that the offered position be within 20

percent of the employee’s PCC basic pay

be changed to within 10 percent of PCC

basic pay. The reasoning is that the

change will reduce employee

apprehension concerning post-transfer

employment, thereby enhancing the

orderly transfer of the Canal in 1999. We

have adopted that suggestion and

revised § 550.714(b)(2) accordingly.

In addition, questions were raised

about the reference to a ‘‘private entity’’

in the proposed § 550.714(b)(1). After

requesting clarification from PCC staff,

we learned that, under the new

Constitutional Title, responsibility for

Panama Canal operations will be

assumed by a single public agency of

the government of Panama referred to as

the ‘‘Panama Canal Authority.’’ We

believe severance pay should not be

payable to those employees who are

offered or accept reasonably comparable

employment with the Panamanian

public entity that is replacing the PCC,

since the Panamanian Constitutional

Title guaranteeing special employment

protections applies only to employees of

that entity. Therefore, we have revised

the proposed regulations to delete any

reference to private successor entities

and to clarify that the rule applies only

to the Panamanian public agency

responsible for managing, operating,

and maintaining the Panama Canal after

its transfer under the Panama Canal

Treaty.

E.O. 12866, Regulatory Review

This rule has been reviewed by the

Office of Management and Budget in

accordance with E.O. 12866.

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 Part 550

Administrative practice and

procedure, Claims, Government

employees, Wages.

Office of Personnel Management.

Janice R. Lachance,

Acting Director.

Accordingly, OPM is amending part

550 of title 5, Code of Federal

Regulations, as follows:

PART 550—PAY ADMINISTRATION

(GENERAL)

Subpart G—Severance Pay

1. The authority citation for subpart G

continues to read as follows:

Authority: 5 U.S.C. 5595; E.O. 11257, 3

CFR, 1964–1965 Comp., p. 357.

2. Section 550.714 is added to read as

follows:

§ 550.714 Panama Canal Commission

employees.

(a) Notwithstanding any other

provisions of this subpart, an employee

separated from employment with the

Panama Canal Commission as a result of

the implementation of any provision of

the Panama Canal Treaty of 1977 and

related agreements shall not be entitled

to severance pay if he or she—

(1) Receives a written offer of

reasonably comparable employment

when such offer is made before

separation from Commission

employment;

(2) Accepts reasonably comparable

employment within 30 days after

separation from Commission

employment; or

(3) Was hired by the Commission on

or after December 18, 1997.

(b) The term reasonably comparable

employment means a position that

meets all the following conditions:

(1) The position is with the

Panamanian public entity that assumes

the functions of managing, operating,

and maintaining the Panama Canal as a

result of the Panama Canal Treaty of

1977;

(2) The rate of basic pay of the

position is not more than 10 percent

below the employee’s rate of basic pay

as a Panama Canal Commission

employee;

(3) The position is within the

employee’s commuting area;
49128 Federal Register / Vol. 62, No. 182 / Friday, September 19, 1997 / Rules and Regulations

(4) The position carries no fixed time

limitation as to length of appointment;

and

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

same as that of the position held by the

employee at the Panama Canal

Commission.

(c) A Panama Canal Commission

employee who resigns prior to receiving

an official written notice that he or she

will not be offered reasonably

comparable employment shall be

considered to be voluntarily separated.

Section 550.706(a) shall be applied, as

appropriate, to any employee who

resigns after receiving such notice.

(d) Except as otherwise provided by

paragraphs (a) through (c) of this

section, the provisions of this subpart

remain applicable to Panama Canal

Commission employees.

[FR Doc. 97–24885 Filed 9–18–97; 8:45 am]

BILLING CODE 6325–01–P

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 920

[Docket No. FV97–920–2 FR]

Kiwifruit Grown in California;

Relaxation in Pack Requirements

AGENCY: Agricultural Marketing Service,

USDA.

ACTION: Final rule.

SUMMARY: This final rule revises pack

requirements for Size 42 and Size 45

kiwifruit under the Federal marketing

order for kiwifruit grown in California.

This rule increases the size variation

tolerance for Size 42 kiwifruit from 5

percent, by count, to 10 percent, by

count, and increases the size variation

tolerance for Size 45 kiwifruit from 10

percent, by count, to 25 percent, by

count. This relaxation was

recommended by the Kiwifruit

Administrative Committee (committee),

the agency responsible for local

administration of the marketing order.

The committee expects this rule to

reduce handler costs, increase grower

returns, and allow the kiwifruit industry

to meet the increased demand for lower

priced kiwifruit.

EFFECTIVE DATE: This final rule becomes

effective September 22, 1997.

