66116 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

DEPARTMENT OF DEFENSE 

OFFICE OF PERSONNEL 

MANAGEMENT 

5 CFR Chapter XCIX and Part 9901 

RIN 3206–AK76/0790–AH82 

Department of Defense Human 

Resources Management and Labor 

Relations Systems 

AGENCY: Department of Defense; Office 

of Personnel Management. 

ACTION: Final rule. 

SUMMARY: The Department of Defense 

(DoD or the Department) and the Office 

of Personnel Management (OPM) are 

issuing final regulations to establish the 

National Security Personnel System 

(NSPS), a human resources management 

system, within DoD, as authorized by 

the National Defense Authorization Act 

(Pub. L. 108–136, November 24, 2003). 

These regulations govern basic pay, 

staffing, classification, performance 

management, labor relations, adverse 

actions, and employee appeals. These 

changes are designed to ensure that the 

Department’s human resources 

management and labor relations systems 

align with its critical mission 

requirements and protects the civil 

service rights of its employees. 

DATES: Effective November 28, 2005. 

FOR FURTHER INFORMATION CONTACT: At 

OPM: Nancy Kichak at 202–606–6500; 

at DoD: Brad Bunn at 703–696–4664. 

SUPPLEMENTARY INFORMATION: 

Table of Abbreviations 

AJ—Administrative Judge 

COLA—Cost of Living Adjustment 

CONUS—Continental United States 

DARPA—Defense Advanced Research 

Projects Agency 

DoD—Department of Defense 

ECI—Employment Cost Index 

EEO—Equal Employment Opportunity 

EEOC—Equal Employment Opportunity 

Commission 

EPI—Extraordinary Pay Increase 

FLRA—Federal Labor Relations Authority 

FLSA—Fair Labor Standards Act 

FMCS—Federal Mediation and Conciliation 

Service 

FSIP—Federal Service Impasses Panel 

FWS—Federal Wage System 

GAO—Government Accountability Office 

(former General Accounting Office) 

GS—General Schedule 

HR—Human Resources 

KPP—Key Performance Parameter 

LWOP—Leave Without Pay 

MRO—Mandatory Removal Offense 

MSPB—Merit Systems Protection Board 

NAF—Nonappropriated Fund 

NAPA—National Academy of Public 

Administration 

NSLRB—National Security Labor Relations 

Board 

NSPS—National Security Personnel System 

OMB—Office of Management and Budget 

OPM—Office of Personnel Management 

PEO—Program Executive Office 

PFR—Petition for Review 

RFR—Request for Review 

SES—Senior Executive Service 

SL—Senior Level 

ST—Scientific or Professional Positions 

WGI—Within-Grade Increase 

Table of Contents 

This supplementary information section is 

organized as follows: 

Introduction 

The Case for Action 

Pay and Classification 

Performance Management 

Staffing, Employment and Workforce 

Shaping 

Adverse Action and Appeals 

Labor-Management Relations 

Development of the National Security 

Personnel System 

Strategic Engagement and Establishment of 

the Program Executive Office 

Development of Design Options 

Guiding Principles and Key Performance 

Parameters 

Communications During the Design 

Process 

Outreach to Employee Representatives 

Outreach to Employees 

Outreach to Other Stakeholders 

Development of Design Options—Working 

Groups 

Publication of Proposed Regulations 

Public Comments 

Meet-and-Confer Process 

Major Issues 

Specificity of the Regulations 

Pay for Performance and Pay Pool Funding 

Adverse Actions and Appeals 

Mandatory Removal Offenses 

Labor Relations 

Management Rights/Scope and Duty to 

Bargain 

Independence of the National Security 

Labor Relations Board 

Response to Specific Comments and Detailed 

Explanation of Regulations 

Subpart A—General Provisions 

Section 9901.101—Purpose 

Section 9901.102—Eligibility and Coverage 

Summary of Coverage Eligibility Chart 

Section 9901.103—Definitions 

Section 9901.104—Scope of Authority 

Section 9901.105—Coordination with OPM 

Section 9901.106—Continuing 

Collaboration 

Section 9901.107—Relationship to Other 

Provisions 

Section 9901.108—Program Evaluation 

Subpart B—Classification 

Section 9901.201—Purpose 

Section 9901.202—Coverage 

Section 9901.203—Waivers 

Section 9901.204—Definitions 

Section 9901.211—Career Groups 

Section 9901.212—Pay Schedules and Pay 

Bands 

Section 9901.221—Classification 

Requirements 

Section 9901.222—Reconsideration of 

Classification Decisions 

Section 9901.231—Conversion of Positions 

and Employees to the NSPS 

Classification System 

Subpart C—Pay and Pay Administration 

General Comments 

Section 9901.301—Purpose 

Section 9901.302—Coverage 

Section 9901.303—Waivers 

Section 9901.304—Definitions 

Section 9901.311—Major Features 

Section 9901.312—Maximum Rates 

Section 9901.313—National Security 

Compensation Comparability 

Section 9901.321—Structure 

Section 9901.322—Setting and Adjusting 

Rate Ranges 

Section 9901.323—Eligibility for Pay 

Increase Associated with a Rate Range 

Adjustment 

Section 9901.331—General 

Section 9901.332—Local Market 

Supplements 

Section 9901.333—Setting and Adjusting 

Local Market Supplements 

Section 9901.334—Eligibility for Pay 

Increase Associated with a Supplement 

Adjustment 

Section 9901.341—General 

Section 9901.342—Performance Payouts 

Section 9901.343—Pay Reduction Based on 

Unacceptable Performance and/or 

Conduct 

Section 9901.344—Other Performance 

Payments 

Section 9901.345—Treatment of 

Developmental Positions 

Section 9901.351—Setting an Employee’s 

Starting Pay 

Section 9901.352—Setting Pay Upon 

Reassignment 

Section 9901.353—Setting Pay Upon 

Promotion 

Section 9901.354—Setting Pay Upon 

Reduction in Band 

Section 9901.355—Pay Retention 

Section 9901.356—Miscellaneous 

Section 9901.361—General 

Section 9901.371—General 

Section 9901.372—Creating Initial Pay 

Ranges 

Section 9901.373—Conversion of 

Employees to the NSPS Pay System 

Subpart D—Performance Management 

General Comments 

Section 9901.401—Purpose 

Section 9901.402—Coverage 

Section 9901.403—Waivers 

Section 9901.404—Definitions 

Section 9901.405—Performance 

Management System Requirements 

Section 9901.406—Setting and 

Communicating Performance 

Expectations 

Section 9901.407—Monitoring 

Performance and Providing Feedback 

Section 9901.408—Developing 

Performance and Addressing Poor 

Performance 

Section 9901.409—Rating and Rewarding 

Performance 

Subpart E—Staffing and Employment 

General Comments 

Section 9901.501—Purpose 

Section 9901.502—Scope of Authority 

Section 9901.503—Coverage 

Section 9901.504—Definitions 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66117 

Section 9901.511—Appointing Authorities 

Section 9901.512—Probationary Periods 

Section 9901.513—Qualification Standards 

Section 9901.514—Non-Citizen Hiring 

Section 9901.515—Competitive Examining 

Procedures 

Section 9901.516—Internal Placement 

Subpart F—Workforce Shaping 

General Comments 

Section 9901.601—Purpose and 

Applicability 

Section 9901.602—Scope of Authority 

Section 9901.603—Definitions 

Section 9901.604—Coverage 

Section 9901.605—Competitive Area 

Section 9901.606—Competitive Group 

Section 9901.607—Retention Standing 

Section 9901.608—Displacement, Release, 

and Position offers 

Section 9901.609—Reduction in force 

Notices 

Section 9901.610—Voluntary Separation 

Section 9901.611—Reduction in force 

Appeals 

Subpart G—Adverse Actions 

General Comments 

Section 9901.701—Purpose 

Section 9901.702—Waivers 

Section 9901.703—Definitions 

Section 9901.704—Coverage 

Section 9901.711—Standard for Action 

Section 9901.712—Mandatory Removal 

Offenses 

Section 9901.714—Proposal Notice 

Section 9901.715—Opportunity to Reply 

Section 9901.716—Decision Notice 

Section 9901.717—Departmental Record 

Subpart H—Appeals 

General Comments 

Section 9901.802—Applicable Legal 

Standards and Precedents 

Section 9901.803—Waivers 

Section 9901.804—Definitions 

Section 9901.805—Coverage 

Section 9901.806—Alternative Dispute 

Resolution 

Section 9901.807—Appellate Procedures 

Section 9901.808—Appeals of Mandatory 

Removal Actions 

Section 9901.809—Actions Involving 

Discrimination 

Subpart I—Labor-Management Relations 

General Comments 

Section 9901.901—Purpose 

Section 9901.902—Scope of Authority 

Section 9901.903—Definitions 

Section 9901.904—Coverage 

Section 9901.905—Impact on Existing 

Agreements 

Section 9901.906—Employee Rights 

Section 9901.907—National Security Labor 

Relations Board 

Section 9901.908—Powers and Duties of 

the Board 

Section 9901.909—Powers and Duties of 

the Federal Labor Relations Authority 

Section 9901.910—Management Rights 

Section 9901.911—Exclusive Recognition 

of Labor Organizations 

Section 9901.912—Determination of 

Appropriate Units for Labor 

Organization Representation 

Section 9901.913—National Consultation 

Section 9901.914—Representation Rights 

and Duties 

Section 9901.916—Unfair Labor Practices 

Section 9901.917—Duty to Bargain and 

Consult 

Section 9901.918—Multi-Unit Bargaining 

Section 9901.919—Collective Bargaining 

Above the Level of Recognition 

Section 9901.920—Negotiation Impasses 

Section 9901.921—Standards of Conduct 

for Labor Organizations 

Section 9901.922—Grievance Procedures 

Section 9901.923—Exceptions to 

Arbitration Awards 

Section 9901.924—Official Time 

Section 9901.925—Compilation and 

Publication of Data 

Section 9901.926—Regulations of the 

Board 

Section 9901.927—Continuation of 

Existing Laws, Recognitions, 

Agreements, and Procedures 

Section 9901.928—Savings Provisions 

Next Steps 

NSPS Implementation 

Employee Transition Plan (Spiral Strategy) 

HR and Labor Relations Transition 

Development of Implementing Issuances 

and Continuing Collaboration Training 

Regulatory Requirements 

E.O. 12866—Regulatory Review 

Regulatory Flexibility Act 

E.O. 12988—Civil Justice Reform 

E.O. 13132—Federalism 

Paperwork Reduction Act of 1995 (44 

U.S.C. chapter 35) 

Unfunded Mandates 

Introduction 

The Secretary of Defense, Donald 

Rumsfeld, and the Director of the Office 

of Personnel Management, Linda M. 

Springer, jointly prescribe this final 

regulation to establish a flexible and 

contemporary system, consistent with 

statutory merit system principles and 

prohibitions against prohibited 

personnel practices (in 5 U.S.C. 2301 

and 2302, respectively), for managing 

the Department’s human capital. This 

system has been developed pursuant to 

a process based on extensive outreach to 

employees and employee 

representatives. In addition, DoD and 

OPM have engaged in outreach to the 

public as well as to the Congress and 

other key stakeholders. As enacted by 

section 1101 of the National Defense 

Authorization Act (Pub. L. 108–136, 

November 24, 2003, hereinafter referred 

to as ‘‘enabling legislation’’ or ‘‘enabling 

statute’’) and codified at 5 U.S.C. 9902, 

the system preserves all core civil 

service protections, including merit 

system principles, veterans’ preference, 

and due process. It also protects against 

discrimination, retaliation against 

whistleblowers, and other prohibited 

personnel practices, and ensures that 

employees may organize and bargain 

collectively (when not otherwise 

prohibited by law, including these 

regulations, applicable Executive orders, 

and any other legal authority). 

This Supplementary Information 

addresses the following areas: 

• The Case for Action 

• Summary of the Design Process 

Æ Strategic Engagement and 

Establishment of the Program Executive 

Office 

Æ Development of Design Options 

Æ Meet-and-Confer Process 

• Major Issues 

• Response to Specific Comments and 

Detailed Explanation of Regulations 

• Next Steps 

The Case for Action 

‘‘* * * a future force that is defined less by 

size and more by mobility and swiftness, one 

that is easier to deploy and sustain, one that 

relies more heavily on stealth, precision 

weaponry, and information technologies.’’

With that statement on May 25, 2001, 

President Bush set a new direction for 

defense strategy and defense 

management—one toward 

transformation. On January 31, 2002, 

Secretary of Defense Donald Rumsfeld 

echoed the sentiments expressed by 

President Bush, stating that ‘‘[a]ll the 

high-tech weapons in the world will not 

transform the U.S. armed forces unless 

we also transform the way we think, the 

way we train, the way we exercise, and 

the way we fight.’’

Transformation is more than 

acquiring new equipment and 

embracing new technology—it is the 

process of working and managing 

creatively to achieve real results. To 

transform the way DoD achieves its 

mission, it must transform the way it 

leads and manages the people who 

develop, acquire, and maintain our 

Nation’s defense capability. Those 

responsible for defense transformation—

including DoD civilian employees—

must anticipate the future and wherever 

possible help create it. The Department 

must seek to develop new capabilities to 

meet tomorrow’s threats as well as those 

of today. NSPS is a key pillar in the 

Department of Defense’s 

transformation—a new way to manage 

its civilian workforce. NSPS is essential 

to the Department’s efforts to create an 

environment in which the Total Force 

(military personnel, civilian employees, 

and contractors) thinks and operates as 

one cohesive unit. 

DoD civilians are unique in 

government: They are an integral part of 

an organization that has a military 

function. DoD civilians must 

complement and support the military 

around the world in every time zone, 

every day. Just as new threats, new 

missions, new technology, and new 

tactics are changing the work of the 

military, they are changing the work of 

our 700,000 civilians. To support the 

66118 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

interests of the United States in today’s 

national security environment—where 

unpredictability is the norm and greater 

agility the imperative—civilians must be 

an integrated, flexible, and responsive 

part of the team. 

At best, the current personnel system 

is based on 20th century assumptions 

about the nature of public service and 

cannot adequately address the 21st 

century national security environment. 

Although the current Federal personnel 

management system is based on 

important core principles, those 

principles are operationalized in an 

inflexible, one-size-fits-all system of 

defining work, hiring staff, managing 

people, assessing and rewarding 

performance, and advancing personnel. 

These inherent weaknesses make 

support of DoD’s mission complex, 

costly, and ultimately risky. Currently, 

pay and the movement of personnel are 

pegged to outdated, narrowly defined 

work definitions; hiring processes are 

cumbersome; high performers and low 

performers are paid alike; and the labor 

system encourages a dispute-oriented, 

adversarial relationship between 

management and labor. These systemic 

inefficiencies detract from the potential 

effectiveness of the Total Force. A more 

flexible, mission-driven system of 

human resources management that 

retains those core principles will 

provide a more cohesive Total Force. 

The Department’s 20 years of experience 

with transformational personnel 

demonstration projects, covering nearly 

30,000 DoD employees, has shown that 

fundamental change in personnel 

management has positive results on 

individual career growth and 

opportunities, workforce 

responsiveness, and innovation; all 

these things multiply mission 

effectiveness. 

The immense challenges facing DoD 

today require a civilian workforce 

transformation: Civilians are being 

asked to assume new and different 

responsibilities, take more risk, and be 

more innovative, agile, and accountable 

than ever before. It is critical that DoD 

supports the entire civilian workforce 

with modern systems—particularly a 

human resources management system 

and a labor relations system that 

support and protect their critical role in 

DoD’s Total Force effectiveness. The 

enabling legislation provides the 

Department of Defense with the 

authority to meet this transformation 

challenge. 

More specifically, the law provides 

the Department and OPM—in 

collaboration with employee 

representatives—authority to establish a 

flexible and contemporary system of 

civilian human resources management 

for DoD civilians. The attacks of 

September 11 and the continuing war 

on terrorism make clear that flexibility 

is not a policy preference. It is nothing 

less than an absolute requirement, and 

it must become the foundation of DoD 

civilian human resources management. 

NSPS is designed to promote a 

performance culture in which the 

performance and contributions of the 

DoD civilian workforce are more fully 

recognized and rewarded. The system 

offers the civilian workforce a 

contemporary pay-banding construct, 

which will include performance-based 

pay. As the Department moves away 

from the General Schedule system, it 

will become more competitive in setting 

salaries and it will be able to adjust 

salaries based on various factors, 

including labor market conditions, 

performance, and changes in duties. The 

HR management system is a foundation 

for a leaner, more flexible support 

structure and will help attract skilled, 

talented, and motivated people, while 

also retaining and improving the skills 

of the existing workforce. 

Despite the professionalism and 

dedication of DoD civilian employees, 

the limitations imposed by the current 

personnel system often prevent 

managers from using civilian employees 

effectively. The Department sometimes 

uses military personnel or contractors 

when civilian employees could have 

and should have been the right answer. 

The current system limits opportunities 

for civilians at a time when the role of 

DoD’s civilian workforce is expanding 

to include more significant participation 

in Total Force effectiveness. NSPS will 

generate more opportunities for DoD 

civilians by easing the administrative 

burden routinely required by the current 

system and providing an incentive for 

managers to turn to them first when 

certain vital tasks need doing. This will 

free uniformed men and women to focus 

on matters unique to the military. 

The law requires the Department to 

establish a contemporary and flexible 

system of human resources 

management. DoD and OPM crafted 

NSPS through a collaborative process 

involving management, employees, and 

employee representatives. DoD 

leadership will ensure that supervisors 

and employees understand the new 

system and can function effectively 

within it. The system retains the core 

values of the civil service and allows 

employees to be paid and rewarded 

based on performance, innovation, and 

results. In addition, the system provides 

employees with greater opportunities 

for career growth and mobility within 

the Department. 

A key to the success of NSPS is 

ensuring employees perceive the system 

as fair. In a human resources 

management system, fairness is the 

basis for trust between employees and 

supervisors. The Department’s mission 

cannot be accomplished without the 

workforce. It is a tenet of the 

Department that employees will 

exercise personal responsibility and 

sustain a high level of individual 

performance and teamwork when they 

perceive that the human resources 

system and their supervisors are fair. 

The Department and the Office of 

Personnel Management are addressing 

fairness in the National Security 

Personnel System in several 

dimensions: System design; the right to 

seek review of important categories of 

management decisions; workforce 

access to information about system 

provisions, processes, and decision 

criteria; and accountability mechanisms. 

NSPS regulations and implementing 

issuances will include rules to guard 

against arbitrary actions. Examples 

include written performance 

expectations, the guarantee that 

employees rated higher than 

‘‘unacceptable’’ will receive the full 

minimum by which their pay rate range 

is adjusted, the requirement to prescribe 

the conditions for probationary periods 

established by the Secretary, public 

notice of vacancies when the 

Department is recruiting externally, and 

prohibition against establishing 

reduction in force competitive areas that 

target an individual employee on the 

basis of non-merit factors. 

NSPS continues employees’ and labor 

organizations’ rights to challenge or seek 

review of key decisions. For example, 

all employees will be able to request 

reconsideration of their performance 

ratings through an administrative 

grievance procedure. Bargaining unit 

employees will also have the option of 

using a negotiated grievance procedure. 

Employees must be notified in advance 

of a proposed adverse action, be given 

time and opportunity for reply, and be 

given a decision notice that includes the 

reasons for the decision. Labor 

organization officials may file unfair 

labor practice claims or grievances. 

The Department and its Components 

will make information about NSPS 

rules, policies, and practices readily 

available to the workforce in the form of 

published regulations, published 

implementing issuances, local level 

instructions, training, and other sources. 

The last dimension of accountability 

for fair decisions and practices under 

NSPS will call on two major streams of 

information. First, human resources 

management accountability reviews 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66119 

within the Department will be used to 

identify and address issues regarding 

the observance of merit system 

principles and regulatory and policy 

requirements, including those 

established under NSPS. In addition, 

the Department will monitor the 

outcomes of administrative and 

negotiated grievances, performance 

rating reconsiderations, equal 

employment opportunity complaints, 

and whistleblower complaints to correct 

chronic problems and particular 

failings. 

The second stream will be NSPS 

program evaluation findings. These will 

enable the Secretary and the Director to 

determine whether the design of NSPS 

and the pattern of its results meet 

statutory requirements like fairness and 

equity and the specific performance 

expectations of the NSPS Requirements 

Document for a credible and trusted 

system. Section 9901.108 of these final 

regulations codifies the requirement for 

NSPS program evaluation. It opens to 

designated employee representatives the 

design and results of evaluations of 

particular NSPS aspects so that they can 

provide comments and 

recommendations to help ensure 

balanced and fair methods and 

conclusions. A robust and long-term 

NSPS program evaluation plan of 

studies and reviews, transactional data 

analyses, opinion surveys, and other 

evaluative methods will be fielded with 

NSPS implementation. 

Fairness in NSPS is not a specific 

thing, but rather an intrinsic quality 

being built into the design of a flexible 

human resources management system—

one to be accounted for during reviews 

and evaluations of NSPS operations and 

decisions. 

A. Pay and Classification 

The NSPS pay and classification 

system will provide a more flexible 

support structure that will help attract 

skilled, talented, workers; retain and 

appropriately reward current 

employees; and create opportunities for 

civilians to participate more fully in the 

total integrated workforce. A pay 

banding structure will replace the 

artificial limitations created by the 

current pay and classification systems. 

With broad pay bands, the Department 

will be able to move employees more 

freely across a range of work 

opportunities without being bound by 

narrowly described work definitions. 

The pay structure will be much more 

responsive to market conditions. The 

Department will be able to adjust rate 

ranges and local market supplements 

based on variations relating to specific 

occupations, rather than the current 

one-size-fits all approach. Labor market 

conditions will also be considered when 

making pay-setting decisions. As 

prescribed in the enabling legislation, 

the new compensation system will 

better link individual pay to 

performance using performance rather 

than time on the job to determine pay 

increases. 

B. Performance Management 

In recognition of the increased 

importance of performance in making 

pay and retention decisions, the 

Department has created a much more 

robust performance management 

system. 

The Department will use a multi-level 

system that makes distinctions in levels 

of employee performance. The system 

will link employee achievements, 

contributions, knowledge, and skills to 

organizational results. It will also allow 

the Department to better recognize and 

support team contributions and 

accomplishments. Performance 

expectations will be clearly 

communicated to employees and will be 

linked to the organization’s strategic 

goals and objectives. The ability to 

recognize valid distinctions in 

performance and reward employees 

based on those distinctions will foster a 

high performance culture within the 

Department. 

C. Staffing, Employment and Workforce 

Shaping 

NSPS will retain the merit system 

principles and veterans’ preference 

while giving the Department the 

flexibility necessary to streamline the 

hiring process and adapt quickly to 

critical mission needs. The Department 

will be able to use direct-hire authority 

for severe shortage or critical needs. 

NSPS will also provide for a more 

efficient process for creating appointing 

authorities, in conjunction with the 

Office of Personnel Management, as new 

requirements emerge. As part of this 

process, the system provides for 

transparency and public awareness 

through notice in the Federal Register. 

The new pay-setting flexibilities will 

also enhance the Department’s ability to 

attract and retain the talented workforce 

necessary to accomplish its mission. 

Through workforce shaping 

flexibilities, the Department will create 

a reduction in force system that places 

more emphasis on performance while 

continuing to protect veterans’

preference rights. The downsizing 

process will be less disruptive to 

employees and the mission. The 

Department will continue to fully utilize 

tools such as separation incentives and 

the Priority Placement Program to avoid 

and mitigate the impact of any 

reductions it faces. 

D. Adverse Actions and Appeals 

Consistent with the enabling 

legislation, the final regulations 

streamline and simplify adverse actions 

and appeals procedures, but without 

compromising due process for DoD 

employees. Employees will still receive 

notice of a proposed adverse action, the 

right to reply, and the right to appeal to 

the Merit Systems Protection Board 

(MSPB). In the proposed regulations, we 

proposed to replace the two existing 

authorities and adopt a single process 

and standard for all actions whether 

based on unacceptable performance or 

misconduct. In doing so, we proposed to 

adopt the higher of the two current 

burdens of proof—‘‘preponderance of 

the evidence’’—rather than the lower 

standard—‘‘substantial evidence.’’ We 

have retained this higher burden of 

proof. In addition, the final regulations 

clarify that the full MSPB’s standard for 

review is as specified in the enabling 

legislation. The final regulations retain 

authority for the Secretary to establish a 

number of mandatory removal offenses 

(MROs) that have a direct and 

substantial adverse effect on the 

Department’s national security mission. 

The final regulations also retain 

authority for the Department to review 

decisions of MSPB Administrative 

Judges who are the first step in the 

NSPS appeals process. 

E. Labor Management Relations 

To ensure that the Department has the 

flexibility to carry out its vital mission, 

as authorized by the enabling 

legislation, the regulations, among other 

things, revise management’s rights and 

its duty to bargain to ensure that the 

Department can act as and when 

necessary. Collective bargaining is 

prohibited on such critical matters as 

procedures observed in making work 

assignments and deployments unless 

the Secretary, in his or her sole, 

exclusive, and unreviewable discretion, 

elects to bargain. The Secretary may 

authorize bargaining on these matters to 

advance the Department’s mission 

accomplishment or promote 

organizational effectiveness. If the 

Secretary does not elect to bargain 

procedures on these matters, 

consultation is required. Management 

and exclusive representatives will 

negotiate over changes that have 

foreseeable, significant, and substantial 

impact, as well as appropriate 

arrangements for employees affected by 

those changes, under certain specified 

conditions. Additionally, the 

regulations create the National Security 

66120 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

Labor Relations Board (NSLRB) to 

address those issues that are most 

important to accomplishing the DoD 

mission, with other matters retained by 

the Federal Labor Relations Authority 

(FLRA). The regulations provide the 

Secretary discretion as to when the 

NSLRB will be in place. The regulations 

also provide the Secretary discretion, in 

consultation with the Director, to 

designate another third party to exercise 

the authority of the Board in the 

interim. The revisions to the regulations 

strike the right balance between the 

mission needs of DoD and the 

meaningful involvement of employees 

and their representatives. 

Development of the National Security 

Personnel System 

A. Strategic Engagement and 

Establishment of Program Executive 

Office 

While dialogue with employee 

representatives began in January 2004, 

in April senior DoD leadership initiated 

a collaborative process to design and 

implement NSPS. This process was 

crafted by a group of 25 to 30 senior 

experts representing DoD, OPM, and the 

Office of Management and Budget. The 

Defense Acquisition Management model 

was used to establish the requirements 

for the design and implementation of 

NSPS, including Guiding Principles and 

Key Performance Parameters (KPPs), 

which defined the minimum 

requirements for NSPS. The Honorable 

Gordon R. England was appointed by 

the Secretary of Defense as the NSPS 

Senior Executive. As the NSPS Senior 

Executive, Secretary England 

established the NSPS Program Executive 

Office (PEO) as the central DoD policy 

and program office to conduct the 

design, planning and development, 

deployment, assessment, and full 

implementation of NSPS. 

The entire process was accomplished 

jointly with OPM. An integrated 

executive management team composed 

of senior DoD and OPM leaders 

provided overall policy and strategic 

advice to the PEO and served as staff to 

the Senior Executive. 

B. Development of Design Options 

Guiding Principles and Key 

Performance Parameters 

In setting up the process for the 

design of the system, senior leadership 

adopted a set of Guiding Principles as 

a compass to direct efforts throughout 

all phases of NSPS development. They 

translate and communicate the broad 

requirements and priorities outlined in 

the enabling legislation into concise, 

understandable requirements that 

underscore the Department’s purpose 

and intent in creating NSPS. The 

Guiding Principles are: 

• Put mission first—support National 

Security goals and strategic objectives; 

• Respect the individual—protect 

rights guaranteed by law; 

• Value talent, performance, 

leadership and commitment to public 

service; 

• Be flexible, understandable, 

credible, responsive, and executable; 

• Ensure accountability at all levels; 

• Balance HR interoperability with 

unique mission requirements; and 

• Be competitive and cost effective. 

In addition, senior leadership 

approved a set of Key Performance 

Parameters (KPPs), which define the 

minimum requirements and/or 

attributes of the system. Those KPPs are 

summarized below: 

• High Performing: Employees/ 

supervisors are compensated/retained 

based on performance/contribution to 

mission; 

• Agile and Responsive: Workforce 

can be easily sized, shaped, and 

deployed to meet changing mission 

requirements; 

• Credible and Trusted: System 

assures openness, clarity, accountability 

and merit principles; 

• Fiscally Sound: Aggregate increases 

in civilian payroll, at the appropriations 

level, will conform to OMB fiscal 

guidance, and managers will have 

flexibility to manage to budget; 

• Supporting Infrastructure: 

Information technology support and 

training and change management plans 

are available and funded; and 

• Schedule: NSPS will be operational 

and demonstrate success prior to 

November 2009. 

Communications During the Design 

Process 

In undertaking a project of this 

magnitude, impacting over 700,000 

civilians of the Department, it was 

essential to ensure the availability of 

information on the new HR and labor 

relations systems. It was also critical to 

solicit the views and ideas of 

employees, employee representatives 

and other stakeholders. 

In April 2004, the PEO developed and 

implemented a communications 

strategy. The objectives of DoD’s 

communications strategy are to (1) 

demonstrate the rationale for and 

benefits of NSPS; (2) demonstrate 

openness and transparency in the 

design and process of converting to 

NSPS; (3) express DoD’s commitment to 

ensuring NSPS is applied fairly and 

equitably; and (4) address potential 

criticism of NSPS. 

The PEO identified numerous 

channels for disseminating relevant, 

timely, and consistent information. 

These include: Print and electronic 

media; e-mail; town hall meetings; focus 

groups; speeches; and briefings. A 

website was developed to serve as a 

primary, two-way communications tool 

for the workforce, other stakeholders, 

and the general public. The website 

includes the capability for visitors to 

submit questions and comments. The 

PEO has responded to thousands of 

questions and comments. 

The website will remain available 

during implementation and will provide 

current information for managers, 

supervisors and employees. 

Outreach to Employee Representatives 

In January and February 2004, we met 

with union leaders for the purpose of 

exchanging ideas and interests on a new 

labor relations system. All unions 

holding DoD national consultation 

rights (NCR) at the time were invited to 

the January 22, 2004, meeting. Seven of 

these eight NCR unions elected to 

attend. In addition, one additional 

union without DoD national 

consultation rights was invited to attend 

and participated in the January 22, 

2004, meeting. Union leadership from 

all of the 43 unions representing DoD 

employees were invited to attend and 

participate in the February 26–27, 2004, 

meeting. Twenty-six unions attended 

and participated in the February 2004 

meeting. 

In the spring of 2004 and continuing 

over the course of several months, we 

sponsored a series of additional 

meetings with union leadership to 

discuss design elements of NSPS. 

Officials from DoD and OPM met 

throughout the summer and fall with 

union officials representing many of the 

DoD civilians who are bargaining unit 

employees. These sessions provided the 

opportunity to discuss the design 

elements, options, and proposals under 

consideration for NSPS and solicit 

union feedback. 

During this time, 10 meetings (in 

addition to the 2 meetings held in 

January and February 2004) were held 

with officials of the 43 unions that 

represent DoD employees, including the 

9 unions that currently have national 

consultation rights. These union 

officials represent over 1,500 separate 

bargaining units covering about 450,000 

employees. These meetings involved as 

many as 80 union leaders from the 

national and local level at any one time, 

and addressed a variety of topics, 

including: The reasons change is needed 

and the Department’s interests; 

employee communications; and 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66121 

proposed design options in the areas of 

labor relations and collective 

bargaining, adverse actions and appeals, 

and pay and performance management. 

Outreach to Employees 

In keeping with DoD’s commitment to 

provide employees and managers an 

opportunity to participate in the 

development of NSPS, the PEO 

sponsored a number of Focus Group 

sessions and town hall meetings at 

various sites across DoD. In mid-July 

2004, a total of 106 focus groups were 

held throughout DoD, including 

overseas locations. Separate focus 

groups were held for employees, 

civilian and military supervisors, and 

managers and practitioners from HR, 

legal and EEO communities. Bargaining 

unit employees and union leaders were 

invited to participate. For the major 

system design elements, focus group 

participants were asked what they 

thought worked well in the current HR 

systems and what they thought should 

be changed. Over 10,000 comments, 

ideas and suggestions received during 

the focus group sessions were 

summarized and provided to NSPS 

Working Groups for use in developing 

options for the labor relations, appeals, 

adverse actions, and human resources 

design elements of NSPS. 

In addition, town hall meetings were 

held in DoD facilities around the world 

during the summer of 2004, providing 

an opportunity to communicate with the 

workforce, provide the status of the 

design and development of NSPS, and 

solicit thoughts and ideas. The NSPS 

Senior Executive, Secretary England, 

conducted the first town hall meeting at 

the Pentagon on July 7, 2004. Some of 

the town hall meetings were broadcast 

live, as well as videotaped and 

rebroadcast on military television 

channels and websites to facilitate the 

widest possible dissemination. 

Outreach to Other Stakeholders 

In addition to reaching out to DoD 

employees and labor organizations, DoD 

and OPM met with other groups who 

were thought to be interested in the 

design of a new HR system for DoD. 

DoD and OPM invited selected 

stakeholders to participate in briefings 

held at OPM in August and September 

2004. 

Those invited to the briefings 

included: Public interest groups, such as 

the National Academy of Public 

Administration (NAPA), Coalition for 

Effective Change, and Partnership for 

Public Service; veterans’ service 

organizations; and non-union employee 

advocacy groups. Both before and after 

these briefings, DoD and OPM 

responded to dozens of requests for 

special briefings. DoD and OPM also 

met with the Government 

Accountability Office, Office of 

Management and Budget, and 

Department of Homeland Security to 

keep them up to date on the team’s 

activities; and consulted with the Merit 

Systems Protection Board on the 

appeals process to ensure that it 

provides employees the protections of 

due process. 

Development of Design Options—

Working Groups 

In order to incorporate all the 

information and develop options, the 

PEO established functionally aligned 

Working Groups. Over 120 employees 

representing the Military Departments 

(Army, Navy, Air Force), other DoD 

Components, and OPM participated in 

the process. 

The Working Groups reviewed all 

available information, including: 

Pertinent laws, rules, regulations; input 

from NSPS focus groups and town hall; 

union consultation meetings; data 

review and analysis from alternative 

personnel systems and laboratory and 

acquisition demonstration projects; the 

enabling legislation; and Guiding 

Principles and Key Performance 

Parameters. In addition, subject matter 

experts briefed the Working Groups on 

a variety of topics, such as pay-forperformance systems, alternative 

personnel systems, pay pool 

management, and market sensitive 

compensation systems. 

In developing options for the NSPS, 

the Working Groups benefited from the 

Government’s experience under 

demonstration project authorities (e.g. 

the China Lake Demonstration Project 

originally authorized by section 6 of the 

Civil Service Miscellaneous 

Amendments Act of 1983; the Defense 

reinvention laboratory demonstration 

projects authorized by section 342 of the 

National Defense Authorization act for 

fiscal year 1995, as amended; and the 

Acquisition Workforce Demonstration 

Project, authorized be section 4308 of 

the National Defense Authorization Act 

for fiscal year 1996, as amended) and 

alternative personnel systems (e.g. the 

Defense Intelligence Personnel System, 

the Government Accountability Office, 

and the Federal Aviation 

Administration), the DoD ‘‘Best 

Practices’’ initiative (68 FR 16120, April 

2, 2003), and the compilation of 

research materials from the Department 

of Homeland Security HR Systems 

Design process. 

At the conclusion of the process, the 

Working Groups provided a set of 

options covering a broad range of 

variations on the six areas of focus: (1) 

Compensation (classification and pay 

banding); (2) performance management; 

(3) hiring, assignment, pay setting, and 

workforce shaping; (4) employee 

engagement; (5) adverse action and 

appeals; and (6) labor relations. Each 

option was evaluated against the 

Guiding Principles and KPPs. 

Potential options presented a wide 

range of views and concerns. The PEO 

and senior leaders representing 

organizations within DoD reviewed all 

the options. After extensive discussion, 

the selected options were presented to 

the Overarching Integrated Product 

Team (OIPT) for review and the Senior 

Executive for approval. 

Publication of Proposed Regulations 

These extensive and collaborative 

design efforts all preceded the formal 

process for developing the new HR and 

labor relations systems. The enabling 

legislation established a formal process 

in this regard, officially beginning when 

the Secretary and the Director published 

proposed regulations to establish the 

new DoD HR and labor relations 

systems in the Federal Register on 

February 14, 2005. The process was 

designed to ensure collaboration with 

employee representatives in the design 

and implementation of the new HR and 

labor relations systems. 

The first formal step provided a 30- 

day period for the public, employees, 

and employee representatives to review 

and submit formal comments on the 

proposed system. The second step 

provided for a minimum of 30 days to 

‘‘meet and confer’’ with employee 

representatives in order to attempt to 

reach agreement on the design of the 

new system. The third step required 

notification to Congress on the decision 

to implement the new system. The new 

system becomes effective 30 days after 

congressional notification. 

C. Public Comments 

In response to the proposed rule, the 

Department received 58,538 comments 

during 30-day public comment period. 

The Department received comments 

from a wide variety of individuals 

including DoD civilian and military 

personnel, DoD organizations, labor 

organizations, other Federal agencies, 

Members of Congress and the general 

public. At the conclusion of the public 

comment period, and continuing over 

the next several months, DoD and OPM 

staff reviewed and analyzed the 

comments. 

In general, the comments ranged from 

overall rejection of the proposed 

regulations to enthusiastic acceptance. 

Many comments focused on the need for 

66122 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

1 DoD has 43 different unions representing over 

1,500 separate bargaining units covering about 

450,000 employees. In the spring of 2004, thirty-six 

unions joined together to form the United 

Department of Defense Workers Coalition (‘‘the 

Coalition’’). 2There were 41 different form letters totaling 

43,714 comments. An additional 1,850 form letters 

were received with additional comments added by 

the commenter. 

3 During this period of time, the Honorable Dan 

Blair was Acting Director of the Office of Personnel 

Management. On June 28, 2005, the Honorable 

Linda M. Springer was sworn in as OPM’s Director. 

fairness in the system and the need for 

training of employees and managers. 

Concerns were expressed about 

maintaining due process and the scope 

of bargaining. 

Many of the comments were from 

national labor organizations and their 

members.1 Almost 80 percent of the 

comments were form letters submitted 

by email or letter.2 The form letters 

expressed general opposition to the 

proposed regulations. These 

submissions expressed concerns that the 

proposed regulations lacked sufficient 

specificity. The comments also 

expressed a desire to remain with the 

current system, citing too much power 

being given to managers and 

supervisors, with no corresponding 

accountability. Specific concerns 

included: Adequate funding of pay 

pools; deployment of civilians to war 

zones; and the lack of third-party review 

for performance appraisals, adverse 

actions and labor disputes. There was 

also concern that the regulations did not 

adhere to congressional intent to 

maintain the requirements of the 

applicable labor relations statutes. 

Approximately 415 of the commenters 

included substantive analysis of the 

proposed regulations. Virtually all of 

these comments favor some changes, 

along with a wide variety of views on 

the merits of the proposed regulations. 

Acknowledging that there are strong 

views on the proposals presented, DoD 

and OPM reviewed and carefully 

considered all the comments and the 

arguments made for and against the 

proposed changes. 

The major comments received on the 

proposed regulatory changes are 

summarized below, together with a 

discussion of the changes made as a 

result of the comments. Also 

summarized are the suggestions for 

changes considered where no change is 

being made. In addition to the more 

substantive comments discussed below, 

a number of editorial suggestions were 

made, some of which have been adopted 

and others which have not. A number 

of other changes have been made to 

better organize or structure the 

regulatory text. Finally, we received a 

number of comments on issues that go 

beyond the scope of these regulations, 

which are not addressed in the 

discussion that follows. 

D. The Meet-and-Confer Process 

The public comment period was 

followed by the second step in the 

formal development process—an 

additional 30-day period during which 

DoD and OPM representatives were to 

meet and confer with employee 

representatives to resolve differences 

over the proposed regulations wherever 

possible. 

The meet-and-confer process began 

officially in April 2005. On April 8, 

2005, a meeting with labor organizations 

was held to discuss procedures to be 

followed during the meet-and-confer 

process. 

The following principals participated 

in the meet-and-confer process: 

• Forty-three labor organizations were 

invited to participate. Thirty-six of those 

labor organizations were represented by 

a ‘‘coalition’’ led by the AFL–CIO, and 

were authorized to send an unlimited 

number of representatives. Eighteen of 

the labor organizations chose to send 

representatives. The actual number of 

representatives present in the room 

typically ranged from 25 to 50. 

• The coalition includes: American 

Federation of State, County and 

Municipal Employees (AFSCME); 

American Nurses Assn. (ANA); Antilles 

Consolidated Education Assn. (ACEA); 

Assn. of Civilian Technicians (ACT); 

American Federation of Government 

Employees (AFGE); American 

Federation of Teachers (AFT); 

Communications Workers of America 

(CWA); Fairchild Federal Employees 

Union (FFEU); Federal Education Assn. 

(FEA); Int’l. Assn. of Machinists and 

Aerospace Workers (IAMAW); Graphic 

Communications International Union 

(GCIU); Hawaii Council of Commissary 

Dept. of Defense Unions (HCCDU); Int’l. 

Brotherhood of Boilermakers; Int’l. 

Assn. of Fire Fighters (IAFF); Int’l. Assn. 

of Tool Craftsman (IATC); Int’l. 

Brotherhood of Electrical Workers 

(IBEW); Int’l. Brotherhood of Teamsters, 

Chauffeurs, Warehousemen and Helpers 

of America (IBT); Int’l. Guard Union of 

America (IGUA); Int’l. Union of 

Operating Engineers (IUOE); Int’l. Union 

of Painters and Allied Trades (IUPAT); 

Int’l. Federation of Professional and 

Technical Engineers (IFPTE); Int l. 

Organization of Masters, Mates and 

Pilots (IOMMP); Laborers International 

Unions (LIUNA); National Marine 

Engineers Beneficial Assn. (MEBA); 

Metal Trades Dept./AFL–CIO (MTD); 

National Assn. of Aeronautical 

Examiners (NAAE); National Air Traffic 

Controller Assn. (NATC); National 

Federation of Federal Employees 

(NFFE); National Assn. of Gov. 

Employees (NAGE); Professional 

Airways Systems Specialists (PASS); 

Retail Wholesale, and Department Store 

Union (RWDSU); Seafarers Int’l. Union 

of North America (SIUNA); Service 

Employees International Union (SEIU); 

Sheet Metal Workers Int’l. Assn. 

(SMWIA); Sport Air Traffic Controllers 

(SPORT); United Assn. of Journeymen 

and Apprentices of the plumbing, 

sprinkler fitting industry of the U.S. and 

Canada (UA); United Nurses Assn. of 

California (UNAC); and United Power 

Trades Org. (UPTO) 

• Other unions also participated in 

the meet-and-confer process. These 

include: Fraternal Order of Police (FOP) 

and the National Assn. of Independent 

Labor (NAIL). 

• Five representatives from DoD, 

including the Principal Deputy Under 

Secretary of Defense (Personnel and 

Readiness), the Program Executive 

Officer, the Deputy PEO, and two senior 

program managers. 

• Two senior executives from the 

Office of Personnel Management (OPM) 

and various senior program managers as 

necessary. 

The Secretary, in consultation with 

the Acting Director,3 also requested the 

services of the Federal Mediation and 

Conciliation Service for the entire meetand-confer process. Face-to-face meetand-confer sessions occurred from April 

18, 2005, through June 2, 2005. During 

that period, the parties met for 19 days, 

with other days spent preparing for 

meetings and exchanging 

recommendations for amendments to 

the regulations. The Department 

provided 36 written recommendations 

to revise the regulations as well as 14 

recommended clarifications of intent. 

The unions presented revised 

regulations for each subpart of the 

proposed regulations in addition to 

other revisions covering such topics 

as—exigencies and post-implementation 

bargaining, implementing issuances, 

and third-party review of performance 

appraisals and adverse actions. At the 

conclusion of the meet-and-confer 

process, the NSPS Senior Executive and 

the Acting Director of OPM met with 

representatives from the labor 

organizations in mid-June 2005, to 

provide them with an opportunity to 

present their issues and concerns 

directly to the principals. 

The review of the public comments 

and the proposals during the meet-andconfer process has led to significant 

revisions of the proposed regulations. 

Some of the revisions are substantial, 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66123 

4 Implementing issuances are defined in 

§ 9901.103 of the regulations. Issuances are defined 

in § 9901.903. 

such as extending employees the right 

to grieve performance ratings of record, 

restricting authority to issue 

implementing issuances 4 that supersede 

inconsistent provisions of collective 

bargaining agreements, changing the 

standard for mitigating penalties, 

providing an opportunity for labor 

organizations to submit names of 

potential members of the NSLRB, and 

retaining the current interest of justice 

standard for payment of attorney fees. 

Other revisions are purely technical. 

Significant differences with many of 

the labor organizations remain over 

such issues as the scope of bargaining, 

implementing issuances that supersede 

conflicting provisions of collective 

bargaining agreements, the specificity of 

the regulations, the ability to grieve pay 

decisions, the use of behavior as part of 

performance evaluation and the use of 

performance in a reduction in force. 

These differences cannot be reconciled 

with the need for a contemporary and 

flexible system of human resources 

management as DoD seeks to transform 

the civilian part of the Total Force of 

military personnel, civilian employees, 

and DoD contractors. The current 

system limits opportunities for civilians 

at a time when the role of DoD’s civilian 

workforce is expanding to include more 

significant participation in Total Force 

effectiveness. NSPS will generate more 

opportunities for DoD civilians by 

easing the administrative burden 

routinely required by the current 

system. It will provide an incentive for 

managers to (1) identify military 

positions that can be converted to 

civilian and (2) to turn to civilians first 

when certain vital tasks need doing. 

This will free military men and women 

to focus on matters unique to the 

military, while greatly increasing the 

role of the Department’s civilian 

employees. The need for a flexible and 

contemporary system to support the 

Department’s national security mission 

is nothing less than an absolute 

requirement and it must become the 

foundation of DoD civilian human 

resources management. 

Where we indicate agreement in this 

Supplementary Information, we are 

referring to agreements reached between 

DoD and OPM, after consideration of 

public comments and proposals made 

during the meet-and-confer process, 

rather than to agreements reached 

between management and labor 

organization representatives during the 

meet-and-confer process. 

Major Issues 

The 58,538 public comments, in 

addition to the face-to-face discussions 

during the meet-and-confer process, 

clearly defined the issues that were of 

most concern to DoD civilians 

potentially covered by all or parts of 

NSPS. Major issues identified were as 

follows: (a) Specificity of the 

Regulations; (b) Pay for Performance 

and Pay Pool Funding; (c) Adverse 

Actions and Appeals; (d) Mandatory 

Removal Offenses; (e) Labor Relations; 

(f) Management Rights/Scope and Duty 

to Bargain; and (g) Independence of the 

NSLRB. Because these issues are critical 

to understanding the objectives of the 

Department’s new HR and labor 

relations systems, as well as the 

implementation of NSPS, we have given 

them particular attention in the 

following sections of this 

SUPPLEMENTARY INFORMATION. 

a. Specificity of the Regulations 

A significant issue raised in the 

public comments and during the meetand-confer process concerns the lack of 

specificity in the proposed regulations. 

Many of the commenters recommended 

that the regulations include far greater 

specificity, while others referred to the 

inability to provide substantive 

comments on the proposed rule without 

more information. 

These comments and concerns 

focused almost exclusively on the 

subparts establishing the HR system—

those dealing with Subpart B—

Classification, Subpart C—Pay and Pay 

Administration, Subpart D—

Performance Management, Subpart E—

Staffing and Employment, and Subpart 

F—Workforce Shaping. Those subparts 

remain relatively general in nature and 

expressly provide for the Department to 

develop implementing issuances to 

carry out the policies established in 

accordance with NSPS. In contrast, the 

subparts dealing with adverse actions, 

appeals, and labor relations (subparts G, 

H, and I, respectively) are more detailed, 

requiring fewer implementing 

issuances. 

The law requires the Department to 

establish a contemporary and flexible 

system of human resources management 

(see 5 U.S.C. 9902(b) (1) and (2)). Of all 

of the various objectives set by Congress 

for this system in the enabling 

legislation, flexibility was the very first 

enumerated. Unnecessary and excessive 

detail in subparts B, C, D, E, and F 

would undermine that objective. The 

regulations provide the overall 

framework for the new HR system 

without the inflexible requirements 

present in today’s system. In response to 

these comments, and as a result of the 

meet-and-confer process, we have added 

greater detail to certain sections of the 

subparts at issue. These additions are 

documented at length in our responses 

to the detailed comments that follow. 

However, even with added detail, all 

five of the subparts at issue retain their 

original structure in the final 

regulations, establishing a general 

policy framework to be supplemented 

by detailed Departmental implementing 

issuances. We believe this is the 

appropriate approach, providing the 

Department the flexibility it requires in 

implementing an HR system of this 

scope. 

Labor organization comments focus 

primarily on process, asserting that by 

including greater detail in the proposed 

regulations, they would have been given 

an opportunity to participate and 

provide input to the final regulations via 

the statutory meet-and-confer process 

set forth in 5 U.S.C. 9902(f)(1)(A)–(C). 

Among other things, that statutory 

process requires the Department and 

OPM to provide employee 

representatives with an opportunity to 

comment on the proposed regulations 

and, thereafter, meet with DoD and 

OPM officials (under the auspices of the 

Federal Mediation and Conciliation 

Service, if necessary) in an attempt to 

resolve any concerns and 

disagreements. As the labor 

organizations and other commenters 

have correctly pointed out, the proposed 

regulations did not provide for an 

analogous opportunity with respect to 

the development of implementing 

issuances. This became a major topic of 

discussion during the meet-and-confer 

process, with labor organizations 

insisting that DoD and OPM either 

include all implementing details in 

these final regulations or subject the 

Department’s implementing issuances to 

collective bargaining. We did not adopt 

either alternative. Including such detail 

in these regulations would not provide 

the Department the flexibility its 

mission requires. In addition, collective 

bargaining over the content of 

implementing issuances is prohibited by 

the enabling legislation. 

In summary, the inflexibility of the 

current system required new ways to 

meet the rapidly changing requirements 

for DoD civilians to provide support to 

the military members. A standardized, 

yet flexible DoD environment that 

promotes the growth of all employees 

and improves the manager’s ability to 

manage the workforce is essential. The 

regulations were developed to provide 

the Department the ability to maintain 

flexibility, while at the same time 

involving employee representatives in 

66124 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

the details of new processes established 

through implementing issuances. 

Five of the subparts in these final 

regulations remain relatively general in 

nature, providing broad policy 

parameters but leaving much of the 

details to implementing issuances. We 

believe this structure, patterned after the 

chapters in title 5 that they replace, is 

appropriate. By providing for detailed 

implementing issuances, the subparts 

dealing with Classification, Pay and Pay 

Administration, Performance 

Management, Staffing and Employment, 

and Workforce Shaping provide the 

Department with the flexibility 

mandated by Congress, and they do so 

without compromising the Department’s 

commitment to substantive employee 

representative involvement in the 

development of those implementing 

issuances. 

b. Pay for Performance and Pay Pool 

Funding 

The pay system we described in the 

proposed regulations was designed to 

fundamentally change the way we pay 

employees in the Department of 

Defense. Instead of a pay system based 

primarily on tenure and time-in-grade, 

we proposed a system that bases 

individual pay increases on 

performance. This proposal honors 

major points that were debated by the 

Congress and agreed upon with the 

passage of the enabling legislation. In 

addition, the proposed pay system 

would be far more market-sensitive than 

the current pay system. The proposed 

changes relating to classification, pay, 

and performance management were 

designed to achieve these two primary 

goals. 

A number of commenters agreed with 

the proposal to create a more 

occupation-specific and market- and 

performance-based classification and 

pay system. However, most commenters 

strongly recommended that we maintain 

the status quo; that is, that DoD 

continue to rely on the General 

Schedule (GS) and Federal Wage System 

(FWS) classification and pay systems. 

Many commenters thought the proposed 

pay-for-performance system would 

lower employee morale, increase 

competition among employees, and 

undermine teamwork and cooperation. 

Some also questioned the ability of the 

Department to successfully implement 

the proposed system, or of DoD 

managers to establish and apply 

performance standards fairly and 

consistently to pay decisions. Other 

commenters thought a pay-forperformance system would have a 

chilling effect on the expression of 

dissenting opinions, especially those 

concerning fraud, waste, and abuse. 

Some commenters recommended that 

current employees be allowed to remain 

in the existing system or have the option 

to stay in the current system or convert 

to NSPS. Still others wanted a more 

gradual implementation with testing of 

the effectiveness of the new system on 

various populations first. 

We have retained the system 

described in the proposed regulations. 

We believe Congress and the American 

people expect their public employees to 

be paid according to how well they 

perform, rather than how long they have 

been on the job. They also expect the 

Department to do everything it can to 

recruit and retain the most talented 

individuals it can find to carry out its 

critical mission. The GS and FWS pay 

systems do not provide the opportunity 

to appropriately reward top performers 

or pay them according to their true 

value in the labor market. Under the GS 

and FWS pay systems, performance is 

rewarded as an exception rather than 

the rule, and market is defined as ‘‘one 

size fits all,’’ with no distinction for 

differences in market pay based on 

occupation. 

The GS and FWS pay systems are 

primarily longevity-based systems—that 

is, pay increases are linked primarily to 

the passage of time. While time in grade 

determines eligibility for a GS or FWS 

step increase, it is true that a finding 

that the employee is performing at an 

acceptable level of competence is also 

required. However, this minimal 

requirement is met by roughly 99 

percent of all GS employees. Thus, at 

any given grade level, the vast majority 

of employees can expect to 

automatically receive base pay increases 

of up to 30 percent over time—in 

addition to the annual across-the-board 

pay increases—so long as their 

performance is ‘‘acceptable.’’ Even 

employees whose performance is 

unacceptable receive annual across-theboard pay increases that range from 3 to 

5 percent, and special rates that are even 

higher. Over time, even less productive 

employees will progress steadily to the 

top of the GS and FWS pay ranges and 

may end up being paid significantly 

more than higher-performing employees 

with less time in grade. Such a system 

cannot be fairly characterized as 

providing performance-based pay. 

The NSPS pay-for-performance 

system, by contrast, is designed to 

recognize and reward performance in 

two key ways. First, it establishes the 

fundamental principle that no employee 

may receive a base pay or local market 

supplement increase if his or her 

performance does not meet or exceed 

expectations. In contrast to the present 

pay systems, employees rated 

unacceptable will not get an annual 

adjustment. Second, the NSPS system 

provides for individual base pay 

increases based on an employee’s 

performance, whether by demonstrating 

requisite competencies at the entry/ 

developmental level or by meeting or 

exceeding performance expectations at 

the full performance level. In contrast to 

the present pay systems, under NSPS, 

an employee will progress through the 

pay range based on how well he or she 

performs. 

This concept may be simply 

summarized: The higher the 

performance, the higher the pay. This, 

too, is a fundamental principle of the 

new system, and we choose the order of 

these words deliberately. This system 

does not assume that individuals are 

motivated by pay, but rather that we 

have an obligation as an employer to 

reward the highest performers with 

additional compensation—however they 

may be motivated to achieve excellence. 

The Department has a special 

responsibility in this regard. Thus, the 

system we have designed is not a 

‘‘performance-for-pay’’ system, but a 

‘‘pay-for-performance’’ system. 

Nevertheless, we believe it will inspire 

DoD employees to perform at their best. 

This is in contrast to the GS and FWS 

pay systems, where it is possible for a 

high-performing employee to be paid 

the same, or even less, than a lower 

performing co-worker. 

As it designs and implements NSPS, 

the Department is taking the following 

steps to ensure that the performance 

management system functions properly: 

• Training managers to provide 

candid and constructive feedback to 

help employees maximize their 

contribution and potential; 

• Emphasizing the need for ongoing 

and meaningful dialogue between 

managers and employees; 

• Use of a pay pool process to ensure 

that performance decisions are made in 

a careful, deliberative environment that 

uses a consistent approach to decisions 

regarding performance ratings and 

shares; 

• Implementing a new competencybased performance management system 

that is intended to create a clear linkage 

between employee performance and the 

Department’s strategic plan and core 

values; 

• Increasing employee understanding 

and ownership of organizational goals 

and objectives; 

• Adopting automation tools that 

facilitate ‘‘best practices’’ in the pay-forperformance environment; 

• Reinforcing the use of team and 

organizational rewards; and 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66125 

• Preserving non-cash rewards as 

tools to recognize performance. 

The 50-plus-year-old GS pay system 

also is not sufficiently market-sensitive, 

potentially under-valuing the talents of 

the Department’s most critical 

employees. Under the GS and FWS pay 

systems, all employees in a given 

geographic location receive the same 

annual pay adjustment without regard 

to their occupation or the level of duties 

and responsibilities they are expected to 

perform. This one-size-fits-all approach 

treats all occupations alike, across the 

board as well as in particular locations, 

regardless of market value. Thus, we 

inevitably end up underpaying 

employees in some occupations and 

overpaying others. Even within an 

occupation, the rigidities of the current 

pay systems sometimes force us to 

underpay employees at the entry/ 

developmental grades, with recruiting 

difficulties and high attrition the result. 

The new NSPS pay system is 

designed to be much more marketsensitive. First, it allows NSPS, after 

coordination with OPM, to define 

occupational career groups and levels of 

work within each career group that are 

tailored to the Department’s missions 

and components. Second, it gives DoD 

considerable discretion, after 

coordination with OPM, to set and 

adjust the minimum and maximum 

rates of pay for each of those career 

groups or bands, based on national and 

local labor market factors and other 

conditions. Instead of ‘‘one size fits all’’

pay rates and adjustments, the system 

allows DoD to customize those 

adjustments and optimize valuable but 

limited resources. This kind of 

flexibility, which is lacking under the 

GS and FWS pay systems, will enable 

DoD to allocate payroll dollars to the 

occupations and locations where they 

are most needed to carry out the 

Department’s mission. 

The goals and principles of the new 

system are sound, and we have 

confidence that the Department has the 

capability to execute them effectively. 

Pay-for-performance systems like that 

proposed for DoD are not new. Pay 

banding has been around in the Federal 

Government since 1980, and the Federal 

Government has substantial experience 

in implementing performance-based pay 

systems (e.g., in demonstration 

projects). DoD alone has tested and 

implemented 11 performance-based pay 

systems since 1980. Research shows that 

employee attitudes toward such systems 

change over time, as they gain 

experience with them. For example, 

employee support for the ‘‘China Lake’’

broadbanding/pay-for-performance 

demonstration project was only 29 

percent before the project began, 

reached 51 percent by 1985, and was 69 

percent by 1988. Employee support was 

70 percent when Congress made the 

project permanent in 1994. Today, 

thousands of Federal employees already 

are covered by successful performancebased pay systems. 

The system we have devised is also 

consistent with the findings and 

recommendations of NAPA in its May 

2004 Report, ‘‘Recommending 

Performance-Based Federal Pay.’’ The 

basis for managing individual salary 

increases should be pay for 

performance. This recommendation has 

been a constant theme in discussions for 

more than two decades and the 

principle in every demonstration project 

that tested new pay policies. The 

evidence from the projects confirms that 

pay for performance can be successful 

in DoD. Nonetheless, the switch to a 

pay-for-performance system will be 

implemented via a spiral (multi-phase) 

approach resulting in application of the 

NSPS HR system, including the pay-forperformance system, to new segments of 

the DoD population at approximately 6- 

month intervals over a 2-year period. 

The phased intervals of implementation 

will provide opportunities to assess and 

adjust the system as each new group of 

employees is covered by the new 

system. For the most part, populations 

phased into NSPS will be grouped by 

organization in order to facilitate the 

change in organizational culture that 

will be essential to the success of NSPS 

and the improved organizational 

performance resulting from its 

implementation. 

In summary, we believe the 

Department’s pay-for-performance 

system is an imperative, essential to 

DoD’s ability to attract, retain, and 

reward a workforce that is able to meet 

the high expectations set for it by the 

Department’s senior leaders for the 

purpose of accomplishing the 

Department’s mission—the defense of 

our nation. 

Many commenters expressed concern 

that there will not be sufficient 

resources made available to fund pay 

pools at adequate levels. There were 

also many comments suggesting that 

pay pool money will be diverted from 

pay to mission requirements or to 

reward supervisors and managers, 

thereby leaving less for lower-graded 

employees. 

Proper funding of pay pools is 

fundamental to the success of NSPS. 

DoD senior leadership recognized its 

importance in setting two Key 

Performance Parameters—‘‘Credible and 

Trusted’’ and ‘‘Fiscally Sound.’’ In 

addition, this issue was the subject of 

testimony by the NSPS Senior Executive 

to the Senate Armed Services 

Committee in April 2005. Secretary 

England was asked what assurances he 

could give that limited appropriations 

or other budget pressures would not 

result in pay pools too small to truly 

reward performance. He declared that 

the Department viewed this as a basic 

covenant with its employees and 

confirmed that action is being taken to 

protect pay pool funding. 

The Department is implementing 

financial policies for NSPS. Protection 

of pay pool funding is being addressed 

in several different ways. First, the 

Department will mandate the minimum 

composition and expenditure of pay 

pool funds. Second, appropriate seniorlevel officials are required to certify that 

funds allocated to the performancebased pay pools have been used only for 

the purpose for which they were 

intended. Third, any exception to the 

minimum funding of the pay pool will 

be based on stringent criteria, along 

with higher-level approval. Fourth, 

mechanisms will be in place to monitor 

compliance. 

In accordance with the enabling 

legislation, for fiscal years 2004 through 

2008, the aggregate amount allocated for 

compensation of DoD civilian 

employees under NSPS, to the 

maximum extent practicable, will not be 

less than if they had not been converted 

to the NSPS. This takes into account 

potential step increases and promotions 

employees would have received if not 

converted to NSPS. In addition, 

§ 9901.313(b) provides that for fiscal 

years 2009 and beyond, DoD will 

develop a formula that ensures, to the 

maximum extent possible, that 

employees are not disadvantaged in the 

overall amount of pay available, in the 

aggregate, as a result of conversion to 

NSPS, while providing flexibility to 

accommodate changes in the function of 

the organization, changes in the mix of 

employees performing those functions, 

and other changed circumstances that 

may affect pay levels. 

c. Adverse Actions and Appeals 

In authorizing the creation of a new 

human resources system for the 

Department, Congress specifically 

required that employees be afforded the 

protections of due process. Recognizing 

the critical nature of the Department’s 

mission, Congress also stated in 5 U.S.C. 

9902(h)(2) that the new appeals process 

may ‘‘establish legal standards and 

procedures for personnel actions, 

including standards for applicable 

relief, to be taken on the basis of 

employee misconduct, or performance 

that fails to meet expectations.’’

66126 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

The proposed regulations included a 

number of changes to adverse actions 

and appeals procedures. Consistent with 

the enabling legislation, these changes 

were intended to simplify and 

streamline those procedures and 

provide for greater individual 

accountability, all without 

compromising guaranteed due process 

or protections against whistleblower 

reprisal or discrimination. Greater 

accountability is particularly critical to 

the Department. By its very nature, the 

Department’s national security mission 

requires an exceptionally high level of 

workplace order and discipline. The fact 

that DoD employees provide critical 

support to the military mission of 

defending the country means that they, 

and the Department have a special 

responsibility to the public. 

With that in mind, the proposed 

regulations provided for shorter notice 

for adverse actions, an accelerated 

appeals adjudication process using 

MSPB AJs, a preponderance of the 

evidence burden of proof to sustain the 

Department’s adverse actions, whether 

based on conduct or performance, or 

both, and specifically limited the 

mitigation of agency selected penalties 

by MSPB AJs and private arbitrators. 

The proposed regulations also required 

that arbitration decisions on adverse 

actions be reviewable by the Department 

and the full MSPB prior to review by the 

Federal Circuit Court of Appeals. The 

proposed regulations also gave the 

Secretary authority to establish a 

number of mandatory removal offenses 

(MRO)—that is, offenses that have such 

a direct and substantial impact on 

national security that they must carry a 

mandatory removal penalty. While the 

enabling legislation provides authority 

to establish an internal appeals process 

using adjudicators other than MSPB AJs, 

the Secretary and the Director decided 

that with the changes outlined above, 

DoD could achieve the objectives of the 

enabling legislation using MSPB AJs for 

initial review of employee adverse 

action appeals. Ultimately, the enabling 

legislation provides for full MSPB 

review of any DoD final appeals 

decision as well as for judicial review. 

Commenters, including labor 

organizations participating in the meetand-confer process, generally expressed 

concern that these changes, separately 

and together, would vitiate the due 

process rights of DoD employees. They 

argued that the changes would 

substantially diminish the authority of 

third parties such as MSPB and 

arbitrators to fully and fairly review and 

adjudicate adverse actions. 

Commenters, as well as some members 

of Congress, expressed particular 

concern, about the proposal to permit 

the Department to review arbitrator and 

MSPB AJ decisions on adverse actions. 

Commenters expressed skepticism that 

the stringent standards established for 

this review would adequately protect 

due process of employees. Commenters 

also expressed concern about the 

proposal to limit the ability to mitigate 

penalties unless the penalty was 

‘‘wholly without justification.’’

Commenters generally supported the 

proposal to adopt a ‘‘preponderance of 

evidence’’ standard of proof, although a 

few commenters were opposed to this 

proposal. 

These comments express a 

fundamental misconception of the 

requirements of due process as 

established by the United States 

Supreme Court. For example, in 

accordance with Supreme Court 

decisions, due process requires that 

before an employee who has a property 

interest in a job is removed, he or she 

is entitled to notice, an opportunity to 

reply, a decision, and a post-decision 

review. The final regulations preserve 

these due process rights for covered 

employees and afford even greater 

protection than the U.S. Constitution 

requires. Recognizing that many of these 

comments were erroneously 

characterized as due process issues, we 

nevertheless considered their merits. 

DoD and OPM have decided that the 

final regulations will continue to 

provide for a shorter, 15-day minimum 

advance notice to an employee of a 

proposed adverse action (compared to a 

30-day notice under current law). We 

have also retained the provision giving 

employees a minimum of 10 days to 

respond to the charges specified in the 

notice of adverse actions. Some 

commenters suggested that the 10-day 

period was not long enough, but this 

notice is actually longer than the 7-day 

minimum reply period that is provided 

under current law. This reply period 

runs concurrently with the notice 

period, which is also consistent with 

current law. Employees continue to 

have a right to be heard before a 

proposed adverse action is taken against 

them. This change protects that right 

while still providing for a more 

streamlined process. Since these are 

minimum time periods, local 

management may extend these time 

limits on a case-by-case basis if 

necessary. 

We are persuaded by the concerns 

expressed by commenters, as well as 

labor organizations during the meetand-confer process, that the enabling 

legislation establishes the standard by 

which the full MSPB may mitigate 

penalties. Specifically, the proposed 

regulations precluded mitigation except 

where a determination is made that the 

penalty is so disproportionate to the 

basis for the action as to be wholly 

without justification. Since the enabling 

legislation specifically provides the 

criteria for full MSPB review of NSPS 

appeals decisions, the Secretary and 

Director agree that it is unnecessary to 

require the full Board to apply the 

‘‘wholly without justification’’ standard. 

The criteria for full MSPB review as 

provided in the enabling legislation 

have been added to these regulations. 

Furthermore, the Secretary and Director 

agree to revise the ‘‘wholly without 

justification’’ standard for MSPB AJs 

that are used as part of the Department’s 

appeals process as well as arbitrators. 

The standard has been revised to 

preclude mitigation except when the 

action is ‘‘totally unwarranted in light of 

all pertinent circumstances.’’ This 

standard is similar to that recognized by 

the Federal courts and is intended to 

limit mitigation of penalties by 

providing deference to an agency’s 

penalty determination. The Department 

has statutory authority to establish new 

legal standards. In this case, the 

Department is electing to adopt a legal 

standard that meets the need of the 

Department by ensuring deference is 

provided to the Department’s penalty 

determinations along with the 

requirement that AJs give consideration 

to the Department’s national security 

mission. 

Under the final regulations, MSPB AJs 

(as well as arbitrators) will also be able 

to mitigate penalties in adverse action 

cases, but only under limited 

circumstances. We continue to believe 

that, because the Department bears full 

accountability for national security, it is 

in the best position to determine the 

penalty for poor performance and/or 

misconduct, subject to a more limited 

review than exists now under chapter 

75 of title 5, U.S. Code. Thus, its 

judgment in regard to penalty should be 

given deference. This limited standard 

for mitigation of penalties selected by 

DoD is intended to explicitly restrict the 

authority of MSPB AJs and arbitrators to 

modify penalties to those situations 

where the penalty is simply not 

warranted. MSPB AJs and arbitrators 

may not modify the penalty imposed by 

the Department unless such penalty is 

totally unwarranted in light of all 

pertinent circumstances. Consistent 

with the intent that deference be given 

to agency selected penalties, the 

regulations also provide that when a 

penalty is mitigated, the maximum 

justifiable penalty must be applied. In 

determining the maximum justifiable 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66127 

penalty, MSPB AJs and arbitrators will 

use the applicable agency table of 

penalties or other internal guidance. 

Commenters and labor organizations 

expressed strong concerns over DoD 

reviewing MSPB AJ decisions. These 

concerns ranged from whether the 

Department had legal authority to 

conduct this review to whether this 

assists in achieving the Department’s 

goal of streamlining the appeals process. 

Some expressed concerns that this 

would not be a truly independent 

appeals process as a result. We 

recognize these concerns, but believe 

that the process provides for appropriate 

review and safeguards. The enabling 

legislation authorizes an appeals 

process resulting in a final Department 

decision that is subject to full MSPB 

review. Consistent with this authority, 

we have established an independent 

appeals process using existing and 

familiar resources, MSPB AJs, to 

adjudicate employee appeals of DoD 

adverse actions. These AJs would issue 

initial decisions that would lead to a 

final Department decision subject to full 

MSPB review. The decision to utilize 

the MSPB AJ corps, rather than 

establishing a new corps of AJs, is 

purposeful. We are mindful of the need 

to conserve resources and recognize the 

value these AJs’ independence brings to 

the process. Nevertheless, to ensure that 

the Department receives proper 

deference to its critical mission 

requirements, the Department will 

retain the opportunity to review and 

modify, under criteria prescribed in 

these regulations, those initial AJ 

decisions before they become final 

Department decisions. In response to 

concerns raised by the unions during 

the meet-and-confer process, this review 

will occur at the DoD level. This 

highlights that the highest levels of the 

Department wish to ensure that this 

process is applied fairly and 

consistently across the Department. 

Also, in order to ensure timely decisions 

by the Department when taking action 

on an AJ or arbitrator decision, time 

limits for taking action will be 

established in implementing issuances. 

Ultimately, any decision of the 

Department is subject to review by the 

full MSPB and the Court of Appeals for 

the Federal Circuit. We believe this 

process affords employees full and fair 

opportunity for redress, as well as 

adjudicative independence, and 

deference to DoD’s critical mission 

needs, consistent with the NSPS 

statutory authority. 

Finally, many commenters and labor 

organizations participating in the meetand-confer process expressed concerns 

about the organization of the appellate 

procedures, finding them difficult to 

follow. We are persuaded by their 

concerns and have reorganized the 

appellate procedures in a user-friendly 

format. 

With the changes outlined above, we 

believe we have addressed and resolved 

the concerns raised by commenters 

regarding adverse actions and appeals. 

Due process is preserved under the final 

regulations. Thus, the adverse actions 

and appeals procedures set forth in 

these regulations are ‘‘fair, efficient, and 

expeditious,’’ consistent with 

congressional direction. 

d. Mandatory Removal Offenses 

The proposed regulations authorized 

the Secretary to identify offenses that, 

because they have a direct and 

substantial adverse impact on the 

Department’s national security mission, 

warrant a mandatory penalty of removal 

from the Federal service. Only the 

Secretary could mitigate the removal of 

an employee determined to have 

committed such a mandatory removal 

offense (MRO). Employees alleged to 

have committed these offenses would 

have the right to advance notice, an 

opportunity to respond, and a written 

decision. They would also be entitled to 

appeal that decision to the independent 

MSPB AJs, who could reverse the action 

but could not mitigate the removal 

penalty. Decisions of the MSPB AJs are 

subject to review by DoD as well as the 

full MSPB. 

Commenters and unions expressed a 

number of objections to the concept of 

MROs. Since no examples of potential 

MROs were provided in the proposed 

regulations, they feared that removal 

could be too harsh a penalty as for yet 

unspecified offenses. They also were 

concerned that employees would not be 

given full and complete notice of such 

offenses prior to their application. 

As proposed, an MRO should have a 

direct and substantial adverse impact on 

the Department’s national security 

mission. Accordingly, we have decided 

to retain MROs. However, in response to 

comments, the Secretary and the 

Director understand the concern over 

the lack of specificity with regard to 

MROs. During the meet-and-confer 

process, participating labor 

organizations expressed a similar 

concern, but we believe we were able to 

satisfactorily address most of their 

objections about lack of specificity by 

sharing with them potential mandatory 

removal offenses. 

In addition to those MROs discussed 

during the meet-and-confer process, an 

illustrative list of potential MROs 

follows: 

• Purchasing, using, or transporting 

weapons or materials for the purpose of 

committing, attempting to commit, or 

aiding and abetting terrorism. 

• Committing, attempting to commit, 

or aiding and abetting an act of sabotage 

against the Department of Defense that 

resulted or could have resulted in loss 

of life, significant financial loss or 

adverse impact on military readiness. 

• Soliciting or intentionally accepting 

a bribe or other unauthorized personal 

benefit in return for an act that 

compromises or could compromise 

national security. 

• Employees involved in the 

Personnel Reliability Program failing to 

safeguard the assets for which they are 

directly responsible and such failure 

results in loss, theft, sabotage, 

unauthorized use, destruction, 

detonation, or damage. 

• Intentionally engaging in activities 

that compromise or could compromise 

the information or financial 

infrastructure, including major 

procurement fraud, of the Department of 

Defense, when the employee knew or 

reasonably should have known of the 

compromise or potential compromise. 

There is no question that employees 

must be made aware of the final list of 

MROs approved by the Secretary. Both 

the Secretary and the Director believe 

that this is a basic issue of fairness and 

a tenet of an organizational culture that 

establishes clear accountability. That is 

why the proposed regulations provided 

that MROs will be identified to 

employees in advance, as part of 

implementing issuances, and made 

known to all employees upon 

identification. During the meet-andconfer process, participating labor 

organizations were especially concerned 

about this issue. We agree that these 

offenses should not be a surprise to 

anyone, and have retained these 

provisions in the final regulations but 

have also added a requirement that they 

be publicized via notice in the Federal 

Register. The Secretary also intends to 

consult with the Department of Justice 

in preparing the list of offenses for 

publication. 

With these changes, the final 

regulations provide for the 

independence demanded by 

commenters while assuring DoD’s 

ability to remove employees who engage 

in offenses that have direct and 

substantial impact on the Department’s 

national security mission. The Secretary 

is accountable to the President and the 

American people for safeguarding 

national security. No other agency or 

department bears this burden. These 

regulations ensure that the Secretary’s 

authority aligns with that responsibility. 

66128 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

e. Labor Relations 

Without exception, employee 

representatives objected to the proposed 

labor relations regulations, both in their 

comments and during the meet-andconfer process. Employee 

representatives argued that Congress 

expressly specified only two 

modifications to chapter 71—bargaining 

above the level of recognition and 

independent third party review of 

decisions. We disagree. In enacting 

chapter 99, Congress expressly 

recognized the need for the Department 

to design a labor relations system that 

both addresses the unique role that the 

Department’s civilian workforce plays 

in supporting the Department’s national 

security mission and allows for a 

collaborative issue-based approach to 

labor management relations. 

Moreover, Congress specifically 

authorized the Secretary, together with 

the Director, to establish and adjust this 

labor relations system in support of the 

overall HR management system 

notwithstanding the provisions of the 

current system as set forth in chapter 71. 

Thus, the Secretary and the Director 

have modified chapter 71 ‘‘to address 

the unique role that the Department’s 

civilian workforce plays in supporting 

the Department’s national security 

mission.’’ (5 U.S.C. 9902(m)) In taking 

the steps necessary to establish and 

adjust this labor relations system, 

Congress further recognized that the 

provisions of this system will supersede 

existing collective bargaining 

agreements covering Department 

employees and negotiated pursuant to 

the provisions of chapter 71. Finally, 

Congress indicated that the authority of 

the Secretary and Director to devise and 

adjust the Department’s labor relations 

system would expire in 2009 absent 

further action by Congress (5 U.S.C. 

9902(d)(2) and 5 U.S.C. 9902(m)(1), (2), 

(8), and (9)). 

f. Management Rights/Scope and Duty 

To Bargain 

The ability to act quickly is central to 

the Department’s national security 

mission—not just during emergencies 

but, more importantly, in order to 

prepare for or prevent emergencies. The 

ability to act quickly is necessary even 

in meeting day-to-day operational 

demands. The Department must be able 

to assign employees and to introduce 

the latest security technologies without 

delay. This principle was crucial in the 

formulation of the enabling legislation 

and in the congressional debate that 

followed its introduction. Congress 

clearly recognized the Department’s 

need to operate under a new labor 

relations system that would provide the 

flexibility necessary to respond to a 

variety of vital operational challenges 

and carry out its national security 

mission. 

To achieve this objective, the 

proposed regulations revised, among 

other things, the management rights and 

duty to bargain provisions found in 5 

U.S.C. chapter 71. We expanded the list 

of management rights that are excluded 

from bargaining, including the numbers, 

types, and grades of employees or 

positions assigned to any organizational 

subdivision, work project, or tour of 

duty; and the technology, methods, and 

means of performing work—rights that 

deal directly with the Department’s 

national security operations. In 

addition, we excluded from bargaining 

the procedures that the Department 

would follow in exercising these 

expanded operational management 

rights. We also proposed to allow the 

Department to take action in any of 

these areas without advance notice to 

labor organizations and without preimplementation bargaining. 

Without exception, labor 

organizations objected to the proposed 

regulations, both in their comments and 

during the meet-and-confer process, 

arguing that altering the scope of 

bargaining in any way is contrary to the 

enabling legislation. They also claimed 

that these changes were unnecessary 

because current law already provided 

the Department with sufficient 

flexibility to deal with emergencies. 

They also took strong exception to the 

provisions in the proposed regulations 

that would allow issuances to supersede 

conflicting provisions of any collective 

bargaining agreements and limit 

bargaining to only those matters that are 

not inconsistent with the issuances. 

Labor organizations did acknowledge 

the Department’s need to take certain 

actions without pre-implementation 

bargaining, and during the meet-andconfer process they proposed a process 

for accelerated bargaining within 

established time limits and the use of 

binding arbitration to resolve all 

bargaining disputes. Additionally, they 

suggested that the term ‘‘emergency’’ be 

interpreted as including ‘‘exigencies 

requiring action reasonably necessary to 

carry out the Department’s national 

security mission before collective 

bargaining concerning the action can be 

completed,’’ and that in such exigencies 

the Department will afford the 

opportunity to bargain when 

circumstances reasonably allow. Their 

proposals would have allowed the 

Department to temporarily suspend 

provisions of collective bargaining 

agreements in situations where there is 

a direct connection between the 

exigency and the Department’s national 

security mission. Even under such 

mission critical and exigent conditions, 

they insisted that post implementation 

agreements would have prospective 

effect only if the emergency was 

unforeseen. If the national security 

exigency were foreseen, then any 

remedy for Department action that was 

contrary to a contractual provision 

would have retroactive effect unless the 

retroactive effect would ‘‘unduly disrupt 

Department operations reasonably 

necessary to carry out the Department’s 

national security mission.’’

We recognize the good faith effort 

made by these labor organizations to 

meet the Department’s operational 

needs. However, their proposals were 

lacking in several respects. We have, 

therefore, retained the management 

rights/scope of bargaining provisions in 

the proposed regulations with some 

modifications. 

With respect to procedures, the 

proposals offered by the labor 

organizations do not go far enough. 

They would still require the Department 

to bargain, before acting, over the 

procedures it would follow in exercising 

its management rights, including those 

that deal directly with its operations. 

Once negotiated, those procedures can 

and do place significant constraints on 

critical actions such as the assignment 

of work, the deployment of personnel, 

and the staffing of tours of duty. These 

procedures are negotiable under 5 

U.S.C. chapter 71. Labor organizations 

would have the Department continue 

that obligation, but under time limits 

and with an expanded interpretation of 

the chapter 71 provisions regarding 

emergencies that would allow 

management to bargain post 

implementation in certain limited 

circumstances. 

However, in today’s operational 

environment, the exception has become 

the rule. Department managers, 

supervisors, and employees are critical 

to the Department’s mission to defend 

our national security. The Department 

must be able to rely on the judgment 

and ability of managers and supervisors 

to make day-to-day decisions—even if 

this means deviating from established or 

negotiated procedures. Moreover, the 

Department’s managers and supervisors 

must be able to make split-second 

decisions to deal with operational 

realities free of procedural constraints. 

With respect to post-implementation 

bargaining, the proposals offered by 

labor organizations are similarly 

lacking. Although they would allow 

management to implement without 

bargaining in advance when faced with 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66129 

an emergency, they would still require 

immediate post-implementation 

negotiations and third-party impasse 

resolution over such matters. However, 

the reality of DoD’s operational 

environment today is that change is 

constant, and as a consequence, so too 

would be post-implementation 

bargaining, with the prospect of 

prolonged third-party impasse 

resolution. These negotiations would be 

required even in cases where the change 

was short-lived and/or where its impact 

was insignificant, insubstantial, or 

transient. The demand on DoD’s 

frontline managers, supervisors and 

employees to engage in constant postimplementation negotiations would 

divert them from accomplishing the 

mission. This is unacceptable and 

inconsistent with the authority Congress 

granted to the Department in the 

enabling legislation. 

Further, under 5 U.S.C. chapter 71, 

interpretations of negotiated appropriate 

arrangements tend to assume that those 

agreements have anticipated future 

changes, but today’s operational 

environment belies that assumption. 

Changes necessitated by operational 

demands are recurring and variable. Our 

frontline managers and supervisors 

must not be bound by agreements 

presupposing circumstances that are 

assumed to be constant, when they must 

face current and future exigencies. 

Nevertheless, in recognition of the 

concerns articulated by commenters 

during the public comment period and 

during the meet-and-confer process by 

participating labor organizations and as 

a result of the June 16, 2005, meeting of 

the United DoD Workers Coalition, 

DoD’s NSPS Senior Executive, and 

OPM’s Acting Director, the Secretary 

and the Director decided that the 

proposed regulations would be revised 

in a number of ways. 

First, we have modified the definition 

of ‘‘issuances’’ to make clear the 

distinction between an ‘‘implementing 

issuance’’ and an ‘‘issuance’’. An 

‘‘implementing issuance’’ is a document 

issued to carry out a policy or procedure 

implementing NSPS (but does not 

include internal operating guides, 

manuals, or handbooks that do not 

change employees’ conditions of 

employment), while an ‘‘issuance’’ is a 

document to carry out a non-NSPS 

policy or procedure of the Department. 

We have also clarified that while an 

implementing issuance immediately 

supersedes those provisions of 

collective bargaining agreements that 

are inconsistent with the implementing 

issuance, an issuance does not 

supersede a conflicting provision of a 

collective bargaining agreement during 

the term of that agreement. This ensures 

the viability of the collective bargaining 

process under NSPS. When a provision 

of a collective bargaining agreement 

conflicts with an issuance, the collective 

bargaining provision remains in effect 

until the expiration or renegotiation of 

the agreement, at which time the parties 

will have to bring the conflicting 

provision into conformance with the 

issuance. This is comparable to the 

process that has long been followed 

regarding Governmentwide regulations. 

Specifically, issuances will be subject to 

national consultation with those labor 

organizations holding national 

consultation rights. Moreover, following 

consideration of comments and 

recommendations received through the 

national consultation process, issuances 

are subject to collective bargaining to 

the extent proposals are not inconsistent 

with the issuance and are otherwise 

negotiable under § 9901.910 and 

§ 9901.917. 

More importantly, and in response to 

concerns that managers may issue 

implementing issuances and issuances 

for the sole purpose of invalidating 

particular provisions of a collective 

bargaining agreement that they do not 

like, we have also modified the 

regulations to specify that implementing 

issuances, that is, those that implement 

NSPS and supersede conflicting 

provisions of existing collective 

bargaining agreements, may only be 

issued by the Secretary, Deputy 

Secretary, Principal Staff Assistants, or 

Secretaries of the Military Departments. 

We have limited ‘‘Principal Staff 

Assistants’’ to senior officials in the 

Office of the Secretary of Defense who 

report directly to the Secretary and 

Deputy Secretary of Defense. We also 

have added a new subparagraph, 

§ 9901.905(c) to make clear that any 

provision of a collective bargaining 

agreement that is inconsistent with 

issuances that do not implement NSPS 

will remain in effect until the 

expiration, renewal, or extension of the 

agreement, whichever occurs first. 

Finally, we have modified the 

regulations to permit bargaining, in the 

sole, exclusive, unreviewable discretion 

of the Secretary, over the procedures 

that would be followed in exercising the 

expanded operational management 

rights. We have also modified the 

regulations to permit bargaining, at the 

election of the Secretary, over 

appropriate arrangements on the routine 

matters related to the expanded 

operational management rights. The 

Secretary may authorize such bargaining 

to advance the Department’s mission 

accomplishment or promote 

organizational effectiveness. Mid-term 

agreements on appropriate arrangements 

and procedures for (a)(1) and (a)(2) 

management rights are not precedential 

or binding on subsequent acts, or 

retroactively applied, except at the 

Secretary’s sole, exclusive, and 

unreviewable discretion. Procedures 

and appropriate arrangements in term 

agreements are binding, except that 

nothing will delay or prevent the 

Secretary from exercising his or her 

authority under subpart I. For example, 

the Secretary may authorize deviation 

from such agreements when it is 

necessary to carry out the Department’s 

mission. This authority builds on the 

authority that exists today when an 

emergency occurs, as that term is 

applied under chapter 71, to address the 

unique nature of the Department’s 

mission and the operational demands it 

must face. 

Taken together, we believe these 

revisions meet the Department’s mission 

needs, are consistent with the enabling 

legislation’s intent to preserve collective 

bargaining rights as provided for in 5 

U.S.C. chapter 99, and assure employees 

that issuances will not be issued for the 

improper purpose of eliminating local 

bargaining. While commenters have 

argued that any alteration of the scope 

of bargaining violates the enabling 

legislation, this interpretation is 

inconsistent with the express authority 

Congress has given the Secretary and 

the Director to establish and from time 

to time adjust the labor relations system 

for the Department to address the 

unique role that the Department’s 

civilian workforce plays in supporting 

the Department’s national security 

mission. These regulations fulfill that 

statutory requirement while providing 

employees with the rights envisioned by 

Congress. 

g. Independence of the National 

Security Labor Relations Board 

The National Security Labor Relations 

Board (NSLRB) described in the NSPS 

regulations is intended to act as one 

element of independent third-party 

review of collective bargaining disputes 

as provided for in 5 U.S.C. 9902(m)(6). 

Commenters, including labor 

organizations participating in the meetand-confer process, objected to the 

creation of the NSLRB because they 

believe that an internal DoD review 

board would not be independent from 

management influence, unlike the 

Federal Labor Relations Authority 

(FLRA). Commenters suggested that any 

board whose membership would be 

appointed and removed by the Secretary 

could not reasonably be expected to 

remain impartial. They also suggested 

that the primary reason for taking 

66130 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

jurisdiction of these matters away from 

the independent and impartial FLRA is 

to guarantee that DoD management can 

influence the NSLRB’s decisions, giving 

them an unfair advantage over employee 

representatives. 

We have decided to retain the NSLRB. 

Employing the NSLRB to adjudicate 

labor disputes in place of the FLRA 

ensures timely and efficient case 

management by a body cognizant of the 

important and unique nature of the 

Department’s mission. We believe that 

the final regulations have adequately 

balanced the Department’s interest in 

timeliness and mission recognition with 

employees’ desire to have an impartial 

dispute adjudicator. The regulations 

establish NSLRB membership criteria 

that require candidates to exhibit 

integrity and impartiality in addition to 

extensive knowledge of labor laws, 

DoD’s mission, or both. Although the 

Secretary has authority to remove 

NSLRB members before the expiration 

of their terms, that authority is limited 

to removal for inefficiency, neglect of 

duty or malfeasance in office, which is 

a standard similar to that for removing 

members of the FLRA. In addition, since 

the standard is established in these 

jointly prescribed regulations, it may 

not be changed unilaterally by the 

Secretary. Finally, we stress that the 

NSLRB decisions are subject to review 

by the FLRA, which acts as another 

element of independent third-party 

review. The FLRA decisions, including 

those reviewing decisions of the NSLRB, 

remain subject to judicial review as they 

are under chapter 71. These regulations 

establish that the NSLRB will operate 

independent of the chain of supervision 

as does any agency administrative judge 

or administrative review board whose 

decisions can be appealed to a higher 

authority. 

Multiple commenters, including labor 

organizations participating in the meetand-confer process, recommended that 

the labor organizations be given the 

opportunity to participate in the NSLRB 

nomination process. We agree and have 

included in the final regulations an 

explicit requirement that the Secretary 

consider labor organization 

nominations. Whereas the proposed 

regulations did not provide a role for 

labor organizations in the nomination 

process, the final regulations provide 

that the Secretary will consider labor 

organization nominations in selecting 

the two non-chair members of the 

NSLRB. This assures labor organizations 

a voice in the NSLRB selection process. 

While we have not adopted all 

suggestions related to the NSLRB, we 

believe the final regulations ensure that 

NSLRB members will discharge their 

duties in a fair and impartial manner by 

(1) including employee representatives 

in the process for selecting such 

members; (2) requiring that individuals 

appointed as members have integrity, 

impartiality, and subject matter 

expertise; (3) limiting the grounds on 

which the Secretary can remove NSLRB 

members; and (4) providing for FLRA 

review of NSLRB decisions and, as 

prescribed in chapter 71, judicial review 

of FLRA decisions. 

Response to Specific Comments and 

Detailed Explanation of Regulations 

Subpart A—General Provisions 

Section 9901.101—Purpose 

Section 9901.101 explains the overall 

purpose of the regulations in 5 CFR part 

9901, which is to implement a new 

human resources management system 

and a new labor relations system, as 

authorized by 5 U.S.C. 9902. The 

section states various guiding principles 

and key operational characteristics and 

requirements. We have added a 

reference in § 9901.101(a) to the labor 

relations system, which is established 

under 5 U.S.C. 9902(m), since this is a 

separate and distinct authority. (See 

additional discussion regarding this 

distinction in the analysis of comments 

regarding § 9901.102.) 

Commenters questioned the authority 

to waive or modify statutes through 

these regulations. We are modifying 

§ 9901.101(a) to clarify that 5 U.S.C. 

9902 provides authority for these 

regulations to waive or modify certain 

statutory provisions. 

A commenter recommended that the 

regulations restate the statutory merit 

principles instead of just referencing 

them as a guiding principle. We do not 

believe such a restatement is necessary; 

however, we have added a statutory 

citation—5 U.S.C. 2301—in 

§ 9901.101(b)(1). 

Commenters expressed concern 

regarding the key operational 

characteristic ‘‘Agile and Responsive 

Workforce and Management,’’ which 

was further described as ‘‘workforce can 

be easily sized, shaped, and deployed to 

meet changing mission requirements.’’

In particular, some objected to viewing 

civilian employees as deployable in the 

same manner as military personnel. 

While DoD has always had and will 

continue to have the right to assign 

employees to serve in geographic 

locations based on mission 

requirements, the word ‘‘deploy’’ in this 

section is being used in a broader 

context and was intended to encompass 

the strategic organization of work based 

on employee skills and competencies 

and mission needs. In particular, we 

believe the authority in subpart B to 

classify work into broader career groups 

supports this objective. 

Section 9901.102—Eligibility and 

Coverage 

Section 9901.102 sets forth general 

rules regarding employee eligibility and 

coverage under the various subparts of 

part 9901. Categories of eligible 

employees become covered only when 

the Secretary affirmatively approves 

coverage as of a specific effective date. 

Commenters indicated that the 

Secretary’s discretionary authority in 

coverage matters is too broad. We 

believe it is essential that the Secretary 

be given such discretion. The authority 

to establish systems would be 

meaningless unless there is 

corresponding authority to place eligible 

employees under the system. The 

Secretary needs flexibility to phase in 

coverage in an orderly way, while 

retaining authority to change effective 

dates as needed, based on changing 

conditions or mission requirements. 

Commenters stated that the authority 

in § 9901.102(b)(1) to establish an 

immediate effective date for subpart I 

(dealing with labor relations) conflicts 

with 5 U.S.C. 9902(l). Section 9902(l) 

provides that the Secretary may apply 

the ‘‘National Security Personnel 

System’’ only if (1) the affected 

organizational or functional unit has no 

more than 300,000 employees or (2) the 

Secretary determines ‘‘in accordance 

with subsection (a)’’ that the 

Department has in place a performance 

management system that meets the 

criteria in 5 U.S.C. 9902(b). The term 

‘‘National Security Personnel System’’ is 

defined in 5 U.S.C. 9902(a) to be the 

‘‘human resources management 

system,’’ which is established under the 

authority of subsection (a). Section 

9902(b) provides requirements for a 

system established ‘‘under subsection 

(a).’’ Under 5 U.S.C. 9902(b)(3)(D) and 

(d), the human resources management 

system established under subsection (a) 

does not reach to the labor relations 

system established under 5 U.S.C. 

chapter 71. Instead, 5 U.S.C. 9902(m) 

provides a totally separate authority to 

establish and adjust a ‘‘labor relations 

system.’’ We believe it is clear that the 

limitations in 5 U.S.C. 9902(l) apply 

only to the human resources 

management system established under 5 

U.S.C. 9902(a). 

Commenters raised questions about 

the coverage of employees in certain 

DoD laboratories who are covered by a 

demonstration project or an alternative 

system. Section 9902(c) of title 5, U.S. 

Code, states that the National Security 

Personnel System will not apply to 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66131 

defense laboratories in organizations 

listed in Section 9902(c)(2) before 

October 1, 2008, and will apply after 

that date only if the Secretary 

determines that greater flexibilities are 

available. Consistent with the 

explanation in the preceding paragraph, 

the reference to the ‘‘National Security 

Personnel System’’ in 5 U.S.C. 9902(c) 

refers to the human resources 

management system which is defined as 

the National Security Personnel System 

in Section 9902(a). Thus, the restrictions 

in 5 U.S.C. 9902(c) do not apply to the 

coverage of these laboratory employees 

under the labor relations system 

established under 5 U.S.C. 9902(m), and 

these employees may be covered by 

subpart I (dealing with labor relations) 

before October 1, 2008. 

Commenters objected to the possible 

coverage of certain civilian mariners 

who are currently covered by a pay 

system established under 5 U.S.C. 5348 

and are also covered by 5 U.S.C. chapter 

71. These employees will be covered by 

subpart I (dealing with labor relations). 

However, the Secretary has determined 

that they will not be covered by the 

human resources system, including the 

adverse actions and appeals provisions. 

Other commenters asked about certain 

Army Corps of Engineers employees 

under Public Law 97–257. U.S. Army 

Corps of Engineers employees paid from 

Corps of Engineers Special Power Rate 

Schedules will be covered by subpart I 

(dealing with labor relations). The 

Secretary has determined that they will 

not be covered by the human resources 

system, including the adverse actions 

and appeals provisions. 

Commenters asked whether a category 

of employees could be covered by some, 

but not all, provisions of subparts B 

through H. In particular, commenters 

noted that National Guard Technicians 

were eligible for coverage but were 

subject to certain provisions outside 

title 5—e.g., qualification requirements 

established under title 32, instead of 

qualification standards established 

under 5 U.S.C. chapter 51. Since 5 

U.S.C. 9902 does not provide authority 

to modify or waive statutory provisions 

outside of certain specified chapters in 

title 5, any such provisions would 

continue in effect. The Secretary may 

extend coverage to eligible employees 

under subparts B through H to the 

extent those provisions are not in 

conflict with other statutory 

requirements. 

Commenters proposed that certain 

occupations be excluded from 

coverage—e.g., attorneys or law 

enforcement officers—because of the 

nature of their work. We disagree. We 

believe the flexible systems we are 

authorizing can be applied successfully 

to all occupational categories. 

Commenters raised questions 

regarding the purpose of § 9901.102(f). 

Paragraph (f) is intended to allow the 

Secretary to extend NSPS coverage to 

employees who are currently covered by 

systems established administratively 

under authorities outside of title 5, but 

only when those authorities give DoD 

the discretion to cover those employees 

under administratively determined 

systems or to leave them in the title 5 

systems that would otherwise apply. For 

example, if DoD has discretionary 

statutory authority to cover a category of 

employees under an administratively 

determined classification and pay 

system instead of the General Schedule, 

such employees remain potentially 

eligible for General Schedule coverage 

and accordingly would also be eligible 

for NSPS coverage. Commenters 

questioned whether paragraph (f) could 

be used to cover educators employed by 

the DoD Education Activity in an NSPS 

pay system. Since the pay system for 

those educators employed overseas 

(Department of Defense Dependents 

Schools) is established under 

nondiscretionary statutory provisions in 

title 20, they are not eligible for 

coverage under an NSPS pay system. 

However, the pay system for those 

educators employed in the Continental 

United States (Defense Domestic 

Elementary and Secondary Schools) is 

established under discretionary 

provisions in title 10. Therefore, they 

are eligible for coverage under an NSPS 

pay system. 

Commenters proposed that current 

employees (or at least current 

employees meeting certain age and 

service requirements) be 

‘‘grandfathered’’ and left in existing title 

5 systems instead of being covered by 

NSPS, unless they elect otherwise. This 

proposal is not practicable from an 

administrative viewpoint and is 

contrary to the objectives behind the 

enabling legislation. We believe the 

flexibilities provided under the 

proposed NSPS will yield significant 

benefits to the Government and will also 

benefit employees based on their 

performance. It is therefore not 

acceptable to delay full application of 

NSPS. 