FOR FURTHER INFORMATION CONTACT: Rose

Aguayo, Marketing Specialist, California

Marketing Field Office, Marketing Order

Administration Branch, Fruit and

Vegetable Division, AMS, USDA, 2202

Monterey St., suite 102B, Fresno,

California 93721; telephone: (209) 487–

5901, Fax: (209) 487–5906 or George

Kelhart, Marketing Order

Administration Branch, Fruit and

Vegetable Division, AMS, USDA, room

2525–S, P.O. Box 96456, Washington,

DC 20090–6456; telephone: (202) 720–

2491, Fax: (202) 720–5698. Small

businesses may request information on

compliance with this regulation by

contacting Jay Guerber, Marketing Order

Administration Branch, Fruit and

Vegetable Division, AMS, USDA, P.O.

Box 96456, room 2525–S, Washington,

DC 20090–6456, telephone: (202) 720–

2491, Fax: (202) 720–5698.

SUPPLEMENTARY INFORMATION: This final

rule is issued under Marketing Order

No. 920 (7 CFR part 920), as amended,

regulating the handling of kiwifruit

grown in California, hereinafter referred

to as the ‘‘order.’’ The order is effective

under the Agricultural Marketing

Agreement Act of 1937, as amended (7

U.S.C. 601–674), hereinafter referred to

as the ‘‘Act.’’

The Department of Agriculture

(Department) is issuing this rule in

conformance with Executive Order

12866.

This final rule has been reviewed

under Executive Order 12988, Civil

Justice Reform. This action is not

intended to have retroactive effect. This

rule will not preempt any State or local

laws, regulations, or policies, unless

they present an irreconcilable conflict

with this rule.

The Act provides that administrative

proceedings must be exhausted before

parties may file suit in court. Under

section 608c(15)(A) of the Act, any

handler subject to an order may file

with the Secretary a petition stating that

the order, any provision of the order, or

any obligation imposed in connection

with the order is not in accordance with

law and request a modification of the

order or to be exempted therefrom. A

handler is afforded the opportunity for

a hearing on the petition. After the

hearing the Secretary would rule on the

petition. The Act provides that the

district court of the United States in any

district in which the handler is an

inhabitant, or has his or her principle

place of business, has jurisdiction in

equity to review the Secretary’s ruling

on the petition, provided a bill in equity

is filed not later than 20 days after the

date of the entry of the ruling.

This final rule revises pack

requirements for Size 42 and Size 45

kiwifruit under the Federal marketing

order for kiwifruit grown in California.

This rule will increase the size variation

tolerance for Size 42 kiwifruit from 5

percent, by count, to 10 percent, by

count, and will increase the size

variation tolerance for Size 45 kiwifruit

from 10 percent, by count, to 25 percent,

by count.

Section 920.52 authorizes the

establishment of pack requirements.

Section 920.302(a)(4) of the rules and

regulations outlines the pack

requirements for fresh shipments of

California kiwifruit. Under

§ 920.302(a)(4)(i) of the rules and

regulations, kiwifruit packed in

containers with cell compartments,

cardboard fillers, or molded trays shall

be of proper size and fairly uniform in

size. Section 920.302(a)(4)(ii) outlines

pack requirements for kiwifruit packed

in cell compartments, cardboard fillers

or molded trays and includes a table

that specifies numerical size

designations and the size variation

tolerances. It also outlines pack

requirements for kiwifruit packed in

bags, volume fill or bulk containers, and

includes a separate table that specifies

numerical size designations and size

variation tolerances. This section

provides that not more than 10 percent,

by count of the containers in any lot

may fail to meet pack requirements. It

also provides that not more than 5

percent, by count, of kiwifruit in any

container, (except that for Size 45

kiwifruit, the tolerance, by count, in any

one container, may not be more than 10

percent) may fail to meet pack

requirements. This size variation

tolerance does not apply to other pack

requirements such as how the fruit fills

the cell compartments, cardboard fillers,

or molded trays, or any weight

requirements.

Prior to the 1995–1996 season,

handlers were experiencing difficulty

meeting the size variation tolerance for

Size 45 kiwifruit. Size 45 is the

minimum size. The committee

determined that the best solution was to

increase the size variation tolerance, by

count, in any one container, for Size 45

kiwifruit. Section 920.302 (a)(4) was

revised by a final rule issued June 21,

1995 (60 FR 32257) to include a

provision that increased the size

variation tolerance, by count, in any one

container, from 5 percent to 10 percent

for Size 45 kiwifruit.

This increased size variation tolerance

for Size 45 kiwifruit has been utilized

for two seasons. Handlers are still

experiencing difficulty discerning if size

variation tolerances for smaller fruit are

being met during the packing process.

As the size of the kiwifruit increases,

so does the size of the variation allowed.

In the larger kiwifruit sizes, failure to

meet the required size variation

standards results in packs that are

visibly irregular in size. In Size 42 and