Commenters questioned why 

members of the Senior Executive 

Service (SES) are not covered by 

NSPS—specifically, the classification, 

pay, and performance provisions in 

subparts B through D. In fact, SES 

members are eligible for coverage under 

those NSPS provisions, subject to the 

conditions in § 9901.102(d). (See 

coverage provisions in 

§§ 9901.202(b)(4), 9901.302(b)(4), and 

9901.402(b)(1).) We note that the SES 

pay and performance provisions in title 

5 are already designed to be 

performance-sensitive. Thus, DoD does 

not plan to cover SES members in its 

initial implementation spirals. DoD may 

determine at a later date whether 

coverage under NSPS pay and 

performance provisions is necessary 

given the title 5 authorities that already 

apply to SES members. 

In light of the numerous comments 

regarding the coverage eligibility of 

specific categories of DoD employees 

under the various subparts of these 

regulations, we have prepared the 

following summary chart showing 

various categories of employees that are 

eligible for coverage under the NSPS 

systems. This chart is not intended to be 

comprehensive or authoritative, but 

covers the major categories of 

employees in DoD outside of the 

General Schedule. In the chart, 

categories of employees that are 

identified as eligible for coverage under 

a particular subpart are annotated with 

‘‘Yes,’’ and those that are identified as 

ineligible for coverage are annotated 

with ‘‘No.’’ The chart and its footnotes 

must be read together for full 

information on coverage eligibility. 

Actual coverage is subject to applicable 

law and approval by the Secretary under 

§ 9901.102(b). 

SUMMARY OF NON-GENERAL SCHEDULE COVERAGE ELIGIBILITY UNDER 5 CFR PART 9901 

Category 

Eligible for 

human resources system/ 

appeals process 

(subparts B-H) 

Eligible for labor 

relations system 

(subpart I) 

Air and Army Reserve Technicians ................................................................................................................... Yes ................... Yes. 

Army and Air National Guard technicians (dual status) under 32 U.S.C. 709 ................................................. Yes 1 ................. Yes.2

66132 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

SUMMARY OF NON-GENERAL SCHEDULE COVERAGE ELIGIBILITY UNDER 5 CFR PART 9901—Continued 

Category 

Eligible for 

human resources system/ 

appeals process 

(subparts B-H) 

Eligible for labor 

relations system 

(subpart I) 

Army and Air National Guard technicians (non dual status) under 32 U.S.C. 709 .......................................... Yes 1 ................. Yes.2

Hydropower Corps of Engineers Special Power Rate Schedules (WB pay plan) ............................................ No ..................... Yes. 

Navy Civil Service Mariner (WM pay plan) ....................................................................................................... No ..................... Yes. 

Overseas Teachers (DoDDS) ............................................................................................................................ No ..................... Yes. 

Pentagon Force Protection Agency (title 5 and title 10 employees) ................................................................ Yes 3 ................. Yes. 

Federal Wage System (WA, WD, WG, WJ, WK, WL, WN, WO, WS, WT, WY, XF, XG, XH pay plans) ........ Yes ................... Yes. 

Nonappropriated Fund ....................................................................................................................................... Yes 4 ................. Yes. 

Domestic Teachers (DDESS) ............................................................................................................................ Yes 4 ................. Yes. 

Defense Laboratories in Organizations listed in 5 U.S.C. 9902(c) ................................................................... No 5 ................... Yes. 

Armed Services Board of Contract Appeals ..................................................................................................... No for Board 

members;.

Yes for other 

employees.

No for Board 

members; 

Yes for other 

employees. 

Court of Appeals for the Armed Forces ............................................................................................................ No for Judges 

and attorneys 

in chambers; 

Yes for other 

employees 6.

No for Judges 

and attorneys 

in chambers; 

Yes for other 

employees.6

Consultants and Experts (10 U.S.C. 129b) ....................................................................................................... No ..................... No. 

DARPA, scientists and engineers ..................................................................................................................... No ..................... No. 

DCIPS (including DISES) .................................................................................................................................. No ..................... No. 

Executive Schedule ........................................................................................................................................... No ..................... No. 

Faculty at DoD Educational Institutions: ........................................................................................................... Yes 4 ................. Yes. 

Air University, Air Force Institute of Technology, Army War College/Command & General Staff College, Defense Acquisition University, National Defense University, Defense Language Institute, 

George C. Marshall Center, Asia-Pacific Center for Security Studies, Western Hemisphere Institute for 

Security Cooperation, U.S. Naval Postgraduate School, Naval War College/U.S. Marine Corps University, USAF Academy, U.S. Naval Academy, U.S. Military Academy.

Faculty and staff at USUHS .............................................................................................................................. No ..................... No. 

Foreign Nationals (Direct Hire) .......................................................................................................................... No ..................... No. 

Schedule C ........................................................................................................................................................ Yes ................... No. 

SES .................................................................................................................................................................... Yes ................... No. 

Senior Level (SL/ST) ......................................................................................................................................... Yes ................... Yes. 

DoD Office of the Inspector General ................................................................................................................. Yes, unless appointed under 

authority of 

the Inspector 

General Act of 

1978 (5 

U.S.C. App. 

§ 6)7.

No. 

1Subject to limitations pursuant to 32 U.S.C. 709. 

2But excluded from national level bargaining under 5 U.S.C. 9902(g). 

3Title 10 employees under title 10 discretionary authority and subject to 10 U.S.C. 2674. 

4 Under title 10 discretionary authority. 

5 Until 2008, excluded from HR system and appeals process pursuant to 5 U.S.C. 9902(c). 

6Pursuant to 10 U.S.C. chapter 47, subchapter XII. 

7 Currently there are no appointees under that authority. 

Section 9901.103—Definitions 

Section 9901.103 provides definitions 

of terms used in more than one subpart. 

Commenters expressed concerns about 

some definitions. 

Commenters requested greater clarity 

with respect to the use of 

‘‘implementing issuances.’’

Accordingly, we are revising the 

definition of ‘‘implementing issuances’’

to make clear that such documents can 

be issued by only certain high-level DoD 

officials (despite the Secretary’s broad 

delegation authority), including those 

formally designated as acting in those 

high-level positions. We have also 

clarified that implementing issuances 

do not include internal operating 

guides, handbooks, or manuals that do 

not change conditions of employment. 

This is consistent with current practice. 

We have also added a definition of 

‘‘Military Department.’’

To address general comments 

regarding the need for greater specificity 

where possible, we have added 

definitions of the terms ‘‘initial 

probationary period’’ and ‘‘in-service 

probationary period.’’ These terms are 

used in subpart E (Staffing and 

Employment) and subpart F (Workforce 

Shaping). In addition, we clarified the 

definition of ‘‘NSPS’’ to more closely 

track the language in the statute. 

‘‘NSPS’’ means the human resources 

management system established under 5 

U.S.C. 9902(a). It does not include the 

labor relations system established under 

5 U.S.C. 9902(m). We do, however, use 

‘‘NSPS’’ in the supplementary 

information and in public statements as 

a shorthand reference to describe both 

the HR and the labor relations systems. 

We also note that chapter 99 is entitled 

the National Security Personnel System. 

Commenters expressed concern about 

the definition of ‘‘performance.’’ In 

particular, commenters objected to the 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66133 

use of the terms ‘‘behavior,’’

‘‘demeanor,’’ ‘‘attitude,’’ and ‘‘manner of 

performance’’ in defining performance. 

We note that these terms are used in a 

context that makes clear that we are 

dealing with observable behaviors that 

affect the accomplishment of 

assignments, responsibilities, and 

organizational goals. We believe 

performance assessments would not be 

complete without considering 

employees’ behaviors in carrying out 

assigned work. For example, customer 

service is generally a paramount 

organizational objective. Thus, the 

manner in which employees treat 

customers is an important aspect of 

overall performance. Employee 

behaviors can be objectively observed 

and evaluated against established 

performance expectations. Some 

commenters suggested that assessments 

of manner of performance would open 

the door to abuse, cronyism, 

punishment for criticism of 

management, or retaliation against 

whistleblowers. We disagree. Under 

NSPS, employees are still protected 

against prohibited personnel practices 

and will have the same whistleblower 

rights they have always had. We note 

that managers will be held accountable 

for how they manage this process. 

A commenter questioned whether the 

definition of ‘‘promotion’’ allows 

management to add higher-level duties 

without providing pay increases. It 

appears that this comment is primarily 

directed at the new classification 

authority under subpart B that would 

allow DoD to reduce the number of 

grade level distinctions by using bands 

to describe levels of work. Each band 

will encompass a single broad level of 

work that may encompass a range of 

duties previously performed at different 

grade levels. Promotion is movement to 

a higher level of work, i.e., higher band. 

Commenters requested greater clarity 

regarding the term ‘‘unacceptable 

performance.’’ In conjunction with 

related changes made in subpart D 

(Performance Management), we are 

clarifying that an employee’s 

performance may be found to be 

unacceptable based on failure to 

successfully complete work assignments 

or other instructions that amplify 

written performance expectations. 

Section 9901.104—Scope of Authority 

Section 9901.104 identifies the 

provisions in title 5 that are subject to 

waiver or modification under 5 U.S.C. 

9902. 

Commenters objected to any 

modification or waiver of any title 5 

provision. A commenter suggested this 

section would grant legislative power 

reserved for Congress. In fact, this 

section merely implements an authority 

provided by Congress. Under 5 U.S.C. 

9902, DoD and OPM may prescribe 

regulations establishing new human 

resources management and labor 

relations systems notwithstanding 

certain title 5 provisions. In other 

words, Congress has provided that 

systems established by regulation may 

be used in place of certain statutory 

systems. This is not dissimilar to 

numerous cases where Congress has 

excluded an agency from a title 5 

provision and allowed the agency to 

develop its own rules administratively, 

except that, in the case of NSPS, 

Congress has actually established 

additional requirements to guide system 

development in terms of both substance 

and procedure. 

Commenters asserted that this section 

was misleading in that it did not reveal 

that the enabling legislation gave DoD 

authority to waive any part of title 5, 

including provisions dealing with 

retirement, health benefits, life 

insurance, leave, etc. This assertion is 

incorrect. Section 9901.104 identifies 

the limited number of title 5 provisions 

that are subject to waiver or 

modification. DoD and OPM have no 

authority to waive or modify title 5 

provisions, except as provided for in 5 

U.S.C. 9902. (Other laws are affected 

only for the purpose of dealing with 

references to waived or modified 

provisions, as described in § 9901.107). 

Section 9902(b)(5) of title 5, U.S. Code, 

states that a system established under 5 

U.S.C. 9902(a) is ‘‘not limited by any 

specific law or authority under this title 

[i.e., title 5] * * * that is waived in 

regulations prescribed under this 

chapter [i.e., chapter 99], subject to 

paragraph (3).’’ The referenced 

paragraph (3) in 5 U.S.C. 9902(b) 

includes a subparagraph (D) that links to 

5 U.S.C. 9902(d), which in turn specifies 

that most of title 5 is nonwaivable, 

except as provided for in section 9902. 

Commenters questioned the inclusion 

of chapters 33 and 35 in the list of 

waivable or modifiable chapters in 

§ 9901.104, since those chapters include 

veterans’ preference rules. However, 

§ 9901.104(a) states that chapters 33 and 

35 may be waived or modified only as 

authorized by 5 U.S.C. 9902(k). Section 

9902(k) of title 5, U.S. Code, requires the 

Secretary to comply with veterans’

preference requirements. Thus, the 

regulations in subpart E (Staffing and 

Employment) and subpart F (Workforce 

Shaping) that modify parts of chapters 

31 and 33 do not affect veterans’

preference rights and protections. 

A commenter questioned the effect of 

the NSPS regulations on determinations 

under the Fair Labor Standards Act 

(FLSA). OPM’s authority to administer 

the FLSA is found in section 4(f) of the 

Fair Labor Standards Act of 1938, as 

amended. (See also 29 U.S.C. 204(f).) 

Since this authority is outside the 

waivable title 5 chapters, these 

regulations do not affect OPM’s FLSA 

regulations or OPM’s authority to settle 

FLSA claims. 

Section 9901.105—Coordination With 

OPM 

Section 9901.105 identifies the areas 

which trigger a requirement to 

coordinate DoD implementing issuances 

and certain other actions with OPM. As 

described in the section, ‘‘coordination’’

entails (1) providing OPM with an 

opportunity to review and comment on 

DoD proposals and to officially concur 

or nonconcur with all or part of the 

proposals, (2) taking OPM’s views into 

account, and (3) advising OPM of the 

final DoD decision, including 

reasonable advance notice of the 

decision’s effective date. 

Commenters expressed concern that 

§ 9901.105 gave DoD too much 

authority. Some recommended that DoD 

should be required to get formal OPM 

approval, rather than just ‘‘coordinate’’

with OPM. A commenter also suggested 

that DoD should be required to 

coordinate with other agencies with 

national security missions so that 

national security employees would have 

a common framework. Under the 

enabling legislation, OPM’s authority is 

to approve jointly developed 

regulations, and OPM has exercised that 

authority in these part 9901 regulations. 

By design, and in keeping with the 

statutory objective of establishing a 

‘‘flexible’’ system, these regulations give 

DoD considerable authority within the 

regulatory framework. At the same time, 

OPM continues to have a role in 

overseeing the civil service system and 

in advising the President on civil 

service matters, including matters 

covered by these regulations. We believe 

a coordination role is sufficient to allow 

OPM to fulfill its responsibilities. In this 

coordination role, OPM will ensure that 

Governmentwide interests and the 

interests of other agencies are 

appropriately considered. 

In these final regulations, we have 

added a coordination requirement with 

respect to the establishment of policies 

and procedures for time-limited 

appointments under § 9901.511(d), 

consistent with our original intent. The 

supplementary information for the 

proposed regulations stated that 

coordination with OPM would occur in 

this area. (See 70 FR 7563.) We have 

added a coordination requirement with 

66134 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

respect to the modification of coverage, 

retention procedures, or appeals rights 

under subpart F (Workforce Shaping). 

This coordination requirement is 

consistent with § 9901.602, which 

provides that, in accordance with 

§ 9901.105, DoD will prescribe 

implementing issuances to carry out the 

provisions of subpart F. Also, we have 

moved the coordination provision 

related to qualification standards from 

§ 9901.105(c) to § 9901.105(e) to address 

concerns raised during the meet-andconfer process that language in the 

proposed regulations did not clearly 

identify OPM’s role in this matter. 

Finally, we have added a requirement 

that the Secretary coordinate with the 

Director regarding the Secretary’s 

determination under 5 U.S.C. 9902(l) 

that the Department has in place a 

performance management system that 

meets the criteria in 5 U.S.C. 9902(b). 

This determination must be made before 

the Department applies the human 

resources management system 

established under 5 U.S.C. 9902(a) to an 

organization or functional unit that 

exceeds 300,000 civilian employees. 

Section 9901.106—Continuing 

Collaboration 

As authorized by 5 U.S.C. 

9902(f)(1)(D) and (m), section 9901.106 

of the regulations establishes a process 

called ‘‘continuing collaboration’’ for 

involving employee representatives in 

the further planning and development 

of the HR and labor relations systems 

after promulgation of the joint DoD/ 

OPM enabling regulations. Under this 

continuing collaboration provision, DoD 

will provide employee representatives 

the opportunity to participate in the 

development of implementing issuances 

that carry out the provisions of part 

9901. 

Section 9901.106 implements 5 U.S.C. 

9902(f)(1)(D), which requires the 

Secretary and the Director to develop a 

method for employee representatives to 

participate in further planning and 

development after promulgation of joint 

DoD/OPM regulations establishing the 

HR system under 5 U.S.C. 9902(a). In 

addition, this section provides for the 

same continuing collaboration with 

respect to application of the labor 

relations system established by joint 

DoD/OPM regulations under 5 U.S.C. 

9902(m). Section 9901.106 does not 

apply to the adjustment of the NSPS 

enabling regulations themselves. Such 

regulatory adjustments must be made 

using the meet-and-confer process 

described in 5 U.S.C. 9902(f)(1)(A)–(C) 

or (m), as applicable. 

During the meet-and-confer process, 

several participating labor organizations 

suggested that adjustments to the HR 

system or labor relations system should 

be subject to the meet-and-confer 

process rather than the continuing 

collaboration process, and others 

suggested that there should be collective 

bargaining over implementing 

issuances. In addition, commenters 

questioned whether continuing 

collaboration on implementing 

issuances met the requirements of 5 

U.S.C. 9902(f)(1)(D), which requires a 

method for employee representatives to 

participate in any further planning or 

development which might become 

necessary. 

As we have already explained, we 

agree that adjustments to the HR system 

regulations or the labor relations system 

regulations would be subject to the 

meet-and-confer process described in 5 

U.S.C. 9902(f)(1)(A–(C) and (m)(3). 

However, we did not adopt the 

suggestion to require that implementing 

issuances be subject to collective 

bargaining or the meet-and-confer 

process. Collective bargaining is 

inappropriate for the development of 

HR system implementing issuances, 

since it is inconsistent with the 

requirements of Section 9902(f)(4). In 

addition, Congress expressly required 

DoD and OPM to develop a separate 

method, apart from the meet-and-confer 

process, for employee representatives to 

participate in the further planning and 

development of the HR system (which 

will be manifested in the implementing 

issuances). The continuing collaboration 

process does meet the requirements of 5 

U.S.C. 9902(f)(1)(D), and we therefore 

have retained this process in the final 

regulations. 

In addition, we have added language 

to clarify that the continuing 

collaboration process in § 9901.106 is 

the exclusive process for employee 

representatives to participate in the 

further planning, development, and 

implementation of the NSPS HR and 

labor relations systems established by 

these enabling regulations. (See 5 U.S.C. 

9902(f)(4) and (m)(1)–(2).) 

We also received comments during 

the meet-and-confer process, as well as 

written comments, suggesting that all 

labor organizations representing 

employees affected by an implementing 

issuance should have the opportunity to 

be represented in the continuing 

collaboration process. Labor 

organizations recommended that we 

eliminate the provision authorizing the 

Secretary to determine the number of 

employee representatives who will 

participate in the continuing 

collaboration process. While, as a 

practical matter, it would be 

administratively inefficient to include 

representatives from more than 1500 

Departmental bargaining units in the 

continuing collaboration process, we do 

agree that bargaining units affected by 

an implementing issuance should be 

represented in the process. Therefore, 

we have retained the provision giving 

the Secretary sole and exclusive 

discretion to determine the number of 

employee representatives that may 

participate in the process, but we have 

modified the final regulations to make 

clear that each national labor 

organization with one or more 

bargaining units affected by an 

implementing issuance will be provided 

the opportunity to participate in the 

process. We believe this will provide for 

an efficient and meaningful continuing 

collaboration process, particularly when 

large numbers of bargaining units are 

affected. 

Commenters, including labor 

organizations participating in the meetand-confer process, suggested that 

employee representatives should be 

involved before a draft implementing 

issuance is proposed. In fact the 

continuing collaboration process 

provides the Secretary flexibility to 

involve affected labor organizations 

whenever appropriate, including at the 

conceptual stage. These commenters 

further suggested that there should be 

some feedback to the labor organizations 

regarding the disposition of any 

recommendations made during the 

continuing collaboration process. We 

agree and have modified the regulations 

to ensure that the Department considers 

the views and recommendations offered 

during the process before taking final 

action. A commenter also expressed 

concern that the Secretary was not 

required to adopt suggestions or 

recommendations, but we believe 5 

U.S.C. 9902 intended the Secretary to 

have the final authority to implement 

the NSPS. In addition, employee 

representatives will receive from the 

Department a written statement of the 

reasons for taking final action regarding 

an implementing issuance. 

Finally, commenters, including labor 

organizations participating in the meetand-confer process, recommended that 

the regulations provide employee 

representatives a reasonable time to 

submit their comments. The complexity 

of issues will vary greatly from 

implementing issuance to implementing 

issuance, which makes it imprudent to 

establish a standard time for 

commenting in the regulations. 

Therefore, we have not adopted this 

recommendation and have retained the 

provision authorizing the Secretary to 

establish these timeframes. 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66135 

Section 9901.107—Relationship to 

Other Provisions 

Section 9901.107 describes the 

relationship of the NSPS regulations to 

other laws and regulations. Commenters 

expressed confusion regarding the 

purpose of this section ‘‘ in particular, 

paragraph (b). For example, a 

commenter suggested that DoD was 

attempting to exempt itself from title 5 

rules on back pay. Paragraph (b) is 

merely addressing situations where 

other laws contain references to 

statutory provisions that are being 

waived and replaced by NSPS 

regulations. In general, our purpose is to 

give those other laws continuing effect 

by deeming the references to waived 

provisions to be references to the NSPS 

regulations replacing those waived 

provisions. Thus, for example, we are 

not eliminating NSPS employees’

entitlement to back pay under 5 U.S.C. 

5596, but are merely giving meaning to 

references in Section 5596 to statutory 

provisions in chapters 71 and 77 that no 

longer apply to NSPS employees. The 

final regulations reflect a technical 

revision in paragraph (b)(3) to make 

clear that all references in section 5596 

to provisions in chapter 71 (dealing 

with labor relations) are considered to 

be references to corresponding 

provisions in subpart I of these 

regulations. Also, in paragraph (b)(2), 

we revised a regulatory citation 

consistent with the rearrangement of 

sections in subpart H. 

Commenters expressed concern 

regarding § 9901.107(a)(2), which (1) 

provides that part 9901 must be 

interpreted in a manner that recognizes 

DoD’s need to accomplish its critical 

national security mission swiftly and 

effectively and (2) accords DoD and 

OPM’s interpretation of the regulations 

great deference. The principle of 

providing deference to the agencies 

responsible for regulating and 

implementing a statute is well 

established. We believe it is entirely 

appropriate that the regulations 

recognize that the need for deference is 

even greater when the agency is 

responsible for defending and protecting 

our country and its citizens against 

external threats. We have clarified that 

deference is to be given to DoD’s and 

OPM’s interpretation of these 

regulations. In paragraph (c), we have 

removed the reference to law 

enforcement officer geographic 

adjustments under section 404 of the 

Federal Employees Pay Comparability 

Act of 1990, since those adjustments are 

no longer payable. 

Finally, in paragraph (d), we have 

removed the reference to 29 CFR part 

1614 as unnecessary because the 

paragraph specifically provides that the 

employment discrimination laws that 

the Equal Employment Opportunity 

Commission (EEOC) enforces under 42 

U.S.C. 2000e et seq., 29 U.S.C. 621 et 

seq., 29 U.S.C. 791 et seq., and 29 U.S.C. 

206(d) are not waived, modified, or 

otherwise affected by these regulations. 

This is consistent with the enabling 

statute and our commitment to full and 

vigorous enforcement of Federal sector 

nondiscrimination laws. This means 

that employees and applicants for 

employment will have the right to file 

EEO complaints under those provisions 

of law as they do today and that EEOC’s 

jurisdiction over those complaints 

remains unchanged. 

Section 9901.108—Program Evaluation 

Section 9901.108 requires that DoD 

establish procedures for evaluating the 

NSPS regulations and their 

implementation. 

Commenters recommended that other 

organizations, such as OPM, be involved 

in program evaluation. They consider it 

important that program evaluations be 

conducted by independent, unbiased 

organizations. This regulation is meant 

to place a self-evaluation requirement 

on DoD, not to address third-party 

evaluations of NSPS. We believe it is a 

matter of good management that any 

agency implementing new human 

resources management and labor 

relations systems have responsibility for 

evaluating those systems so that 

problems can be corrected and 

improvements made. Under law and 

Executive order, OPM has general 

oversight responsibilities with respect to 

agency administration of human 

resources management programs. Of 

course, OPM has a particular interest 

and accountability with respect to 

NSPS, since Congress authorized OPM 

and DoD to jointly prescribe the NSPS 

regulations. OPM expects to review the 

results of DoD evaluations of NSPS and 

may conduct evaluations of its own. 

Nothing in these regulations prevents 

evaluations of NSPS by other 

appropriate organizations, such as the 

Merit Systems Protection Board or the 

Government Accountability Office. 

A commenter suggested that DoD 

establish an ongoing mechanism 

whereby employees can submit 

observations and recommendations for 

improving NSPS (including anonymous 

submissions). The commenter observed 

that this was especially important when 

employees (including supervisors) are 

not part of a bargaining unit. We do not 

believe it is necessary to establish a 

special, ongoing mechanism for such 

input within this regulation. When 

appropriate for the subject, NSPS 

evaluation methods established under 

§ 9901.108 will elicit workforce 

observations and recommendations; and 

employees also may use normal 

Departmental processes to comment on 

the human resources system. In 

addition, we note that the term 

‘‘employee representative’’ as used in 5 

U.S.C. 9902 is not limited to 

representatives of labor organizations. 

DoD may request views and comments 

from representatives of other employee 

groups, such as a managers’ association. 

Commenters requested greater detail 

on the nature of DoD evaluations, such 

as evaluation criteria, benchmarks, 

parameters, and timeframes. 

Commenters also stated that the 

program evaluation process in the 

proposed regulation is too vague with 

respect to the participation of employee 

representatives and recommended that 

we incorporate more specific 

provisions, such as providing 

information to employee organizations, 

timeframes for review, and procedures 

for employee organizations to collect 

information directly from employees. 

Section 9901.101 of these regulations 

already identifies ‘‘key operational 

characteristics and requirements,’’

which are essentially high-level 

evaluation criteria. DoD will provide 

additional detail as it develops its 

evaluation program. The timing, nature 

and complexity of NSPS program 

evaluations will vary greatly and will be 

affected by the spiral rollout strategy for 

the human resources system. We 

consider it to be imprudent to set 

standard timeframes. We believe this is 

an area where flexibility is essential so 

that DoD can adjust the evaluation 

program based on experience. 

Accordingly, we have not adopted the 

recommendations made by commenters 

for greater specificity. 

Subpart B—Classification 

General Comments 

Commenters were concerned about 

the lack of specificity about the 

structure of the NSPS classification 

system and commented on this issue 

with regard to each section of this 

subpart. A number of commenters felt 

the proposed regulations were too vague 

and did not provide enough details 

about how the career groups and bands 

will be established, which occupations 

will be in each career group, and which 

positions will be in each band. 

Commenters recommended a number of 

amendments to subpart B to provide 

more detailed criteria. 

Commenters expressed a strong desire 

that this subpart of the regulations be 

66136 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

more specific and that employees and 

employee representatives be involved in 

the design of the NSPS classification 

system. Responding to the lack of detail 

in the regulations, labor organizations 

recommended that the bar on collective 

bargaining of the NSPS classification 

system under § 9901.903 of the 

proposed regulations be removed. 

Commenters also requested that 

implementing issuances for this subpart 

be subject to public review and 

comment. We have not removed the bar 

on collective bargaining. While the 

detailed implementing issuances for this 

subpart will not be subject to public 

review and comment, they will be 

established under the ‘‘continuing 

collaboration’’ provisions in § 9901.106. 

Under continuing collaboration, the 

exclusive process for employee 

representative involvement (5 U.S.C. 

9902(f)(4)), employee representatives 

will have the opportunity to review and 

comment on draft implementing 

issuances. Furthermore, we have added 

a new section at § 9901.205, which 

further clarifies that classification 

matters are not subject to collective 

bargaining. This is consistent with the 

statutory mandate that the scope of 

bargaining not be expanded under NSPS 

(5 U.S.C. 9902(m)(7)). 

We understand the desire for the 

regulations to provide more specificity 

about how the NSPS classification 

system will operate. However, the 

regulations must provide sufficient 

flexibility for a classification system 

with career groups and bands that 

support the market-based features of the 

NSPS pay system and can be 

customized to meet DoD’s mission 

requirements and strategic human 

capital needs both today and in the 

future. Except as otherwise explained in 

this section of the SUPPLEMENTARY

INFORMATION, we have not modified 

subpart B of the regulations in response 

to these comments. The regulations 

provide for implementing issuances that 

will provide further details, including 

the criteria for the career groups and 

definitions of the bands. DoD will 

consider the suggestions and 

recommendations made by commenters 

as it develops these implementing 

issuances. 

Commenters recommended that DoD 

issue classification standards to ensure 

consistent application of the NSPS 

classification system. DoD will establish 

standardized classification procedures 

and criteria in the implementing 

issuances required by this subpart. 

Other Comments on Specific Sections of 

Subpart B 

Section 9901.201—Purpose 

Section 9901.201 explains the 

purpose of subpart B, which establishes 

a classification structure and rules for 

covered DoD positions and employees. 

The lack of details in this subpart of the 

proposed regulations caused some 

commenters to question whether the 

proposed classification system would 

provide for ‘‘equal pay for equal work.’’

The merit system principle at 5 U.S.C. 

2301(b)(3) ensures that ‘‘Equal pay 

should be provided for work of equal 

value, with appropriate consideration of 

both national and local rates paid by 

employers in the private sector, and 

appropriate incentives and recognition 

should be provided for excellence in 

performance.’’ The NSPS classification 

system established by these regulations 

will provide for a classification 

structure with consistently defined 

work levels, while the performance 

management and compensation systems 

will establish the value of that work, as 

required under this principle. 

Section 9901.202—Coverage 

Section 9901.202 identifies the 

employees and positions eligible for 

coverage under this subpart, including 

those otherwise covered by the General 

Schedule and prevailing rate systems, 

employees in SL and ST positions, and 

members of the SES, subject to 

§ 9901.102(d). This section also 

provides the authority for the Secretary 

to designate additional employees and 

positions for coverage. Commenters 

requested clarification of coverage for 

students and for laboratories. Students 

in positions otherwise classified to the 

General Schedule or other covered 

classifications systems will be covered 

under the NSPS classification system. 

Section 9902(c) of title 5, U.S. Code, 

specifies that coverage will not occur 

before October 1, 2008, for the defense 

laboratories in the following 

organizations: Aviation and Missile 

Research Development and Engineering 

Center, Army Research Laboratory, 

Medical Research and Materiel 

Command, Engineer Research and 

Development Command, 

Communications-Electronics Command, 

Soldier and Biological Chemical 

Command, Naval Sea Systems 

Command Centers, Naval Research 

Laboratory, Office of Naval Research, 

and Air Force Research Laboratory. 

Section 9902(c)(1) of title 5, U.S. Code, 

provides that on or after October 1, 

2008, these laboratories will be covered 

to the extent the Secretary determines 

the flexibilities provided by NSPS are 

greater than the flexibilities they 

currently have under demonstration 

authority. 

Commenters recommended excluding 

Civilian Mariner, Emergency Essential 

Civilians, and dual status military 

technicians from coverage under this 

subpart. We have not changed coverage 

under this subpart based on these 

comments. The classification system is 

an integral part of NSPS and provides 

the flexibility needed as the foundation 

for the performance management and 

pay components of the system. 

Section 9901.203—Waivers 

Section 9901.203 of the regulations 

specifies the provisions of title 5, U.S. 

Code, that are waived for employees 

covered by the NSPS classification 

system established under subpart B. As 

specified in § 9901.203(a) the waivers 

apply when a category of DoD 

employees is covered by a classification 

system established under this subpart, 

except with respect to OPM’s authority 

under 5 U.S.C. 5112(b) and 5346(c) to 

act on requests for review of 

classification decisions, under 

§ 9901.107 and § 9901.222(d). Section 

9901.203(b) states that the classification 

of positions above GS–15 is not waived 

for certain purposes. 

A commenter requested clarification 

of whether this section waives 5 U.S.C. 

6303(f) regarding the annual leave 

accrual for members of the SES and 

employees in SL and ST positions. As 

specified in § 9901.203(b), this is one of 

the enumerated provisions that may not 

be waived. 

Section 9901.204—Definitions 

This subpart defines the key 

components and terms used in the 

NSPS classification system. A 

commenter suggested revising the 

definition of ‘‘classification’’ to remove 

the phrase ‘‘job evaluation,’’ to 

eliminate potential confusion with 

‘‘performance evaluation.’’ We did not 

make this change. The phrase is not 

used to define classification, but rather 

is included to explain that the terms 

may be used interchangeably. 

Section 9901.211—Career Groups 

Section 9901.211 provides DoD the 

authority to establish career groups. 

DoD’s implementing issuances will 

provide the criteria and rationale for 

grouping occupations or positions into 

career groups. 

One commenter noted that this 

section does not mention OPM’s role in 

establishing the career groups. Under 

§ 9901.105(c)(1), DoD is required to 

coordinate with OPM before 

establishing career groups. 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66137 

Commenters expressed a need for 

consistent career groups across DoD. We 

did not make a change in the regulations 

based on this comment; however, DoD 

anticipates uniform career groups. 

Several commenters provided specific 

recommendations about grouping 

occupations together into career groups. 

Other comments recommended limiting 

the number of career groups to keep the 

system simple. In developing the 

implementing issuances, DoD will 

consider these suggestions. 

Section 9901.212—Pay Schedules and 

Pay Bands 

Section 9901.212 provides DoD with 

the authority to establish pay schedules 

within each career group, and pay bands 

within each pay schedule. One 

commenter noted that the bands, as 

defined in this section, are simple to 

understand. 

Commenters noted an incorrect 

reference in the proposed regulations at 

§ 9901.212(d). We have corrected the 

reference. 

Commenters noted that this section 

does not mention OPM oversight and 

recommended that OPM review and 

approve the pay schedules. Under 

§ 9901.105(c)(1), coordination of pay 

schedules and pay bands with OPM is 

required. 

The proposed regulations stated in 

§ 9901.221(a) that pay schedules ‘‘may 

include two or more pay bands.’’ We 

made a technical correction to clarify 

that a pay schedule may include one or 

more pay bands. 

Commenters expressed a need for 

consistent pay bands throughout DoD. 

We did not make a change in the 

regulations based on this comment; 

however, DoD anticipates that bands 

will be defined consistently for a given 

occupation. Several commenters 

recommended grouping particular 

General Schedule grades into pay bands. 

Commenters also recommended placing 

specific occupations (e.g., attorney) into 

particular bands. Additional 

commenters suggested ways to band 

supervisory positions, while other 

commenters requested clarification of 

how supervisory and team leader 

positions will be placed into bands. DoD 

will consider these suggestions and 

address the number and composition of 

pay bands and the assignment of 

supervisor and team leader positions to 

bands in its implementing issuances. 

Several commenters requested further 

detail on the classification of prevailing 

rate positions under NSPS. One 

commenter suggested adopting the 

bands used for DoD nonappropriated 

fund (NAF) employees. DoD will 

consider these comments when 

establishing NSPS pay schedules and 

pay bands for prevailing rate positions. 

A commenter questioned how duty 

levels within bands will be described. 

DoD will establish a process for 

consistently describing the duties of 

positions. 

Several commenters requested that 

DoD establish military rank 

equivalencies for each band, for 

purposes such as travel 

accommodations. Such equivalency 

determinations are outside the scope of 

the NSPS regulations. 

Several commenters noted the 

importance of dual career paths to 

support both supervisory and nonsupervisory expertise. DoD agrees that 

this is an important feature to include 

in the NSPS classification system. The 

pay band structure supports this 

concept through pay bands, such as 

expert and supervisory bands, which 

could provide for parallel career 

progression. 

Section 9901.221—Classification 

Process 

Section 9901.221 of the regulations 

requires DoD to establish a method for 

describing jobs and documenting those 

descriptions. DoD will establish 

procedures for assigning each job to an 

occupational series, career group, pay 

schedule, and band, and will classify 

each job accordingly. 

Labor organizations participating in 

the meet-and-confer process expressed 

concern that employee promotions 

might be unduly delayed because 

§ 9901.221(d) in the proposed 

regulations did not provide a timeframe 

for classification decisions. As a result 

of these discussions, we have added a 

requirement in this section that 

personnel actions implementing 

classification decisions occur within 

four pay periods after the date of the 

decision. 

Some commenters expressed concerns 

that under the NSPS classification 

system, position descriptions will not be 

required. They were concerned that the 

duties required by a position will not be 

clearly defined and will be too broad, 

which may result in uncertain 

expectations or the assignment of work 

unrelated to an employee’s position. 

While NSPS provides increased 

flexibility, DoD will establish a process 

for consistently describing the 

requirements of positions. 

Section 9901.222—Reconsideration of 

Classification Decisions 

Section 9901.222 of the proposed 

regulations provides employees the 

right to request that DoD or OPM 

reconsider the classification of their 

official position of record including the 

pay system, career group, occupational 

series, pay schedule, or pay band. 

Commenters expressed concern that 

this section provides insufficient detail. 

DoD’s implementing issuances will 

establish policies and procedures for 

handling an employee’s request for 

reconsideration of classification 

decisions. 

A commenter noted that current 

regulations provide employees the right 

to request reconsideration of official 

titles of their positions of record and 

asked that the regulations provide this 

right under the NSPS classification 

system. We agree and have added 

‘‘official title’’ to § 9901.222(a). 

Commenters were concerned that 

there was no independent review to a 

neutral party. Paragraphs (a) and (c) of 

this section provide employees the right 

to directly request OPM reconsider the 

classification of their official position 

and allow an employee to request that 

OPM reconsider a DoD classification 

reconsideration decision, respectively. 

This right is parallel to the classification 

appeal right of current General Schedule 

employees under 5 U.S.C. 5112(b). 

Commenters suggested that the 

regulations authorize retroactive 

promotions if an employee’s position is 

found to be misclassified, and one 

commenter suggested that retroactive 

promotions be limited to 2 years 

preceding the reconsideration 

determination. Under the current 

classification law and regulations (5 

U.S.C. chapter 51 and 5 CFR part 511) 

classification decisions generally may 

not be made effective retroactively. (See 

5 CFR 511.701(a)(4).) In addition, the 

Supreme Court has held that neither the 

Classification Act under 5 U.S.C. 

chapter 51 nor the Back Pay Act under 

5 U.S.C. 5596 creates a substantive right 

to back pay for periods of wrongful 

classifications. (See United States v. 

Testan, 424 U.S. 392 (1976).) 

OPM regulations at 5 CFR 511.703 

provide an exception to this general rule 

and allow a retroactive effective date if 

upon classification appeal an employee 

is found to have been wrongfully 

demoted. Any similar retroactive 

effective date provisions regarding 

classification reconsideration decisions 

will be addressed in DoD’s policies and 

procedures for reviewing these requests, 

under § 9901.222(b). 

Commenters suggested that 

classification reconsideration decisions 

should be based on OPM’s classification 

standards. The appropriate criteria for 

reconsideration are those criteria used 

in classifying the position. As noted in 

§ 9901.222(e), where DoD has adopted 

OPM standards, OPM criteria will be 

66138 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

used; and where DoD has established its 

own criteria for classifying positions 

under this subpart, DoD criteria will be 

used. 

Commenters suggested that DoD 

should have a central classification 

appeals office. This change has not been 

made in the regulations. DoD currently 

has a central classification appeals 

office. 

Section 9901.231—Conversion of 

Positions and Employees to the NSPS 

Classification System 

Section 9901.231 of the regulations 

addresses the conversion of positions to 

the classification system established 

under this subpart. 

Commenters expressed concerns 

about the conversion process, finding it 

vague and requesting further detail. 

They questioned whether all positions 

will be reclassified, whether employees 

will be required to reapply for their 

current job, and how DoD will deal with 

employees in entry positions who have 

completed training but not yet met timein-grade criteria. A commenter 

requested that the length of ‘‘save pay’’

be a minimum of 2 years. Additionally, 

commenters requested guidance on 

converting employees currently 

classified under demonstration projects 

and on converting employees leaving 

DoD from NSPS to the General 

Schedule. A commenter requested that 

employees be provided new position 

descriptions prior to conversion. DoD 

will consider these comments when 

issuing the implementing issuances to 

prescribe the conversion process. 

Commenters questioned the 

applicability of the conversion rules to 

employees converted to the NSPS pay 

system from demonstration projects and 

alternative pay systems. In response to 

these comments, we revised 

§ 9901.231(b) to provide that DoD will 

convert employees to the system 

without a reduction in their rate of pay, 

including any applicable locality 

payment, special rate supplement, local 

market supplement, or ‘‘similar 

payment under other legal authority.’’

We also made a technical correction, 

changing the term ‘‘special rate’’ to 

‘‘special rate supplement.’’ This change 

is consistent with other recently 

published special rate regulations. 

Subpart C—Pay and Pay 

Administration 

General Comments 

Commenters and the labor 

organizations participating in the meetand-confer process articulated concerns 

about the lack of specificity in subpart 

C of the regulations on the pay structure 

and the pay administration rules 

governing the NSPS pay system. 

Commenters felt the regulations were 

too vague and difficult to understand 

because of the lack of detailed 

information on such issues as 

establishment of career groups and pay 

schedules, establishment and 

adjustment of pay band rates and rate 

ranges, establishment and adjustment of 

local market supplements, composition 

and funding of performance pay pools, 

pay-setting, and premium pay. 

Commenters expressed difficulty in 

understanding how their rate of basic 

pay and pay adjustments would be 

determined under NSPS and the impact 

individual and group performance 

would have on pay. Other commenters 

recommended that the regulations be 

withdrawn until the entire system could 

be disclosed or tested. 

Commenters, including labor 

organizations participating in the meetand-confer process, repeatedly 

referenced the lack of specificity when 

recommending a number of 

amendments to subpart C of the 

regulations which they felt would 

provide detailed criteria and situations 

for setting and adjusting rate ranges; 

entitlement to rate range adjustments; 

setting and adjusting local market 

supplements; entitlement to local 

market supplements; eligibility and 

amounts of performance pay increases; 

and setting pay for initial hires, 

reassignments, promotions, and 

reductions in band. Amendments were 

also suggested for initial conversion into 

NSPS. 

Citing the lack of specificity, 

commenters and the labor organizations 

participating in the meet-and-confer 

process stated that the regulations 

should be revised to remove the bar in 

subpart I on collective bargaining of the 

NSPS pay structure and system and to 

provide that the NSPS pay system be 

subject to national consultation rights. 

Numerous commenters requested that 

the regulations be more transparent and 

that DoD work closely with employees 

and employee representatives in 

designing the NSPS pay system. They 

also cited the lack of details in the 

regulations as the basis for doubting the 

fairness and equity of the NSPS pay 

system. 

We recognize the desire that the 

regulations provide greater specificity 

and guarantees pertaining to the NSPS 

pay system. However, the regulations 

must afford DoD sufficient flexibility to 

design an agile pay system that is 

performance-based, market-based, and 

tailored to DoD’s performance goals, 

mission requirements, and strategic 

human capital needs. Except as 

otherwise explained in this section of 

the SUPPLEMENTARY INFORMATION, we 

have not modified subpart C of the 

regulations in response to these 

comments. 

However, we concur with 

commenters that the NSPS pay system 

must be designed in a transparent and 

credible manner that involves 

employees and employee 

representatives. While we have not 

removed the bar on collective 

bargaining in subpart I, the 

implementing issuances, as defined in 

§ 9901.103, which will include the 

details of the NSPS pay system, will be 

covered by the ‘‘continuing 

collaboration’’ provisions in § 9901.106, 

which Congress established as the 

exclusive process for the involvement of 

employee representatives in the further 

planning and development of the HR 

system (5 U.S.C. 9902(f)(1)(D) and 

(f)(4)). (See Section 9901.103—

Definitions and Section 9901.106—

Continuing Collaboration.) Further, DoD 

will consider the suggestions and 

recommendations made by commenters 

as it develops implementing issuances 

for the NSPS pay system. Finally, we 

have added a new section at § 9901.305, 

which further clarifies that pay matters 

are not subject to collective bargaining. 

This is consistent with the statutory 

prohibition against expanding the scope 

of bargaining under NSPS to those 

matters not subject to bargaining today 

because they are governed by law or 

Governmentwide regulations (5 U.S.C. 

9902(m)(7)). 

Commenters also stated that the 

regulations should require the new pay 

system to fully comply with the merit 

system principles and protect against 

prohibited personnel practices, 

implement the performance 

management provisions of subpart D 

prior to implementing the pay system in 

subpart C, require DoD to assess the 

impact of the pay system on employees 

prior to implementation, and establish a 

DoD compensation board. Neither the 

merit system principles nor the rules 

regarding prohibited personnel practices 

are waived under NSPS. Regarding 

testing and/or assessment of the system 

prior to implementation, the 

Department has tested many of these 

flexibilities via the demonstration 

projects. Additionally, the Department 

will use a spiral implementation 

strategy that will allow it to make 

modifications as necessary based on 

lessons learned in the earlier spirals. 

With regard to the recommendation for 

a compensation board, establishment of 

a mechanism for determining rate range 

adjustments will be addressed in 

implementing issuances. 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66139 

Commenters stated the concern that 

they would lose pay comparability with 

DoD employees remaining under the 

General Schedule and with employees 

in other Federal agencies. Commenters 

stated that employees should receive 

pay increases equivalent to the increases 

they would have received under the 

General Schedule. Many commenters 

also stated that the Department should 

continue to rely on the General 

Schedule classification and pay 

system—in essence, a retention of the 

status quo—or make the General 

Schedule system more flexible. Other 

commenters questioned the 

Department’s ability to successfully 

implement the system and/or the ability 

of the Department’s managers to 

establish and apply performance 

standards fairly and consistently to pay 

determinations, especially if they have 

not used the current system effectively. 

Other commenters stated that the NSPS 

pay system must contain the 

transparency and objectivity of the 

General Schedule, including the 

involvement of Congress and the 

Federal Salary Council. 

The Department plans to implement 

the system described in the proposed 

regulations. That system is consistent 

with the statutory requirement that the 

Department establish a ‘‘pay-forperformance’’ system that better links 

individual pay to performance. (See 5 

U.S.C. 9902(b)(6)(I).) Furthermore, we 

believe Congress and the American 

public expect their public employees to 

be paid according to how well they 

perform, rather than how long they have 

been on the job. They also expect the 

Department to maximize its efforts to 

recruit and retain the most talented and 

motivated workforce to accomplish its 

critical national defense mission. 

The General Schedule classification 

and pay system is an impediment to 

these expectations. The General 

Schedule does not provide the 

opportunity to appropriately reward top 

performers and/or compensate them in 

relation to their labor market value. 

Under the General Schedule, 

performance is rewarded by exception, 

and market value is defined as ‘‘one size 

fits all.’’

The General Schedule pay system is 

primarily a longevity-based system, i.e., 

pay increases are linked primarily to 

time in grade. In addition to length of 

time, employees must be found to be 

performing at an ‘‘acceptable level of 

competence’’ to receive a step increase. 

However, since 99 percent of all 

employees satisfy this requirement, 

virtually all employees can expect to 

receive base pay increases automatically 

of up to 30 percent over time. These 

increases are in addition to annual 

across-the-board pay increases. Even 

employees whose performance is 

unacceptable receive the annual acrossthe-board and locality pay increases that 

average between 3 and 5 percent. Over 

time, even minimally productive 

employees will progress steadily to the 

top of the General Schedule pay range 

and may be compensated significantly 

more than higher performing employees 

with less time in grade. A system based 

primarily on longevity is not designed 

to base compensation on performance. 

Commenters stated that employees 

have no basis to predict salary from year 

to year and that they have no way of 

knowing the amount of their annual 

salary increases. Commenters stated that 

many benefits (e.g., leave, retirement, 

life insurance) are based on salary, and 

since raises are not guaranteed and 

cannot be predicted under NSPS, they 

will be losing benefits. Other 

commenters stated that their ‘‘highthree’’ average salary could be less 

under NSPS, which will reduce 

employee annuities. A commenter also 

noted that because salary costs under 

the NSPS pay system cannot be easily 

predicted, the A–76 contract bidding 

process will be more difficult to 

analyze. 

The Department, while recognizing 

that there is less predictability under the 

NSPS pay system, also notes that pay 

increases are not completely predictable 

under the current system—other than 

periodic within-grade increases. 

Additionally, under current title 5 

provisions a number of situations affect 

an employee’s salary (e.g., transfer from 

one locality pay area to another and 

change from an occupation with a 

special rate to an occupation without 

one) and therefore affect an employee’s 

annuity calculation. Furthermore, NSPS 

is a pay-for-performance system that 

will provide meaningful financial 

rewards to high-performing employees 

and greater employee control over 

future pay increases. High-performing 

employees will have the opportunity to 

achieve significant pay increases—the 

higher the performance, the higher the 

pay. The Department will be able to use 

salary trends to estimate future costs for 

purposes such as A–76. 

Commenters questioned the 

Department’s statements that DoD has 

more than 20 years’ experience with 

pay-for-performance systems. Pay-forperformance systems similar to this 

proposal are not new. Pay banding has 

been part of the Department’s 

compensation program since 1980, and 

the Department has a significant amount 

of experience in implementing and 

evaluating performance-based pay 

systems (e.g., demonstration projects). 

Currently, approximately 44,000 of the 

Department’s employees are covered by 

performance-based pay systems. 

Other Comments on Specific Sections of 

Subpart C 

Section 9901.301—Purpose 

Many commenters stated that the payfor-performance system would lower 

employee morale, increase competition 

among employees, and undermine 

teamwork and cooperation. 

The NSPS performance management 

system provides opportunities for the 

Department to recognize and reward 

teamwork. The Department does not 

assume that employees are solely 

motivated by pay. As a responsible 

employer, the Department has the 

obligation to reward the highest 

performers with the highest levels of 

compensation—regardless of their 

motivational basis for achievement. The 

Department believes the new system 

will enhance employees’ desire to strive 

for maximum achievement. More 

importantly, this will provide for more 

equitable treatment of employees based 

on level of performance (which is 

consistent with merit system principles) 

and will help create a high-performance 

culture within the Department. In 

addition, a pay-for-performance system 

will allow the Department to be more 

competitive in recruiting and retaining 

top performers who have higher value 

in the labor market. 

Commenters stated that since DoD 

bases military ‘‘within-grade increases’’

on longevity, civilian employees should 

continue to receive time-based 

increases. The enabling legislation did 

not grant the Department authority to 

waive the provisions of title 10, United 

States Code, under which military pay 

and benefits are established. 

Additionally, while the Department 

values both its military personnel and 

civilian employees, it continues to 

support separate pay and benefit 

systems in recognition of the different 

attributes and demands of military and 

civilian service. 

Section 9901.302—Coverage 

Section 9901.302 lists the categories 

of employees eligible for coverage under 

subpart C. Commenters stated that 

Federal Wage System (FWS) and other 

prevailing rate employees should not be 

covered by the NSPS pay system. Others 

stated that since FWS and other 

prevailing rate pay systems are already 

based on market rates, such employees 

should be excluded from coverage. 

Other commenters thought the NSPS 

66140 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

pay system should cover GS and FWS 

employees at the same time. 

The Department intends to include all 

eligible employees in the NSPS human 

resources management and labor 

relations systems, as described in the 

Subpart A—General provisions section 

of this SUPPLEMENTARY INFORMATION. 

However, the Department does not 

intend to cover FWS employees in the 

initial implementation phases of the 

NSPS human resources management 

system. (See the Next Steps section of 

this SUPPLEMENTARY INFORMATION.) Prior 

to including FWS employees in the 

system, the Department will conduct 

additional analyses to determine the 

appropriate application of NSPS in the 

trades and crafts environment. Part of 

that analysis will include reviewing 

current wage survey approaches. 

A commenter urged the regulations to 

exclude law enforcement officers from 

the NSPS pay system. The commenter 

stated that DoD has not provided any 

evidence that a pay-for-performance 

system is appropriate for law 

enforcement work, that law enforcement 

work often has no counterpart outside 

the Federal Government for labor 

market comparisons, and that the 

proposal does not consider the current 

difficulties in recruiting and retaining 

law enforcement officers. The 

Department considers pay for 

performance appropriate for law 

enforcement work. It also recognizes 

that it will have to use appropriate 

comparisons when making 

determinations regarding pay ranges for 

law enforcement officers. 

Commenters stated that employees 

appointed under the authority of section 

1113 of Public Law 106–398 should be 

added to the coverage statement in 

§ 9901.302. We believe that this refers to 

section 1101 of the National Defense 

Authorization Act for Fiscal Year 1999, 

as amended. This section provides 

authority for DARPA and selected 

military department laboratories to hire 

and pay a limited number of scientists 

and engineers. As shown in our matrix, 

these positions are outside the scope of 

NSPS. (See Section 9901.102—Eligibility 

and Coverage.) 

Section 9901.303—Waivers 

Section 9901.303 lists the provisions 

of title 5 which DoD may waive or 

modify under these regulations, 

including the student loan repayment 

authority at 5 U.S.C. 5379. Commenters 

expressed concern that attorneys and 

other excepted service positions are 

ineligible to participate in the student 

loan repayment program. 

Section 9901.303(c) states that 

employees occupying positions 

excepted from the competitive service 

because of their confidential, policydetermining, policy-making, or policyadvocating character are ineligible. This 

exclusion is identical to the exclusion in 

5 CFR part 537, Repayment of Student 

Loans, and it does not exclude most 

attorneys and other excepted service 

employees from eligibility for student 

loan repayment. 

Section 9901.304—Definitions 

Section 9901.304 provides definitions 

of terms used in subpart C. Commenters 

asked whether extraordinary pay 

increases (EPIs) are basic pay increases 

or bonuses. We have revised the 

definition of ‘‘extraordinary pay 

increase’’ or ‘‘EPI’’ to clarify that an EPI 

may be a basic pay increase or a bonus. 

A commenter asked for the meaning 

of ‘‘pay pool level,’’ as used in the 

definition of ‘‘modal rating.’’ The 

definition of modal rating has been 

revised to clarify that the term modal 

rating for this subpart refers to the most 

frequently occurring rating for 

employees in the same pay band within 

a particular pay pool for a particular 

rating cycle. 

In response to general comments 

requesting greater clarity, we have 

revised the definition of ‘‘pay pool’’ to 

mean ‘‘the amount designated for 

performance payouts’’ instead of ‘‘the 

dollar value of the funds set aside for 

performance payouts.’’

Commenters made various other 

requests for additional definitions of 

terms used in subpart C, such as 

‘‘compensation,’’ ‘‘aggregate pay,’’

‘‘conduct,’’ ‘‘pay system,’’ and ‘‘rate 

range.’’ In some cases, we do not believe 

a definition is needed. In other cases, 

we believe it is more appropriate to 

define or explain such terms in 

implementing issuances in order to 

preserve the Department’s flexibility. 

Section 9901.311—Major Features 

Section 9901.311 provides DoD with 

the authority to establish the NSPS pay 

system through implementing issuances 

and lists the major features of the NSPS 

pay system. Commenters questioned 

whether supervisory and 

nonsupervisory employees will be 

under the same pay system. Others 

questioned the use of a supervisory 

differential under the system. 

The same pay structure and pay 

administration rules cover both 

supervisory and nonsupervisory 

employees. Details on the treatment of 

supervisors and non-supervisors under 

this section will be addressed in the 

implementing issuances. At this time, 

DoD plans to include supervisory and 

nonsupervisory employees in the same 

career groups but to place them under 

separate pay schedules. NSPS does not 

establish a supervisory differential. 

Section 9901.312—Maximum Rates 

Section 9901.312 provides the 

Secretary with the authority to establish 

limitations on maximum rates of basic 

pay and aggregate pay for employees 

covered by the NSPS pay system. 

During the meet-and-confer process, 

participating labor organizations 

recommended retitling the section 

‘‘Maximum and Minimum Rates’’ and 

adding a requirement to the end of the 

section that the overall amount 

allocated for compensation for DoD 

employees covered by NSPS must not 

be less than the amount that would have 

been allocated for compensation if they 

had not been converted to NSPS. This 

section has not been changed; however, 

this topic is addressed under Section 

9901.313—National Security 

Compensation Comparability of this 

SUPPLEMENTARY INFORMATION. 

Commenters expressed concerns that 

maximum rates would limit the 

Department’s ability to reward pay for 

good performance and reduce current 

pay potential. However, we note that 

any pay system will include salary 

ranges (including a maximum rate) for 

any given set of jobs, consistent with the 

applicable labor market. Even the most 

outstanding performers will be limited 

by the salary range for the job they 

perform. The proposed NSPS pay 

system is designed to allow the best 

performers to progress in pay more 

rapidly. The ability to reach the range 

maximum more quickly is a benefit to 

the high-performing employee. 

Section 9901.313—National Security 

Compensation Comparability 

Section 9901.313 is consistent with 5 

U.S.C. 9902(e)(4), which requires that, 

to the maximum extent practicable, 

through fiscal year 2008, the overall 

(aggregate) amount allocated for 

compensation of the Department’s 

civilian employees covered by NSPS 

may not be less than the amount that 

would have been allocated for 

compensation of such employees if they 

had not been converted to the NSPS pay 

system. 

During the meet-and-confer process, 

the participating labor organizations 

recommended adding a new paragraph 

to this section of the regulations that 

requires the rates of compensation for 

DoD civilian employees to be adjusted 

at the same time and in the same 

proportion as the rates of compensation 

for members of the armed forces, as 

required by 5 U.S.C. 9902(e)(3). Other 

commenters recommended that civilian 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66141 

employees receive pay increases 

identical to members of the armed 

forces. Comparability with military pay 

is already addressed under 5 U.S.C. 

9902(e)(3) and does not need to be 

repeated in these regulations. 

Commenters requested clarification 

on the formula DoD will develop in 

applying this section. Commenters 

recommended that DoD ensure that 

through 2008 each individual 

installation receive the same funding it 

would have received under the General 

Schedule. Others, including labor 

organizations during the meet-andconfer process, recommended that the 

final regulations state that the money 

allocated to employees collectively will 

be the same as that allocated under the 

General Schedule. Commenters also 

asked whether the amount of money 

available to employees after 2008 will 

be less than the amount available under 

the General Schedule. Commenters 

requested that § 9901.313 include a 

requirement that the Department 

actually spend the same level of funding 

for employee pay increases under NSPS 

as would be spent under the General 

Schedule. Other commenters pointed 

out that this section protects a pool of 

money, but does not protect the pay of 

individual employees. 

The Department is developing 

financial policy guidance for issuance. 

In addition, training will be conducted 

to reinforce these funding requirements. 

However, Public Law 108–136 does not 

require that every installation be funded 

at the same level as under the General 

Schedule, nor does it require that each 

individual employee will receive the 

same pay increase under NSPS that he 

or she would have received under the 

General Schedule. 

One of the key requirements of the 

NSPS pay-for-performance system is 

providing meaningful financial rewards 

to high-performing employees. Without 

the proper funding, this requirement 

cannot be realized. Although the 

enabling legislation does not mandate a 

funding level beyond fiscal year 2008, 

the Department recognizes the 

importance adequate funding plays in a 

pay-for-performance system. 

Commenters questioned the meaning 

of various terms used in this section. 

For example, commenters asked what 

‘‘pay in the aggregate’’ means in 

paragraph (a). Commenters also asked 

for a definition of ‘‘to the maximum 

extent practicable’’ in paragraph (b) of 

this section and who would decide what 

‘‘to the maximum extent practicable’’

means. Commenters also questioned the 

meaning of ‘‘flexibility to accommodate 

changes in the function of the 

organization and other changed 

circumstances that might impact pay 

levels’’ in that same paragraph. 

Commenters stated that DoD could use 

the flexibility provided by this section 

to lower payroll costs and divert such 

funds to other budget needs. 

The enabling legislation recognizes 

that all future circumstances cannot be 

predicted. The terminology ‘‘to the 

maximum extent practicable’’ was used 

in the enabling legislation and was 

designed to preserve the flexibility to 

accommodate changes in missions, 

changes in the composition of the 

workforce (e.g., mix of new employees, 

long-term employees, and retirement 

eligible employees), and other changes 

that might affect pay levels. Further 

defining the term would be inconsistent 

with the intent of the law. However, 

under NSPS guiding principles, the 

Department values a high-performing 

workforce and recognizes that 

maximum effort to adequately fund 

civilian employee compensation is 

crucial. The term ‘‘pay in the aggregate’’

refers to the concept addressed earlier 

that the enabling legislation does not 

require that each individual employee 

will receive the same pay increase 

under NSPS that he or she would have 

received under the General Schedule. 

The enabling legislation protects pay for 

employees overall rather than at the 

individual level. 

A commenter recommended that the 

two uses of the term ‘‘pay’’ in 

§ 9901.313(b) be replaced with the term 

‘‘compensation’’ because 

‘‘compensation’’ is defined in paragraph 

(c) and ‘‘pay’’ is not. We agree and have 

replaced the term ‘‘pay’’ with 

‘‘compensation’’ in § 9901.313(b). 

During the meet-and-confer process, 

the participating labor organizations 

recommended adding a paragraph to 

this section to address locality pay 

funding. Another commenter 

recommended that the payments 

included as ‘‘compensation’’ under 

§ 9901.313(c) be clarified. To clarify 

what types of payments are included in 

the term ‘‘compensation’’ as used in this 

section, we have redefined 

‘‘compensation’’ to mean basic pay 

‘‘taking into account any applicable 

locality payment under 5 U.S.C. 5304, 

special rate supplement under 5 U.S.C. 

5305, local market supplement under 

§ 9901.332, or similar payment under 

other legal authority.’’

Section 9901.322—Setting and 

Adjusting Rate Ranges 

Section 9901.322 provides DoD with 

the authority to set and adjust rate 

ranges, determine the effective date of 

rate range adjustments, establish 

different rate ranges and provide 

different rate range adjustments for 

different pay bands, and adjust the 

minimum and maximum rates of a pay 

band by different percentages. 

Commenters, including labor 

organizations participating in the meetand-confer process, were concerned 

about the frequency and effective dates 

of rate range adjustments. In response to 

these comments, paragraph (b), which 

says DoD may determine the effective 

date of newly set or adjusted band rate 

ranges, has been modified to add: 

‘‘Established rate ranges will be 

reviewed for possible adjustment at 

least annually.’’ We anticipate making 

rate range adjustments (when 

warranted) and performance payouts in 

January of each year. However, we have 

not revised the regulations to prescribe 

an effective date for such adjustments 

because this would unduly limit the 

Department’s ability to make 

adjustments at other times in response 

to significant labor market changes or 

nonstandard performance cycles. 

Commenters questioned whether 

consideration of the ‘‘availability of 

funds’’ in § 9901.322(a) will allow DoD 

to use salary funds for other budget 

needs and noted that this factor appears 

to contradict the funding guarantees 

provided under § 9901.313—National 

security compensation comparability. 

We believe it is clear in the regulations 

that DoD must comply with § 9901.313. 

The availability of funds criterion may 

be considered only after the 

requirements of § 9901.313 have been 

met. 

Commenters asked why labor market 

conditions will be considered in setting 

and adjusting rate ranges. Others asked 

why different pay adjustments should 

be made for different pay bands. Other 

commenters felt that basing pay for 

employees on the local job market is a 

step in the right direction of closing the 

pay gap between Federal employees and 

their private sector counterparts. 

Commenters asked whether a private 

sector company’s lay-offs will cause a 

rate range minimum or maximum to be 

adjusted downward. 

The Department has not revised 

§ 9901.322(c). The ability to adjust rate 

ranges based on labor market conditions 

and to adjust different pay bands by 

different percentages is a key flexibility 

in designing a system responsive to 

labor market factors. Under 

§ 9901.322(a), the Department will 

consider a number of factors in 

determining appropriate rate ranges. 

Labor market conditions are only one of 

these factors. Others include such 

factors as the Department’s mission 

requirements, availability of funds, and 

pay adjustments granted to employees 

66142 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

of other Federal agencies. The NSPS 

regulations do not give any one factor 

greater weight than others. Given the 

circumstances of a particular year, any 

factor may have a greater or lesser effect 

on decisions regarding adjustments in 

rate ranges. Section 9901.322 refers to 

‘‘other relevant factors,’’ which could 

include any number of indicators, such 

as recruitment and retention rates for 

specific occupations/locations and the 

projected availability of candidates for 

specific occupations compared to 

projected vacancies in these 

occupations. In the framework set by 

§ 9901.322, private sector pay trends do 

not require the Department to match 

these trends automatically, because they 

are only one of several factors that may 

be considered in setting and adjusting 

rate ranges. 

Commenters and labor organizations 

participating in the meet-and-confer 

process were concerned about the 

flexibility provided in § 9901.322(d) 

allowing DoD to adjust the minimum 

and maximum rates of a pay band by 

different percentages. The labor 

organizations recommended that the 

regulations require pay band minimum 

and maximum rates to be adjusted by 

the same percentage. Other commenters 

recommended that the minimum and 

maximum rates be adjusted by the same 

percentage to minimize administrative 

burdens and to avoid pay compression 

if the minimum rate is increased, but 

not the maximum rate. 

Commenters also felt that allowing 

the Department to adjust the maximum 

rate of a pay band by an amount 

different from the minimum rate could 

benefit a few favorite employees at the 

top of a band by providing opportunities 

for greater performance pay increases at 

the expense of other good employees. 

Commenters also were concerned that, 

if minimum pay band rates are not 

increased, employees in such bands will 

not receive a rate range adjustment. A 

commenter suggested that employees 

receive the average percentage increase 

of the minimum and maximum pay 

band rates to prevent DoD from freezing 

pay. The Department does not believe 

that a requirement to automatically 

adjust the minimum and maximum pay 

band rates by the same amount would 

provide the flexibility necessary to make 

the NSPS pay structure reflective of 

market-based factors. However, pay 

compression is one the factors that will 

be considered in establishing minimum 

and maximum rates. 

Commenters stated that only Congress 

should have power to set pay raises. 

Others stated that § 9901.322 will allow 

DoD to reduce congressionally approved 

pay raises to a lower level and that all 

employees, including high performers, 

can have their pay cut if DoD decides to 

use the money for mission or other 

requirements. Others stated that every 

year Congress and the President 

determine the cost-of-living adjustment 

(‘‘COLA’’) increase that employees 

receive and that it is not fair to take 

money Congress intended to offset 

inflation and put the money in a 

performance pool. Commenters 

recommended that DoD continue to 

allocate the annual average pay raise 

that is authorized and appropriated by 

Congress for GS employees to NSPS 

employees who are fully successful in 

addition to other rewards based on 

outstanding performance. The current 

practice under the General Schedule of 

increasing pay for all employees by the 

same amount results in the overpaying 

of employees in some occupations and 

the underpaying of employees in other 

occupations. Under NSPS, the 

Department is creating a system that 

allows the flexibility necessary to 

consider both market factors and 

performance in making compensation 

decisions. 

As set forth in 5 U.S.C. 5303, the 

amount of the annual January 

adjustment in the General Schedule is 

based on a formula using the 

Employment Cost Index (ECI)—a 

measure of the movement in wages and 

salaries for private industry workers. 

However, the President may propose an 

alternate plan due to national 

emergency or economic conditions and 

notify Congress of his plan to adjust the 

General Schedule by a different amount 

than that indicated by the ECI. In recent 

years Congress has specified in 

legislation the amount of the increase in 

General Schedule pay. However, 

whether it is specified by the President 

or by legislation, the adjustment in 

General Schedule rates is not based on 

a cost-of-living calculation, and is not a 

COLA increase. (As a point of 

clarification, nonforeign area cost-ofliving allowances (COLAs) are paid as 

additional compensation to certain 

Federal employees in Alaska, Hawaii, 

Puerto Rico, Guam, the U.S. Virgin 

Islands, and the Commonwealth of the 

Northern Mariana Islands. The COLA is 

designed in recognition of the higher 

living costs in these local areas 

compared with living costs in the 

Washington, DC, area. To set the COLA 

rates, OPM surveys the prices of more 

than 200 items, including goods and 

services, housing, transportation, and 

miscellaneous expenses in each of the 

allowance areas and in the Washington, 

DC, area. Section 5941 of title 5, United 

States Code, and Executive Order 10000 

(as amended) authorize the payment of 

COLAs in nonforeign areas.) 

Commenters stated that it is unfair for 

the Secretary to set pay in secret, that 

such decisions may result in no or 

smaller increases for some pay bands 

compared to others, that unlike General 

Schedule pay decisions, pay-setting 

decisions will now be made behind 

closed doors and employees will have 

no opportunities to influence the 

decisions, and that the Bureau of Labor 

Statistics (BLS) data used by the current 

system is available for public review 

and accountability. A commenter also 

questioned what safeguards are in place 

to ensure that rate range adjustments do 

not result in EEO violations. Merit 

system principles and antidiscrimination laws are not waived 

under NSPS. The merit system principle 

at 5 U.S.C. 2301(b)(3) ensures that 

‘‘Equal pay should be provided for work 

of equal value, with appropriate 

consideration of both national and local 

rates paid by employers in the private 

sector, and appropriate incentives and 

recognition should be provided for 

excellence in performance.’’

The Department concurs with 

commenters that the NSPS pay system 

must be designed and executed in a 

transparent and credible manner that 

involves employees and employee 

representatives. The Department will 

establish in its implementing issuances 

a process for determining rate range 

adjustments. Employee representatives 

will be involved through the 

‘‘continuing collaboration’’ process. 

Section 9901.323—Eligibility for Pay 

Increase Associated With a Rate Range 

Adjustment 

Section 9901.323 provides that an 

employee must have a rating of record 

above ‘‘unacceptable’’ to receive a pay 

increase associated with a rate range 

adjustment. A number of commenters 

stated that payment of rate range 

adjustments should not be based on 

employee performance. Commenters 

objected to withholding such annual 

increases for employees with an 

unacceptable rating, especially if 

employees are denied the ability to 

appeal or grieve the rating. As discussed 

in our analysis of comments on subpart 

D, we have revised the regulations to 

provide bargaining unit employees with 

the option of grieving a rating of record 

through a negotiated grievance process. 

The Department believes that providing 

pay increases to employees whose 

ratings are unacceptable is inconsistent 

with a performance-based pay system. 

Commenters and the labor 

organizations participating in the meetand-confer process expressed concerns 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66143 

that § 9901.323(c) penalizes employees 

who do not have a rating of record by 

not guaranteeing them a rate range 

adjustment and that such employees 

should be presumed to have a rating of 

above ‘‘unacceptable.’’ In response to 

these comments, we have revised the 

regulations to provide that an employee 

without a current rating of record for the 

most recently completed appraisal 

period will receive the same percentage 

increase as employees with a rating 

above ‘‘unacceptable.’’ Paragraph (a) has 

been modified to add that, except for 

employees receiving a retained rate 

under § 9901.355, employees with a 

current rating of record above 

‘‘unacceptable,’’ and employees who do 

not have a current rating of record for 

the most recently completed appraisal 

period, will receive a percentage 

increase in basic pay equal to the 

percentage by which the minimum of 

their rate range is increased (not to 

exceed the maximum rate of the band). 

Additionally, paragraph (c) has been 

deleted. 

Commenters stated it was not clear 

whether all employees with a rating of 

record above ‘‘unacceptable’’ will 

receive the same percentage increase. 

Other commenters stated that this 

section implies that all employees above 

‘‘unacceptable’’ will receive a rate range 

adjustment, but those with salaries at 

the top of the pay band may not if the 

maximum rate of that band is not 

increased. 

Section 9901.323(a) provides that 

employees with a rating of record above 

unacceptable will receive a percentage 

increase in basic pay equal to the 

percentage by which the minimum rate 

of their rate range is increased. 

However, this increase is subject to 

§ 9901.356(b), which provides that an 

employee’s rate of basic pay may not 

exceed the maximum rate of the 

employee’s pay band rate range, except 

when pay retention under § 9901.355 

applies. 

Commenters asked if an employee’s 

pay could drop below the minimum of 

the pay band rate range due to not 

receiving a pay increase based on 

unacceptable performance. Other 

commenters asked whether employees 

will be converted to the next lower band 

if pay falls below the pay band 

minimum rate. Under the NSPS pay 

system, an employee’s pay could drop 

below the minimum of the pay band 

rate range if the minimum of the rate 

range exceeds the employee’s salary. 

However, this situation does not require 

the employee to be placed in a lower 

pay band. The employee’s pay band is 

determined by work assignment. 

Commenters asked if employees on 

retained rates will receive rate range 

increases. We have revised § 9901.323(a) 

to clarify that employees receiving a 

retained rate under § 9901.355 will not 

receive a rate range increase. 

Section 9901.331—General 

Section 9901.331 includes general 

provisions regarding local market 

supplements. Commenters asked for 

clarification of the difference between 

GS locality pay and the NSPS local 

market supplements described in 

§ 9901.331. Commenters also asked 

whether local market supplements will 

replace current GS locality rates and 

special rates and nonforeign area cost-of 

living-allowances. Finally, some 

commenters questioned the cost of 

administering a new locality pay 

system. 

The local market supplement 

authority replaces the GS locality pay 

and special rate authorities. Under 

NSPS, employees stationed in locations 

outside the 48 contiguous States will 

continue to receive applicable foreign 

and nonforeign area cost-of-living 

allowances and other differentials and 

allowances under 5 U.S.C. chapter 59. 

Under the GS locality pay system, all 

employees in a geographic location 

receive the same locality rate without 

regard to their occupation or the level of 

duties and responsibilities they are 

expected to perform. This ‘‘one-size fits 

all’’ method treats all occupations alike, 

regardless of market value and 

competition. This method results in 

underpaying employees in some 

occupations and geographic areas while 

overpaying others (as compared to the 

applicable labor market). NSPS is 

designed to be much more marketsensitive. It gives the Department 

significant discretion to set and adjust 

the minimum and maximum rates of 

pay for each pay band based on national 

and local labor market factors and 

conditions. Instead of ‘‘one size fits all’’

pay increases, NSPS allows the 

Department to allocate payroll dollars to 

the occupations and locations where 

they are most needed to carry out the 

Department’s mission. The Department 

believes that the development of a new 

system to identify appropriate rate range 

adjustments and local market 

supplements is critical to appropriately 

compensating its workforce and will 

consider cost factors as it determines the 

most effective and efficient method for 

this purpose. 

In response to comments regarding 

the lack of specificity in the pay 

retention provisions of the regulations, 

we have removed the language in 

§ 9901.331 providing DoD with the 

authority to determine the extent to 

which local market supplements will 

apply to employees receiving a retained 

rate. Section 9901.355(e) provides that 

employees receiving a retained rate are 

entitled to any applicable local market 

supplement. (See Section 9901.355—

Pay retention.) 

Section 9901.332—Local Market 

Supplements 

Section 9901.332 provides DoD with 

the authority to establish local market 

supplements and local market area 

boundaries. This section also provides 

the purposes for which local market 

supplements are considered basic pay. 

A number of commenters expressed 

concerns about variations among local 

market supplements for occupations in 

the same geographic area. The 

commenters felt this flexibility allows 

errors and inequities to develop over 

time and will be confusing to 

employees. Other commenters were 

pleased to see a shift in the 

determination of locality pay from 

strictly geographic to occupation-based 

as a way to help recruit and retain 

employees. The Department believes 

that variations in local market 

supplements based on occupations are 

appropriate and reflective of the 

conditions in some labor markets. 

Commenters felt that the criteria for 

establishing local market supplements 

and local market areas should be in 

regulation. A commenter stated that the 

regulations should require clear, 

compelling criteria for the establishment 

of additional local market supplements 

that require a balance of human 

resources interoperability with mission 

requirements. Another commenter 

recommended that the regulations be 

modified to ensure that employees in 

rural areas and those adjacent to current 

locality pay areas are not unfairly 

impacted. Others questioned whether 

the cost of living, hazardous duties, 

education, or unique or special skills 

requirements will be considered in 

establishing local market supplements. 

A number of commenters asked whether 

local market supplements will apply to 

employees stationed in nonforeign and 

foreign areas and noted that such 

payments may help with staffing in 

those areas. 

In response to comments requesting 

additional specificity, we have revised 

paragraph (a) to clarify that the 

Secretary will have sole and exclusive 

authority to establish local market areas 

for ‘‘standard local market 

supplements’’ and ‘‘targeted local 

market supplements.’’ We have also 

added definitions of ‘‘standard local 

market supplement’’ and ‘‘targeted local 

66144 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

market supplement’’ in § 9901.304. 

Standard local market supplements 

apply to employees within a given pay 

schedule or band who are stationed 

within a specified local market area, 

unless a targeted local market 

supplement applies. Targeted local 

market supplements apply to a defined 

category of employees (based on 

occupation or other appropriate factors) 

that may be established to address 

recruitment and retention difficulties or 

for other appropriate reasons. 

DoD will consider the comments 

regarding the establishment of local 

market supplements and local market 

areas in developing the implementing 

issuances. The regulations do allow for 

the possibility of establishing local 

market supplements in foreign and 

nonforeign areas outside the 48 

contiguous States; however, in 

determining the need for and level of 

any such supplements, DoD will take 

into account employees’ entitlement to 

allowances and differentials under 5 

U.S.C. chapter 59. 

A commenter questioned the attempt 

to preclude judicial review of local 

market area boundaries under 

§ 9901.332(b). We have clarified 

§ 9901.332(b) to be more consistent with 

the limitation on judicial review of 

locality pay areas in 5 U.S.C. 5304(f)(2). 

Section 5304(f)(2) of title 5, U.S. Code, 

is not waived by these regulations, but 

is modified for continued application. 

Judicial review of any DoD regulation 

regarding the boundaries of standard 

local market areas is limited to whether 

or not the regulation was promulgated 

in accordance with the administrative 

procedures requirements in 5 U.S.C. 

553. This same type of limitation on 

judicial review applies to locality pay 

areas administered by the President’s 

Pay Agent under the current locality pay 

law. 

A number of commenters asked for 

clarification on the purposes for which 

local market supplements are 

considered basic pay. Commenters 

stated that local market supplements 

should be considered basic pay for the 

same purposes as GS locality rates. 

Commenters also questioned whether 

local market supplements will be used 

to compute awards and performance 

payouts under § 9901.342 that are 

computed as a percentage of basic pay. 

In response to these comments, we 

have revised paragraph (c) to add that 

local market supplements are basic pay 

for recruitment, relocation, and 

retention incentives, supervisory 

differentials, and extended assignment 

incentives under 5 U.S.C. chapter 57, 

subchapter IV, and 5 CFR part 575, and 

for lump-sum payments for 

accumulated and accrued annual leave 

under 5 CFR part 550, subpart L, 

consistent with the locality pay 

regulations at 5 CFR part 531, subpart F. 

We note that paragraph (c) includes a 

catchall provision under which local 

market supplements are considered 

basic pay in computing other payments 

and adjustments for which locality pay 

under 5 U.S.C. 5304 is considered basic 

pay. (See § 9901.332(c)(11) in these final 

regulations. We have revised the 

language in the proposed regulations, 

which was located in § 9901.332(c)(8), 

to clarify this provision.) Thus, local 

market supplements also would be used 

in computing percentage-based awards 

under 5 U.S.C. chapter 45, consistent 

with the treatment of locality pay under 

5 CFR 531.610(h). Local market 

supplements are not considered basic 

pay in applying the performance 

payouts provision; instead, local market 

supplements are applied after 

determining the employee’s new rate of 

basic pay. 

Section 9901.333—Setting and 

Adjusting Local Market Supplements 

Section 9901.333 provides DoD with 

the authority to set and adjust local 

market supplements and determine the 

effective date of such adjustments. A 

number of commenters requested 

clarification on how labor market 

conditions would be considered in 

setting local market supplements. For 

example, some commenters questioned 

how local market supplements will 

work for occupations that have no local 

labor market, no private-sector job 

equivalents, or where local market rates 

are not high. Other commenters noted 

that local labor markets can be volatile 

and that the ups and downs of the 

market may be difficult for employees to 

understand. Commenters also 

questioned whether local market 

supplements may be reduced. The 

Department will consider these 

comments as it develops its procedures 

for setting and adjusting local market 

supplements. 

Commenters stated that 9901.333(b) 

should be revised to state that 

supplements will be reviewed 

periodically. Labor organizations 

participating in the meet-and-confer 

process recommended that the 

regulations be amended to require that 

local market supplements be adjusted 

the first pay period in January and that 

supplements be reviewed at least 

annually in conjunction with rate range 

adjustments to determine whether an 

adjustment is warranted. Section 

9901.333(b) provides that DoD will 

review established local market 

supplements at least annually. This 

language is retained since it does not 

prevent the Department from 

conducting a review more frequently. 

However, we have not revised the 

regulations to prescribe an effective date 

for such adjustments because this would 

unduly limit the Department’s ability to 

make adjustments at other times in 

response to significant labor market 

changes. 

Section 9901.334—Eligibility for Pay 

Increase Associated With a Supplement 

Adjustment 

Section 9901.334 provides that an 

employee must have a rating of record 

above ‘‘unacceptable’’ to receive a pay 

increase associated with a local market 

supplement adjustment. A number of 

commenters stated that payment of local 

market supplement adjustments should 

not be based on employee performance. 

Commenters objected to withholding 

such increases for employees with an 

unacceptable rating, especially if 

employees are denied the ability to 

appeal or grieve the rating. As discussed 

in our analysis of comments on subpart 

D, we have revised the regulations to 

provide bargaining unit employees with 

the option of grieving a rating of record 

through a negotiated grievance process. 

However, the Department does not 

consider providing pay increases to 

employees with ratings of unacceptable 

to be consistent with the intent of a 

performance-based system. 

Commenters and the labor 

organizations participating in the meetand-confer process expressed concerns 

that § 9901.334(c) penalizes employees 

who do not have a rating of record by 

not guaranteeing them a local market 

supplement adjustment and that such 

employees should be presumed to have 

a rating of above ‘‘unacceptable.’’ In 

response to these comments, we have 

revised the regulations to specify that an 

employee without a current rating of 

record for the most recently completed 

appraisal period will receive the same 

percentage increase as employees with a 

rating above ‘‘unacceptable.’’ Paragraph 

(a) has been modified to add that 

employees with a current rating of 

record above ‘‘unacceptable’’ and 

employees who do not have a current 

rating of record for the most recently 

completed appraisal period will receive 

a pay increase resulting from a 

supplement adjustment. Additionally, 

paragraph (c) has been deleted. 

Commenters asked whether 

employees on retained rates will receive 

local market supplement increases. 

Commenters also asked whether all 

employees with a rating of record above 

unacceptable will receive the same 

percentage local market supplement 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66145 

increase. As previously discussed in 

this Supplementary Information, 

§ 9901.355 is revised to provide that 

employees receiving a retained rate will 

receive any applicable local market 

supplement increase. 

Section 9901.341—General 

During the meet-and-confer process, 

the participating labor organizations 

recommended adding language at the 

end of § 9901.341 stating that the pay 

and pay administration process must be 

fair, transparent, and credible. The 

regulations already set forth the 

objectives that the entire NSPS, 

including the NSPS pay system, be 

understandable, credible, trusted, and 

consistent with merit system principles. 

(See § 9901.101.) 

Based on a comment regarding 

language consistency between 

§§ 9901.341 and 9901.342(a), to 

maintain consistency we have added 

individual contribution as a factor in 

awarding performance-based pay to 

employees. 

Section 9901.342—Performance Pay 

Increases 

Section 9901.342(a) provides an 

overview of the DoD performance-based 

pay system for employees under a 

performance management system 

established under subpart D. Under a 

pay-for-performance system, a portion 

of the annual salary increase received by 

an employee is based on his or her 

rating of record. The rating is 

retrospective, looking back over the 

employee’s performance and 

contribution over the applicable rating 

period. This section establishes that 

NSPS will use a pay pool concept to 

manage, control and distribute 

performance-based payouts. Pay pool 

panels serve as calibration committees 

and are normally populated by 

management officials. DoD 

implementing issuances will provide 

additional details regarding pay pool 

constructs, pay pool management, and a 

pay pool reconciliation process. The pay 

pool concept improves fairness over the 

current performance evaluation 

methodologies in the Department by 

forcing the open collaboration of peer 

managers in discussing and assigning 

ratings to employees within the pay 

pool. The specific processes for 

performance management and the 

accompanying performance-based pay 

decisions will be addressed in DoD 

implementing issuances. 

Commenters expressed mixed 

concerns about basing performance 

payouts on employee contributions. 

Some commenters recommended that 

the regulations allow components to 

implement a contribution-based system. 

Other commenters agreed that the level 

and value of an employee’s contribution 

should be factored into performance 

payouts. Others recommended that 

contributions not be factored into 

performance payouts because 

management controls an employee’s 

possible contribution level and the 

contribution assessment is arbitrary. 

NSPS is a performance-based system, 

and we believe it is appropriate to 

consider an employee’s contribution in 

the rating and performance payout an 

employee receives. 

Based on a comment regarding 

language consistency between 

§§ 9901.341 and 9901.342(a), we have 

added team performance as a factor in 

awarding performance-based pay to 

employees. Other commenters 

questioned how team or organizational 

performance will affect individual 

employee payouts. Some commenters 

believe that organizational performance 

should not affect an individual’s pay, 

while other commenters stated that 

performance payouts should be based 

on organizational performance. Under 

the NSPS range of shares concept, 

organizational performance can be 

considered in determining the 

appropriate share assignment. 

Regarding the use of pay pool panels, 

a number of comments suggested that 

pay pool deliberations and 

recommendations are susceptible to 

internal politics, funding availability, 

staffing needs, and personal favoritism. 

Similarly, many commenters, including 

labor organizations participating in the 

meet-and-confer process, expressed 

concern that unless the regulations 

preclude supervisors from inclusion in 

the same pay pool as their subordinate 

employees, management cronyism 

would undermine the system. 

Commenters also expressed concerns 

about a pay pool manager’s ability to 

overturn a supervisor’s decisions. Other 

commenters questioned how 

consistency will be ensured among pay 

pools. 

Subject to continuing collaboration, 

implementing issuances will require 

that pay pool management be 

transparent and credible while 

protecting the privacy interests of 

employees concerned and allowing the 

free exchange of viewpoints and 

observations. Subject to continuing 

collaboration, implementing issuances 

will provide safeguards to support the 

neutrality and impartiality of pay pool 

proceedings. The responsibilities of a 

pay pool manager under a pay-forperformance system typically include 

the review of supervisors’ proposed 

ratings of record for consistency and 

equity across organizational units and to 

guard against potential discrimination 

or politicization before finalizing 

ratings. The regulations and 

implementing issuances will require 

that decisions made by pay pool panel 

members and managers must be 

consistent with the merit systems 

principles found in 5 U.S.C. 2301. We 

have added a new paragraph (a)(3) in 

§ 9901.342 that expressly states the 

requirement that pay pools will be 

managed by a pay pool manager or pay 

pool panel, with the responsibility for 

reviewing proposed rating and share 

assignments to ensure fairness and 

consistency. 

Regarding the comments on the 

commingling of employees and 

supervisors in the same pay pool, we 

have not prescribed this level of 

specificity for the structuring of the pay 

pool in this rule. There are a number of 

considerations relative to pay pool 

constructs. These include functional or 

organizational orientations, funding, 

and population size. Depending on 

these and other factors it may be 

appropriate to commingle supervisory 

and non-supervisory personnel 

provided other measures are taken to 

prevent actual and perceived conflicts 

of interest. For example, participants in 

the pay pool process will not be allowed 

to participate in deliberations that 

directly affect their own performance 

assessment or pay. This level of detail 

is best handled in implementing 

issuances. 

Some comments expressed the belief 

that pay-for-performance is contrary to 

the needs of national security and that 

instead of encouraging team cooperation 

and organizational efforts, the system 

will encourage unhealthy competition. 

The deterioration of team or 

collaborative work ethics and 

atmosphere is not an inevitable outcome 

of a pay-for-performance system. We 

expect that the importance of teamwork 

and cooperation will be reinforced in 

the expression of performance standards 

and performance objectives. Through 

communication, ongoing feedback, 

performance rating and performance 

rewards, the importance of teamwork 

and cooperation will be impressed on 

employees. 

Some commenters questioned the use 

of the modal rating for employees who 

do not have a rating of record. The final 

regulations continue to provide that, for 

certain employees without a rating of 

record, DoD will base the performance 

payout under § 9901.342 on the 

employee’s last rating of record or 

modal rating, whichever is most 

advantageous to the employee. (As 

discussed later, we have made some 

66146 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

clarifying language changes in 

§ 9901.342(f) and (g) and added a 

sentence to give DoD authority to 

address situations where it is not 

possible to determine the modal rating. 

Also, we have revised the definition of 

‘‘modal rating’’ in § 9901.304.) DoD 

considered several options for 

addressing this issue and determined 

that use of a modal rating is the most 

equitable. The modal rating provision 

applies only to employees returning 

from a period of military service as 

described in § 9901.342(f) or employees 

returning to duty after being in a 

workers’ compensation status as 

described in § 9901.342(g), except as 

otherwise provided in DoD 

implementing issuances. (See 

§ 9901.342(a)(2).) 

We note that in § 9901.342(a)(2), the 

term ‘‘performance payout’’ has been 

substituted for ‘‘pay increase or bonus 

payment under this part’’ as a matter of 

consistent terminology. 

During the meet-and-confer process, 

the participating labor organizations 

recommended deletion of the proposed 

language at § 9901.342(a)(2) authorizing 

the appropriate rating official to prepare 

a more current rating of record, 

consistent with § 9901.409(b). Other 

commenters also were concerned about 

the fairness of this provision. One 

commenter agreed with the flexibility to 

prepare a more current rating of record, 

but cautioned that any payout should be 

based on overall performance, not 

performance that has occurred more 

recently. 

We have not changed the regulations 

in response to these comments. This 

provision is intended to allow a rating 

official to raise or lower an employee’s 

rating of record based on sustained and 

significant changes in his or her 

performance since the last rating of 

record and is consistent with current 

regulations. In keeping with the 

principle that pay and retention should 

be linked to performance, it is 

incumbent on management to ensure 

that the record accurately reflects 

performance, whether it has improved 

or deteriorated. This is particularly true 

in the case of an employee who was 

previously performing below 

expectations and who shows 

improvement over a significant period 

of time, perhaps as a result of work 

restructuring or additional training. We 

note that the issuance of any rating of 

record is subject to reconsideration 

procedures. While the regulations 

remain unchanged, the implementing 

issuances will require that such ratings 

be subject to procedures similar to those 

required for ratings issued at the end of 

the appraisal period. 

A number of comments addressed 

concerns that pay increases will be 

subject to influences beyond the control 

of the individual employee, such as the 

number of shares assigned to other 

employees in the pay pool, pay pool 

funding levels, the use of pay pool 

funds for entry/developmental pay 

increases, and the distribution of 

discretionary payments. Similarly, 

many commenters were concerned that 

if more employees within a pay pool 

receive higher ratings, the value of the 

payout for each employee is reduced. 

Commenters also suggested that this pay 

pool and shares system will result in 

forced ratings distributions and quotas. 

Other commenters, including the labor 

organizations participating in the meetand-confer process, made a number of 

recommendations regarding the funding 

for pay pools. Finally, a number of 

commenters expressed concerns about 

including across-the-board increase 

money in pay pool funds. 

It is true that pay pools will not have 

unlimited funds available. To create a 

system based on that approach would be 

fiscally unsound. In keeping with our 

guiding principles, the NSPS 

performance management system is 

designed to place greater emphasis on 

making meaningful distinctions 

between different levels of performance 

and to reward employees appropriately 

based on those levels. The proposed 

regulations state that supervisors and 

managers will be held accountable for 

making meaningful distinctions among 

employees based on performance and 

contribution. Implementing issuances 

will continue to stress accountability at 

all levels for performance evaluations 

and the related pay decisions and will 

provide more specific guidance on pay 

pool funding. We note that a sharebased system does not result in forced 

distribution of ratings, since a sharebased system does not rely on the 

distribution of ratings to control costs. 

Current across-the-board increases will 

be replaced by a combination of 

adjustments, including adjustments to 

minimum levels of the rate ranges and 

performance-based increases, and, thus, 

such funding may be included in the 

pay pool. The Department believes that 

this is consistent with intent of the 

enabling legislation. 

Another recurring theme among 

commenters was the concern that an 

employee’s pay would be subject to his 

or her manager’s communication and 

persuasion skills as demonstrated at the 

pay pool panel meetings. We agree that 

care must be taken during the pay pool 

management process to ensure that an 

employee’s final rating is more than a 

function of the negotiating skills of his 

or her manager. Expectations for raters 

and pay pool panel participants will be 

emphasized in training materials and 

implementing issuances. 

During the meet-and-confer process, 

participating labor organizations 

requested that a fixed number of shares, 

rather than a range of shares, be 

associated with a particular rating level. 

Commenters also expressed the belief 

that by fixing a single share per level of 

performance, employees would be better 

insulated from bias and unfair treatment 

by management. The Department 

recognizes that a valid, reliable, and 

transparent performance management 

system with adequate safeguards for 

employees is essential. However, for a 

system to be effective, it must avoid a 

rigid, one-size-fits-all approach by 

providing the flexibility to address a 

variety of circumstances. By allowing a 

range of decision points regarding the 

number of shares, managers can more 

appropriately address the variety and 

complexity of factors that relate to 

employee compensation. For example, 

factors that may be considered in the 

assignment of shares could include the 

position of the employee’s salary within 

the rate range, the receipt of a 

promotion pay increase within the last 

year, the employee’s contribution to the 

accomplishment of important 

organizational objectives, team/ 

organizational performance, whether the 

performance was sustained and likely to 

continue over time or related to a 

particular set of tasks or projects, or 

other appropriate factors. In response to 

the concerns expressed regarding use of 

a range of shares, we have added a new 

paragraph (c)(3) in § 9901.342, which (1) 

requires that DoD provide in 

implementing issuances additional 

guidance on the use of share ranges, 

including some examples of appropriate 

use of factors in making specific share 

assignments; (2) requires that DoD 

organizations inform employees of the 

factors that may be considered in 

making share assignments within their 

pay pool at least 90 days prior to the 

end of the appraisal period; and (3) 

provides that pay pool managers and/or 

pay pool panels will review proposed 

share assignments to ensure that factors 

are applied consistently across the pay 

pool and in accordance with the merit 

system principles. 

Section 9901.342(d) of the regulations 

provides the parameters and criteria for 

the performance share calculation 

methodology in sufficient specificity so 

that managers, employees, and 

employee representatives can better 

understand how performance pay 

increases will be determined and paid. 

At the same time, the regulations allow 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66147 

DoD to tailor the performance share 

calculation to the mission and 

performance needs of individual 

components and the specific 

performance requirements and priorities 

of organizations, individuals, and 

occupational groups. 

Commenters requested that the 

regulations provide a more detailed 

explanation of the formulas used to 

derive share values and payout 

amounts. This can best be handled by 

DoD in its implementing issuances or 

operating procedures. Similarly, some 

comments requested that share values 

be set or predetermined. Some 

commenters recommended that share 

value be expressed as a dollar amount. 

Others recommended that share value 

be expressed as a percentage. Because 

DoD is prohibiting the use of forced 

ratings distribution, the exact value of a 

share cannot be determined prior to 

completion of the rating process. In 

addition, the regulations preserve 

flexibility in setting share values to 

establish a more nimble pay-forperformance system. We have not 

changed the regulations in response to 

these comments. 

Commenters questioned the 

relationship of the share value to the 

employee’s salary. DoD intends to 

prescribe a payout calculation such that 

an employee’s payout will be a function 

of the pool total base salary value, the 

number of shares assigned within the 

pool, the employee’s salary (if the share 

value is computed on a percentage 

basis), and the number of shares 

assigned to the employee. 

Section 9901.342(d)(3) authorizes 

DoD to establish ‘‘control points’’ within 

a pay band that limit increases in the 

rate of basic pay and may require certain 

criteria to be met for increases above the 

control point. A commenter likened 

control points to ‘‘invisible barriers that 

prevent most employees from ever 

reaching the top of their band.’’ The 

same commenter suggested that the use 

of pay pools will provide sufficient cost 

control without the need for control 

points. A number of other commenters 

also expressed similar concerns about 

control points. During the meet-andconfer process, participating labor 

organizations recommended that the 

authority to establish control points be 

deleted from the regulations. 

The concept of control points is not 

inconsistent with the goals of a pay-forperformance system, which envisions a 

greater link between pay decisions and 

an individual’s performance. Control 

points are tools to manage employees’

progression through the bands and can 

help to ensure that only the highest 

performers move into the upper range of 

a pay band, which would allow the 

Department to set pay more consistently 

with the labor market and to be more 

effective in attracting and retaining top 

performers. Several DoD personnel 

demonstration projects have 

successfully used control points in their 

pay-for-performance systems. We will 

ensure that if control points are used 

under NSPS, they are well defined and 

understandable to employees. 

Section 9901.342(d)(4) specifies that a 

performance payout may not cause an 

employee’s rate of basic pay to exceed 

the maximum rate of the band or 

applicable control point. Commenters 

expressed concerns that this provision 

unduly limits pay increases and that the 

paragraph should be modified to state 

that an employee’s rate of basic pay may 

not exceed a control point only if the 

employee does not meet the applicable 

control point criteria. We have not 

modified the regulations in response to 

this comment, since we believe the 

regulatory text is clear. Section 

9901.342(d)(4) states that an employee 

may not receive a pay increase that 

causes his or her rate of basic pay to 

exceed an ‘‘applicable’’ control point. A 

control point is not applicable unless 

the employee fails to meet the criteria 

established under § 9901.342(d)(3). 

Also relative to § 9901.342(d)(4), a 

number of comments relayed concern 

that management decisions relative to 

the distribution of performance payouts 

between bonuses and increases in basic 

pay would be subject to bias and 

favoritism. Many comments suggested 

that organizations might institute 

polices that promote the use of lumpsum payments in lieu of increases in 

basic pay as a cost savings measure. 

Commenters especially emphasized the 

long-term cost to employees in terms of 

retirement benefits. We acknowledge 

that such decisions cannot be taken 

lightly. Again, these regulations require, 

and DoD implementing issuances will 

emphasize, that such distinctions must 

be consistent with the merit system 

principles found in 5 U.S.C. 2301 and 

supported by employee job performance 

and contribution. Training and 

supplemental guidance will illustrate 

the short- and long-term outcomes of 

payout distribution decisions as they 

affect organizations and employees. In 

addition to the system requirements at 

§ 9901.405(b)(4) and (c), which hold 

supervisors accountable for effective 

performance management, the proposed 

regulations provide at § 9901.406(c) that 

the performance expectations for 

supervisors and managers will include 

the assessment and measurement of 

how well they exercise their 

performance management 

responsibilities under NSPS. 

Consistent with other changes in the 

regulations that clarify how DoD will 

grant performance payouts to retained 

rate employees, we have amended 

§ 9901.342(d)(6) to clarify that for an 

employee receiving a retained rate 

under § 9901.355, a lump-sum 

performance payout may not exceed the 

amount that may be received by an 

employee in the same pay pool with the 

same rating of record who is at the 

maximum rate of the band. (See Section 

9901.355—Pay Retention for additional 

information.) 

Section 9901.342(e) specifies the 

circumstances under which 

performance payouts may be prorated. 

Commenters asked for clarification or 

made suggestions regarding when and 

how performance payouts would be 

prorated. This language remains 

unchanged. Policies relative to proration 

can best be handled by DoD in its 

implementing issuances. 

Sections 9901.342(f) clarifies how 

DoD will set the rate of basic pay for 

employees upon reemployment after 

performing honorable service in the 

uniformed services and how intervening 

performance pay adjustments for such 

employees would be determined upon 

reemployment. The regulations require 

DoD to issue implementing issuances 

governing how it will set the rate of 

basic pay for employees upon 

reemployment and require DoD to credit 

the employee with intervening rate 

range adjustments under § 9901.323 and 

increases from performance payouts. 

Commenters agreed that employees 

returning from performing honorable 

uniformed service should not be 

disadvantaged under the NSPS pay 

system. However, some comments 

suggested that employees performing 

military service will be negatively 

affected upon return to civilian service 

under NSPS. For example, a commenter 

noted that the regulations do not 

address the flexibility managers will 

have to assign a returning service 

member to the low end or the high end 

of the share range assigned to a rating 

level. We have revised the language to 

clarify that the pay of an employee 

returning from qualifying service (who 

does not have a rating of record for the 

appraisal period serve as the basis for 

the performance payout) will be set at 

a rate including performance-based pay 

increases equal to either the average 

increase received by employees 

assigned the modal rating or assigned 

the same rating as the employee’s 

actual, most recent rating of record, 

whichever is most advantageous to the 

employee. 

66148 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

Additionally, the following language 

was added to § 9901.342(f): ‘‘In unusual 

cases where insufficient statistical 

information exists to determine the 

modal rating or when previous ratings 

do not convert to the NSPS rating scale, 

DoD may establish alternative 

procedures for determining a basic pay 

increase under this section.’’ This 

language was added primarily in 

response to concerns that some 

organization may experience skewed 

pay pools during the first years NSPS is 

implemented because of the absence of 

a statistically significant number of 

employees in the pay pool due to 

mobilizations (as in the case of military 

technicians). 

Section 9901.342(g) clarifies how DoD 

will set the rate of basic pay for 

employees upon reemployment after 

being in a workers’ compensation status. 

This section has been modified to the 

extent necessary so that it remains 

consistent with § 9901.342(f) and in 

response to comments made about 

paragraph (g) that were similar to those 

made about paragraph (f). 

During the meet-and-confer process, 

the participating labor organizations 

recommended adding a new paragraph 

to § 9901.342 requiring that all 

provisions in part 9901, including 

ratings of record and payouts, be subject 

to a final independent third-party 

review. A commenter agreed with the 

rule in § 9901.342(c) that employees 

with unacceptable ratings of record 

should not receive a performance 

payout, but only if the employee has the 

ability to appeal or grieve the rating. 

Other commenters made similar 

recommendations and questioned what 

appeals or grievance process employees 

can use if they do not agree with their 

pay increase. As discussed in our 

analysis of comments on subpart D, we 

have revised the regulations to provide 

bargaining unit employees with the 

option of grieving a rating of record 

through a negotiated grievance process. 

If that process results in a new rating of 

record, the employee’s rate of basic pay 

would be adjusted accordingly. 

However, management decisions as to 

the amount of a pay increase are not 

subject to review as long as those 

decisions are consistent with the 

validated rating of record and within the 

flexibilities provided by the regulations. 

During the meet-and-confer process, 

the participating labor organizations 

recommended adding a requirement to 

the regulations for all employees rated 

‘‘fully successful’’ or better to share in 

performance payouts. We have not 

accepted this recommendation. The 

Department has not definitively 

identified the number of rating levels or 

their descriptors. Therefore, it is 

premature to guarantee a pay increase to 

any specific group of employees. 

Section 9901.343—Pay Reduction Based 

on Unacceptable Performance and/or 

Conduct 

Section 9901.343 provides DoD with 

the authority to reduce an employee’s 

rate of basic pay for unacceptable 

performance or conduct under the 

adverse action procedures in subpart F 

of these regulations. During the meetand-confer process, the participating 

labor organizations were very concerned 

that the proposed regulations provided 

DoD with the authority to reduce an 

employee’s pay any number of times 

within the appraisal period. In response 

we have revised this section to specify 

that an employee’s rate of basic pay may 

not be reduced more than once in a 12- 

month period based on unacceptable 

performance, conduct, or both. 

Other commenters felt that pay 

reductions should not be permitted for 

any reason and that pay reductions do 

not improve performance, are disruptive 

to the workplace, and have greater 

impact on an employee’s family than on 

the employee. DoD believes it is 

necessary to retain flexibility to reduce 

the pay of an unacceptable performer in 

order to achieve and retain a highperforming workforce. 

During the meet-and-confer process, 

participating labor organizations 

recommended that § 9901.343 specify 

that the maximum 10 percent reduction 

will include any annual increase, local 

market supplement, or other pay 

increases withheld from the employee 

but given to employees who are 

similarly situated and rated above 

unacceptable. Similarly, the labor 

organizations recommended that the 

proposed regulations be revised to 

provide that the pay of employees who 

improve performance within 90 days 

will be adjusted retroactively to reflect 

pay increases they would have received 

if they had been performing at an 

acceptable level at the time such 

increases were effected for the rest of 

the workforce. Other commenters felt 

that a 10 percent limit on pay 

reductions is too high. The 

recommendation to count increases not 

received (e.g., minimum rate range 

adjustments) as part of the 10 percent 

reduction limit, to restore all lost pay if 

the employee’s performance improves 

during a 90-day improvement period, 

and to lower the pay reduction limit are 

inconsistent with the intent of the NSPS 

pay system. 

Commenters and the labor 

organizations participating in the meetand-confer process recommended that 

§ 9901.343 clarify that reductions in pay 

under this section are subject to adverse 

action procedures. Such clarification is 

unnecessary because § 9901.343 already 

refers to the regulations at § 9901.352 

and § 9901.354 clarifying that such 

reductions are subject to adverse action 

procedures under subpart G (or similar 

authority). 

Section 9901.344—Other Performance 

Payments 

Section 9901.344 of the regulations 

provides DoD with the authority to 

reward employees or groups of 

employees through other types of 

payments. Situations where such 

payments may be warranted include 

recognition of extraordinary individual 

performance and organizational or team 

achievements. This section further 

explains that an employee in receipt of 

an extraordinary pay increase (EPI) is 

expected to continue to perform and 

contribute at an exceptionally high 

level. 

Both public comments and 

recommendations made by labor 

organizations participating in the meetand-confer process suggested that 

funding for these payments should be 

separate from funding for the 

performance pay pools. Some of the 

comments expressed concern that use of 

these payments would unfairly divert 

funds from deserving employees to 

unfairly reward or overpay other 

employees. As stated previously, 

managers and supervisors at all levels 

will be held accountable for fairly and 

impartially making performance-based 

reward determinations. DoD 

implementing issuances will provide for 

checks and balances to mitigate the 

potential for abuse. 

Commenters asked whether 

extraordinary pay increases (EPIs) are 

basic pay increases or bonuses. As 

previously stated, we have revised the 

definition of ‘‘extraordinary pay 

increase’’ or ‘‘EPI’’ in § 9901.304 to 

clarify that an EPI may be a basic pay 

increase or bonus. (See Section 

9901.304—Definitions.) 

Commenters questioned whether an 

EPI could be revoked if an employee 

does not continue to perform at an 

exceptionally high level. Others 

recommended that the exceptionally 

high level performance expectation be 

removed from the regulations as an 

unfair requirement. We believe that the 

extraordinary pay increase is an 

important flexibility and have not 

revised the language. 

Commenters asked for clarification on 

whether payments in recognition for 

organizational or team achievement will 

be basic pay increases or bonuses and 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66149 

what other special circumstances might 

warrant additional payments. Under 

NSPS payouts based on organizational 

or team achievement could take the 

form of either basic pay increases or 

bonuses. Any other special 

circumstances will be addressed in 

implementing issuances. 

Section 9901.345—Treatment of 

Developmental Positions 

Section 9901.345 of the regulations 

provides DoD with the authority to 

establish policies and procedures for 

adjusting the pay of employees in 

developmental positions. During the 

meet-and-confer process, the 

participating labor organizations 

requested that the regulations clarify 

how such employees will progress 

through a pay band. Other commenters 

also asked for clarification and 

recommended that entry/developmental 

employees receive pay increases 

equivalent to GS entry/developmental 

pay increases. The language has been 

modified to clarify that entry/ 

developmental pay adjustments may be 

made in lieu of or in addition to those 

authorized under § 9901.342. However, 

we have not modified the language to 

require that developmental employees 

progress in the same time frames as 

under the current system, because such 

a change would be inconsistent with a 

performance-based system. 

During the meet-and-confer process, 

participating labor organizations also 

requested the addition of language so 

that employees in developmental 

positions will be given equivalent 

access to the training and assignments 

needed to meet standardized assessment 

or certification points and progress to 

the full performance band on a timely 

basis. In many cases, employee training 

and development occurs within DoD on 

a decentralized basis. Since training and 

development opportunities are 

administered according to each unit’s 

needs and competency requirements, it 

would be difficult to address these 

issues appropriately at the DoD-wide 

level. However, all of these programs 

must be consistent with the merit 

system principles. DoD will provide 

further guidance in implementing 

issuances regarding increases resulting 

from the acquisition of skills and 

competencies for employees in 

developmental positions. 

Commenters questioned whether 

entry/developmental pay increases will 

come out of the performance pay pool. 

The Department will address the 

financial management of pay pools in 

financial policies. 

Section 9901.351—Setting an 

Employee’s Starting Pay 

Section 9901.351 of the proposed 

regulations provides for DoD to set the 

starting rate of pay for individuals who 

are newly appointed or reappointed to 

the Federal service anywhere within the 

assigned pay band, subject to DoD 

implementing issuances. Some 

commenters expressed concern over the 

lack of specificity in this section and 

questioned what criteria will be used in 

setting pay for new employees. Other 

commenters expressed the belief that it 

is unfair to offer new employees higher 

salaries than current employees. 

We have not changed the regulation 

in response to these comments. The 

Department needs maximum flexibility 

in setting starting rates of pay to be 

competitive when recruiting new talent. 

Appropriate parameters will be 

described in implementing issuances. 

Commenters requested clarification 

on the meaning of the terms ‘‘newly 

appointed’’ and ‘‘reappointed’’ and 

whether this section will be used to set 

pay for employees of other agencies who 

are ‘‘newly appointed’’ to an NSPS 

position. A commenter stated that any 

Government employee entering into the 

NSPS pay system should receive no 

reduction in basic pay. Except for the 

pay administration terms defined in 

§ 9901.103, NSPS pay administration 

terminology and additional guidance as 

to how pay will be set for individuals 

moving into NSPS from outside the 

Federal Government and from other 

Federal agencies will be addressed in 

implementing issuances. 

A commenter suggested that NSPS 

incorporate a signing or recruitment 

bonus authority in § 9901.351 or another 

section of the regulations. The enabling 

legislation does not give the Department 

the authority to waive the recruitment, 

relocation, or retention incentive 

authorities in 5 U.S.C. chapter 57. 

Therefore, these provisions remain 

applicable to NSPS employees. 

Section 9901.352—Setting Pay Upon 

Reassignment 

Section 9901.352(a) provides for DoD 

to set pay anywhere within the assigned 

pay band when an employee is 

reassigned, either voluntarily or 

involuntarily. Some commenters 

expressed concern over the lack of 

specificity in the regulations. Others 

expressed concern about the 

opportunity for management to show 

favoritism in setting pay. Except as 

discussed in this section of the 

SUPPLEMENTARY INFORMATION, we have 

not changed the regulation in response 

to these comments, thereby ensuring the 

Department has maximum flexibility in 

setting rates of pay when employees are 

reassigned from one position to another 

within a pay band or across comparable 

pay bands. However, we have clarified 

that appropriate parameters will be 

described in implementing issuances. 

In response to comments regarding 

the applicability of the adverse action 

procedures to certain employees, we 

have revised § 9901.352(b) to clarify the 

procedures applicable to employees 

subject to actions not covered by 

subpart G. 

A number of commenters strongly 

objected to providing DoD with the 

authority to reduce pay when an 

employee is involuntarily reassigned to 

a comparable band when not as a result 

of unacceptable performance or 

conduct. Commenters suggested that 

this authority could be used to punish 

employees and could result in 

significant pay reductions. Commenters 

asked whether pay retention would 

apply in such involuntary situations. 

The Department will address specific 

parameters and guidance concerning 

management’s authority to set or reduce 

pay when an employee is involuntarily 

reassigned, to include defining 

appropriate circumstances for pay 

retention consistent with the changes in 

§ 9901.355. 

Commenters asked whether adverse 

action procedures apply to all pay 

reductions under § 9901.352. 

Commenters and the labor organizations 

participating in the meet-and-confer 

process recommended that § 9901.352(a) 

be amended to make any reduction in 

pay subject to adverse action 

procedures. However, there are 

situations when reductions in pay 

would not appropriately be covered by 

adverse action procedures (e.g., return 

of an employee to their position of 

record at the end of a temporary 

promotion). Therefore, we have not 

adopted this suggestion. 

Other commenters agreed to the 10 

percent limit on pay reductions, but 

were concerned that the adverse action 

procedures and methods for challenging 

performance ratings in the NSPS 

regulations are inadequate. We believe 

these concerns are appropriately 

covered in subparts D and G, 

respectively. 

During the meet-and-confer process, 

participating labor organizations 

recommended that the language in 

§ 9901.352 specify that the maximum 10 

percent reduction will include any 

annual increase, local market 

supplement, or other pay increases 

withheld from the employee but given 

to employees who are similarly situated 

and rated above unacceptable. We 

66150 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

believe counting increases not received 

(e.g., minimum rate range adjustments) 

as part of the 10 percent reduction limit 

is inconsistent with the intent of the 

NSPS pay system. 

The labor organizations participating 

in the meet-and-confer process also 

recommended deleting the reference to 

‘‘conduct’’ in § 9901.352(b), and other 

commenters stated that conduct should 

not be a basis for pay reductions. We 

believe we have appropriately 

addressed the issue of conduct as part 

of performance in our discussion of the 

definition of ‘‘performance’’ in subpart 

A. 

A commenter asked whether 

§ 9901.352 provides DoD with the 

authority to increase an employee’s pay 

upon reassignment to a different 

position in the same pay band. We have 

revised § 9901.352(a) to clarify that DoD 

may set pay anywhere within the 

assigned pay band when an employee is 

reassigned to a position in the same or 

comparable pay band. We have also 

added a new paragraph (c) to § 9901.352 

to provide that when an employee 

completes a temporary reassignment or 

when an employee’s in-service 

probationary period is terminated, the 

employee’s rate of basic pay will be set 

at the same rate the employee received 

prior to the temporary reassignment or 

placement in the position requiring the 

in-service probationary period, with 

appropriate adjustment of the 

employee’s rate of basic pay based on 

rate range increases or performance 

payouts that occurred during the time 

the employee was assigned to the new 

position. 

Section 9901.353—Setting Pay Upon 

Promotion 

Section 9901.353 of the proposed 

regulations allowed DoD to set pay 

anywhere within the assigned pay band 

when an employee is promoted to a 

position in a higher pay band, subject to 

DoD’s implementing issuances. During 

the meet-and-confer process, 

participating labor organizations 

expressed concern that no parameters 

were provided on pay setting actions 

and suggested a pay increase of at least 

a 6 percent increase over current pay 

when an employee is promoted under 

NSPS. Other commenters also expressed 

strong concerns that the proposed 

regulations did not guarantee pay 

increases upon promotion and provided 

for possible pay reductions. 

In response, we have revised the final 

regulations to provide a general rule 

establishing a minimum percentage 

increase of 6 percent for promotions; 

however, regardless of the minimum 

percentage, the salary resulting from the 

promotion cannot be lower than the 

minimum of the rate range for the 

applicable pay band and no higher than 

the maximum of the rate range for the 

applicable pay band. 

Commenters also requested that the 

regulations clarify what types of 

movements will be considered 

‘‘promotions.’’ The Department will 

provide specific guidance on the types 

of movements which will be considered 

‘‘promotions’’ for pay administration 

purposes under NSPS in implementing 

issuances. 

Section 9901.354—Pay Setting Upon 

Reduction in Band 

Section 9901.354(a) of the proposed 

regulations allowed DoD to set pay 

anywhere within the assigned pay band 

when an employee is reduced in band, 

either voluntarily or involuntarily, 

subject to § 9901.354(b). Some 

commenters expressed concern over the 

lack of specificity in the regulations. 

Others expressed concern about the 

opportunity for management to reduce 

an employee’s pay repeatedly or for any 

reason. The Department will ensure 

appropriate parameters are described in 

implementing issuances. We have not 

changed § 9901.354(a) to provide more 

specificity. However, in response to 

comments requesting clarification, we 

have amended paragraph (a) to state that 

DoD may set pay anywhere within the 

assigned pay band subject to 

§ 9901.354(b) and (c). 

Some commenters objected to pay 

reductions of any amount upon 

reduction in band. Others felt that the 

10 percent limit on pay reductions 

under § 9901.354(b) is too high. Some 

commenters agreed to the 10 percent 

limit, but were concerned that the 

adverse action procedures and methods 

for challenging performance ratings in 

the NSPS regulations are inadequate. 

Other commenters stated that conduct 

should not be a basis for pay reductions 

or reductions in band. We have not 

revised the regulations in response to 

these comments. We believe that 

allowing for reductions in pay within 

defined limits for unacceptable 

performance or conduct is an essential 

feature of a performance-based pay 

system. Consistent with NSPS as a 

performance-based system, the 

Department will address in 

implementing issuances the parameters 

and guidance covering circumstances 

which could lead to a reduction in pay 

as a result of a reduction in band and 

the appropriate percentage of the 

reduction. 

During the meet-and-confer process, 

participating labor organizations 

recommended that the language in 

section § 9901.354(b) specify that the 

maximum 10 percent reduction will 

include any annual increase, local 

market supplement, or other pay 

increases withheld from the employee 

but given to employees who are 

similarly situated and rated above 

unacceptable. We believe counting 

increases not received (e.g., minimum 

rate range adjustments) as part of the 10 

percent reduction limit is inconsistent 

with the intent of the NSPS pay system. 

In response to comments regarding 

the applicability of the adverse action 

procedures to certain employees, we 

have revised § 9901.354(b) to clarify the 

procedures applicable to employees 

subject to actions not covered by 

subpart G. 

Section 9901.354(c) of the proposed 

regulations provided that if an employee 

is reduced in band involuntarily, but 

not through adverse action procedures 

(e.g., termination of a temporary 

promotion or failure to successfully 

complete a supervisory probationary 

period), DoD would limit any reduction 

in pay in accordance with implementing 

issuances. During the meet-and-confer 

process, participating labor 

organizations recommended that we 

amend this section to ensure an 

employee reduced in band 

involuntarily, but not through adverse 

action procedures, will have his or her 

pay reduced to not less than the amount 

the employee would have received if he 

or she had not been temporarily 

promoted or assigned to a supervisory 

position. Other commenters raised 

similar concerns. Based on these 

recommendations, we have revised this 

section to state that such an employee’s 

pay will be set at the level the employee 

would have received if he or she had 

not been temporarily promoted or 

assigned to a supervisory or other 

position requiring an in-service 

probationary period, including rate 

range and performance payout increases 

that occurred during the intervening 

period. We have also clarified that any 

resulting reduction in pay is not 

considered an adverse action under 

subpart G (or similar authority) 

consistent with the provision in 

§ 9901.356(e) of the proposed 

regulations. 

Section 9901.355—Pay Retention 

Section 9901.355 of the proposed 

regulations provided that DoD would 

issue implementing issuances regarding 

pay retention. This section also 

provided that pay retention would be 

based on the employee’s rate of basic 

pay in effect immediately before the 

action that would otherwise reduce the 

employee’s rate and that a retained rate 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66151 

will be compared to the range of rates 

of basic pay applicable to the 

employee’s position. During the meetand-confer process, participating labor 

organizations recommended that we 

address the lack of specifics on pay 

retention. Other commenters also 

suggested that the regulations provide 

more detail on pay retention 

entitlements. 

Accordingly, we have revised the 

language in this section to clarify that 

(1) employees will receive pay retention 

for a 2-year period under appropriate 

circumstances, e.g., reduction in force or 

reclassification; (2) employees on pay 

retention may receive performance 

payouts as bonuses, not salary 

adjustments; (3) employees on pay 

retention will not receive minimum rate 

range adjustments; (4) employees on pay 

retention will receive local market 

supplements; and (5) local market 

supplements are not considered part of 

basic pay in applying pay retention. In 

addition, as previously discussed, we 

have revised § 9901.342(d)(6) to clarify 

how performance bonus payouts will be 

computed for an employee receiving a 

retained rate. (See Section 9901.342—

Performance Pay Increases for 

additional information.) 

Commenters questioned whether 

grade or ‘‘band’’ retention will apply 

under the NSPS pay system. The NSPS 

pay system does not include a grade or 

‘‘band’’ retention authority. 

Section 9901.356—Miscellaneous 

Section 9901.356 provides 

miscellaneous pay administration rules 

for the NSPS pay system. Commenters 

were confused by § 9901.356(a) and 

asked whether an employee’s pay can be 

less than the minimum rate of the pay 

band. Under the NSPS system, an 

employee’s pay could drop below the 

minimum rate of the pay band if the 

minimum rate of the rate range for that 

band exceeds the employee’s salary. 

This could occur if the employee has an 

unacceptable performance rating and 

does not receive a rate range adjustment 

under § 9901.323. However, this 

situation does not require the employee 

to be placed in a lower pay band. The 

employee’s pay band is determined by 

work assignment. 

Commenters asked whether the 

special pay increase under 

§ 9901.356(d), which DoD may pay to an 

NSPS employee prior to moving to a GS 

position, will be paid to employees 

moving to GS positions in DoD and 

other agencies. DoD may apply 

§ 9901.356(d) to an NSPS employee 

moving to a GS position within or 

outside of DoD. 

During the meet-and-confer process, 

the participating labor organizations 

recommended that § 9901.356(e) be 

revised to require DoD to set an 

employee’s pay upon expiration of a 

temporary reassignment or promotion 

under § 9901.354(c) and not be subject 

to separate implementing issuances. 

Other commenters asked whether 

§§ 9901.356(e) and 9901.354(c), which 

both cover pay-setting upon expiration 

of temporary promotions, are consistent. 

Other commenters requested a 

definition of ‘‘temporary reassignment’’

and expressed concerns that 

§ 9901.356(e) provided a loophole DoD 

could use to reduce an employee’s pay 

without following adverse action 

procedures. The term ‘‘reassignment’’ is 

defined in § 9901.103 of subpart A. The 

specific conditions and considerations 

of pay setting upon reassignment are 

more appropriately addressed in 

implementing issuances. However, as 

previously discussed, we have revised 

§§ 9901.352 and 9901.354 to clarify that 

upon completion of a temporary 

reassignment or temporary promotion, 

an employee’s rate of basic pay will be 

set at the same rate the employee 

received prior to a temporary 

reassignment or temporary promotion. 

In addition, we do not believe 

§§ 9901.356(e) and 9901.354(c) were 

inconsistent. However, to further clarify, 

we have moved the provision in 

§ 9901.356(e) of the proposed 

regulations to new §§ 9901.352(c) and 

9901.354(c) to provide that any 

reductions in pay at the conclusion of 

a temporary promotion or temporary 

reassignment would not be covered by 

adverse action procedures. We have 

removed § 9901.356(e) from the final 

regulations because it is no longer 

necessary. (See Section 9901.352—

Setting Pay Upon Reassignment and 

Section 9901.354—Setting Pay Upon 

Reduction in Band in this 

SUPPLEMENTARY INFORMATION for 

additional information.) 

During the meet-and-confer process, 

participating labor organizations also 

recommended adding a new paragraph 

(f) to § 9901.356 to address 

determinations of ratings of record for 

employees who perform activities 

during duty time that are not DoD 

assignments (e.g., EEO counselors and 

union representatives) for the purpose 

of performance payouts and RIF 

retention. This issue will be addressed 

in implementing issuances. 

Section 9901.361—General 

Section 9901.361 provides DoD with 

the authority to issue implementing 

issuances establishing premium pay 

provisions. A number of commenters 

strongly objected to providing DoD such 

authority. They did not understand why 

title 5 premium pay provisions need to 

be waived and were concerned that DoD 

will reduce premium pay entitlements 

to save money. Commenters expressed 

concerns about the lack of specificity in 

this section and that this section 

provides DoD with too much authority 

to affect employees’ pay. Other 

commenters questioned whether 

specific types of premium pay, such as 

environmental differential pay and 

compensatory time off for travel, would 

be waived under this authority. During 

the meet-and-confer process, 

participating labor organizations 

recommended adding a paragraph to 

this section providing that premium pay 

under NSPS will not be less than would 

have been applicable if employees had 

not been converted to NSPS. Other 

commenters made similar 

recommendations. 

We believe the ability to modify 

premium pay in response to current and 

future Departmental needs is a critical 

feature of NSPS. This flexibility 

facilitates the Department’s ability to 

accomplish its diverse missions. For 

example, it is essential that the 

Department have the ability to fully 

compensate deployed employees and 

employees supporting surge 

requirements; the ability to equitably 

compensate employees performing 

overtime work; and the ability to make 

premium pay provisions fair, equitable, 

understandable, and credible to our 

employees. Specific issues regarding 

premium pay, including payments made 

under subchapter V of chapter 55 as 

well as those made in lieu of subchapter 

V of chapter 55, will be addressed in 

implementing issuances. Implementing 

issuances are subject to continuing 

collaboration. Also, under § 9901.105, 

any policies regarding premium pay that 

differ from those that exist in 

Governmentwide regulations must be 

coordinated with OPM. We have revised 

§ 9901.361(a) to clarify that these 

regulations are the source of the 

authority to waive the premium pay 

provisions, consistent with 

§ 9901.303(a)(2). 

Commenters stated that law 

enforcement officer availability pay 

should not be waived for NSPS law 

enforcement officers. Commenters noted 

that OPM has stated that Federal law 

enforcement officers should have 

consistency in terms of premium pay 

entitlements. Other commenters 

questioned why firefighter pay under 5 

U.S.C. 5545b is not waivable, if DoD can 

waive availability pay. 

Under 5 U.S.C. 9902(d)(2), DoD may 

waive premium pay provisions under 5 

66152 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

U.S.C. chapter 55, subchapter V, 

including availability pay for criminal 

investigators under 5 U.S.C. 5545a, but 

is prohibited from waiving pay for 

firefighters under 5 U.S.C. 5545b. DoD 

must coordinate with OPM prior to 

establishing policies regarding premium 

pay for law enforcement officers that 

differ from those in Governmentwide 

regulations. (See § 9901.105.) 

Commenters also questioned whether 

this section provides DoD with the 

authority to change FLSA overtime pay. 

As previously discussed, since the 

FLSA authority is outside the waivable 

title 5 chapters, these regulations do not 

affect FLSA overtime pay entitlements. 

(See Section 9901.104—Scope of 

Authority for additional information.) 

Section 9901.371—General 

Commenters requested that 

§§ 9901.371 through 9901.373, regarding 

the conversion of employees into the 

NSPS pay system, be revised to provide 

detailed information on converting 

employees in demonstration projects 

and alternative personnel systems to 

NSPS. 

The Department recognizes the desire 

that the regulations provide greater 

specificity. However, employees in 

organizations currently covered by 

demonstration projects and alternative 

personnel systems have the same rights 

and protections as other employees 

upon their conversion to the NSPS pay 

system. Sections 9901.372 and 9901.373 

have been revised to clarify such 

protections. (See Section 9901.372—

Creating Initial Pay Ranges and Section 

9901.373—Conversion of Employees to 

the NSPS Pay System.) 

Commenters asked whether 

§§ 9901.371 through 9901.373 are 

applicable to employees coming into 

NSPS after the initial spiral for an 

organization. Other commenters asked 

whether the pay-setting rules in 

§§ 9901.351, 9901.352, and 9901.353 

will apply to such employees. Another 

commenter stated that the language in 

§ 9901.371(a), which excludes 

employees ‘‘reassigned or transferred’’

to the NSPS system, is not adequate, 

since employees could move into such 

positions by another pay action. 

These sections apply only to 

employees in an organization at the time 

the organization undergoes its 

conversion to the NSPS pay system. 

They do not apply to an employee who 

moves into an organization after the 

organization has been converted to the 

NSPS pay system. We have revised 

§ 9901.371(a) by replacing ‘‘are 

reassigned or transferred’’ with ‘‘move’’

to clarify that the conversion provisions 

exclude employees who move from a 

non-NSPS position to a position already 

covered by NSPS under any 

circumstances. The Department will 

issue implementing issuances detailing 

the conversion procedure for employees 

entering an organization after its 

conversion to the NSPS pay system. 

Commenters requested a 3-year 

moratorium on any action that would 

reduce an employee’s pay after the 

employee’s conversion to the NSPS pay 

system. The Department is not changing 

the conversion rules to provide a 

moratorium on such actions. The 

Department guarantees employees will 

convert into the NSPS pay system 

without a reduction in pay. However, 

subsequent employee pay actions will 

be based on pay-for-performance 

criteria. 

Section 9901.372—Creating Initial Pay 

Ranges 

Section 9901.372 provides DoD with 

the authority to set initial pay band rate 

ranges under subpart C. Some 

commenters supported the use of the 

General Schedule salary structure as the 

baseline for moving an employee into a 

new band to allay concerns that pay 

rates will be reduced. Other commenters 

recommended that the regulations 

guarantee that the initial rate ranges be 

at least equal to the employees’ former 

rate ranges. During the meet-and-confer 

process, the participating labor 

organizations recommended that 

§ 9901.372 be amended to require initial 

pay band rate ranges to link to the 

ranges that applied to employees in 

their former pay system. The 

Department has not changed the 

regulatory language in this area but will 

consider these comments when 

developing implementing issuances. 

In response to comments regarding 

the applicability of the conversion rules 

to employees converted to the NSPS pay 

system from demonstration projects and 

alternative pay systems, we have revised 

§ 9901.372 to provide that initial pay 

band ranges may link to the ranges that 

apply to employees in their previously 

applicable pay system, taking into 

account any applicable locality 

payment, special rate supplement, local 

market supplement, or ‘‘similar 

payment under other legal authority.’’

Section 9901.373—Conversion of 

Employees to the NSPS Pay System 

Section 9901.373 provides the rules 

for converting employees into the NSPS 

pay system when that system is initially 

applied to a category of employees. 

Section 9901.373(a) provides that DoD 

will convert employees into the system 

without a reduction in their rate of pay. 

In response to comments regarding 

the applicability of the conversion rules 

to employees converted to the NSPS pay 

system from demonstration projects and 

alternative pay systems, we have revised 

§ 9901.373(a) to provide that DoD will 

convert employees to the system 

without a reduction in their rate of pay, 

including any applicable locality 

payment, special rate supplement, local 

market supplement, or ‘‘similar 

payment under other legal authority.’’

Also, consistent with other changes in 

subpart C, we have revised 

§ 9901.373(b) to address other adverse 

action authorities for employees subject 

to actions not covered by subpart G. 

Commenters stated that employees on 

temporary promotions will lose money 

at conversion under § 9901.373(d). 

Others stated that all employees on 

temporary promotions will be 

downgraded upon conversion into 

NSPS. Other commenters recommended 

that the regulations provide DoD 

components the option to terminate 

temporary promotions prior to 

conversion and repromote the employee 

immediately after conversion. 

Under § 9901.372(d) employees will 

be returned to their permanent position 

upon conversion to the NSPS pay 

system. However, organizations may 

simultaneously reassign or repromote an 

employee to the position held prior to 

conversion. The Department will issue 

implementing issuances detailing the 

pay-setting procedures for employees 

who are returned to a temporary 

position. 

Many commenters requested details 

on whether employees would receive a 

pay increase for the time spent towards 

their next within-grade increase upon 

conversion into the system and 

recommended that the regulations 

provide explicitly for such increases. 

During the meet-and-confer process, the 

participating labor organizations also 

recommended that the regulations 

require such increases to be paid upon 

conversion. Other commenters stated 

that § 9901.373(e) is confusing, since it 

implies the Secretary of Defense could 

use this authority to reduce pay. Still 

others asked whether DoD will pay such 

increases to employees converting into 

NSPS from demonstration projects or 

alternative pay systems. 

During the conversion to NSPS, the 

Department will provide a prorated pay 

increase based on the amount of service 

a GS or prevailing rate employee 

performing at an acceptable level has 

completed towards the next withingrade increase (WGI). Section 

9901.373(e) is the authority under 

which the Department will provide the 

prorated pay increase—commonly 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66153 

referred to as a ‘‘WGI buy-in.’’ We have 

revised this paragraph to provide DoD 

with the discretion to pay conversion 

increases to employees in other pay 

systems, subject to DoD implementing 

issuances. 

Some other commenters asked 

whether employees on a special rate 

would receive a pay increase for the 

time spent towards their next withingrade increase and others asked whether 

such a pay increase would be calculated 

using the applicable special rate table or 

the General Schedule base rate. 

During the conversion to NSPS, the 

Department will provide a prorated pay 

increase to employees on a special rate. 

The increase will use the same formula 

for determining the prorated pay 

increase that will be used for employees 

on regular General Schedule rates. 

Commenters requested details on 

whether employees would receive a pay 

increase for the time spent in grade 

towards a career-ladder promotion. 

During the meet-and-confer process, the 

participating labor organizations 

recommended that the regulations 

require that such increases be paid upon 

conversion. A number of other 

commenters made similar 

recommendations. 

The Department does not consider 

prospective career-ladder promotions to 

be time-based. All promotions, even 

career-ladder promotions, involve the 

assignment of higher-graded duties to an 

employee. After employees have 

converted to NSPS, the system will 

provide sufficient capability to 

recognize the progression of trainees 

through pay increases under § 9901.345. 

Commenters asked how employees on 

leave without pay (LWOP) and on other 

absences, such as suspensions, longterm training assignments, and 

Intergovernmental Personnel Act 

assignments, will be converted into the 

NSPS pay system. Other commenters 

asked how employees on grade and pay 

retention will convert into the NSPS 

system. 

Employees are placed in a LWOP 

status for a number of different reasons. 

Each circumstance affects the 

conversion rules applicable to an 

employee. In recognition of this, the 

Department will issue implementing 

issuances governing the conversion 

procedures for employees in a LWOP 

status. Implementing issuances also will 

address the conversion of (1) employees 

absent for various other reasons and (2) 

employees on grade or pay retention. 

Commenters stated that employees 

outside CONUS could be negatively 

affected when they return to CONUS 

positions in NSPS because, unlike 

CONUS employees whose conversion 

will be based on base pay plus locality 

pay, employees outside CONUS do not 

have a locality pay rate which will 

result in a lower pay rate at the time of 

conversion. 

Under the current title 5 provisions, 

employees returning to CONUS 

positions receive the applicable locality 

rate. Under NSPS provisions, employees 

returning to CONUS positions will 

receive the local market supplement 

applicable to their new position and 

geographic location. We anticipate that 

local market supplements will initially 

be set equal to the applicable locality 

pay rate. 

Commenters asked for assurances 

regarding how pay will be set if 

employees leave NSPS and return to GS 

positions. Upon movement to a GS 

position, pay for NSPS employees will 

be set under the GS pay-setting rules at 

5 CFR part 531, subpart B, subject to the 

gaining organization’s pay-setting 

policies. 

Subpart D—Performance Management 

General Comments 

A general concern expressed by many 

commenters, as well as labor 

organizations during the meet-andconfer process, was a lack of specificity 

in the proposed regulations. Many 

commenters wanted to see detailed 

requirements and procedures for how 

the classification, pay, and performance 

systems would operate. The regulations 

set forth the general requirements and 

establish a framework for the 

development of more specific systems 

through a series of implementing 

issuances. For example, the 

performance management implementing 

issuances will address the specific 

processes and practices that will be 

used within the Department and its 

components regarding such matters as 

rating levels, core competencies, 

standard performance factors, and 

progress reviews. 

By far the greatest concern expressed 

by commenters regarding the proposed 

performance management regulations 

involved the perception of fairness of 

the new system. This concern was 

expressed in a variety of ways, 

including the following: 

• Potential for rater subjectivity, 

consistency of raters, rater favoritism, 

rater bias, and potential for ‘‘cronyism.’’

• Equality of treatment across agency 

lines, i.e., employees performing the 

same amount and quality of work in one 

DoD agency could receive a lower 

performance-based pay increase than a 

counterpart in another DoD 

organization. 

• Concern that employees with the 

same performance rating could receive 

two different amounts of money or that 

one could receive a pay increase and 

another a bonus. 

Directly related to the concern for 

fairness was the concern that the new 

system provide adequate performance 

management safeguards and the 

recommendation that the new system 

provide adequate checks and balances 

over the exercise of discretionary 

authority of supervisors and managers 

to affect the pay of employees through 

performance. Some commenters 

assumed that the accountability 

measures provided in the proposed 

regulations were the only safeguards to 

be included in NSPS and therefore 

found the proposed regulations 

insufficient. Some understood that the 

implementing issuances would further 

define these tools, which could include 

the use of an oversight panel, but 

preferred that they be specified in the 

enabling regulations. Others simply 

wanted to emphasize the importance of 

safeguards and checks and balances in 

a pay-for-performance system. 

The regulations make every attempt to 

ensure that the NSPS performance 

management system will be fair. First, 

the regulations adopt guiding principles 

based on the performance management 

system criteria Congress has recently 

enacted with respect to chapters 47, 54, 

and 99 of title 5, United States Code. 

These principles require any 

performance management system(s) 

established by DoD to be fair, credible, 

and transparent and to adhere to the 

merit system principles found in 5 

U.S.C. 2301. Second, the Department is 

committed to further developing these 

principles as it designs its performance 

management system through its 

implementing issuances. Section 

9901.401 requires DoD to establish 

‘‘effective safeguards to ensure that the 

management of the system is fair and 

equitable and based on employee 

performance,’’ and § 9901.405(c) 

specifies supervisory and managerial 

responsibilities for effective 

performance management. 

Many commenters recognized that 

conversion to the NSPS would require 

new skills, knowledge, and a change in 

organizational culture. These 

commenters overwhelmingly 

emphasized the need for DoD to include 

proper training programs for employees, 

but especially supervisors and 

managers, since they will carry the 

primary responsibility for administering 

a pay-for-performance system. The 

commenters further acknowledged the 

need for NSPS training programs to be 

properly funded and appeared to draw 

66154 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

a nexus between fair administration of 

performance management and pay and 

the level of supervisory competency and 

training. A significant number of 

commenters were also concerned about 

the participation of military supervisors 

in the administration of civilian 

performance management and pay 

under NSPS. These commenters were 

concerned about the potential effect 

military supervisors unfamiliar with 

civilian performance management and 

pay-for-performance processes might 

have on employees’ pay and retention. 

They also raised concerns about the 

effect of frequent military assignment 

rotations on the familiarity of 

supervisors with the civilian 

subordinates’ work and performance. 

DoD is committed to extensive 

training for managers, supervisors, and 

employees so that they understand the 

requirements of the performance 

management system. Further, DoD is 

committed to the training of managers 

and supervisors, including military 

members, and will focus that training on 

how to establish and communicate 

performance expectations, how to assess 

employee performance, and how to 

appropriately translate that assessment 

into pay adjustments. Finally, the 

Department is committed to creating a 

performance culture in DoD that 

sustains a high performance 

organization. 

Commenters also suggested that there 

should be a formal evaluation of any 

performance management system. 

Section 9901.108 of both the proposed 

and final regulations includes the 

requirement for the establishment of 

procedures for evaluating regulations 

and the implementation of any 

regulations established under 5 U.S.C. 

9902. Therefore, no change was made in 

subpart D to address this comment 

because the performance management 

system is covered by the overall 

evaluation requirement. 

In addition, during the meet-andconfer process, participating labor 

organizations suggested including a 

requirement for the Government 

Accountability Office (GAO) to conduct 

an annual review of the performance 

management system, including pay-forperformance provisions and payouts, 

and make a report to Congress. Congress 

has stated that it will carefully monitor 

the development and implementation of 

the NSPS. Furthermore, it would not be 

appropriate for DoD and OPM to 

mandate that GAO prepare an annual 

report to Congress. 

Most of the suggestions discussed in 

the general comments section, as well as 

many others that suggest specific 

practices or processes, by their nature 

relate to the operation of the 

performance management system DoD 

will establish through implementing 

issuances. As such, they are not 

specifically addressed by these enabling 

regulations. These comments will be 

taken into account by DoD as it 

develops a more detailed picture of the 

NSPS performance management system 

through implementing issuances. 

Other Comments on Specific Sections of 

Subpart D 

Section 9901.401—Purpose 

Many commenters, including 

participating labor organizations during 

the meet-and-confer process, questioned 

the need to revise current performance 

management rules, stating that what 

NSPS proposes under the new 

performance management system could 

be done under the current rules, with 

additional training for management and 

staff, or through minor modifications of 

5 U.S.C. chapter 43 rather than the 

redesign of the entire performance 

management system. Others 

recommended putting specific 

provisions from chapter 43 into the 

NSPS performance management 

requirements. 

Section 9901.401 provides for the 

establishment of a DoD performance 

management system and sets out the 

guiding principles that govern it. These 

guiding principles are based on the 

criteria Congress recently enacted with 

respect to chapter 99 of title 5, U.S. 

Code. The regulations are based on a 

clear mandate from Congress to 

strengthen the performance 

management system to support a high 

performance culture and serve as the 

basis for pay decisions, as explained in 

the Case for Action. 

Section 9901.402—Coverage 

Section 9901.402 of the proposed 

regulations clarified which categories of 

employees are eligible for coverage 

under subpart D—Performance 

Management. Commenters 

recommended that this subpart be 

revised to exclude employees whose 

pay is set by other statute (e.g., overseas 

teachers). Other commenters raised 

questions concerning whether certain 

populations of employees would be 

covered by this subpart. Section 9902(a) 

of title 5, U.S. Code, provides authority 

for the Secretary of Defense to make 

such determinations upon 

establishment of the NSPS or after NSPS 

is established by regulation. Therefore, 

it is not necessary to determine 

inclusion/ exclusion of each unique 

population within DoD in the enabling 

regulations. Consequently, no change 

was made to this section. 

Section 9901.403—Waivers 

Section 9901.403 specifies that 

employee coverage under this subpart 

results in the waiver of the provisions 

of 5 U.S.C. chapter 43 with regard to 

that employee or category of employees. 

Many employees and labor 

organizations strongly recommended 

that we continue to manage 

performance subject to 5 U.S.C. chapter 

43. However, for the reasons explained 

in the Pay for Performance discussion 

under Part VII, Major Issues, of this 

SUPPLEMENTARY INFORMATION, we have 

concluded that the waiver of chapter 43 

is appropriate. No change has been 

made in this section. 

Section 9901.404—Definitions 

Commenters asked for additional 

explanation of terms used in the 

proposed regulations or that we define 

additional terms. We have addressed 

some of these terms in the 

SUPPLEMENTARY INFORMATION regarding 

subpart A of the regulations, where we 

have defined common terminology that 

is used in several subparts of the 

regulations. Many of the terms are more 

appropriately left to implementing 

issuances. However, two of the terms 

related to this subpart that drew a 

number of comments are addressed 

here. 

Several commenters expressed 

concern about the definition of 

‘‘unacceptable performance’’ in 

§ 9901.103. That definition defines 

‘‘unacceptable performance’’ as ‘‘the 

failure to meet one or more performance 

expectations.’’ A few commenters 

expressed concern that under the 

proposed definition, performance 

measures could only define and 

differentiate ‘‘acceptable’’ and 

‘‘unacceptable’’ performance. Other 

commenters were concerned that 

unattainable goals and expectations 

would be used in conjunction with the 

proposed definition. In response to 

these concerns, we have modified the 

definition of ‘‘unacceptable 

performance’’ found in § 9901.103. The 

new definition provides that 

performance expectations may be 

amplified through work assignments or 

other instructions, for which the 

employee is held individually 

accountable. As part of its 

implementation strategy, DoD will 

provide training on setting appropriate 

performance expectations. 

During the meet-and-confer process, 

the participating labor organizations 

suggested that the definition of 

‘‘performance expectations’’ in the 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66155 

proposed regulations be amended to 

require such expectations to meet 

certain characteristics (e.g., objective 

and observable or verifiable descriptions 

of manner, quality, quantity, timeliness, 

and cost effectiveness). Many of the 

commenters also suggested that this 

language be modified to require that any 

performance expectation used in 

assessment of performance be ‘‘objective 

and measurable.’’ While many of these 

characteristics are noteworthy, due to 

the breadth of missions and types of 

work performed in DoD, such 

characteristics may not always be 

applicable to each and every 

performance expectation. In response to 

comments that the definition of 

‘‘performance expectations’’ was too 

broad, we have revised the definition to 

explain that expectations are based on 

(1) the duties, responsibilities, 

competencies, and objectives associated 

with an employee’s position and (2) the 

contributions and demonstrated 

competencies management expects of an 

employee. 

Section 9901.405—Performance 

Management System Requirements 

Section 9901.405 provides for the 

establishment of a performance 

management system under NSPS 

through the use of implementing 

issuances. This section also establishes 

the requirements that must be met by 

the NSPS performance management 

system. 

During the meet-and-confer process, 

participating labor organizations 

proposed that the development of the 

performance management system be 

accomplished through a three-step 

process: Continuing collaboration, 

national consultation, and finally 

bargaining. Such a cumbersome and 

inefficient process would inevitably 

lead to a fragmented and inconsistent 

implementation of the NSPS. 

Furthermore, it is inconsistent with the 

statutory prohibition against expanding 

the scope of bargaining (5 U.S.C. 

9902(m)(7)) and the mandate that the 

collaborative process established by 5 

U.S.C. 9902(f) be the exclusive process 

for involvement of employee 

representatives in the planning, 

development, and implementation of 

the NSPS HR system. Therefore, this 

suggestion has not been incorporated 

into the final regulations, and 

continuing collaboration in the 

development of the implementing 

issuances will be the means for ensuring 

employee involvement in the design 

and implementation of the performance 

management system. 

Many commenters had specific ideas 

and recommendations for the design 

and operation of performance 

management systems. We will address 

some of these concerns here, and others 

will be addressed more appropriately as 

DoD develops the implementing 

issuances. For example, a few 

commenters recommended more overtly 

embedding the concept of contribution 

in the enabling regulations. However, 

we find that the concept of contribution 

already is clearly presented in the 

enabling regulations, including a 

definition of the term in subpart A. 

Other commenters suggested 

providing system transparency by 

requiring the agency to publish the 

performance ratings and payouts for all 

employees. We agree with the concept 

of incorporating additional transparency 

in the performance management system, 

but not at the expense of employee 

confidentiality and privacy. There are 

many other effective methods for 

providing transparency that do not 

require disclosure of individual 

performance ratings. Many of these 

methods are practiced today in DoD’s 

pay-for-performance demonstration 

projects. While protecting individual 

identifying information, organizations 

often publish summary results and 

aggregate data such as average ratings 

and payouts within pay pools and 

career paths. Additionally, 

organizations often provide employees 

with comparative compensation data in 

the form of scatter grams or similar 

graphic representations of payout 

statistics, in which data points are 

anonymous. 

Several commenters proposed tying 

performance ratings to customer 

satisfaction and/or the use of 360-degree 

ratings. These suggestions are related to 

the operation of the performance 

management system, the details of 

which DoD will establish through 

implementing issuances. While we 

agree that the use of customer input 

and/or 360 degree ratings should be 

tools available to DoD Components in 

the implementation of this subpart, 

these tools are not appropriate for 

application to all types of work and 

work environments. Therefore, we did 

not adopt the suggestion to require their 

use Department-wide. 

During the meet-and-confer process, 

the participating labor organizations 

recommended that appraisals be 

required once a year. Management 

agreed with this recommendation, and 

this section has been modified to 

include the requirement that 

performance appraisals occur at least 

annually. 

Section 9901.406—Setting and 

Communicating Performance 

Expectations 

Section 9901.406 provides the 

requirements and guidelines for 

communicating with employees 

regarding their performance through the 

use of ‘‘performance expectations.’’

Regarding the requirements in 

§ 9901.406(a), some commenters said it 

would be difficult to link individual 

performance to the Department’s 

strategic objectives, some thought the 

linkage already exists in the current 

system, and some recommended that 

DoD implementing issuances amplify 

how this be done. We agree that 

additional guidance will be helpful and 

that this degree of specificity is best 

accomplished through DoD 

implementing issuances and/or DoD 

Component regulations and guidance. 

Therefore, no changes were made in 

response to these comments. 

We received comments concerning 

the content of § 9901.406(b), which also 

was a topic of discussion during the 

meet-and-confer process. A majority of 

commenters objected to the inclusion of 

‘‘professionalism and standards of 

appropriate conduct and behavior, such 

as civility and respect for others’ as 

indicators of performance. Most of these 

commenters believed assessment of 

these traits would lead to arbitrary and 

subjective determinations. Others 

thought this provision would be a tool 

for advancing favoritism or retaliation in 

the workforce. Still others interpreted 

this requirement to apply to 

nonsupervisory employees only and 

recommended the application of this 

requirement to supervisors and 

managers, as well. We have addressed 

these issues in our discussion of the 

definition of ‘‘performance’’ in subpart 

A. These requirements apply equally to 

all employees, including supervisors 

and managers. 

During the meet-and-confer process, 

the participating labor organizations 

recommended changes to specify that 

performance expectations are 

appropriately and clearly 

communicated to employees. 

Management shared these concerns and 

agreed that the basic performance 

expectations should be provided to 

employees in writing. We have revised 

this section accordingly. 

Other comments expressed concern 

that employees could be rated against 

expectations that had not been 

communicated or that employees would 

be rated against continually varying and 

changing expectations. We believe the 

regulations sufficiently address 

concerns about communication of 

66156 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

performance expectations. This section 

of the proposed regulations clearly 

stated the requirement that performance 

expectations be communicated to 

employees prior to holding the 

employee accountable for them. No 

changes were made in the regulations to 

address concerns about management 

flexibility to change performance 

expectations. Such flexibility is 

necessary to enable DoD to respond to 

changes in organizational mission and 

priorities. 

Labor organizations participating in 

the meet-and-confer process, as well as 

many commenters, raised concerns 

regarding supervisory and managerial 

accountability. Specifically, they 

questioned how this would be 

accomplished, since many believe 

supervisors and managers are not held 

accountable now. Section 9901.406(c) 

expressly states that supervisors’ and 

managers’ performance expectations 

will include ‘‘assessment and 

measurements’’ of how well they 

complete their performance 

management responsibilities. DoD will 

provide training on the appropriate 

competencies to ensure that supervisors 

and managers are prepared to do this. In 

addition, supervisors’ and managers’

ratings of record will be based, in part, 

on how well they perform this 

important function. Ultimately, pay 

decisions for supervisors and managers 

will be affected by their performance of 

this function. 

Section 9901.406(d) of the proposed 

regulations provides examples of a 

variety of forms performance 

expectations could take. Many 

commenters made suggestions regarding 

the purpose and content of performance 

expectations. Some of these commenters 

recommended the establishment of 

standard performance elements in order 

to promote consistency across 

organizational lines. Other commenters 

recommended the use of performance 

standards tied to each individual’s area 

of responsibility. The performance 

management system envisioned by the 

Department will include both standard 

performance elements and individual 

goals and objectives. These elements of 

the system will be addressed in the DoD 

implementing issuances. 

In addition, individual commenters 

and participating labor organizations 

alike expressed concern that the 

explanation of performance 

expectations was too broad. In response, 

a new paragraph has been added to 

§ 9901.406 to explain that performance 

expectations may be amplified through 

particular work assignments or other 

instructions, which need not be in 

writing, and 9901.406(d)(5), which 

allowed for the use of any other means 

as long as it would be clear to a 

reasonable person, has been deleted. 

Several commenters objected to the 

language in § 9901.406(f) limiting 

employee involvement in developing 

performance expectations to ‘‘insofar as 

practicable.’’ In some cases, individual 

employees may not be directly involved 

in the development of particular 

performance expectations because the 

performance expectations were 

developed through a group endeavor, or 

the same expectations might be applied 

to an entire group of employees where 

a smaller group of employees was 

involved in their initial development. 

Some commenters also objected to 

reserving final decisions regarding 

performance expectations to the sole 

and exclusive discretion of 

management. This is no different than 

the current practice regarding 

performance elements and standards, 

and both performance elements/ 

standards and performance expectations 

are part of assigning work, which is a 

management right. 

Section 9901.407—Monitoring 

Performance and Providing Feedback 

Section 9901.407 establishes the basic 

responsibility for supervisors to monitor 

employee and organizational 

performance and inform employees of 

their progress in meeting their 

performance expectations. This section 

received two primary comments: 

(1) The recommendation that the 

regulation require more than one 

progress review per year and (2) the 

concern that interim performance or 

progress reviews would not occur 

despite regulatory language. We agree 

that multiple interim performance 

reviews and/or interim feedback are 

appropriate for many types of work and 

positions. However, since this is not 

true of all types of work, the enabling 

regulation will continue to specify a 

minimum interim performance review 

requirement of at least once during each 

appraisal period. We also made no 

change in response to comments 

indicating that regulations alone would 

not result in conducting interim 

performance reviews. We believe the 

proposed regulation provides sufficient 

language in subpart D to hold 

supervisors and managers accountable 

for effectively managing the 

performance of employees. (See our 

previous discussion regarding 

§ 9901.406(c).) 

Section 9901.408—Developing 

Performance and Addressing Poor 

Performance 

Section 9901.408 addresses two 

aspects of developing or improving 

performance: The continual 

improvement that is part of a highperformance culture and the remedial 

improvement that addresses poor 

performance. 

Many commenters expressed concern 

that without the protections provided by 

mandatory improvement periods, 

management would be overly harsh in 

adverse actions related to poor 

performance. Similarly, during the 

meet-and-confer process and through 

written comments, participating labor 

organizations asked that employees be 

provided a reasonable opportunity to 

improve performance before an adverse 

action is proposed or initiated, except in 

the most extreme case of a performance 

deficiency that endangers national 

security or the safety of personnel. The 

proposed regulations provided for an 

improvement period as one of several 

options available to address or correct 

unacceptable performance prior to 

taking an adverse action. We continue to 

believe an improvement period should 

be an option under the new system, but 

not a requirement as it is now under 

chapter 43 of title 5, U.S. Code. 

Therefore, we made no changes as a 

result of these recommendations. An 

agency may now take a performance 

action under chapter 75 without 

affording an improvement period. 

Additionally, as specified in subpart H, 

employees continue to have the right to 

appeal adverse actions. 

At least two commenters 

recommended modification of the 

language in § 9901.408(c) to 

acknowledge adverse action appeal 

procedures for groups of employees not 

covered by subpart H of the NSPS 

regulations. In response to this 

recommendation, we have revised this 

section to reference appropriate appeal 

procedures for employees not covered 

by actions subject to subpart H. 

Section 9901.409—Rating and 

Rewarding Performance 

Section 9901.409 establishes the 

requirements regarding rating and 

rewarding employee performance, 

including the use of a multi-level rating 

system, the purposes for which ratings 

may be issued, and procedures for 

challenging a rating of record. 

Section 9901.409(a) received many 

comments indicating that DoD was 

taking a step backward in moving from, 

in some cases, a pass/fail performance 

management systems to a multi-level 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66157 

rating system. A few comments 

indicated that the new performance 

management system should require 

more than three rating levels. Since 

meaningful performance distinctions are 

an essential requirement in a pay-forperformance system, language requiring 

a multi-level rating system was retained. 

While the regulations specify minimum 

requirements, the details of the 

performance management system will 

be developed through the implementing 

issuances. Such details would include 

specifying the number of rating levels 

and providing descriptions of the 

different levels of performance. 

In regard to § 9901.409(b), some 

commenters were happy to see their 

performance rating of record used as a 

basis for pay. Most commenters, 

however, did not agree with the linkage 

of pay to performance and indicated 

their preference for pay based on 

longevity. As stated under the Pay for 

Performance portion in the Major Issues 

Section of the SUPPLEMENTARY

INFORMATION, the enabling statute 

requires that the Department establish a 

‘‘pay-for-performance’’ system that 

better links individual pay to 

performance. (See 5 U.S.C. 

9902(b)(6)(I).) Also, we believe Congress 

and the American people want to see 

DoD’s employees compensated based on 

performance rather than longevity. 

Therefore, we retained the language 

establishing the rating of record as a 

basis for pay determinations. 

In addition, commenters expressed 

concern that the authority to issue 

additional ratings may be vulnerable to 

abuse, especially during RIF. The 

authority to issue additional ratings of 

record enables management to issue 

new ratings of record to recognize 

significant deterioration or 

improvement in performance since the 

previous rating of record was issued. 

DoD will include appropriate safeguards 

in its implementing issuances. 

Similarly, while some commenters 

were happy that performance would be 

used as a basis for determining 

reduction in force (RIF) standing, others 

thought performance should be given 

equal weight with seniority. However, 

most commenters thought seniority 

should continue to determine retention 

standing in the event of a RIF. Length 

of service does play a role. However, we 

believe that it is essential that 

performance play a larger role in 

retention so no change was made in this 

section of the regulations. 

We received a number of comments 

concerning § 9901.409(g). The majority 

of commenters thought the 

reconsideration process to challenge 

performance ratings should include an 

opportunity for third-party review. This 

issue was also raised during the meetand-confer process with participating 

labor organizations. These organizations 

indicated their strong belief and desire 

that employees must have access to a 

negotiated grievance procedure and 

binding arbitration for the 

reconsideration process to be credible. 

In response to these concerns, 

§ 9901.409(h) was added to enable 

bargaining unit employees to choose to 

use either an administrative 

reconsideration process under this 

subpart or a negotiated grievance 

process under § 9901.922(h), but not 

both. 

In addition to concerns regarding the 

ability to grieve a rating of record, many 

commenters also expressed a similar 

concern regarding the ability to have a 

pay determination reconsidered. This 

was also a topic of discussion during the 

meet-and-confer process. We have made 

no changes in the final regulations in 

this regard. However, we recognize that 

changing a rating of record as the result 

of a reconsideration could lead to a 

conforming change in the employee’s 

payout. 

A few commenters recommended 

modification of § 9901.409(i) to 

recognize alternative reduction in force 

procedures for employee groups not 

covered by subpart F of these 

regulations. We agree and have 

modified this section accordingly. 

Subpart E—Staffing and Employment 

General Comments 

As previously addressed in the 

subpart A supplemental information, 

commenters expressed concerns about 

the lack of specificity in subpart E of the 

proposed regulations on external 

recruitment and internal placement. 

Although some commenters found the 

staffing and employment concepts to be 

simple and supported our plan, many 

commenters felt the proposed 

regulations were too vague. They did 

not support issuing detailed guidance in 

internal implementing issuances 

because that process does not 

adequately allow for public comment. 

Because of the lack of specificity, 

commenters recommended a number of 

different amendments to subpart E of 

the regulations to provide detailed 

criteria and conditions for addressing 

staffing and employment issues 

involving external hiring and internal 

placement. The commenters 

recommended the regulations: 

• Specify the time limits for 

probationary periods; 

• Limit probationary periods to the 

initial hire and the first supervisory 

appointment only; 

• Include information on crediting 

time toward completion of a 

probationary period and appeal rights; 

• List the series that will be covered 

by direct hire authority and specify who 

may determine which series will be 

added or deleted; 

• Clarify whether time-in-grade still 

applies; 

• Specify what happens to careerconditional employees when they move 

into NSPS; 

• Identify the contemporary hiring 

practices that are acceptable, e.g., using 

headhunters, signing bonuses, 

newspaper ads; and 

• Address how NSPS will streamline 

the lengthy process of rating and 

ranking. 

We understand the desire for the 

regulations to provide more specificity 

and assurances regarding NSPS staffing 

and employment. However, the 

regulations must also provide DoD with 

sufficient flexibility to design an agile 

system to attract high quality employees 

and the ability to place employees in a 

manner consistent with mission 

requirements and strategic human 

capital needs. These suggestions and 

requests for more detailed information 

will be considered in developing the 

implementing issuances. 

Many commenters stated current 

hiring flexibilities were sufficient and 

felt the Department had not 

demonstrated why changes were needed 

in the staffing and employment areas or 

how our proposals would result in a less 

cumbersome or fairer hiring process. 

Still others indicated they saw little in 

our proposal that would substantially 

alter or improve management’s ability to 

hire or move employees as missionrelated requirements dictate. We 

disagree. For example, in § 9901.511(c), 

we have removed a time-consuming 

step in establishing a direct hire 

authority by providing DoD with the 

authority to make severe shortage and 

critical need determinations without 

approval by OPM. In addition, 

§ 9901.515(a) permits limiting 

consideration under competitive 

examining to highly qualified applicants 

in a commuting area instead of having 

to consider potentially thousands of 

applications from across the country. 

Also, § 9901.511(d) provides DoD the 

capability to convert employees on 

time-limited appointments, which may 

be necessary because of funding or 

organizational issues, to career 

appointments, if such a possibility is 

stated in the vacancy announcement so 

that interested persons may apply for 

66158 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

the potential conversion opportunity. 

We believe these additional flexibilities 

will permit DoD to meet workforce and 

organizational goals in a much more 

timely fashion. 

Numerous commenters also believed 

that management does not currently 

fully utilize existing hiring flexibilities. 

The Department will continue to 

provide training on existing hiring 

flexibilities, and we are confident that 

the extensive training planned for NSPS 

implementation will educate managers 

and employees about the new 

flexibilities NSPS will offer. Once 

managers are aware of these flexibilities, 

we believe they will utilize them to 

more effectively hire and place 

employees where their skills and 

knowledge will be most useful to the 

Department. 

Several comments pointed out our 

proposals do not address the issue of 

lengthy background security checks or 

other impediments to hiring, such as 

funding problems and hiring freezes. 

While we understand that the 

administrative processes involved in 

completing background security 

investigations and resolving funding 

issues may play a significant role in the 

speed of the hiring process, they are 

outside the scope of the enabling 

legislation. 

Commenters, including labor 

organizations participating in the meetand-confer process, were concerned 

about a perceived threat of involuntary 

deployment, particularly to hazardous 

overseas locations. While they 

understand the requirement to support 

our military members in every way, 

some believe that NSPS is an attempt to 

institute a ‘‘backdoor draft.’’

Commenters also stressed that 

management should not have the ability 

to reassign or detail employees to 

perform similar or different duties at a 

moment’s notice. Our need to institute 

a flexible system with the ability to 

deploy the Department’s personnel in a 

manner consistent with mission 

requirements does not mean that 

employees will be reassigned in a 

capricious, arbitrary manner or totally 

without warning. Under current law, 

management already has authority to 

assign work to be performed and to 

accomplish the mission of the 

Department, including the authority to 

reassign or detail employees. We intend 

to continue to treat our employees in a 

fair, credible, and respectful manner. 

We will develop the processes and 

procedures under NSPS that will help 

us to achieve this. 

Several commenters, including labor 

organizations participating in the meetand-confer process, raised questions 

about priority placement programs and 

how they will work under NSPS. 

Commenters inquired as to how paybanded positions would be dealt with, 

how hiring flexibilities will impact the 

DoD Priority Placement Program, and 

whether or not the Governmentwide 

priority placement mechanism, the 

Reemployment Priority List, might be 

eliminated because it is inconsistent 

with a performance-based human 

resources system. The Department has a 

longstanding commitment to protect 

and assist employees who have been 

affected by its workforce shaping 

initiatives, and we will continue to 

honor that responsibility. DoD’s Priority 

Placement Program will be modified to 

incorporate NSPS features, just as it has 

previously been modified to 

accommodate other changes throughout 

the years. 

Many commenters referred to the 

requirement that DoD staffing and 

employment regulations be designed in 

a transparent and credible manner that 

involves employees and employee 

representatives. We agree that employee 

representatives should be provided an 

opportunity to participate in the 

development of implementing 

issuances. This issue is specifically 

addressed in the SUPPLEMENTARY

INFORMATION in subpart A. 

Comments on Specific Sections of 

Subpart E 

Section 9901.501—Purpose 

Section 9901.501 of the proposed 

regulation explains the purpose of 

subpart E, which contains regulations 

for the establishment of qualification 

requirements; recruitment for, and 

appointment to, positions; and 

assignment, reassignment, detail, 

transfer, or promotion of employees, 

consistent with 5 U.S.C. 9902(a) and (k). 

During the meet-and-confer process, 

participating labor organizations 

recommended that we add paragraphs 

(d) and (e) to this section, as follows: 

(d) The policies and procedures for 

staffing and employment will be 

planned and developed in accordance 

with 5 U.S.C. 9902(f)(1)(d), and will be 

subject to national consultation rights 

and the duty to bargain under 5 U.S.C. 

chapter 71. 

(e) Compliance with the policies, 

procedures, issuances and provisions of 

collective bargaining agreements on 

staffing and employment will be subject 

to the negotiated grievance procedure 

and binding arbitration before an 

independent third party, an alternative 

dispute resolution process that is 

mutually agreed to by the parties, or the 

Merit Systems Protection Board, as 

appropriate. 

These and other bargaining issues are 

specifically addressed in several places 

in the SUPPLEMENTARY INFORMATION

under Major Issues, as well as in 

subparts A and I. 

Section 9901.502—Scope of Authority 

Section 9901.502 of the proposed 

regulation authorizes the modification 

and replacement of certain provisions of 

title 5 related to hiring and assigning 

employees when a specified category of 

employees, applicants, and positions is 

covered by this subpart. This section 

also authorizes DoD to prescribe, in 

accordance with § 9901.105, 

implementing issuances to carry out the 

provisions of this subpart. Commenters 

objected to the proposed waiver and/or 

modification of various provisions of 

title 5; however, modification and/or 

replacement of the specified sections of 

title 5 is authorized by enabling 

legislation (5 U.S.C. 9902(k)) and is 

essential to the development of a more 

flexible system for hiring and assigning 

employees. 

Section 9901.503—Coverage 

Section 9901.503 provides the 

Secretary the authority to determine 

employee eligibility and coverage in 

accordance with § 9901.102(b). Several 

commenters, including labor 

organizations participating in the meetand-confer process, recommended that 

certain types of positions be excluded 

from coverage under the new personnel 

system, including Police Officers, 

Teachers, Civil Service Mariners, and 

National Guard Technicians under title 

32. These and other coverage issues are 

specifically addressed in the 

SUPPLEMENTARY INFORMATION in subpart 

A. 

Section 9901.504—Definitions 

In response to multiple comments 

requesting an explanation of, and/or 

improved distinctions between, similar 

terms, we have—

• Revised the definition of 

‘‘temporary employee’’ to clarify the 

Department’s intent. A temporary 

employee is an individual not on a 

career appointment who is employed for 

a limited period of time not to exceed 

1 year. The appointment may be 

extended, up to a maximum established 

by implementing issuances, to perform 

the work of a position that does not 

require an additional career employee. 

• Revised the definition of ‘‘term 

employee’’ to clarify the Department’s 

intent. A term employee is an 

individual not on a career appointment 

who is employed for a period of time of 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66159 

more than 1 year. The appointment may 

be extended, up to a maximum 

established by implementing issuances, 

when the need for an employee’s service 

is not permanent. 

• Revised the definition of ‘‘timelimited employee’’ to clarify the 

meaning. A time-limited employee is an 

individual appointed to a position for a 

period of limited duration (i.e., term or 

temporary) in either the competitive or 

excepted service. 

• Added a definition of ‘‘initial 

probationary period’’ to subpart A to 

clarify the intent of § 9901.512 and 

ensure consistency between subpart E 

and subpart H. An initial probationary 

period means the period of time, as 

designated by the Secretary, 

immediately following an employee’s 

appointment during which an 

authorized management official 

determines whether the employee 

fulfills the requirements of the position 

to which assigned. 

• Added a definition of ‘‘in-service 

probationary period’’ to subpart A to 

clarify the intent and ensure consistency 

between subpart E and subpart H. An 

in-service probationary period, such as 

a supervisory probationary period, 

means the period of time, as designated 

by the Secretary, during which an 

authorized management official 

determines whether the employee 

fulfills the requirements of the position 

to which assigned. 

Section 9901.511—Appointing 

Authorities 

Section 9901.511(b)(2) of the 

proposed regulations provides for DoD 

and OPM to jointly publish a notice in 

the Federal Register when establishing 

a new competitive appointing authority 

or a new excepted appointing authority 

that may lead to a subsequent 

noncompetitive appointment to a 

competitive position in the career 

service. Further, the section requires a 

period of public comment prior to the 

establishment of such an authority 

unless a critical mission requirement 

exists. Commenters criticized this 

section stating that this authority and 

our lack of specificity will lead to a 

patronage or spoils system and 

corruption of the merit system. They 

generally opposed the Department’s 

ability to establish a new appointing 

authority, even if a critical mission 

requirement exists, without first issuing 

a notice in the Federal Register 

allowing for a public comment period. 

During the meet-and-confer process, 

participating labor organizations 

recommended that we add paragraph 

(iii) to 9901.511(b)(2) to state: ‘‘In 

exercising its authority under paragraph 

(b)(2)(ii) of this section, DoD will 

provide reasonable advance notice, 

where practicable, to the relevant 

congressional committees and to the 

respective labor organizations, of the 

reason(s) why the Secretary has elected 

to establish a new appointing authority 

to meet critical mission requirements or 

fill a severe shortage/critical hiring need 

without a preceding comment period. 

We do not agree. We recognize that if 

these hiring authorities are exercised 

and conditions of employment are 

impacted, local bargaining may occur in 

accordance with subpart I, as 

appropriate. We also agree that labor 

organizations, and indeed all 

employees, should receive notice via 

well-established processes, such as 

publication of notices in the Federal 

Register. 

Some commenters did not understand 

the need for additional appointing 

authorities and viewed this flexibility as 

diminishing veterans’ preference and as 

a mechanism for promoting nepotism, 

favoritism, and cronyism that will lead 

to more discrimination complaints and 

grievances. In a related issue, one 

commenter expressed concern over the 

lack of any reference to granting 5 or 10 

preference points to veterans. 

In establishing new appointing 

authorities, the regulations provide for 

review by OPM and, when an 

appointment is made using a new 

competitive appointing authority or a 

new excepted appointing authority that 

may lead to a subsequent 

noncompetitive appointment to a 

competitive position in the career 

service, a requirement for public 

comment. Implementing issuances will 

provide additional guidance and 

parameters to ensure that these 

authorities are utilized for specified 

purposes in accordance with merit 

system principles and the principles of 

veterans’ preference. NSPS does not 

change or diminish preference as 

indicated in § 9901.501(c). 

Section 9901.511(c) authorizes the 

Secretary to exercise direct hire 

authority when there is a severe 

shortage of candidates or a critical 

hiring need. One commenter suggested 

that direct hire authority should be 

automatically allowed without 

extensive documentation for those 

positions for which a separate pay 

schedule is authorized. We have not 

adopted this suggestion. Other 

commenters wondered if the direct hire 

authorities could apply to career 

employees or if they were meant only 

for new hires. The specific criteria and 

instructions concerning direct hire 

authorities will be provided in the 

implementing issuances; however, 

generally, a direct hire authority is used 

to appoint applicants not currently 

employed in the civil service. 

A technical correction was made to 

§ 9901.511(c)(3) by removing the 

reference to paragraph (a). 

Section 9901.511(d) authorizes the 

Secretary to prescribe procedures for 

making time-limited appointments and 

for converting those employees without 

further competition to the career service 

provided certain conditions are met. 

Commenters cited unease with our idea 

of time-limited appointments that they 

believe will result in NSPS evolving 

into a system based on temporary 

employment. Some commenters do not 

believe temporary employees should 

have the ability to convert to permanent 

appointments without once again going 

through a competitive process. During 

the meet-and-confer process, 

participating labor organizations 

indicated that term employees should 

not perform work of permanent 

positions. 

Regarding the comment about NSPS 

developing a system based on temporary 

employment, we have revised 

definitions for time-limited 

appointments, both temporary and term, 

in § 9901.504 to include specific 

information on appropriate timeframes 

for time-limited appointments. The 

Department will provide further 

guidance in implementing issuances on 

the appropriate use of time-limited 

appointments to meet mission needs. 

Regarding the comment about 

additional competition before 

converting a temporary appointment to 

a career appointment, we note that 

§ 9901.511(d)(2) requires a time-limited 

vacancy announcement to include 

information about the possibility of 

noncompetitive conversion, if 

applicable, and that the individual be 

appointed to the time-limited 

appointment under NSPS competitive 

examining procedures. We believe that 

additional competition is not necessary 

due to the competition required for 

initial placement into the time-limited 

appointment. Also, in response to the 

comment during meet-and-confer, we 

have revised and clarified § 9901.511(d) 

to indicate that: (1) Term employment 

will not be used for positions that 

should be filled on a permanent basis; 

and (2) term appointments may be used 

to accomplish permanent work in 

circumstances where the position 

cannot be filled permanently, e.g., the 

incumbent will be out of the position for 

a significant period of time, but is 

expected to return. 

One commenter suggested that since 

there is no clear distinction between 

temporary and term employees, we 

66160 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

should refer to these employees simply 

as time-limited and delete the example 

‘‘(e.g., an individual employed on a 

temporary or term basis)’’ from 

§ 9901.511(d)(2). We deleted this 

example as it is not necessary and we 

have clarified the distinction between 

temporary and term employees with the 

revised definitions in § 9901.504. 

Another commenter suggested that we 

have only two appointment types, 

permanent and temporary, to simplify 

recruitment. We did not adopt this 

suggestion. Different circumstances and 

needs justify the use of both temporary 

employees and term employees. 

Section 9901.512—Probationary Periods 

Section 9901.512 of the proposed 

regulations provides that the Secretary 

may establish probationary periods, 

both initial and in-service, for 

employees appointed to positions in the 

competitive and excepted service 

covered by the National Security 

Personnel System. For clarity, we 

consolidated all information pertaining 

to probationary periods, both initial and 

in-service, in this section and deleted 

references to in-service probationary 

periods from § 9901.516. We have also 

added a definition of initial 

probationary period to subpart A of part 

9901. 

Commenters were disturbed by the 

lack of specificity on probationary 

periods. They pointed out that the 

opportunity for multiple or extended 

probationary periods may result in 

inconsistencies and abusive treatment 

by supervisors who might retain 

employees in a perpetual probationary 

status simply by moving them from one 

position to another. Commenters were 

concerned that managers will be able to 

make arbitrary decisions as to who 

serves an in-service probationary period 

and when. Commenters, including labor 

organizations participating in the meetand-confer process, indicated that 

probationary periods should not exceed 

1 year. Some commenters asserted that 

probationary periods of longer than 1 

year show a lack of faith in management 

to make decisions about an individual’s 

ability to perform satisfactorily within 

that timeframe. Commenters wanted to 

either retain the Governmentwide 

probationary periods established by 

OPM or to establish specific 

probationary periods to be published in 

the Federal Register. A few commenters 

supported longer probationary periods, 

such as a 3-year probationary period to 

substitute for the career-conditional 

period that currently exists. However, 

other commenters expressed concern 

because probationary periods could be 

as long as 5 or 10 years. During the 

meet-and-confer process, labor 

organizations indicated that in-service 

probationary periods should apply to 

supervisory positions only. 

Based on the comments received, 

including comments from labor 

organizations participating in the meetand-confer process, we have revised the 

final regulations to set parameters on 

probationary periods and to indicate the 

types of circumstances that would lead 

the Department to establish longer 

probationary periods. The Department 

will retain the flexibility to create 

probationary periods of varying lengths 

within those overall time frames. 

Specifically, we revised § 9901.512 to 

include that: (1) Probationary periods 

under NSPS will be between 1 year and 

3 years; (2) probationary periods 

established for more than 1 year will be 

applied to categories of positions or 

types of work that require a longer time 

period to evaluate the employee’s ability 

to perform the work; (3) in-service 

probationary periods will apply to 

certain groups of positions or 

occupations under prescribed specific 

conditions; and (4) that an employee 

who fails to complete an in-service 

probationary period will be returned to 

a grade or band no lower than that held 

before the in-service probationary 

period and the employee will be 

entitled to have his or her pay set in 

accordance with the applicable section 

of subpart C. Implementing issuances 

will clarify that decisions to establish 

probationary periods longer than 1 year 

will be made at the Department level. In 

addition, we have clarified that nothing 

in this section prohibits an action 

against an individual serving an inservice probationary period for cause 

unrelated to performance. 

Section 9901.513—Qualification 

Standards 

Section 9901.513 provides for DoD to 

either continue to use qualification 

standards established or approved by 

OPM, or to establish its own for 

positions covered by NSPS. One 

commenter wanted to know what is 

wrong with the OPM qualification 

standards and if he/she would be 

required to have different qualifications 

from the position hired into; another 

commenter suggested that we obtain 

OPM approval for all qualification 

standards for positions covered by 

NSPS; several others suggested possible 

changes for NSPS qualification 

standards. One commenter stated that 

the first sentence of this section 

contradicts the second sentence and 

suggested we add the following at the 

end of the second sentence: ‘‘when OPM 

standards do not fully cover the 

occupation or are not available.’’

We believe the Department may have 

a need to modify existing, or establish 

new, qualification standards to meet 

mission requirements. In addition, 

§ 9901.105 of subpart A does include 

the establishment of alternative or 

additional qualification standards as an 

item to be coordinated with OPM. 

Therefore, we have not revised this 

section. 

Section 9901.514—Non-Citizen Hiring 

Section 9901.514 of the proposed 

regulations provides for DoD to 

establish procedures for appointing noncitizens to excepted service positions 

within the National Security Personnel 

System. During the meet-and-confer 

process, participating labor 

organizations recommended that we 

strike this entire section and also 

remove references to non-citizen hiring 

authority. Several commenters also 

disagreed with the hiring of non-citizens 

citing that such appointments are 

inconsistent with ‘‘national security’’ or 

might lead to the outsourcing of DoD 

functions. Many were skeptical that 

qualified U.S. citizens could not be 

found or trained. The Department 

currently has the authority, delegated by 

OPM, to hire non-citizens. Therefore, 

this provision simply codifies in the 

regulation the authority already given to 

the Department. We have retained the 

Governmentwide criteria that this 

authority can only be used in the 

absence of qualified U.S. citizens and 

when immigration and security 

requirements are met. Although the 

non-citizen hiring authority is rarely 

used, the Department does occasionally 

have situations where there are no 

qualified U.S. citizens available for 

critical positions. 

Section 9901.515—Competitive 

Examining Procedures 

Section 9901.515 of the proposed 

regulations provides DoD authority to 

establish procedures for examining 

applicants for entry into competitive 

and excepted service positions in NSPS, 

including the use of traditional 

numerical rating and ranking or 

alternative ranking and selection 

procedures (category rating), and 

specifies which applications/applicants 

the Department must accept and 

consider after a period of public notice. 

In response to comments we received on 

§ 9901.515(a) asking who competitive 

examining procedures apply to, we have 

added wording to clarify that we are 

referring to applicants from outside of 

the civil service when we address who 

is recruited under competitive 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66161 

examining procedures. We have 

modified § 9901.515(a)(1) to reflect that 

DoD will accept applications for vacant 

positions from all ‘‘U.S. citizens,’’ as 

opposed to all ‘‘sources,’’ to reflect a 

commenter’s concern that the term 

‘‘sources’’ implies we are referring to 

noncompetitive sources. 

In a related matter, commenters 

expressed concern about DoD’s ability 

to narrow the groups of employees who 

will be considered for jobs, including 

the elimination of highly-qualified 

workers from various segments of 

society and the treatment of veterans. 

The ability to narrow the area of 

consideration will not preclude us from 

opening any recruitment action as 

broadly as we choose. However, because 

technology has made the Federal 

Government a more applicant-friendly 

employer, it has also increased the 

administrative burden involved to 

efficiently and effectively fill missioncritical jobs. At times, we are 

overwhelmed by the volume of 

applications that must be evaluated and 

considered, especially when filling a 

small number of jobs. In these instances, 

we need the ability to narrow the pool 

of applicants we consider, and there 

may be a sufficient number of qualified 

applicants within the local commuting 

area. DoD will continue to provide equal 

treatment and equal access and will 

comply with the merit system 

principles. 

Section 9901.515(b) of the proposed 

regulations allows DoD to establish 

procedures for the examination of 

applicants for entry into competitive 

and excepted service positions in NSPS. 

Such procedures must adhere to the 

merit system principles in 5 U.S.C. 2301 

and veterans’ preference requirements 

as set forth in 5 U.S.C. 3309 through 

3320, and include provisions for 

employees entitled to priority 

consideration in accordance with 5 

U.S.C. 8151. In response to a comment 

we received suggesting that this 

paragraph should address preference 

eligibility in the competitive service as 

well as the excepted service under 

NSPS procedures, and to provide clarity 

regarding the application of veterans’

preference, we have revised the second 

sentence of this section to include a 

reference to 5 U.S.C. 1302(b) and (c) 

concerning veterans’ preference in 

employment. We also made a technical 

correction to the third sentence by 

removing the reference to 5 U.S.C. 

1302(c). 

Section 9901.516—Internal Placement 

Section 9901.516 of the proposed 

regulations provides for DoD to 

prescribe implementing issuances 

regarding the assignment, reassignment, 

reinstatement, detail, transfer, and 

promotion of individuals or employees 

into or within NSPS. This section also 

addressed the establishment of inservice probationary periods by way of 

the implementing issuances. For clarity, 

we moved all references to probationary 

periods, to include in-service 

probationary periods, to § 9901.512. We 

made no other changes to this section. 

Subpart F—Workforce Shaping 

General Comments 

Commenters, including comments 

during the meet-and-confer process, 

were concerned that subpart F provides 

the Department with excessive rights to 

make decisions concerning the staffing 

of organizations, the abolishment of 

positions, and the need to implement a 

reduction in force (RIF). We disagree. 

The Department has no greater right to 

make restructuring decisions under 

subpart F than the Department presently 

has under section 351.201(a)(1) of 

OPM’s RIF regulations. 

Commenters, including comments 

during the meet-and-confer process, 

were also concerned that because 

subpart F provides more weight to 

performance as a retention factor than 

under OPM’s 5 CFR part 351 RIF 

regulations, employees’ retention 

standing under subpart F would be 

primarily based upon performance 

ratings rather than upon tenure and 

veterans’ preference. In fact, subpart F 

provides that, consistent with OPM’s 

RIF regulations, tenure remains the most 

important retention factor, with 

veterans’ preference the second most 

important factor. Subpart F gives 

performance greater retention weight by 

providing that performance is the third 

most important factor, while creditable 

service is the least important of the four 

factors. Under OPM’s RIF regulations, 

creditable service is the third most 

important factor while performance is 

the least important factor. The 

additional weight on performance is 

consistent with the Department’s 

implementation of a performance-based 

HR system. 

TABLE.—RELATIVE WEIGHT OF RETENTION FACTORS

Order of retention factors 

from highest to lowest OPM’s 5 CFR part 351 RIF regulations NSPS 5 CFR 9901 subpart F workforce shaping regulations 

1 ........................................... Tenure (i.e., type of appointment) .................................. Tenure (i.e., type of appointment). 

2 ........................................... Veterans’ Preference ...................................................... Veterans’ Preference. 

3 ........................................... Creditable Federal Service ............................................. Performance Ratings. 

4 ........................................... Performance Ratings ...................................................... Creditable Federal Service. 

In order to ensure fairness in RIF 

actions and an impartial review of 

Department decisions, such as 

abolishing positions and crediting 

performance ratings, subpart F provides 

an appeal right under § 9901.611 for an 

employee who is reached for a RIF 

action resulting in separation, reduction 

in pay band, or furlough for more than 

30 consecutive days (or more than 22 

discontinuous workdays), and who 

believes that the Department improperly 

applied subpart F. 

Commenters, including labor 

organizations participating in the meetand-confer process, recommended that 

the design and implementation of 

subpart F should be subject to collective 

bargaining. This would be inconsistent 

with the enabling legislation (5 U.S.C. 

9902(f)(4)), which makes the 

collaborative process the exclusive 

process for involvement of employee 

representatives in the planning, 

development, and implementation of 

the HR system. We have added language 

at §§ 9901.605(f) and 9901.606(e), which 

further clarifies that competitive areas 

and competitive groups are not subject 

to collective bargaining. Even so, in 

developing final subpart F regulations, 

we did consider all comments 

submitted by participating labor 

organizations, including comments 

during the meet-and-confer process. 

66162 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

Other Comments on Specific Sections of 

Subpart F 

Section 9901.601—Purpose and 

Applicability 

Section 9901.601 specifies that 

subpart F implements the Department’s 

system to determine employees’

retention rights resulting from 

organizational decisions such as 

realignment, reorganization, and 

closure. 

As an alternative to the RIF system in 

the proposed regulation, commenters 

suggested that the Department retain or 

modify OPM’s present 5 CFR part 351 

retention regulations as an alternative to 

subpart F. These suggestions were 

inconsistent with a performance-based 

HR system and were not adopted. 

Section 9901.602—Scope of Authority 

As authorized by 5 U.S.C. 9902(k), 

§ 9901.602 provides that subpart F 

modifies and then applies the statutory 

retention provisions in 5 U.S.C. 3501 

through 3503, except for the veterans’

preference provisions which are not 

modified in sections 3501 and 3502. 

Finally, the section also provides that 

the Department will further implement 

subpart F through implementing 

issuances in accordance with 

§ 9901.105. 

Section 9901.603—Definitions 

Section 9901.603 defines specific 

terms for purposes of subpart F. 

Commenters, including labor 

organizations participating in the meetand-confer process, suggested that 

subpart F clarify the definition of 

‘‘competing employee.’’ The Department 

will publish implementing issuances 

clarifying who is a ‘‘competing 

employee’’ under subpart F. 

In order to clarify how the 

Department will consider performance 

as a retention factor under 

§ 9901.607(a)(3), we added a definition 

of ‘‘modal rating’’ to § 9901.603. For 

purposes of subpart F, ‘‘modal rating’’

means the rating of record that occurs 

most frequently in a particular 

competitive group. The Department will 

publish implementing issuances further 

clarifying the consideration of 

performance in RIF competition under 

subpart F. 

Commenters, including comments 

during the meet-and-confer process, on 

both sections 9901.603 and 9901.607 

(‘‘retention list’’) suggested that the 

definition of ‘‘retention factors’’

specifically address the provision that 

retention factors includes ‘‘such other 

factors as the Secretary considers 

necessary and appropriate to rank 

employees within a particular retention 

list.’’ Commenters were also concerned 

that this discretion in the definition 

could lead to abuse in conducting RIF 

actions. After consideration of the 

comments, we decided to revise the 

definition of ‘‘retention factors’’ to 

reflect the actual ranking order of the 

four principal retention factors found in 

§ 9901.607(a) (i.e., tenure first, veterans’

preference second, performance third, 

and creditable service fourth) without 

any additional changes to the definition. 

The Department will appropriately 

cover any consideration given to 

additional retention factors through 

implementing issuances. However, even 

if the Department chooses to give 

consideration to additional factors 

under authority of this definition, the 

Department must still follow the 

ranking order of the four factors found 

in § 9901.607(a). 

A commenter suggested that a 

definition of ‘‘tenure’’ be added to 

§ 9901.603. We did not adopt this 

suggestion. Section 9901.603 defines 

‘‘tenure group’’ as the initial grouping of 

employees for RIF competition on the 

basis of the type of their appointments. 

Section 9901.607(a)(1) provides the 

ranking order of tenure as used in RIF 

actions under subpart F. The 

Department will publish implementing 

issuances on ‘‘tenure’’ to clarify for 

purposes of subpart F that tenure is 

granted and governed by the type of 

appointment under which an employee 

is currently serving without regard to 

whether his or her appointment is in a 

competitive position or an excepted 

position. 

Section 9901.604—Coverage 

Section 9901.604 specifies which 

employees and which personnel actions 

are covered by subpart F. 

Commenters suggested that 

§ 9901.604(a) of subpart F specifically 

exclude National Guard technicians 

who have retention rights under 32 

U.S.C. 709. The technicians are not 

currently covered by OPM’s RIF 

regulations; therefore, implementing 

issuances will similarly exclude the 

National Guard technicians from 

subpart F. 

Commenters, including comments 

during the meet-and-confer process, 

suggested that the regulations 

specifically address the provision in 

§ 9901.604(a)(2) providing that subpart 

F also applies to other employees 

‘‘designated by the Secretary as DoD 

may be authorized to include under 5 

U.S.C. 9902.’’ We retained the section as 

originally proposed. The Department 

will implement § 9901.604(a)(2) through 

implementing issuances. 

A commenter suggested that subpart F 

include term employees, who in fact 

compete for retention in the ranking 

order covered in § 9901.607(a)(1). Other 

commenters, including comments 

during the meet-and-confer process, 

suggested that subpart F exclude term 

employees from RIF competition. We 

did not adopt this suggestion. The 

Department will clarify the coverage of 

term employees in subpart F through 

implementing issuances. In response to 

another comment, the Department will 

also clarify through implementing 

issuances the retention rights under 

subpart F of seasonal employees, 

employees on other nonpermanent 

appointments, and employees on 

probationary appointments. 

Commenters, including comments 

during the meet-and-confer process, 

asked for clarification when subpart F 

would apply to employees of the 

Department. We agree that clarification 

is necessary. Proposed § 9901.604(b)(1) 

provided that subpart F applies to the 

release of a competing employee from a 

retention list by actions such as 

separation or reduction in band for a 

reason covered in § 9901.601 (e.g., 

realigning, reshaping, etc). After 

consideration of the comments, we 

revised § 9901.604(b)(1) to clarify that 

subpart F also applies to a displacement 

action affecting a competing employee 

within a retention list. 

A commenter agreed with the transfer 

of function provisions in 

§ 9901.604(b)(2), which provides that 

the Department applies 5 CFR part 351, 

subpart C, of OPM’s regulations to a 

transfer of function situation. Also, 

other commenters suggested that the 

Department develop its own transfer of 

function procedures for purposes of 

subpart F. After consideration of the 

comments, we revised § 9901.604(b)(2) 

and a conforming change in § 9901.602 

to provide that, consistent with the 

requirements in section 5 U.S.C. 3503, 

the Department may through 

implementing issuances implement its 

own transfer of function procedures 

under subpart F. 

Section 9901.604(b)(3) provides that 

the Department applies section 351.604 

of OPM’s regulations to implement a 

RIF furlough of more than 30 

consecutive calendar days. Commenters 

suggested that the Department develop 

its own RIF furlough procedures for 

purposes of subpart F. However, we 

believe that only clarification is 

necessary. Consistent with the 

definition of ‘‘furlough’’ in 5 CFR 

351.203 and the regulations in 5 CFR 

351.604, we revised § 9901.604(b)(3) to 

provide that subpart F applies to the 

furlough of a competing employee for 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66163 

more than 30 consecutive days or more 

than 22 discontinuous workdays. The 

Department will implement 

§ 9901.604(b)(3) through implementing 

issuances covering both continuous and 

discontinuous furloughs. 

Section 9901.604(c)(2) provides that 

subpart F does not apply to a reduction 

in band based upon reclassification due 

to new classification standards or the 

correction of classification error. 

Demotions resulting from 

misclassification or a new classification 

standard are similarly excluded from 

OPM’s RIF regulations. Commenters, 

including labor organizations 

participating in the meet-and-confer 

process, suggested that § 9901.604(c)(2) 

be revised to apply subpart F to both a 

reduction in band and a reduction in 

pay resulting from a classification 

decision. We did not adopt this 

suggestion because the Department 

believes there is no need to establish 

rules that differ from the 

Governmentwide RIF regulations in this 

regard. 

Section 9901.604(c)(7) provides that, 

with one exception, subpart F does not 

apply to a reduction in band based upon 

job erosion. The exception provides that 

subpart F applies to a reduction in band 

based upon job erosion when the agency 

has formally announced a reduction in 

force in the competitive area that will be 

effective within 180 days. Demotions 

resulting from job erosion are similarly 

excluded from OPM’s RIF regulations, 

with a comparable exception. 

Commenters, including labor 

organizations participating in the meetand-confer process, suggested that 

§ 9901.604(c)(7) be revised to apply 

subpart F to both a reduction in band 

and a reduction in pay resulting from 

job erosion. We did not adopt this 

suggestion because the Department 

believes there is no need to establish 

rules that differ from the 

Governmentwide RIF regulations in this 

regard. 

Section 9901.605—Competitive Area 

Section 9901.605 covers ‘‘Competitive 

Area,’’ which defines the organizational 

and geographic boundaries within 

which employees compete for retention 

under subpart F. 

Commenters, including labor 

organizations participating in the meetand-confer process, believed that the 

minimum competitive area under 

§ 9901.605(a) was too narrow and could 

encourage the Department to target 

employees for RIF actions. One 

commenter supported the competitive 

area standard under § 9901.605(a). After 

consideration of comments on the 

competitive area standard, we have 

retained § 9901.605(a) without revision. 

Section 9901.605(a) provides the 

Department with the option of 

restricting RIF actions to organizations 

and positions directly affected by 

organizational decisions such as 

realignment, reorganization, and 

closure. The Department also retains the 

option to use a competitive area larger 

than the minimum standard (e.g., an 

entire activity could be defined as a 

single competitive area). 

To ensure fairness in the 

Department’s competitive area 

decisions, § 9901.605(e) requires that a 

competitive area must be established 

only on the basis of legitimate 

organizational reasons. The section 

prohibits establishment of a competitive 

area for the purpose of targeting an 

employee for a RIF action because of 

nonmerit factors. An employee who is 

reached for a separation, demotion, or 

furlough action, and believes that the 

Department improperly established a 

competitive area under subpart F, may 

appeal the Department’s decision under 

§ 9901.611. 

Commenters suggested that subpart F 

clarify the competitive area standard 

and terminology under § 9901.605(a). 

Commenters also requested that subpart 

F clarify the Department’s oversight role 

in reviewing competitive area decisions. 

Another commenter suggested that 

subpart F clarify whether § 9901.605 

potentially authorizes establishment of a 

one-person competitive area. Finally, 

commenters, including labor 

organizations participating in the meetand-confer process, suggested that 

subpart F clarify the Department’s 

procedures for approving a change in 

the competitive area definition within 

90 days of the effective date of the RIF. 

The Department will clarify the 

competitive area standard, its 

terminology, and related material in 

implementing issuances. 

Labor organizations participating in 

the meet-and-confer process suggested 

that § 9901.605 be revised to provide 

that a competitive area may not include 

only preference eligibles. This 

suggestion was not adopted. Section 

9901.605 provides that the Department 

establishes competitive areas solely on 

the basis of organizational and 

geographic decisions, not on the basis of 

the retention standing of individual 

employees in the competitive areas. 

A commenter was concerned that a 

competitive area defined under 

§ 9901.605 could result in the release of 

an employee with higher performance 

ratings than another employee in a 

different competitive area. We recognize 

that this scenario may result from any 

RIF situation, and could also occur 

today under current OPM regulations 

where employees compete for retention 

only within a single competitive area. 

A commenter was concerned that a 

competitive area defined in § 9901.605 

could limit the potential future 

promotion opportunities of an employee 

involved in RIF competition. That 

scenario, too, may result from any RIF 

situation, including actions taken today 

under OPM’s regulations. 

A commenter was concerned that an 

employee reached for a RIF action under 

subpart F could not appeal a 

competitive area decision. As 

previously noted, an employee may 

appeal the competitive area as part of a 

RIF appeal under § 9901.611. 

Section 9901.606—Competitive Group 

Section 9901.606 covers the 

‘‘competitive group,’’ which serves as 

the basis for ranking employees on the 

basis of their relative retention standing. 

After the Department applies the 

retention factors (i.e., tenure, veterans’

preference, performance, and creditable 

service), the competitive group ranks 

employees in the order of their relative 

standing on a ‘‘retention list’’ that is 

similar to a ‘‘retention register’’ under 5 

CFR 351.404 of OPM’s RIF regulations. 

Commenters, including labor 

organizations participating in the meetand-confer process, were concerned that 

a competitive group established under 

§ 9901.606(a) provides too narrow a 

basis for RIF competition. After 

consideration of comments on 

establishment of a competitive group, 

§ 9901.606(a) is adopted without 

revision. Section 9901.606(a) provides 

the Department with an additional 

option to restrict RIF actions to 

organizations and positions directly 

affected by organizational decisions 

such as realignment, reorganization, and 

closure. The Department also retains the 

option to establish a larger competitive 

group that potentially could cover an 

entire activity. 

A commenter was concerned that a 

competitive group defined in 

§ 9901.606(a) could limit the potential 

future promotion opportunities of an 

employee involved in RIF competition. 

That situation could result in any RIF, 

including actions taken today under 

OPM’s regulations. 

Commenters suggested that subpart F 

clarify how and when the Department 

will establish and/or modify 

competitive groups. A commenter also 

suggested that subpart F clarify 

competitive group terminology. The 

Department will clarify its competitive 

group policies in implementing 

issuances. 

66164 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

Section 9901.606(c) provides that the 

Department uses employees’ official 

positions of record to place employees 

into a competitive group. The section 

also provides that the Department ‘‘may 

supplement an employee’s official 

position description by using other 

applicable records that document the 

employee’s actual duties and 

responsibilities.’’ A commenter 

suggested that the Department place 

employees into a competitive group 

only on the basis of their official 

positions of record. Other commenters 

suggested that subpart F cover how the 

Department will use records other than 

official positions to establish 

competitive groups. After consideration 

of the comments, we have retained 

§ 9901.606(c) without revision. Section 

9901.606(c) provides the Department 

with maximum flexibility in 

establishing competitive groups based 

upon employees’ actual duties and 

responsibilities. 

Commenters suggested revision of 

§ 9901.606 to provide that the 

Department may not establish a 

competitive group comprised of fewer 

than 25 employees. Commenters, 

including labor organizations 

participating in the meet-and-confer 

process, also suggested revision of 

§ 9901.606 to provide that the 

Department may not establish a 

competitive group comprised only of 

preference eligibles. We did not adopt 

these suggestions. The Department 

makes staffing decisions under subpart 

F based upon organizational 

considerations. Consistent with this 

premise, § 9901.606 provides that the 

Department establishes competitive 

groups based upon employees’ positions 

without regard to the number of 

employees performing those positions. 

Section 9901.607—Retention Standing 

Section 9901.607 covers ‘‘retention 

standing’’ on a ‘‘retention list’’ under 

subpart F. The Department ranks 

employees on a ‘‘retention list’’ on the 

basis of their relative retention standing. 

This section also covers access by 

employees and their representatives to 

the retention list. 

Commenters suggested that subpart F 

clarify the ranking order of the factors 

the Department uses to establish 

retention lists under § 9901.607. In fact, 

sections 9901.607(a)(1)–(4) mandate the 

required order and weight of the 

retention factors (i.e., tenure has the 

most weight, creditable service has the 

least weight). The Department will 

publish implementing issuances further 

clarifying the ranking order of the 

retention factors in § 9901.607(a). 

Section 9901.607(a)(1) provides that 

in ranking employees on the retention 

list, employees with career tenure, 

including employees serving an initial 

probationary period, are listed first, 

followed by employees on term and 

similar appointments as identified in 

DoD implementing issuances. 

Commenters, including comments 

during the meet-and-confer process, 

suggested that employees serving an 

initial probationary period on 

appointment to the Federal service be 

listed below employees with career 

tenure, and above employees with term 

or similar appointments. We agree with 

this suggestion and have accordingly 

revised § 9901.607(a)(1) to incorporate 

this change. Commenters suggested that 

§ 9901.607(a)(1) be revised to clarify 

whether, before a RIF, the Department 

may convert a temporary noncompeting 

employee with no retention rights under 

subpart F to a permanent position that 

provides the incumbent with full 

retention rights. We did not adopt this 

suggestion. The Department has the 

right to take appropriate personnel 

actions before, during, and after the 

effective date of the RIF. A commenter 

suggested that § 9901.607(a)(1) be 

revised to include service as a tenure 

element. We did not adopt this 

suggestion. Creditable service is a 

separate retention factor covered by 

§ 9901.607(a)(4). 

Commenters noted that 

§ 9901.607(a)(2) erroneously referenced 

5 CFR 351.504(c) and (d) rather than 5 

CFR 351.501(c) and (d) of OPM’s RIF 

regulations. We corrected this misprint. 

Commenters were concerned that 

§ 9901.607(a)(2) reduces the relative 

weight of veterans’ preference as a 

retention factor under subpart F. In fact, 

§ 9901.607(a)(2) applies veterans’

preference with the same retention 

weight as under OPM’s current RIF 

regulations, which are referenced in 

§ 9901.607(a)(2). Specifically, under 

§ 9901.607(a)(2) veterans’ preference is 

considered as a retention ranking factor 

immediately after tenure on the same 

basis as OPM’s regulations consider 

veterans’ preference in the context of 

tenure. 

A commenter suggested that 

§ 9901.607(a)(2) be revised to include a 

cite to the statutory basis for veterans’

preference in RIF. This suggestion was 

not adopted. Section 9901.602 states 

that, without modification, subpart F 

applies the RIF and statutory preference 

requirements mandated by 5 U.S.C. 

3501 through 3503. Also, 

§ 9901.607(a)(2) references back to the 

provisions in 5 CFR 351.501(c) and (d) 

of OPM’s reduction in force regulations 

that implement the retention preference 

requirements. 

A commenter suggested that 

§ 9901.607(a)(2) be revised to increase 

the relative weight of veterans’

preference as a retention factor. This 

suggestion was not adopted. Section 

9901.607(a)(2) provides veterans’

preference with the same weight in 

determining RIF retention standing as 

under OPM’s regulations. 

As noted in the General Comments 

section above, commenters, including 

labor organizations participating in the 

meet-and-confer process, were 

concerned that § 9901.607(a)(3) 

excessively increases the relative weight 

of performance as a retention factor 

under subpart F. Section 9901.607(a)(3) 

considers performance as the third most 

important retention factor after tenure 

and veterans’ preference. Under OPM’s 

RIF regulations, performance receives 

the least weight as a retention factor. As 

we noted in the General Comments, the 

additional retention weight for 

performance is fully consistent with the 

goal of increasing the likelihood that 

higher-performing employees will be 

retained in the event of a RIF. 

Commenters, including labor 

organizations participating in the meetand-confer process, asked that 

§ 9901.607(a)(3) clarify how the 

Department will provide additional 

weight to performance as a retention 

factor. The Department will publish 

implementing issuances clarifying the 

consideration of performance in RIF 

competition under subpart F. Other 

commenters requested clarification on 

how the Department will ensure that 

ratings are impartial and objective, as 

well as how an employee may contest 

a rating within the Department. These 

concerns are discussed in subpart D. 

Commenters, including labor 

organizations participating in the meetand-confer process, suggested that 

§ 9901.607(a)(3) be revised to clarify that 

the Department will not always use a 

single rating of record to determine the 

weight of performance upon an 

employee’s retention standing. We agree 

with this suggestion. The Department’s 

implementing issuances covering the 

consideration of performance in RIF 

competition under subpart F will 

explain how employees will receive 

retention credit for their multiple 

ratings under the Department’s 

personnel system. In a conforming 

change, § 9901.603 includes a definition 

of ‘‘modal rating’’ that the Department 

will use to determine retention credit 

for employees who do not have any 

ratings of record under the Department’s 

personnel system. 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66165 

Commenters suggested that 

§ 9901.607(a)(3) be revised to provide 

that performance receive the same or no 

greater retention weight than creditable 

service. This suggestion was not 

adopted. Consistent with the 

Department’s personnel system that 

emphasizes performance, 

§ 9901.607(a)(3) provides that 

performance receives greater weight as a 

retention factor than creditable service. 

A commenter suggested that 

performance receive less weight under 

subpart F than veterans’ preference. As 

previously noted, §§ 9901.607(a)(2) and 

(a)(3) provide that veterans’ preference 

is considered as a retention factor before 

performance under subpart F. 

Commenters suggested that 

§ 9901.607(a)(3) be revised to increase 

the relative weight of performance over 

veterans’ preference as a retention 

factor. This suggestion was not adopted. 

Section 9901.607(a)(2) considers 

veterans’ preference on the same basis 

as under OPM’s regulations determining 

RIF retention standing, while 

§ 9901.607(a)(3) provides less weight to 

performance than veterans’ preference 

as a retention factor. 

Commenters suggested that subpart F 

provide retention credit for performance 

on the same basis as OPM regulations. 

This suggestion was not adopted. The 

additional weight for performance as a 

retention factor under subpart F is 

consistent with the increased emphasis 

on performance in the Department’s 

new personnel system. 

Commenters, including labor 

organizations participating in the meetand-confer process, were concerned that 

§ 9901.607(a)(4) excessively decreases 

the relative weight of creditable service 

as a retention factor under subpart F. 

Section 9901.607(a)(4) considers service 

as the fourth and least important 

retention factor. Under OPM’s RIF 

regulations, service is the third most 

important retention factor, while 

performance receives the least weight as 

a factor. Again, the decreased retention 

weight on service and the additional 

weight for performance are consistent 

with the increased emphasis on 

performance in the Department’s 

performance-based personnel system. 

A commenter suggested that subpart F 

clarify ‘‘length of service.’’ Section 

9901.607(a)(4) provides that employees 

receive retention credit for creditable 

civilian and Armed Forces service on 

the basis of 5 U.S.C. 3502(a)(A) and (B), 

and OPM’s regulations in 5 CFR 

351.503. However, we believe that 

clarification is necessary. We revised 

§ 9901.607(a)(4) to provide that in 

calculating creditable civilian and 

uniformed service under subpart F, the 

Department uses 5 CFR 351.503 of 

OPM’s RIF regulations, but without 

regard to provisions covering additional 

service credit for performance in 5 CFR 

351.503(c)(3) and (e) of OPM’s 

regulations. The Department will 

publish implementing issuances 

clarifying RIF service credit under 

subpart F. 

In a clarifying edit, we added 

§ 9901.607(a)(5), which provides that 

the Department may establish tiebreaking procedures when two or more 

employees have the same retention 

standing. This sentence was included in 

§ 9901.607(a)(4) of the proposed 

regulations. 

Commenters, including labor 

organizations participating in the meetand-confer process, suggested that 

§ 9901.607(c) be revised to provide that 

all employees have access to a retention 

list established under § 9901.607(a)(1). 

We did not adopt this suggestion 

because § 9901.607(c) provides that 

employees who have received a specific 

written RIF notice have access to a 

retention list in accordance with 5 CFR 

351.505 of OPM’s RIF regulations. 

However, we believe that clarification is 

necessary. We revised § 9901.607(c) to 

provide that in allowing access to 

retention records, the Department uses 

section 5 CFR 351.505 of OPM’s 

reduction in force regulations, but 

substitutes ‘‘retention list’’ for 

‘‘competitive level’’ or ‘‘retention 

register.’’ The Department will publish 

implementing issuances clarifying 

access to retention lists under 

9901.607(c). 

Section 9901.608—Displacement, 

Release, and Position Offers 

Section 9901.608 covers personnel 

actions that result in displacement 

within the retention list or the release of 

an employee from a retention list under 

subpart F. A qualified employee reached 

for release from his/her present position 

because of position abolishment or 

displacement by a higher-standing 

employee on the retention list may 

potentially displace a lower-standing 

employee on the list before separation 

or furlough by RIF. 

A commenter suggested that 

§ 9901.608(a) be revised to clarify how 

the Department determines that a 

higher-standing employee is qualified to 

displace a lower-standing employee on 

the retention list. Another commenter 

suggested that § 9901.608(a)(1)(i) be 

revised to eliminate a requirement that 

the Department only uses 5 CFR 351.702 

of OPM’s retention regulations to 

determine employees’ qualifications for 

displacing a lower-standing employee 

on the retention list under subpart F. 

We agree that clarification is necessary. 

We revised § 9901.608(a)(1)(i) to provide 

that in determining the qualifications of 

a higher-standing employee to displace 

a lower-standing employee under 

subpart F, the Department uses, as 

applicable, 5 CFR 351.702 of OPM’s 

retention regulations, or its own 

qualifications, consistent with other 

requirements in 5 CFR 351.702. The 

Department will publish implementing 

issuances clarifying qualification 

determinations for displacement within 

a retention list under § 9901.608(a). We 

also added § 9901.608(a)(1)(iii) to clarify 

that a displaced employee must be in 

the same or lower pay band as the 

higher-standing employee who 

displaced him/her. 

Commenters suggested that 

§ 9901.608(a) be revised to clarify 

terminology such as ‘‘status’’ and 

‘‘undue interruption.’’ The Department 

will publish implementing issuances 

clarifying terminology under 

9901.608(a). 

A commenter suggested that 

§ 9901.608(a) be revised to require the 

Department to provide positive efforts 

that would increase the likelihood of 

higher-standing employees being 

qualified to displace employees with 

lower retention standing. We did not 

adopt this suggestion. We believe it 

would be unfair for the Department to 

pursue a program whose purpose is to 

increase the likelihood of one category 

of employees displacing a different 

category of employees in a RIF. 

Commenters suggested that 

§ 9901.608(b)(1) be revised to clarify the 

order in which employees are released 

from the retention list. Section 

9901.608(b)(1) provides that, consistent 

with the order of retention required by 

§ 9901.607(a), employees with the 

lowest retention standing are released 

before higher standing employees on the 

retention list. 

Commenters also suggested that 

§ 9901.608(b)(2) clarify displacement 

rights involving time-limited positions. 

We agree that clarification is necessary. 

We revised § 9901.608(b)(2) to provide 

that under subpart F a competing 

employee may not be released from a 

retention list containing a position held 

by a temporary employee when the 

competing employee is qualified for the 

position under § 9901.608(a)(1)(i). The 

Department will publish implementing 

issuances clarifying release from 

retention lists under 9901.608(b). 

A commenter suggested that 

§ 9901.608(b) clarify the procedures that 

the Department uses to break ties in 

employees’ relative retention standing. 

The Department will publish 

implementing issuances clarifying tieVerDate Aug<31>2005 16:44 Oct 31, 2005 Jkt 208001 PO 00000 Frm 00051 Fmt 4701 Sfmt 4700 E:\FR\FM\01NOR3.SGM 01NOR3
66166 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

breaking procedures in releasing 

employees from retention lists. Section 

9901.607(a)(5) of the final regulations 

covers the Department’s right to 

establish tie-breaking procedures. 

A commenter suggested that 

§ 9901.608(b)(3) clarify how the 

Department will use exceptions to the 

regular order of release from the 

retention list. We agree that clarification 

is necessary. We revised 

§ 9901.608(b)(3) to provide that in 

temporarily postponing the release of an 

employee from the retention list, the 

Department uses 5 CFR 351.506, 

351.606, 351.607, and 351.608 of OPM’s 

RIF regulations, but substitutes the term 

‘‘retention list’’ for the term 

‘‘competitive level’’ where part 351 uses 

that term in the four identified sections. 

The Department will publish 

implementing issuances further 

clarifying exceptions to the usual order 

of release under § 9901.608(b)(3). 

Commenters suggested that 

§ 9901.608(c) clarify whether the 

Department will consider employees’

retention standing in offering vacant 

positions under subpart F. We agree that 

clarification is necessary. Section 

9901.608(c) provides that the 

Department must use retention standing 

in offering a vacant position in the same 

competitive area to an employee 

released from a retention list under 

subpart F. We revised § 9901.608(c) to 

clarify that the Department must use 

retention standing when offering a 

vacancy in the same competitive area to 

an employee who is competing on the 

retention list under § 9901.608(a)(1) 

because of either position abolishment 

or displacement by an employee with 

higher retention standing. The 

Department will publish implementing 

issuances clarifying offers of vacancies 

under § 9901.608(c). 

A commenter asked whether a 

released employee who is offered a 

vacancy under § 9901.608(c) has any 

potential rights to pay retention. The 

Department will publish implementing 

issuances clarifying employees’

entitlements to pay retention under 

§ 9901.608(c). However, in a conforming 

change, we have revised § 9901.355 of 

subpart C to provide additional 

information on pay retention. 

Commenters, including labor 

organizations participating in the meetand-confer process, suggested that 

§ 9901.608(d) be revised to provide that, 

in lieu of RIF separation or furlough, an 

employee released from a retention list 

would have potential displacement 

rights to positions held by lowerstanding employees on other retention 

lists similar to ‘‘bump’’ and ‘‘retreat’’

regulations provided to released 

employees under subpart G of part 351 

of OPM’s RIF regulations. This 

suggestion was not adopted. Section 

9901.608(d) provides the Department 

with flexibility to restrict RIF actions to 

organizations and positions directly 

affected by organizational decisions 

such as realignment, reorganization, and 

closure. In a related clarification, we 

revised § 9901.608(d)(2) to provide that 

the furlough of an employee released 

from a retention list is covered by 

§ 9901.604(b)(3). The Department will 

publish implementing issuances 

clarifying actions following the release 

of employees from a retention list under 

§ 9901.608(d). 

Section 9901.609—Reduction in Force 

Notices 

Section 9901.609 covers the notice 

that the Department must issue to each 

employee before release from the 

retention list under subpart F. The 

Department must issue a specific 

written notice a minimum of 60 days 

before the employee is reached for 

release from the retention list by a RIF 

action (e.g., separation or furlough). 

Commenters suggested that 

§ 9901.609 be revised to provide 120 

days written notice. This suggestion was 

not adopted. The requirement for a 

minimum 60 days notice of a RIF action 

is consistent with the requirements of 5 

U.S.C. 3502(d)(1)(A) for OPM’s 

regulations published in 5 CFR 

351.801(a)(1). The Department will 

publish implementing issuances 

clarifying the content of RIF notices 

issued under § 9901.609. 

In a clarifying change consistent with 

management flexibilities provided by 5 

CFR 351.801(b), § 9901.609 is revised to 

provide that when the Department 

applies subpart F because of 

circumstances not reasonably 

foreseeable, the Secretary, at the request 

of a component head or designee, may 

approve a RIF notice period of less than 

60 days. The notice period must cover 

at least 30 days before the date of release 

from the retention list. The Department 

will publish implementing issuances 

covering a RIF notice period of less than 

60 days under § 9901.609. 

Section 9901.610—Voluntary 

Separation 

Section 9901.610 covers voluntary 

separation from the Department as a RIF 

action. Under this option, the 

Department may allow an employee to 

volunteer for separation from the service 

by reduction in force when the action 

avoids the RIF separation of another 

employee. 

One commenter suggested that the 

Department use the voluntary 

separation option to avoid RIF actions. 

The Department will publish 

implementing issuances clarifying the 

applicability of voluntary RIF 

separations under § 9901.610. 

Section 9901.611—Reduction in Force 

Appeals 

Section 9901.611 covers RIF appeals. 

An employee who is reached for a RIF 

action resulting in separation, reduction 

in band, or furlough under 

§ 9901.604(b), and who believes that the 

Department improperly applied subpart 

F, has the right to appeal to the Merit 

Systems Protection Board. Also, 

commenters during the meet-and-confer 

process suggested, as an alternative to 

appealing RIF actions to the Board, 

employees should instead have the right 

to file a grievance. We did not adopt this 

suggestion. Section 9901.611(a) 

references 5 CFR 351.901 of OPM’s 

regulations in providing the same 

impartial right to appeal a RIF action 

under subpart F as provided to an 

employee under OPM’s retention 

regulations. 

For clarification, we revised 

§ 9901.611(a)(3) to provide that an 

employee has the right under subpart F 

to appeal a furlough of more than 30 

days, as defined in § 9901.604(b)(3). 

Commenters, including labor 

organizations participating in the meetand-confer process, suggested that 

§ 9901.611(a) be revised to provide a 

right to appeal a RIF action under 

subpart H of part 9901 (‘‘Appeals’’). 

This suggestion was not adopted. 

Subpart H of part 9901 only covers 

appeals of certain adverse actions taken 

under subpart G of part 9901 (e.g., 

removals, suspensions for more than 14 

days, furloughs of 30 or less consecutive 

days, and reductions in pay band—or a 

comparable reduction). The procedures 

in subpart H are appropriate for 

reviewing an adverse action appeal (i.e., 

an appeal of a personnel action that the 

Department took for cause). In contrast, 

§ 9901.611(a) provides for the right to 

appeal a RIF action (i.e., an appeal of a 

personnel action that the Department 

took for an organizational reason) on the 

same basis as under OPM’s RIF 

regulations. 

Commenters suggested revision of 

§ 9901.611(a) to provide for expedited 

Board review of appeals under subpart 

F. This suggestion was not adopted. 

Section 9901.611 provides for the right 

to appeal a RIF action to the Board using 

the same procedures as an appeal under 

OPM’s regulations. 

Commenters, including labor 

organizations participating in the meetand-confer process, suggested revision 

of § 9901.611(b) to provide for the right 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66167 

to appeal to the Board, or another thirdparty appellate body, an action taken 

under internal Department placement 

programs. This suggestion was not 

adopted. Section 9901.611(b) does not 

provide the right to appeal an internal 

placement action (including a 

placement under the Priority Placement 

Program). An employee who believes 

that the Department failed to properly 

effect an internal placement action may 

contest the action through a grievance or 

other remedy available for the review of 

the Department’s internal staffing 

decisions. 

Subpart G—Adverse Actions 

General Comments 

Many commenters, including labor 

organizations participating in the meetand-confer process, objected to the 

provisions in subpart G. They felt that 

the proposed regulations would 

adversely impact due process rights, 

discrimination and whistleblowing 

claims, and the ability to retain staff. We 

disagree. Under the enabling legislation, 

DoD is prohibited from waiving or 

modifying any provision relating to 

prohibited personnel practices or merit 

system principles, including reprisal for 

whistleblowing or unlawful 

discrimination. The regulations 

therefore do not modify these 

protections in any way. The enabling 

legislation also requires DoD to ensure 

that employees are afforded the 

protections of due process, which we 

have done. In accordance with U.S. 

Supreme Court decisions, the 

regulations ensure employees notice, a 

right to reply, a final written decision, 

and a post-decision review when the 

Secretary proposes to deprive them of 

constitutionally protected interests in 

their employment. Although we have 

made changes to the proposed 

regulations, due process and other legal 

protections are preserved as required by 

Congress, and we do not believe the 

regulations in this subpart will have any 

negative effect on retention efforts. 

Section 9901.701—Purpose 

This section outlines the purpose of 

this subpart and provides for the 

development and publication of DoD 

implementing issuances. During the 

meet-and-confer process, the 

participating labor organizations stated 

that DoD does not have the authority to 

prescribe implementing issuances to 

carry out the provisions of this subpart. 

We disagree. The enabling legislation 

expressly states that the Secretary and 

the Director will jointly prescribe 

regulations for the system. This carries 

with it the authority for the Secretary to 

provide further clarification, guidance, 

and instruction on these regulations 

through implementing issuances. It is 

also consistent with the continuing 

collaboration process described in 

§ 9901.106 which implements 5 U.S.C. 

9902(f)(1)(D). 

Section 9901.702—Waivers 

This section specifies the provisions 

of title 5, U.S. Code, that are waived for 

employees that are covered by the NSPS 

adverse action system established under 

subpart G. During the meet-and-confer 

process, the participating labor 

organizations recommended that this 

provision be deleted. We do not agree 

with this recommendation because it is 

inconsistent with the enabling 

legislation, which allows waiver of 

certain provisions of title 5, U.S. Code, 

and the creation of new adverse action 

procedures. We have made no changes 

to this section. 

Section 9901.703—Definitions 

This section defines terms relevant to 

this subpart. The labor organizations 

participating in the meet-and-confer 

process recommended that the 

definition of ‘‘adverse action’’ be 

amended to include ‘‘demotion’’ and 

exclude the words ‘‘or other comparable 

reduction.’’ We disagree. The term 

‘‘demotion’’ is not used in the 

regulations. The concept of demotion is 

covered through reduction in pay band 

(or comparable reduction). The term 

‘‘comparable reduction’’ is taken 

directly from the enabling legislation. 

These labor organizations also 

recommended that a definition be added 

for ‘‘band.’’ Commenters, and labor 

organizations during the meet-andconfer process, recommended that a 

definition be added for ‘‘day.’’ We agree 

and have added definitions for those 

terms. A definition of ‘‘reduction in 

pay’’ has also been added to clarify that 

nonreceipt of a pay increase (such as a 

rate range adjustment, supplemental 

adjustment, or a performance pay 

increase) does not constitute a reduction 

in pay and therefore is not an adverse 

action. 

During the meet-and-confer process, 

labor organizations also suggested that 

the definitions of ‘‘indefinite 

suspension,’’ ‘‘pay,’’ and ‘‘suspension’’

be modified. Since the definitions for 

these terms are essentially identical to 

current statutory and regulatory 

definitions, we see no basis for making 

the suggested modifications. Finally, 

labor organizations, as well as 

commenters, recommended the deletion 

of ‘‘mandatory removal offenses’’

(MROs). We disagree because of that 

term’s relevance to this section and the 

fact that the concept of MROs is 

retained. 

Section 9901.704—Coverage 

Section 9901.704 describes the types 

of actions and employees covered by 

and excluded from coverage under the 

subpart. Commenters, as well as labor 

organizations participating in the meetand-confer process, recommended that 

employees who are serving in-service 

probationary periods be given appeal 

rights. We have clarified that employees 

who are serving an in-service 

probationary period will have appeal 

rights if they are not returned to a grade 

or band and pay rate no lower than that 

held before the in-service probationary 

period. The labor organizations, during 

the meet-and-confer process, also 

recommended that we add a provision 

stating that employees who are 

excluded from the enabling legislation 

are not covered by this provision. Such 

a provision is unnecessary because 

employees excluded from coverage 

under the enabling legislation are not 

covered by any provision of the NSPS 

regulations. 

We received many comments 

suggesting we add reduction in force 

(RIF) actions to coverage. We believe the 

NSPS appeal system should be limited 

to removals, suspensions for more than 

14 days, furlough for 30 days or less, 

and reduction in pay or pay band (or 

comparable reduction) as set forth in 5 

U.S.C. 9902(h)(4)(A). Employees subject 

to RIF actions will continue to have the 

same appeal rights as they do today and 

that is made clear in subpart F of the 

regulations. Commenters recommended 

clarification as to whether adverse 

actions resulting from agency suitability 

determinations are excluded. We 

believe such clarification is unnecessary 

since agency suitability actions, 

including removals, are taken under 5 

U.S.C. chapter 73. Suitability actions 

under chapter 73 are by definition not 

adverse actions. Moreover, the enabling 

legislation expressly excludes from its 

coverage suitability actions taken under 

5 U.S.C. chapter 73. See 5 U.S.C. 

9902(d)(2). Other commenters 

recommended that term employees be 

excluded from coverage. The 

Department wishes to maintain the 

status quo with respect to term 

employees’ appeal rights. One 

commenter suggested that the 

movement of an employee to a lower 

pay band not be considered an adverse 

action under NSPS when such 

movement is the result of a less than 

fully successful performance rating. We 

disagree. The enabling legislation 

identified a reduction in pay band as an 

appealable action. 

66168 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

Section 9901.711—Standard for Action 

This provision describes the standard 

for taking an action against an employee 

as ‘‘for such cause as will promote the 

efficiency of the service.’’ During the 

meet-and-confer process, participating 

labor organizations, as well as most 

commenters, agreed with this provision. 

However, some commenters stated that 

this standard provides management too 

much discretion. We have retained this 

long-standing and well established 

‘‘efficiency of the service’’ standard. 

Section 9901.712—Mandatory Removal 

Offenses 

This provision gives the Secretary the 

authority to identify Mandatory 

Removal Offenses (MROs), which are 

offenses that have a direct and 

substantial impact on the Department’s 

national security mission. An employee 

who commits such an offense must be 

removed from Federal service, unless 

the Secretary determines in his or her 

sole and exclusive discretion that a 

lesser penalty is appropriate. 

Commenters as well as participating 

labor organizations during the meetand-confer process stated that this 

provision should be deleted in its 

entirety because in their view, the 

establishment of MROs exceeds DoD’s 

authority under the enabling legislation 

and is open to abuse. Some commenters 

stated that MROs should be defined and 

subject to public comment through the 

formal rule-making process. 

Commenters expressed concern that the 

Secretary can issue and change the list 

at will. Some commenters stated that 

the Secretary should not be the only 

mitigating authority for MROs and that 

his non-reviewable discretion is 

inappropriate for a political appointee. 

In addition, commenters stated MROs 

do not leave any room for flexibility 

based on individual circumstances or 

mitigating factors and takes the 

flexibility away from DoD supervisors. 

Other commenters expressed concern 

that if an MRO offense is not sustained, 

an employee can still be charged with 

a non-MRO offense based on the same 

facts. 

We disagree that the establishment of 

MROs exceeds the Department’s 

authority. The enabling legislation 

expressly provides authority to waive 

the current statutory provision 

governing adverse action in establishing 

the HR system. Although no MROs have 

been established, the provision that 

allows for the establishment of MROs 

must be retained to support the vital 

mission of the Department. We have 

revised the proposed regulations to 

provide, at a minimum, that MROs will 

be (1) identified in advance as part of 

the Department’s implementing 

issuances, (2) publicized upon 

establishment via notice in the Federal 

Register, and (3) made known to all 

employees on a periodic basis, as 

appropriate, through means determined 

by the Department. Examples of 

potential MROs are provided under 

Major Issues: Adverse Actions and 

Appeals. The offenses that may be 

identified as MROs will be so egregious 

as to have a direct and substantial 

adverse impact on the Department’s 

national security mission, and therefore 

would not properly be subject to 

mitigation except in unusual 

circumstances as determined by the 

Secretary. Employees who commit such 

offenses must be removed from the 

Department and the Federal service. The 

support of the national security mission 

outweighs any loss of flexibility in the 

system. We disagree that it is 

inappropriate for the Department to 

have the ability to take a subsequent 

action if the offense is found to not be 

an MRO. We believe that if an 

employee’s misconduct is found to 

qualify as an MRO, it does not mean 

that the misconduct should not be 

addressed. For misconduct amounting 

to an MRO, mitigation of penalties, 

review of notice letters, and designation 

of offenses must be at the highest levels 

of the Department to prevent abuse, 

ensure judicious use of the authority, 

and provide maximum transparency for 

employees. In light of the above, we 

believe that MROs need not be subject 

to public comment through the formal 

rule-making process. They will, 

however, be subject to continuing 

collaboration with employee 

representatives. This ensures 

transparency in the process of 

establishing MROs. 

Section 9901.714—Proposal Notice 

This provision outlines procedures for 

issuing proposal notices, including a 

shorter advance notice period of at least 

15 days. Commenters and labor 

organizations participating in the meetand-confer process recommended 

retaining the current 30-day written 

notice of a proposed adverse action. 

Other commenters argued that due 

process is denied because of the 

potential inability to gather and review 

evidence within the proposed time 

frame. We disagree that the advance 

written notice period should be 30 days. 

The shortened notice supports the NSPS 

goal of streamlining the adverse action 

process and provides adequate time for 

consideration of evidence. We have 

clarified in the regulations that the 15- 

day notice period represents the 

minimum period of time for advance 

notice to the employee. We have further 

modified this section to clarify that 

notice of proposed adverse action or 

opportunity to reply are not required in 

the event of a furlough of 30 days or less 

without pay due to unforeseeable 

circumstances. 

This provision also shortens the 

minimum notice period from 7 to 5 days 

in situations where there is reasonable 

cause to believe a crime has been 

committed. Commenters and labor 

organizations participating in the meetand-confer process recommended 

retaining the current crime provision 

notice period of 7 days. We believe that 

5 days is the appropriate amount of time 

to allow for notice and reply in such 

situations given the need to take action 

in these situations. Commenters 

expressed concern over the lack of an 

explicit requirement that the 

Department have actual knowledge of a 

criminal investigation or criminal 

charges being filed against an employee 

before imposing the 5-day notice period. 

Commenters also recommended that 

‘‘reasonable cause’’ be defined. The 

criteria under which the crime 

provision may be invoked is well 

established in current statute, 

regulation, and case law and was not 

changed in the proposed regulations. 

We do not believe it necessary to define 

reasonable cause in these regulations. 

Each case is unique and considerable 

guidance is provided in existing case 

law. 

Labor organizations during the meetand-confer process recommended 

including a requirement for DoD to 

provide employees copies of all 

evidence including exculpatory 

evidence during the notice period. 

While the regulations do not require 

that copies of evidence be delivered to 

the employee, the Department will 

ensure that the employee is informed of 

his or her right to review the 

Department’s evidence supporting the 

proposed action. There is no need to 

specifically require DoD to make 

exculpatory evidence available to the 

employee during the notice period since 

all evidence relied upon by the 

decision-maker must be made available 

to the employee. 

Labor organizations during the meetand-confer process also recommended 

modifying the proposed regulations 

with regard to the status of an employee 

during the notice period. Under current 

law and regulation, an employee is 

normally entitled to be in a pay status 

during the notice period. A Component 

may place an employee in a different 

position or even in a non-duty status, 

but the employee must continue to be 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66169 

paid. The labor organizations 

recommended that the Department’s 

authority to assign an employee to other 

duties or to place the employee in a 

non-duty pay status should be 

substantially limited, even if the 

Department determines that the 

employee’s continued presence would 

have an adverse impact on the 

Department’s mission. The labor 

organizations recommended deleting 

‘‘the Department’s mission’’ as a 

possible justification for assigning an 

employee to a different status or 

position. We do not believe such 

modification is appropriate. Deleting 

‘‘the Department’s mission’’ as a reason 

for reassigning an employee to other 

duties or placing him or her in a nonduty pay status would adversely impact 

the Department’s flexibility in 

accomplishing the mission. 

Commenters stated the Department 

should not be allowed to require an 

employee to use personal leave during 

the notice period. We disagree with the 

labor organizations’ recommended 

deletion of language in this area. We do 

not envision requiring an employee to 

use personal leave during a notice 

period; however, an employee may 

voluntarily elect to request leave. If, in 

the exceptional case, the Department 

places an employee on personal leave 

involuntarily, such action would 

constitute an adverse action and be 

subject to the procedural requirements 

of subpart G and, depending on the facts 

of the case, could potentially be 

appealed under subpart H. This is 

consistent with current law and the 

proposed language is not intended to 

modify the status quo. 

Section 9901.715—Opportunity to Reply 

This provision outlines procedures 

related to the opportunity to reply and 

provides that employees be granted at 

least 10 days to reply (or 5 days when 

there is reasonable cause to believe the 

employee has committed a crime). 

Commenters and labor organizations 

participating in the meet-and-confer 

process recommended employees be 

provided at least 30 days to reply 

instead of 10 days, and at least 7 days 

when there is reasonable cause to 

believe the employee has committed a 

crime for which a sentence of 

imprisonment may be imposed. They 

believe the minimum 10-day (or 5-day, 

under the crime provision) reply period 

is not sufficient time for the employee 

to provide a response and that the 

shortened time period limits managers’

ability to fully consider the employee’s 

reply. Other commenters stated the 

regulations should allow for the 

extension of time limits. Commenters 

and labor organizations participating 

during the meet-and-confer process also 

recommended deletion of the 

requirement that a reply period run 

concurrently with a notice period. 

We disagree that the reply period 

should be increased and believe the 

proposed minimum 10-day reply period 

(or 5 days when the ‘‘crime provision’’

is invoked) is ample time for an 

employee to prepare a response. We also 

believe that such a period provides 

sufficient time for a manager to consider 

an employee’s reply. Furthermore, both 

the 15-day notice period and the 10-day 

reply period represent minimums and 

may be extended as necessary at the 

Department’s discretion. We believe that 

the reply period should run 

concurrently with the notice period. 

This is consistent with the goal of 

streamlining the procedure and is 

unchanged from current law. The reply 

period does end prior to the end of the 

notice period; however, this is necessary 

to allow time for managers to consider 

the reply and make a timely decision. 

Commenters and labor organizations 

participating in the meet-and-confer 

process requested clarification of 

provisions in this section which refer to 

an employee being represented by an 

individual ‘‘at the employee’s expense.’’

The circumstances under which the 

employee will be responsible for paying 

for his or her own representation (e.g., 

non-Federal employee representative) 

were clarified during the meet-andconfer process and are reflected in the 

final regulations. They also 

recommended deletion of the provision 

that covers disallowing an individual to 

serve as the employee’s representative, 

stating that the exclusion of 

representative standard is too broad and 

should not be within the discretion of 

the Department. We disagree with this 

recommendation because such 

procedures are necessary for the orderly 

and fair resolution of the action. We 

disagree that the standard is too broad, 

as the criteria are specifically related to 

the Department’s mission. 

During the meet-and-confer process, 

the participating labor organizations 

also recommended extending the reply 

period when the Department is 

considering an employee’s medical 

condition in regard to a proposed 

adverse action. We disagree that 

extending the reply period in such 

situations is necessary in regulation. 

The 10-day reply period set forth in 

§ 9901.714 represents a minimum and 

may be increased at the Department’s 

discretion. 

Commenters stated that regulations do 

not allow duty time for the employee to 

prepare a response and one commenter 

suggested that we clarify what is meant 

by a ‘‘reasonable amount of official 

time’’ to review the evidence. 

Commenters stated the regulations do 

not discuss whether the employee’s 

representative will be allowed official 

time to assist the employee. We disagree 

that the regulations do not allow duty 

time for the employee to prepare a 

response. The employee may receive 

official time to review the Department’s 

supporting evidence and to furnish 

affidavits and other documentary 

evidence, if the employee is otherwise 

in an active duty status. With regard to 

an employee’s representative being 

allowed official time, the proposed 

regulation is essentially the same as 

current law. 

Section 9901.716—Decision Notice 

This provision outlines procedures for 

issuance of decision notices. During the 

meet-and-confer process, participating 

labor organizations gave alternative 

proposals regarding the delivery of the 

decision notice to the employee. One 

proposal recommended providing the 

decision notice to the employee on or 

before the effective date and deleting all 

language providing guidance if unable 

to deliver the notice in person. The 

other proposal recommended delivery 

by electronic mail and certified mail, 

return receipt requested if unable to 

deliver the notice in person. During the 

meet-and-confer process, participating 

labor organizations also stated that the 

Department had no legal authority to 

mail a decision letter to the last known 

address. We believe that in 

circumstances when the Department is 

unable to deliver the decision notice in 

person, there must be guidelines 

provided to ensure all parties 

understand their responsibilities; 

therefore, we did not delete the 

guidance contained in the subsection. 

However, in response to discussions 

with labor organizations during the 

meet-and-confer process and public 

comments received, the language was 

modified to broaden delivery methods 

to include mail, overnight or express 

delivery service or the use of a 

messenger service. The regulations will 

retain the language that the Department 

will deliver the decision letter to the last 

known address of record, if unable to 

deliver in person, as the method of last 

resort. 

Section 9901.717—Departmental 

Record 

This provision describes the 

Departmental Record. During the meetand-confer process, participating labor 

organizations recommended that we 

amend this provision to be consistent 

66170 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

with 5 U.S.C. 7513(e) by deleting the 

requirement to retain documents 

pursuant to the General Records 

Schedule and the Guide to Personnel 

Recordkeeping. Additionally, they 

recommended that this provision be 

amended to require the retention of 

exculpatory evidence and any material 

relevant to the action. Some 

commenters stated that the Department 

should retain any information that the 

employee requests to be retained as a 

part of the official record of any adverse 

action. We did not revise this provision. 

This provision establishes sound 

recordkeeping procedures which are 

substantively the same as those in 5 

U.S.C. 7513(e) except that the proposed 

provision provides more guidance 

regarding recordkeeping procedures. 

Any and all directly relevant evidence 

will be retained regardless of whether 

the employee requests the Department 

do so. One commenter suggested that 

notation be made in an employee’s 

official records in cases where an 

employee under investigation for 

misconduct resigns prior to issuance of 

a proposal notice. The commenter 

argued that such documentation could 

prevent the future employment of an 

employee who might present a security 

risk. We do not believe such a notation, 

based on an ongoing investigation, 

would be appropriate. 

Subpart H—Appeals 

General Comments 

Subpart H modifies current MSPB 

appellate procedures for certain adverse 

actions taken under subpart G. Such 

changes include establishment of 

streamlined appellate procedures, 

providing for Department review of 

initial decisions, limited discovery, 

summary judgment, and expedited 

timeframes. Commenters, including 

labor organizations participating in the 

meet-and-confer process, objected to the 

provisions in subpart H, stating that 

DoD does not have the authority to 

make changes in MSPB appellate 

procedures. They argued that there was 

no evidence that current procedural 

protections or the decisions of an 

arbitrator or MSPB jeopardize national 

security/defense and there is no need to 

improve efficiency of the MSPB process. 

They asserted that it is not necessary for 

MSPB to provide greater deference to 

DoD than to any other agency. We 

disagree. Section 9902(h) expressly 

authorizes the Secretary to establish an 

appellate process for employees covered 

by NSPS, including establishing legal 

standards and procedures, including 

standards for applicable relief. In 

addition, section 9902(d) makes 

waivable the current statutory 

requirements for the appeals process. 

Section 9902(b)(5) also states that the 

system established under section 

9902(a) is not to be limited by any law 

or authority that is waived in the NSPS 

regulations. The modifications in this 

subpart were made following 

consultation with MSPB officials, as 

called for in the enabling statute. 

In addition, some commenters argued 

that any modification of current rules 

regarding an employee’s ability to make 

and have an allegation of discrimination 

reviewed was beyond the authority of 

NSPS. We believe these regulations do 

not impermissibly modify existing EEO 

procedures and fully retain the right of 

employees to have allegations of 

discrimination fully and fairly reviewed 

and adjudicated. Under these 

regulations, employees can raise 

allegations of discrimination as part of 

any appeal or grievance of an adverse 

action and, if dissatisfied with the final 

DoD decision, obtain full MSPB and 

EEOC review of such allegations. 

Commenters also stated that the 

current personnel system already allows 

separation or removal to be effected 

rapidly if in the interest of national 

security under 5 U.S.C. 7532. Section 

7532 is limited in its scope regarding 

the basis for action and employee 

appeal channels; therefore we don’t 

believe it appropriately addresses the 

broad range of offenses and penalties 

that are necessary to ensure the well 

disciplined workforce needed to carry 

out the Department’s mission. 

Finally, many commenters objected to 

the Department’s review of AJ decisions, 

questioning the neutrality and 

impartiality of the review process, as 

well as its negative impact on due 

process. While the Department has the 

authority to review initial AJ decisions, 

that authority will be limited to those 

decisions for which either party has 

timely filed a request for review. The 

Department may remand, modify or 

overturn the AJ’s decision only based on 

the criteria in § 9901.807(g)(2)(ii)(B) of 

these final regulations. 

We will continuously monitor and 

evaluate the appeals process to ensure 

that these changes are fair. 

Other Comments on Specific Sections of 

Subpart H 

Section 9901.802—Applicable Legal 

Standards and Precedents 

These regulations state that in 

applying existing legal standards and 

precedents, MSPB and arbitrators are 

bound by the legal standard set forth in 

§ 9901.107(a)(2). Section 9901.107(a)(2) 

provides that these regulations must be 

interpreted in a way that recognizes the 

critical national security mission of the 

Department. Each provision must be 

construed to promote the swift, flexible, 

effective day-to-day accomplishment of 

this mission as defined by the Secretary; 

DoD’s and OPM’s interpretation of 

NSPS regulations must be accorded 

great deference. During the meet-andconfer process, the participating labor 

organizations recommended that we 

delete the requirement that the MSPB 

consider DoD’s mission when applying 

legal standards not inconsistent with 

this subpart. Some commenters also 

recommended DoD and OPM not be 

given deference in their interpretations 

of NSPS regulations. 

The authority to require MSPB to give 

deference to DoD’s and OPM’s 

interpretation of NSPS regulations 

derives from 5 U.S.C. 9902, including 

section 9902(h)(3), which authorizes 

establishment of legal standards. It is 

also based on longstanding standards of 

legal interpretation, which provides that 

considerable weight be given to an 

agency’s interpretation of its own 

regulations. Accordingly, we have not 

modified this section. We believe that 

the Department’s and OPM’s 

interpretation of the regulations in part 

9901 must be given great deference to 

ensure that appropriate recognition is 

given to accomplishment of the 

Department’s national security mission 

when appeals decisions are made. Also 

during the meet-and-confer process, the 

participating labor organizations 

recommended that we modify the 

language of this section to include 

references to 5 U.S.C. 2301 and 

9902(h)(2) and (3). The suggested 

additional citations are not necessary as 

the law and citations noted in this 

subpart adequately provide for all 

requirements. 

Section 9901.803—Waivers 

This section specifies the provisions 

of title 5, U.S. Code, that are waived for 

employees covered by the NSPS appeals 

process established under subpart H. 

This section also specifies that the 

appellate procedures in subpart H 

replace those of the Merit Systems 

Protection Board (MSPB) to the extent 

MSPB’s procedures are inconsistent 

with these regulations, and that MSPB 

must follow these regulations until it 

issues conforming regulations. Some 

commenters recommended we delete 

the reference to modification of 5 U.S.C. 

7702 stating this was beyond the 

authority of NSPS. During the meet-andconfer process, the participating labor 

organizations also voiced concern that 

NSPS does not give DoD the authority 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66171 

to waive or modify discrimination 

complaint procedures. 

The Department’s authority to modify 

5 U.S.C. 7702 is found in 5 U.S.C. 

9902(h), which authorizes the 

establishment of a new appeals process. 

Consistent with section 9902(h)(7), we 

may modify or adapt the mixed case 

process in these regulations, provided 

employee rights and remedies are 

preserved. The final regulations modify 

some of the procedures for processing 

mixed cases, while preserving the rights 

and remedies as required by 

§ 9902(h)(7). These rights include the 

right to seek EEOC review of an MSPB 

decision in a mixed case pursuant to 5 

U.S.C. 7702(b), which has not been 

modified. They also preserve judicial 

review in such cases. Consistent with 

the enabling legislation, these 

regulations assure due process and 

appropriately streamline the procedures 

of the appeals process dealing with 

mixed cases. 

Section 9901.804—Definitions 

During the meet-and-confer process, 

the participating labor organizations 

recommended that we amend or delete 

a number of definitions, such as 

‘‘request for review’’ and ‘‘mandatory 

removal offense.’’ We did not accept 

these recommendations because the 

proposed changes would alter the 

essence of underlying procedural 

concepts that are critical to the 

successful implementation of NSPS. 

Section 9901.805—Coverage 

This section of the proposed 

regulation provided that the appeals 

process covers employee appeals of 

certain adverse actions taken under 

subpart G. Commenters and labor 

organizations participating in the meetand-confer process suggested we add 

reduction in force (RIF) and demotions 

as covered actions. Commenters also 

recommended that suspensions of 14 

days or less be a covered action. 

Commenters, as well as labor 

organizations participating in the meetand-confer process, stated that 

exclusion of RIF actions from NSPS 

coverage under the NSPS appeals 

process contradicts § 9901.611 which 

states that RIF actions are appealable to 

the MSPB under 5 CFR 351.901. We 

disagree that these are contradictory. 

The provisions indicate that RIF actions 

are not included as appealable actions 

under NSPS but are independently 

appealable to the MSPB. We believe the 

NSPS appeal system should be limited 

to those actions set forth in the enabling 

legislation. Inclusion of additional 

actions (such as suspensions of 14 days 

or less) goes beyond the intent of the 

enabling legislation. ‘‘Demotions’’ in 

NSPS are covered by the concept of 

reduction in pay band (or comparable 

reduction), which is covered under 

§ 9901.805(a). 

One commenter recommended that 

we specify when appeal rights are 

granted or denied based on failure to 

maintain a condition of employment 

and explain why appeal rights vary 

depending on whether the condition of 

employment was specified at the time of 

appointment or subsequent to 

appointment. The applicability of 

appeal rights when an adverse action is 

based on failure to maintain a condition 

of employment requires an 

individualized assessment of an 

employee’s status and the specific facts 

of the case. It is not possible to specify 

a broad rule that would cover all such 

actions. 

Section 9901.806—Alternative Dispute 

Resolution 

This section of the proposed 

regulations encouraged the use of 

alternative dispute resolution (ADR) 

methods to address employee-employer 

disputes arising in the workplace, 

including those which may involve 

disciplinary actions. The proposed 

regulations also recognize that these 

methods may be subject to collective 

bargaining to the extent permitted by 

subpart I of part 9901. During the meetand-confer process, participating labor 

organizations endorsed the concept. 

Commenters endorsed the concept of 

ADR and urged a stronger statement on 

the use of ADR. Commenters suggested 

that we establish ombudsman offices at 

each component in order to follow the 

‘‘best practices’’ noted elsewhere by the 

Government Accountability Office, and 

to facilitate resolution of disputes at the 

lowest possible level. We believe that 

the proposed regulations adequately 

stress the importance of ADR and have 

made no changes to this section. 

Section 9901.807—Appellate 

Procedures 

This section established streamlined 

appellate procedures and provided for 

such things as Department review of 

initial decisions, limited discovery, 

summary judgment, and expedited 

timeframes. Commenters and labor 

organizations participating in the meetand-confer process stated that this 

section of the proposed regulations was 

not organized well and was difficult to 

follow. We agree and have reorganized 

the material as indicated below with the 

previous section designation in 

brackets. For example, ‘‘9901.807(a)(1) 

[9901.807(a)]’’ indicates that 

‘‘9901.807(a)(1)’’ is the new designation 

in the final rules and ‘‘[9901.807(a)]’’ is 

the old designation in the proposed 

rules. Some commenters recommended 

that the entire section be deleted, stating 

DoD does not have the authority to 

make the changes set forth in this 

section. We disagree. Section 9902(h) 

expressly authorizes the Secretary to 

establish an appeals process. In 

addition, § 9902(d) expressly authorizes 

the waiver of the current statutory 

appeals process. Commenters noted that 

§ 9901.807 does not include a provision 

for MSPB to re-open a decision of its 

AJs. This is consistent with the enabling 

legislation which limits MSPB review to 

the Department’s final decisions which 

have been appealed to the Board and 

thus does not authorize Board reopening 

of initial AJ decisions. Adequate and 

appropriate review of AJ decisions will 

result from the Request for Review 

(RFR) and Petition for Review (PFR) 

processes. 

Section 9901.807(a)(1) [9901.807(a)] 

There was no change in this 

provision. It was merely redesignated. 

Section 9901.807(a)(2)(i) 

[9901.807(b)(1)] 

There was no change in this 

provision. It was merely redesignated. 

This provision of the proposed 

regulations is introductory in nature. 

The actual changes are set forth in later 

provisions. While there was discussion 

during the meet-and-confer process and 

comments on the system elements, we 

will discuss those comments in the 

applicable sections. 

Section 9901.807(a)(2)(ii) 

[9901.807(b)(2)] 

This provision provides that the AJ 

will adjudicate appeals and deliver his 

or her decision to each party and to 

OPM. During the meet-and-confer 

process, participating labor 

organizations recommended that NSPS 

processing rules be deleted and that the 

full MSPB have overall and exclusive 

authority in adjudicating appeals. We 

disagree. As written, the regulations 

meet the goals of ensuring appropriate 

deference to DoD’s decisions and 

penalty determination in adverse 

actions and streamlining the way such 

cases are handled while continuing to 

preserve and safeguard employee due 

process protections. 

Section 9901.807(a)(3) [9901.807(e)] 

This provision allows OPM to 

participate or intervene in the appeal at 

any time it believes that an erroneous 

decision may result which will have a 

substantial impact on civil service law, 

rule, regulation or policy directive. 

66172 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

During the meet-and-confer process, 

participating labor organizations stated 

that this provision should be deleted. 

We do not agree with the 

recommendation, as we believe this 

provision is consistent with current law 

and is necessary for OPM to carry out 

its mission. 

Section 9901.807(a)(4)(i) and (ii) 

[9901.807(g)(1) and (2)] 

There were no changes in these 

provisions. They were merely 

redesignated. 

Section 9901.807(a)(5) [9901.807(j)] 

There was no change in this 

provision. It was merely redesignated. 

Section 9901.807(a)(6) [9901.807(k)(1)] 

This provision sets the time limit for 

an employee to file an initial appeal 

through the NSPS appeal system at 20 

days. Commenters noted that EEOC 

regulations provide complainants 30 

days to file an appeal with the MSPB 

after agency decision in mixed cases. 

Other commenters and labor 

organizations during the meet-andconfer process expressed concern 

because the employees were given less 

time in the appeal process. In regard to 

the comments on EEOC regulations, we 

note that the 30-day period provided in 

EEOC regulations simply reflects the 

Commission’s adoption of the time limit 

provided in the Board’s current 

regulations. 

Section 9901.807(a)(7) [9901.807(k)(2)] 

This provision covers disqualification 

of a party’s representative at any time 

during the appeal process. During the 

meet-and-confer process, participating 

labor organizations stated that this 

provision should be deleted. 

Commenters stated it was not necessary 

to provide for procedures to disqualify 

a party’s representative. Some 

commenters expressed concern that 

there are no listed criteria for 

disqualification. We believe this 

provision is necessary in order to ensure 

an orderly and fair adjudication. 

Decisions regarding disqualification will 

be at the discretion of the AJ and should 

be consistent (to the degree not 

inconsistent with these regulations) 

with current Board rules at 5 CFR 

1201.31(b) which provide criteria under 

which a representative may be 

disqualified. One commenter requested 

that we clarify that Department 

representatives will avoid the 

appearance of conflict of interest, but 

may not be disqualified solely on the 

basis of having advised management on 

the processing of underlying matters 

where such advice was within the scope 

of their responsibilities. For purposes of 

these regulations, we believe the 

proposed language adequately covers 

the disqualification issue. 

Section 9901.807(b) [9901.807(k)(4)] 

This provision allows the AJ to 

suspend processing a case only if jointly 

requested by the parties. During the 

meet-and-confer process, participating 

labor organizations recommended that a 

joint case suspension request 

requirement be deleted. Commenters 

recommended allowing the AJ to 

suspend the case if a single party shows 

good cause since appellants might need 

extra time to hire an attorney or locate 

witnesses. We believe the proposed 

regulations provide sufficient time to 

prepare a case, provide an appropriate 

means to suspend a case, and comport 

with the goals of NSPS. No changes 

have been made to this section. 

Section 9901.807(c)(1) and (2) 

[9901.807(i)(1) and (2)] 

These provisions discuss settlements. 

They prohibit the presiding MSPB AJ 

from requiring settlement discussions. 

Where the parties agree to participate in 

formal settlement discussions, these 

discussions will be conducted by an 

official other than the presiding AJ. 

During the meet-and-confer process, 

participating labor organizations 

recommended deletion of 

§ 9901.807(i)(1). Commenters were in 

favor of settlement discussions; 

however, some believe that the 

proposed regulations do not encourage 

such discussions. Some commenters 

stated that settlement discussions being 

conducted by the presiding AJ allows 

the AJ latitude in this area to facilitate 

settlement and eliminate additional 

formal settlement procedures. The 

regulations do encourage settlement; 

however, we believe strongly that 

settlement should be completely 

voluntary and based on the parties’

individual interests. Also, we believe 

that settlement proceedings should be 

conducted by an official who is not 

adjudicating the case to avoid actual or 

perceived conflicts of interest on the 

part of MSPB adjudicating officials. We 

have made no change in this section. 

Section 9901.807(d)(1), (2), and (3) 

[9901.807(k)(3), (i), (ii), and (iii)] 

These sections modify discovery 

procedures by placing limits on the 

extent of discovery. During the meetand-confer process, participating labor 

organizations stated that the limits are 

too restrictive and may be easily abused. 

Commenters stated the limits would 

prevent adequate methods to gather 

evidence necessary for the case and that 

the limits are arbitrary, placing the 

employee at a disadvantage. 

Commenters stated the regulations are 

unfair, hamper due process, and limit 

employee defense. We believe these 

limits will usually allow adequate 

methods for discovery of evidence, are 

fair, and do not violate due process. 

Additionally, we have clarified in these 

regulations that the AJ may grant 

additional discovery for necessity and 

good cause. One commenter requested 

that we clarify whether the new 

limitations on discovery replace or 

augment the existing motion to compel 

process. To the extent existing rules on 

discovery, including provisions 

regarding motions to compel process, 

are inconsistent with these new 

limitations on discovery, the existing 

provisions are modified. Another 

commenter requested that we limit the 

number of all requests for production to 

a total of 50 per case. The regulations 

already limit the number of requests for 

production to 25 per pleading. However, 

the AJ may grant a party’s motion for 

additional discovery upon a showing of 

necessity and good cause. We believe 

that this provides appropriate limits on 

requests for production while providing 

an avenue for additional discovery if 

appropriate. Therefore, we choose not to 

adopt the suggestion. 

Section 9901.807(e)(1), (i), (ii), and (iii) 

[9901.807(d)(1), (i), (ii), and (iii)] 

These provisions describe the 

standard of proof, which must be met by 

the Department for a decision to be 

sustained. Preponderance of the 

evidence is the single standard of proof 

under NSPS. Commenters have stated 

the burden of proof for employees has 

been increased; however, this is 

inaccurate. The only change in the level 

of proof is that the regulations adopt a 

single burden of proof—preponderance 

of the evidence—for cases based on 

performance and/or misconduct. (Under 

current law, agencies must only meet a 

substantial evidence burden of proof in 

performance cases taken under chapter 

43 of title 5. This is a lower burden than 

preponderance of the evidence.) The 

burden remains the same for an 

appellant. Other commenters stated that 

the differences between conduct and 

performance should be acknowledged 

by maintaining the previous standard 

(‘‘substantial evidence’’) for 

performance cases. We do not believe 

the differences warrant different 

standards and note that under current 

title 5 provisions, actions taken under 

chapter 75 based on unacceptable 

performance are subject to the higher 

standard of proof. The single 

(‘‘preponderance’’) standard for all 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66173 

cases, whether taken for reasons of 

performance, or conduct, or a 

combination of both, simplifies the 

appeals process and assures consistency 

without compromising fairness or 

burdening the employee. No changes 

have been made to these provisions. 

Section 9901.807(e)(2) [9901.807(k)(5)] 

This provision covers the AJ’s ability, 

when some or all materials facts are not 

in dispute, to issue an order to limit the 

scope of the hearing or issue a decision 

without holding a hearing. During the 

meet-and-confer process, participating 

labor organizations stated that they 

accepted the use of summary judgment 

where the facts of the case are not in 

dispute; however, they recommended 

the AJ not be able to render such a 

decision on his or her own initiative. 

They also recommended that credibility 

determinations should not be made 

absent a hearing. Commenters stated 

that the burden of proof for the 

employee has been increased before the 

employee is allowed a hearing. Other 

commenters stated a hearing should be 

held if a material fact is in dispute and 

there is a credibility question. Some 

commenters also stated summary 

judgments have not worked in other 

forums. Additionally, there were 

concerns that the employee entitlement 

to a hearing has been diminished. We 

did not revise this provision. We believe 

that the AJ should have the authority to 

rule in this area on his or her own 

initiative when some or all material 

facts are not in dispute. Allowing 

summary judgment when no material 

facts are in dispute eliminates the 

requirement for unnecessary and timeconsuming hearings, expediting the 

process for both parties. Similarly, when 

a hearing is appropriate, limiting the 

scope of such hearing to matters in 

dispute serves the interests of all 

parties. Both of these measures will 

streamline the appeals process without 

compromising due process. Summary 

judgments are a well-established and 

effective way of fairly handling cases 

where material facts are not in dispute. 

When material facts are in dispute, the 

normal hearing process will be 

followed. 

Section 9901.807(f)(1) [9901.807(k)(7)] 

This provision covers the 90-day time 

limit in which an AJ must make an 

initial decision. During the meet-andconfer process, participating labor 

organizations stated that they accepted 

expediting the process to require that 

decisions be issued within 90 days by 

the MSPB AJ. Commenters expressed 

concern these time limits, with no 

provisions for extension, will result in 

inadequate time for case preparation, 

settlement discussions, and discovery, 

and fail to take into account 

unavoidable witness unavailability. 

Other commenters suggested that this 

section be modified to require AJs to 

issue decisions within 30 or 45 days of 

the last day of a hearing, or the last 

written response to a summary 

judgment motion. We did not revise this 

provision as we believe the 90-day time 

frame provides ample time for the AJ to 

make a fair decision and for appropriate 

pre-hearing and witness arrangements. 

The new time frame also facilitates the 

efficient and expeditious resolution of 

an appeal without impairing due 

process protections. 

Section 9901.807(f)(2)(i)–(v) 

[9901.807(k)(6)] 

These provisions cover mitigation of a 

penalty and require great deference to 

the Department’s penalty determination. 

While mitigation is allowed, it is 

allowed under a limited standard. The 

labor organizations participating in the 

meet-and-confer process objected to the 

deference being shown to the 

Department in penalty determination 

and the wholly without justification 

mitigation standard. They further stated 

that the proposed language placing a 

standard for review on the full MSPB is 

not permissible and stated that the fact 

finder or reviewing entity should 

consider the factors as set forth in 

Douglas v. VA, 5 MSPR 280, 305–06 

(1981), in determining whether the 

proposed penalty is appropriate. We 

also received numerous comments 

expressing concern regarding the 

mitigation standard of wholly without 

justification and the appearance that the 

Department will have to meet a lower 

threshold to sustain the penalty. 

Commenters expressed concern that 

MSPB has less latitude to modify 

decisions and protect employee rights. 

Commenters objected to the fact that 

adjudicators would be required to give 

deference to the Department’s penalty 

determination. Based on these 

comments and concerns we have 

reconsidered this provision and have 

removed the full MSPB from coverage 

by this standard. The standards for 

review for the full MSPB are provided 

in 5 U.S.C. 9902(h)(5). We will also 

consider placing pertinent 

circumstances in an implementing 

issuance to be used for consideration in 

penalty determination. Furthermore, we 

agree to revise the ‘‘wholly without 

justification’’ standard for MSPB AJs 

that are used as part of the Department’s 

appeals process, as well as arbitrators. 

Since § 9901.922(f)(2) broadly provides 

that arbitrators hearing a matter 

appealable under 5 U.S.C. 7701 or 

subpart H are bound by the rules in part 

9901 (which include the standard for 

mitigation), we have deleted the 

references to arbitrators in 

§ 9901.807(f)(2) as superfluous. The 

standard has been revised to preclude 

mitigation except when the action is 

‘‘totally unwarranted in light of all 

pertinent circumstances.’’ This standard 

is similar to that recognized by the 

Federal courts and is intended to limit 

mitigation of penalties by providing 

deference to an agency’s penalty 

determination. The Department has 

statutory authority to establish new 

legal standards. (See 5 U.S.C. 

9902(h)(2).) In this case, the Department 

is electing to adopt a legal standard that 

meets the need of the Department by 

ensuring deference is provided to the 

Department’s penalty determinations 

along with the requirement that AJs give 

consideration to the Department’s 

national security mission. The 

Department bears full accountability for 

national security; therefore, it is in the 

best position to determine the most 

appropriate penalty for misconduct or 

unacceptable performance. In the past, 

MSPB has exercised considerable 

latitude in modifying agency penalties, 

sometimes to the detriment of DoD’s 

mission. The MSPB AJ and arbitrator 

may still mitigate penalties for all types 

of offenses, except mandatory removal 

offenses. The intent is to restrict the 

breadth of their discretion to mitigate 

penalties to only those situations where 

the penalty is totally unwarranted in 

light of all pertinent circumstances. 

When mitigating a penalty, MSPB AJs 

and arbitrators must apply the 

maximum justifiable penalty, using the 

applicable agency table of penalties or 

other internal guidance. 

Section 9901.807(f)(3) and (4) 

[9901.807(d)(2) and (3)] 

These provisions cover the review of 

charges and performance expectations. 

They provide that neither the MSPB AJ 

nor the full MSPB may reverse the 

Department’s action based on the way in 

which the charge is labeled or the 

conduct characterized, provided the 

employee is on notice of the facts 

sufficient to respond to the factual 

allegations of the charge. Similarly, an 

MSPB AJ or full MSPB may not reverse 

the Department’s action based on the 

way a performance expectation is 

expressed, provided the performance 

expectation would be clear to a 

reasonable person. The labor 

organizations participating in the meetand-confer process stated that the AJ or 

the full Board should have the authority 

to consider the way in which the charge 

66174 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

is labeled, the conduct is characterized, 

or the way the performance expectation 

is expressed in determining whether the 

agency’s penalty is appropriate. We 

received many comments stating that 

the elimination of the requirement to 

clearly articulate the charge is unfair, 

does not provide the employee 

sufficient information to prepare a 

defense, and should not be permitted. 

Other commenters expressed concern 

over whether the AJ would be allowed 

to mitigate the penalty if the AJ found 

that the stated charge was 

mischaracterized or mislabeled. These 

commenters also questioned whether 

‘‘factual allegations’’ meant the same as 

‘‘basis for the action.’’ We did not revise 

this provision, as we believe that as long 

as the employee has sufficient notice to 

respond to the allegations of a charge, 

the Department will have complied with 

the notice and due process requirements 

of these regulations. The Department 

must prove by preponderance of the 

evidence that an action taken against an 

employee promotes the efficiency of the 

service. Mitigation may also be 

appropriate in such cases provided it 

meets the standards established in these 

regulations. Additionally, this section 

requires that performance expectations 

be clearly conveyed in a manner 

understandable to a ‘‘reasonable 

person.’’ MSPB AJs and the full MSPB 

will judge the Department’s expression 

of performance expectations by a 

‘‘reasonable person’’ standard. These 

provisions are written to eliminate 

overly technical and legalistic aspects of 

the current appeals process, while 

preserving employees’ due process 

rights. 

Section 9901.807(f)(5), (i) and (ii) 

[9901.807(c), (1) and (2)] 

These provisions covered the granting 

of interim relief. They stated the full 

MSPB may not grant interim relief until 

after the Department’s final decision. 

During the meet-and-confer process, 

participating labor organizations 

recommended that interim relief be 

granted by the full MSPB as a matter of 

course if the AJ finds in favor of the 

appellant. We received comments 

stating that the enabling legislation does 

not specifically allow DoD to limit the 

full MSPB’s authority to grant interim 

relief in this way. Commenters also 

stated this limitation might 

impermissibly alter EEO procedures. 

Commenters, including labor 

organizations during the meet-andconfer process, stated DoD should not 

have discretion to temporarily place an 

employee in a different position when 

interim relief is ordered by the full 

MSPB. Commenters also questioned 

what the employee’s pay status would 

be while on excused absence. Other 

commenters recommended we allow the 

AJ to grant interim relief or, in the 

alternative, establish a procedure for 

interlocutory appeal to allow a stay 

until the Board hears the full case. 

Commenters objected to attorney fees 

not being paid until a final MSPB 

decision. We believe the limitation on 

the AJs’ authority to grant interim relief 

is necessary. In addition, it is consistent 

with the enabling legislation, which 

prohibits granting interim relief unless 

it is specifically ordered by the full 

Board (5 U.S.C. 9902(h)(4)). It is 

premature for the AJ to grant interim 

relief when DoD has filed a request for 

review. To provide for the efficient 

accomplishment of the mission and to 

avoid disruption in the workplace, DoD 

should have discretion in determining 

the placement of an employee during 

the period of interim relief. Explanation 

of the pay status of employees in a 

period of excused absence is not 

required because, by definition, excused 

absence is an absence from duty without 

loss of pay and without charge to leave. 

Finally, the provision relating to 

attorney fees represents no change from 

current law. 

Section 9901.807(f)(6)(i) and (ii) 

[9901.807(h)(1) and (h)(2)] 

These provisions of the proposed 

regulations established a new standard 

for recovering attorney fees, which was 

intended to simplify the process. 

Comments received on the proposed 

regulations and labor organizations, 

during the meet-and-confer process, 

argued that the new standard was 

unreasonable, unfair, would discourage 

employees from challenging wrongful 

terminations, violated the Back Pay Act, 

and would result in uneconomical, 

piecemeal litigation. After consideration 

of these comments, we have revised the 

NSPS regulations to retain the pre-NSPS 

statutory standard under which such 

fees may be awarded; therefore, all 

objections to proposed changes have 

been addressed. 

Section 9901.807(g) [9901.807(k)(8)] 

This provision covers the procedures 

utilized to arrive at the Department’s 

final decision in appeals of adverse 

actions. Commenters, and participating 

labor organizations during the meetand-confer process, stated that the 

provisions for the RFR process and the 

Department’s review of AJ decisions 

should be deleted from the regulations. 

Commenters also recommended 

simplifying the process and placing 

deadlines in the Department’s review of 

AJ decisions. Further, commenters 

stated that the RFR process is 

unwarranted, fails to preserve due 

process protections, and detracts from 

the goals of streamlining the appeals 

process. These provisions will not be 

deleted from the regulations. Though 

somewhat detailed, the Secretary is 

expressly authorized by 5 U.S.C. 

9902(h) to establish an appeals process. 

The process contained in this regulation 

is necessary to assure that the 

Department’s national security mission 

is appropriately considered in adverse 

action appeals decisions. The 

Department will be constrained in the 

exercise of this authority by the 

provisions of § 9901.807(g)(2)(ii). We 

anticipate that relatively few cases will 

be reviewed by the Department under 

this authority. 

Section 9901.807(g)(1) 

[9901.807(k)(8)(i)] 

This provision covers who will 

receive and act on an RFR. During the 

meet-and-confer process, participating 

labor organizations stated that the 

proposed regulations did not specify the 

official who would remand, modify, or 

reverse the MSPB AJ’s initial decision. 

We also received comments regarding 

the extension of the strict time frames 

within the NSPS appeals process. DoD 

will establish the process for receiving 

and acting on an RFR, including time 

limits for the Department to take action 

on an RFR, in implementing issuances. 

We have clarified that in light of the 

expedited time frames in the appellate 

process, an extension for the request for 

review will be granted if a good reason 

for the delay is shown. 

Section 9901.807(g)(2)(i), (ii), (A), (B) 

and (C) [9901.807(k)(8)(ii), (iii), (A), (B), 

and (C)] 

These provisions cover the RFR 

process where, under limited 

circumstances, the Department may 

affirm, remand, modify, or reverse an 

AJ’s initial decision for which an RFR 

has been filed. Commenters and labor 

organizations during the meet-andconfer process stated that this review 

authority is arbitrary, capricious and a 

violation of due process. Comments 

were received regarding additional 

complexity, expense, and length added 

to the appeal process by the internal 

DoD review. We agree that the internal 

appellate process must be credible and 

preserve due process. It preserves due 

process for reasons stated in the general 

comments on adverse actions and 

appeals. To that end, the Department is 

committed to establishing an internal 

entity that adheres to merit system 

principles. This process provides the 

Department the necessary authority to 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66175 

review initial AJ decisions to ensure 

that such decisions interpret NSPS and 

these regulations in a way that 

recognizes the critical mission of the 

Department and to determine which of 

those cases are of a precedent-setting 

nature. Although the process may be 

lengthened in some aspects, we have 

gained efficiencies and mission-related 

benefits in other areas that more than 

offset any potential increases in time or 

costs at any step of the process. 

Moreover, we anticipate relatively few 

cases will be reviewed by DoD, since 

DoD may reverse or modify initial AJ 

decisions only under the limited criteria 

specified in § 9901.807(g), thus 

minimizing any increase in processing 

time. 

Some commenters questioned two of 

the bases for modifying or reversing an 

AJ decision: The Department’s national 

security mission and conflict with 

Governmentwide rules. These 

commenters stated that impact on 

national security mission alone, 

regardless of the appellant’s guilt or 

innocence, would not be grounds to 

modify or reverse an AJ decision. The 

second point the commenters made was 

that the Department lacked expertise to 

interpret Governmentwide regulations. 

We recognize that the wording of the 

regulation regarding the Department’s 

modification or reversal of an AJ’s 

decision based on national security fails 

to specifically reference the employee’s 

guilt or innocence. However, an 

employee’s culpability is a prerequisite 

to sustaining an action. Additionally, 

the requirement for all actions to 

promote the efficiency of the service 

and further review by the full MSPB 

provide additional safeguards for 

employees. We believe the Department 

has sufficient expertise to determine 

compliance with Governmentwide 

regulations. 

Lastly, we received comments 

regarding vague remand provisions and 

lack of time for the AJ to make a 

decision if a summary judgment was 

remanded with a direction to hold a 

hearing. We will establish timelines and 

remand provisions for the Department’s 

review of the AJ’s decision in an 

implementing issuance. Further, we 

have revised the regulation to allow the 

AJ more time, 45 days versus 30 days, 

to make a decision in those instances 

where they are directed to hold a 

hearing in a case involving summary 

judgment. 

Section 9901.807(g)(3)(A) and (B) 

[9901.807(k)(8)(ii), (A) and (B)] 

This provision covers the precedential 

effect of a Department decision. 

Commenters and labor organizations 

participating in the meet-and-confer 

process stated that the Department 

should not be allowed to determine 

which cases would set precedent, and 

they recommended revising the 

regulation to state that any AJ decision 

is precedential unless it is reversed or 

modified by the full MSPB. Commenters 

stated that Departmental decisions 

should be considered precedential even 

if subsequently overturned by the full 

MSPB. We believe the Department 

should be able to determine that some 

Department decisions are important 

enough to serve as precedent even 

though not acted upon by the full 

MSPB. Further, we believe that the 

Department must be governed by the 

rulings of the full MSPB, if the 

Department’s decision is reversed or 

modified by the full MSPB, unless 

overturned by a court. 

Section 9901.807(g)(4) 

[9901.807(k)(8)(ii)] 

This provision covers the publication 

of precedential decisions. During the 

meet-and-confer process, participating 

labor organizations stated that there 

were not any details regarding the 

publication of decisions. Commenters 

echoed this concern. We agree with the 

labor organizations and have added 

clarifying language regarding 

publication of DoD precedential 

decisions, the details of which will be 

provided in implementing issuances. 

Section 9901.807(h)(1) [9901.807(f)] 

This provision provides for filing for 

a Petition for Review by a party or the 

Director of OPM. During the meet-andconfer process, participating labor 

organizations stated that the Department 

should delete the provision which 

allows OPM to petition MSPB for 

review. We disagree. While OPM is 

responsible for providing guidance and 

assistance to DoD in developing a new 

human resources management system, it 

also has responsibility for protecting 

Governmentwide institutional interests 

regarding the civil service system. 

Therefore, we believe that OPM must 

have the authority to act if it believes a 

decision will have substantial impact on 

civil service law, rule, regulation, or 

policy directive. One commenter 

requested that we clarify whether this 

provision eliminates MSPB’s right to 

reopen an appeal on its own motion. In 

accordance with § 9901.807, MSPB may 

only review those decisions for which a 

petition for review has been filed by the 

Department, OPM, or an employee. 

Section 9901.807(h)(2)(i), (ii), and 

(iii)(A)(B)(C) and (iv) [9901.807(k)(9) 

and (10)] 

These provisions cover the petition 

for review process to the full MSPB. 

Further, these provisions cover the 

standards for the full MSPB review as 

stated in 5 U.S.C. 9901(h). During the 

meet-and-confer process, participating 

labor organizations accepted expediting 

the process to require decisions be 

issued within 90 days by the full MSPB. 

However, these provisions have been 

clarified by including the review 

standards as stated in 5 U.S.C. 9901(h). 

Section 9901.807(h)(3) [9901.807(k)(11)] 

This provision covers OPM’s request 

for reconsideration of an MSPB 

decision. During the meet-and-confer 

process, participating labor 

organizations recommended that this 

provision be deleted. We did not accept 

this recommendation because this 

provision is consistent with current law. 

This provision is necessary for OPM to 

carry out its mission, which includes 

protecting Governmentwide 

institutional interests regarding the civil 

service system. 

Section 9901.807(h)(4) [9901.807(l)] 

This provision addresses the failure of 

MSPB to meet established deadlines and 

the reporting requirements. Commenters 

recommended that this reporting 

requirement be deleted while other 

commenters recommended that MSPB 

submit quarterly or annual reports. We 

did not accept the recommendations to 

change the provisions as we consider 

the timelines placed on MSPB as being 

an integral part of streamlining the 

Department’s appellate process. This 

reporting requirement is only imposed if 

a deadline is missed. We are confident 

that MSPB will rarely, if ever, fail to 

meet the required deadlines. As a result, 

any report required by this provision 

will rarely be necessary. 

Section 9901.807(i) [9901.807(m)] 

This provision covers the 

Department’s authority to seek judicial 

review of MSPB decisions. We made a 

technical correction to delete the 

reference to the Department seeking 

reconsideration by MSPB of a final 

MSPB decision because the Department 

has that ability under current MSPB 

rules. 

Section 9901.808—Appeals of 

Mandatory Removal Actions 

This provision covers appeals of 

mandatory removal actions (MROs). It 

states that only the Secretary may 

mitigate the penalty for a sustained 

MRO. Additionally, it states that if the 

66176 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

MSPB AJ or the full MSPB sustains an 

employee’s appeal based on a finding 

that the employee did not commit an 

MRO, the Department is not precluded 

from subsequently proposing an adverse 

action based in whole or in part of the 

same or similar evidence. During the 

meet-and-confer process, participating 

labor organizations stated that this 

provision should be deleted in its 

entirety. Commenters and labor 

organizations in the meet-and-confer 

process stated that the Secretary should 

not be the only authority to mitigate 

MROs and that limiting the full Board’s 

ability to mitigate MROs is contrary to 

the enabling legislation. Commenters 

also stated that the proposed provisions 

inappropriately give DoD ‘‘two bites at 

the apple’’ when an action is not found 

to amount to an MRO since the 

Department may take a subsequent 

action on the same evidence. Other 

commenters were concerned that an 

employee might not be entitled to 

attorney fees even if the employee 

prevailed on the MRO issue, but failed 

in prevailing in a subsequent action 

based on the same facts. We disagree 

that this provision should be deleted. 

The Secretary is expressly authorized 

under 5 U.S.C. 9902(h) to establish 

appeals procedures and standards for 

relief, including standards for mitigation 

of penalties. This process is necessary to 

support the national security mission of 

the Department. We do agree, however, 

that the enabling legislation allows 

mitigation of MRO penalties by the full 

MSPB and have modified the provision 

accordingly. We disagree that it is 

inappropriate for the Department to 

have the ability to take a subsequent 

action if the offense is found to not be 

an MRO. Though an employee’s 

misconduct may not be found to qualify 

as an MRO, it does not mean that the 

misconduct should not be addressed. 

Subsequent proposal of an adverse 

action based in whole or in part on the 

same or similar evidence is consistent 

with what can occur today under 

current law. Finally, we believe attorney 

fees will be fairly awarded based on the 

latest change to these regulations. 

Section 9901.809—Actions Involving 

Discrimination 

This provision outlines the processes 

for handling appeals of actions in which 

discrimination is alleged. During the 

meet-and-confer process participating 

labor organizations stated that this 

provision should be deleted because it 

inappropriately modifies processes for 

discrimination claims. We disagree. 

Section 9902(h) expressly authorizes the 

Secretary to establish legal standards 

and procedures for employee appeals. 

Consistent with section 9902(h)(7), we 

may modify or adapt the mixed case 

process in these regulations, provided 

employee rights and remedies are 

preserved. The final regulations modify 

some of the procedures for processing 

mixed cases, while preserving the rights 

and remedies as required by section 

9902(h)(7). 

Some commenters stated this 

provision is unclear and suggested that 

we delete the provision or rewrite it. 

Several commenters stated that the 

provision should be modified to 

eliminate potential confusion over 

language that appears to require the 

Department to forward to MSPB a nonappealed action. We agree with this 

comment and have amended the 

regulations to provide that an appellant 

may choose to pursue his or her 

allegation of discrimination even when 

no PFR is filed with the Board. In such 

cases, the appellant can request the 

Department to refer the discrimination 

issue to the Board, the Board will then 

issue a final decision on the 

discrimination allegation which may 

then be pursued to EEOC or district 

court. Some commenters recommended 

we delete the reference to modifying 5 

U.S.C. 7702 stating this was beyond the 

authority of NSPS. We believe the 

proposed regulations do not 

impermissibly modify existing EEO 

rights and remedies. To clarify this 

section, we have modified some of the 

proposed language without altering any 

of the proposed intent. 

Subpart I—Labor-Management 

Relations 

General Comments 

Commenters, including, labor 

organizations participating in the meetand-confer process, objected to subpart 

I in its entirety arguing that Congress 

did not authorize the Secretary and 

Director to modify 5 U.S.C. 71 beyond 

providing for bargaining above the level 

of unit recognition and the 

establishment of a new independent 

third party to review and resolve labor 

management disputes. We disagree. In 

enacting chapter 99, Congress expressly 

recognized the need for the Department 

to design a labor relations system that 

both addresses the unique role that the 

Department’s civilian workforce plays 

in supporting the Department’s national 

security mission and allows for a 

collaborative issued-based approach to 

labor management relations. The labor 

relations system established in subpart 

I does this by creating a new, tailored 

approach to labor relations. While the 

scope of bargaining is reduced in some 

areas, such as management rights, to 

enable the Department to better utilize 

its civilian workforce to support rapidly 

changing national security challenges, 

such as the Global War on Terrorism 

and supporting humanitarian assistance 

missions here and abroad, employee 

representatives are given opportunities 

to participate in new areas that have a 

substantive impact on the daily lives of 

the workers they represent. However, 

through continuing collaboration 

(§ 9901.107), employee representatives 

will have the opportunity to participate 

in the planning, development, and 

implementation of the Department’s 

implementing issuances, which will 

cover subjects ranging from the pay and 

performance management systems to 

staffing and classification. 

The labor relations system is 

consistent with the general parameters 

Congress provided, including the 

process for involving employee 

representatives (see 5 U.S.C. 9902(m)(3) 

and (4)). It mandated that the new 

system may not expand the scope of 

collective bargaining beyond the scope 

of bargaining available today under 

chapter 71, even where provisions of 

title 5 are waived or waivable (5 U.S.C. 

9902(m)(7)), and required that 

employees be authorized to organize 

and bargain collectively within the 

framework established in chapter 99, 

that is, within the framework of a 

system that promotes a collaborative 

issue-based approach to labor relations 

and which is developed, established, 

and implemented to enable the 

Department’s civilian workforce to 

better support the Department’s national 

security mission (5 U.S.C. 9902(b)(4)). 

These commenters also argued that 

there is no legal authority to invalidate 

provisions in collective bargaining 

agreements with implementing 

issuances or issuances. Again, we 

disagree. First, Congress authorized the 

Department to establish and implement 

the HR system by providing an 

alternative to collective bargaining for 

involving employee representatives in 

the planning, development, and 

implementation of that system and 

making this the exclusive process for 

their involvement (5 U.S.C. 9902(f)). It 

would be impossible to implement the 

HR system authorized by Congress 

without overriding conflicting 

provisions of existing collective 

bargaining agreements. 

Moreover, in taking the steps 

necessary to establish and adjust the 

labor relations system, Congress 

specifically recognized that the 

provisions of this system will supersede 

existing collective bargaining 

agreements covering Department 

employees and negotiated pursuant to 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66177 

the provisions of chapter 71 except as 

otherwise determined by the Secretary 

(5 U.S.C. 9902(m)(8)). The proposed 

regulations stopped well short of this 

authority by providing for a process that 

would not supersede collective 

bargaining agreements in their entirety. 

Instead, the proposed regulations 

provided a much more constrained 

approach, providing only that those 

specific provisions of collective 

bargaining agreements conflicting with 

these NSPS regulations or NSPS 

implementing issuances would be 

superseded. This very narrow authority 

is essential to enable the Department to 

establish and implement one NSPS 

across the Department. Absence of this 

authority would effectively defeat the 

intent of Congress by denying the 

Department the ability to have a single 

HR system to support the Department’s 

national security mission. 

During the meet-and-confer process, it 

became clear that there was confusion 

over which type of issuance would 

supersede conflicting provisions of 

collective bargaining agreements. Some 

commenters, and labor organizations 

participating in the meet-and-confer 

process, recommended that collective 

bargaining agreements should not be 

superseded before their expiration. 

Participating labor organizations 

effectively argued that the Department 

did not need the authority to 

immediately supersede collective 

bargaining provisions with issuances 

not implementing NSPS. We agree and 

have amended the final regulations to 

provide that conflicting collective 

bargaining agreement provisions will 

not immediately be superseded by 

issuances, although such provisions 

must be brought into conformance with 

the issuance upon expiration of the 

agreement or renegotiation of the 

provision during the term of the 

agreement. 

However, to ensure consistent 

implementation of NSPS across 

organizations with representation by 

different bargaining units, we continue 

to believe that implementing issuances 

must take effect immediately and thus 

supersede any conflicting provisions of 

collective bargaining agreements for 

NSPS-covered employees. While DoD 

plans to implement the labor relations 

system DoD-wide immediately, the HR 

system will be implemented in spirals. 

The implementing issuances for the HR 

system will only apply to employees 

who are covered by the NSPS HR 

system. 

Commenters, including labor 

organizations during the meet-andconfer process, also recommended that 

the design and implementation of every 

aspect of the proposed NSPS, including 

the pay, performance, and classification 

system and appeals process, be subject 

to collective bargaining. Congress 

expressly prohibited expanding the 

scope of collective bargaining in 5 

U.S.C. 9902(m)(7) which provides that 

nothing in section 9902 will be 

construed to expand the scope of 

bargaining with respect to provisions in 

title 5 that may be waived, modified, or 

otherwise affected under section 9902. 

In lieu of bargaining, Congress charged 

OPM and DoD to establish the 

mechanism for continuing involvement 

of employee representatives in 5 U.S.C. 

9902(f)(1)(d) and (m)(2). With this in 

mind, we provided a number of 

mechanisms to ensure the substantive 

involvement of labor organizations in 

such things as the development of 

implementing issuances, the 

administration of the Department’s new 

pay system, and the nomination of 

members to the National Security Labor 

Relations Board (NSLRB or Board). 

Other concerns related to the scope of 

bargaining are addressed in the 

discussion of the related sections of 

subpart I that follow. 

We also expressly provided two 

specific mechanisms to address the 

mandate that the labor relations system 

should allow for a collaborative, issuebased approach to labor relations. 

National level bargaining, as provided 

for in this regulation, and which is 

expressly authorized in the enabling 

legislation (5 U.S.C. 9902(g)), allows for 

an issue-based approach to addressing 

matters of significance to the 

Department as a whole. Multi-unit 

bargaining, as provided for in these 

regulations, allows for a collaborative, 

issue-based approach to addressing 

matters of interest to specific 

communities of interest within DoD, 

such as military installations that house 

multiple organizations and multiple 

bargaining units. 

Other Comments on Specific Sections of 

Subpart I 

Section 9901.901—Purpose 

The proposed regulation restates the 

enabling legislation’s purpose to 

provide DoD and OPM with a labormanagement relations system that 

addresses the unique role that 

Department employees have in 

supporting the Department’s national 

security mission and to promote a 

collaborative issue-based approach to 

labor management relations. In their 

comments and during the meet-andconfer process, participating labor 

organizations recommended that we 

include in this section a statement that 

labor organizations and collective 

bargaining are in the public interest, 

consistent with the enabling 

legislation’s preservation of collective 

bargaining rights. 

We have decided to retain the 

originally proposed language, while 

adding an express reference to the 

collaborative issued-based approach 

authorized by the enabling legislation. 

This section of the regulations 

recognizes and stresses the fundamental 

purpose underlying the enabling 

legislation and the statutory mandate to 

build a flexible HR system that supports 

the unique mission of DoD and the role 

of DoD civilian employees as a critical 

part of the Department’s Total Force. 

Consistent with the enabling legislation, 

the labor relations system specifically 

recognizes the right of employees to 

organize and bargain collectively subject 

to limitations established by law, 

including these regulations, applicable 

Executive orders, and any other legal 

authority. 

Section 9901.902—Scope of Authority 

A number of commenters, including 

labor organizations participating in the 

meet-and-confer process, presented 

their views that the enabling legislation 

did not authorize the Department and 

OPM to modify provisions of 5 U.S.C. 

chapter 71. We disagree. The enabling 

legislation authorizes the Secretary, 

together with the Director, to establish 

and adjust a labor relations system in 

support of the overall HR system 

notwithstanding the provisions of the 

current system, as set forth in chapter 71 

(5 U.S.C. 9902(d)(2) and 5 U.S.C. 

9902(m)(1) and (2)). In addition, as 

discussed in General Comments, 

Congress provided the parameters for 

that system, including, for example, 

prohibiting the expansion of the scope 

of bargaining; requiring that the system 

address the unique role that the 

Department’s civilian force work plays 

in supporting the Department’s national 

security mission; authorizing the system 

to allow for a collaborative issue-based 

approach to labor management 

relations; requiring that employees be 

authorized to bargain collectively, as 

provided for in chapter 99 (not as 

provided for in chapter 71); mandating 

that the system provide for third party 

review of decisions; and authorizing the 

system to utilize national level 

bargaining (an authority separately 

established in 5 U.S.C. 9902(g)). 

Section 9901.903—Definitions 

In their comments and during the 

meet-and-confer process, participating 

labor organizations recommended that 

the current definition of ‘‘conditions of 

66178 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

employment’’ be expanded to include 

the classification of any position. A 

number of commenters, including labor 

organizations participating in meet-andconfer process, also recommended that 

we modify the definition of conditions 

of employment to eliminate the 

exclusion of pay. As a general matter, 

the classification or pay of Federal 

employees is not subject to negotiation 

today. This restriction is consistent with 

the prohibition on any expansion of the 

scope of bargaining in 5 U.S.C. 

9902(m)(7). Therefore, we have not 

adopted this suggestion. 

Some commenters, including labor 

organizations participating in meet-andconfer process, also raised concerns that 

the revised definition of ‘‘confidential 

employee’’ was overbroad and could be 

subject to misapplication. They 

recommended that we retain the 

definition of ‘‘confidential employee’’

contained in 5 U.S.C. 7103. We agree 

with the recommendation and have 

modified the regulation accordingly. 

During the meet-and-confer process, 

the impact of issuances on the collective 

bargaining process and existing 

collective bargaining agreements was 

discussed. During these discussions it 

became apparent that there was 

confusion surrounding the distinction 

between ‘‘implementing issuances’’ and 

‘‘issuances.’’ To address these concerns, 

we have modified the definitions, 

including the definition of 

‘‘implementing issuance’’ as it appears 

in subpart A. In addition, we have crossreferenced the definitions of both 

‘‘issuance’’ and ‘‘implementing 

issuance’’ that appear in subpart A so 

that the differences in the two types of 

issuances will be readily apparent. 

The labor organizations participating 

in the meet-and-confer process 

expressed concerns that any manager 

could simply sign an issuance or 

implementing issuance and thereby 

invalidate legitimate provisions of a 

collective bargaining agreement. They 

recommended that we restrict the 

authority to sign such issuances to the 

Secretary or Deputy Secretary alone. We 

believe that restricting this authority to 

the Secretary or Deputy Secretary is far 

too restrictive for such a large and 

diverse Department. Therefore, we have 

revised the language to make clear that 

only the Secretary, Deputy Secretary, 

Principal Staff Assistants, or Secretaries 

of the Military Departments may sign an 

‘‘implementing issuance.’’ In addition, 

we have revised the language to make 

clear that only these same officials may 

sign an ‘‘issuance,’’ which may limit the 

scope of collective bargaining as 

provided for in this regulation. This is 

a very high level of approval and 

requires extensive coordination within 

the Department. We believe that this 

change addresses the legitimate 

concerns of the commenters while 

providing the Department the necessary 

flexibility to meet changing national 

security requirements and to efficiently 

manage its workforce. 

A number of commenters and labor 

organizations participating in the meetand-confer process recommended that 

we not change the definition of 

‘‘supervisor’’ with regard to nurses and 

firefighters. We agree, and have revised 

the definition of ‘‘supervisor’’ as it 

relates to firefighters and nurses to be 

consistent with what is in chapter 71 

today. Commenters also expressed a 

range of concerns regarding the portion 

of the definition of ‘‘supervisor’’ dealing 

with supervision of members of the 

armed forces. A number of commenters 

questioned if the intent was that 

military technicians who supervise 

members of the reserves, such as on 

drill weekends, would be considered 

supervisors. While we believe this 

language is clear, the comments lead us 

to believe that it has been 

misunderstood. This provision only 

affects civilian employees and was 

intended to apply to those situations 

where a civilian is exercising 

supervisory control over military 

members. With regard to military 

technicians who are required to hold 

military reserve positions in addition to 

their civilian positions, this definition 

would only be applicable while serving 

in their civilian capacity. Thus, an 

individual who is not a supervisor in 

his or her civilian status, but supervises 

reservists while in military status, 

would not meet the definition of 

‘‘supervisor’’ for purposes of subpart I. 

If an individual is exercising 

supervisory duties and authorities over 

military personnel, as defined in the 

regulation, we believe that individual is 

a member of the management team, and 

his or her inclusion within a bargaining 

unit would create an inherent conflict of 

interest. Therefore, we have retained 

that portion of the definition of 

‘‘supervisor’’ with respect to the 

supervision of members of the armed 

forces. 

Section 9901.904—Coverage 

During the meet-and-confer process, 

the participating labor organizations 

recommended that the labor relations 

system be phased in spirals like the HR 

system rather than implemented 

concurrently Department-wide. In fact, 

the participating labor organizations 

asserted that the requirement to phase 

in the HR system was equally applicable 

to the labor relations system. We 

disagree. The provisions authorizing the 

establishment of a labor relations system 

(5 U.S.C. 9902(m)) are clearly separate 

from the authority to establish an HR 

system (5 U.S.C. 9902(a)) and the 

requirement for phased implementation 

in 5 U.S.C. 9902(l) is not applicable to 

the labor relations system. We have 

therefore not adopted this 

recommendation. 

We also received comments that 

certain groups of employees were 

unique and therefore should not be 

covered by the labor relations system. 

Specifically, commenters suggested that 

teachers should be excluded from 

coverage as they do not play a combat 

support role and already sign mobility 

agreements giving management all the 

flexibility it needs. We disagree. Their 

contributions in teaching the children of 

our service men and women and the 

civilian employees who support them 

are absolutely critical to the successful 

accomplishment of the Department’s 

national security mission. Thus, the 

final regulations continue to cover 

teachers in the labor relations system. 

Another group of employees that 

commenters recommended for 

exclusion from the labor relations 

system based on their unique 

characteristics are employees covered 

under the Civilian Mariner or CIVMARS 

program. While we agree that some of 

the rules governing these employees are 

unique within the Department, these 

employees are presently covered by 

chapter 71. Given that fact, we find no 

compelling argument that these 

employees should not now be covered 

under the labor relations provisions of 

these regulations and we have therefore 

not adopted the recommendation. 

Some commenters, including 

participating labor organizations, stated 

that there was no indication in the 

proposed regulations that DoD or OPM 

responded to the intent of Congress that 

‘‘in designing the labor relations system 

the Secretary should take into 

consideration the unique requirements 

and contributions of public safety 

employees in supporting the national 

security mission of the Department.’’

The commenters are referring to the 

Conference Report on H.R. 1588, the 

‘‘National Defense Authorization Act for 

Fiscal Year 2004,’’ H. Rpt. 108–354, 

page 760. While the proposed 

regulations were silent regarding this 

provision in the conference report, we 

have taken into consideration the 

unique requirements and contributions 

of public safety employees in 

supporting the national security mission 

of the Department. The role of public 

safety employees was considered 

throughout the design process for the 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66179 

labor relations system. While we agree 

that these employees are unique within 

the Department, they are presently 

covered by chapter 71 and we found no 

compelling reason that these employees 

should not now be covered under the 

labor relations provisions of these 

regulations. 

Section 9901.905—Impact on Existing 

Agreements 

Commenters, including labor 

organizations participating in the meetand-confer process, expressed concern 

that Congress did not intend the 

Department to have the authority to 

supersede valid provisions of collective 

bargaining agreements through the 

promulgation of implementing 

issuances and issuances. These 

commenters argued that conflicting 

provisions of collective bargaining 

agreements should remain intact until 

renegotiated regardless of the extension 

of a new Department policy through 

implementing issuances or issuances. 

We disagree with respect to 

‘‘implementing issuances,’’ but agree as 

to ‘‘issuances,’’ for the reasons 

explained under General Comments. We 

have added a new subparagraph, 

§ 9901.905(c) to make clear that any 

provision of a collective bargaining 

agreement that is inconsistent with 

issuances that do not implement NSPS 

will remain in effect until the 

expiration, renewal, or extension of the 

agreement, whichever occurs first. 

Commenters also expressed concern 

that 60 days is not sufficient time to 

bring into conformance the remaining 

negotiable provisions of a collective 

bargaining agreement, following 

invalidation as authorized by § 9901.905 

of the regulations. We disagree. This 

bargaining will be limited to only those 

specific contract provisions that are 

rendered unenforceable, or require 

changes to their language to conform to 

the implementing issuance or these 

regulations. Therefore, we believe that 

60 days is sufficient time for bargaining, 

given the limited scope. For these 

reasons, we have not adopted the 

recommended changes. 

We received several comments that 

this section is confusing. We agree with 

these comments and have revised the 

language in § 9901.905(b) to make clear 

that it is only those collective bargaining 

agreement provisions that are directly 

affected by the collective bargaining 

agreement provisions rendered 

unenforceable by this regulation or an 

implementing issuance that must be 

brought into conformance. 

We have also substantively modified 

the provisions in § 9901.905(b) in 

response to concerns raised during the 

meet-and-confer process that the 

language in the proposed regulations 

would have the effect of forcing the 

parties to wait until expiration of the 60- 

day period to seek assistance with any 

bargaining impasse. We agree with this 

concern and have modified the language 

in the final regulation to permit the 

parties to utilize § 9901.920 impasse 

procedures to obtain assistance at any 

time. 

Section 9901.906—Employee Rights 

Commenters recommended that we 

delete this section as it is essentially 

identical to 5 U.S.C. 7102 and, thus, 

unnecessary. We disagree. Although this 

provision is essentially the same as the 

chapter 71 provision, we believe that it 

is important to clearly restate these 

rights in subpart I to provide employees 

notice of their statutory rights. 

Therefore, we have not adopted the 

recommended change. 

Section 9901.907—National Security 

Labor Relations Board 

Commenters raised the concern that 

the NSLRB will not be fully staffed and 

operational before the onset of 

bargaining disputes arising from 

implementation of subpart I. We agree 

with this concern and have modified the 

regulation to provide the Secretary with 

the authority to determine the effective 

date for the establishment of the NSLRB. 

Commenters objected to the creation 

of the NSLRB, and recommended that 

the regulations preserve the authority of 

FLRA, FMCS, and FSIP. They remarked 

that these agencies, which are 

independent, impartial, and already 

funded, currently adjudicate the labor 

disputes that the proposed regulations 

authorize the NSLRB to resolve. In this 

regard, they challenged the 

independence and impartiality of any 

NSLRB member appointed by the 

Secretary. Therefore, they objected to 

any change to the status quo. 

We disagree that the NSLRB will not 

be an independent and impartial third 

party. The proposed regulations provide 

that NSLRB members may only be 

removed by the Secretary for 

inefficiency, neglect of duty, or 

malfeasance in office. This is the same 

standard that currently applies to 

members of the FLRA. Since this 

standard and the establishment of the 

NSLRB itself are provided for in these 

enabling regulations, they are beyond 

the scope of the Secretary’s authority to 

change unilaterally. In addition, these 

regulations authorize the NSLRB to 

issue its own rules and operational 

procedures. The concatenation of these 

provisions assures the NSLRB’s 

independence. Moreover, while there 

will be costs associated with the 

establishment of the NSLRB, we believe 

these costs will be offset by the 

increased efficiency in the resolution of 

labor disputes. 

Commenters recommended that the 

final regulations set strict tenure 

requirements and limit the tenure for 

NSLRB board members to one term, 

with no possibility for renewal or 

extension. We note that the proposed 

regulations set the term of NSLRB 

member appointments at 3 years, but we 

do not agree that there should be a 

prohibition on members serving an 

additional term. These individuals may 

be viewed as exemplary adjudicators 

not only to management, but also to the 

labor organizations. To unilaterally 

exclude members from serving 

additional terms would limit the 

applicant pool and possibly lead to 

extended vacancies. We therefore have 

not accepted the recommendation. 

However, commenters, including 

labor organizations participating in the 

meet-and-confer process, recommended 

that we provide for more union 

involvement in the appointment of 

NSLRB members. We agree with these 

commenters and, thus, have modified 

the regulations to provide a process 

whereby employee representatives may 

submit a list of nominees for the 

Secretary’s consideration for 

appointment of non-chair members of 

the NSLRB. We have also provided that 

the Secretary may consult with 

employee organizations to obtain 

additional information regarding any 

nominee submitted. 

Other commenters approved of the 

proposal to establish the NSLRB, 

indicating that the NSLRB would afford 

the Department greater regularity and 

consistency in case processing than 

currently provided by FLRA. Labor 

organizations participating in the meetand-confer process noted that the ‘‘onestop shop’’ concept of the NSLRB was 

preferable to the division of 

prosecutorial, adjudicatory, and 

mediation responsibilities provided for 

in the current system. We agree. 

Commenters suggested that we pursue 

a new statutory authority for direct 

judicial review of NSLRB decisions. 

While such a proposal is reasonable, 

enactment would be time consuming, 

uncertain, and subject to significant 

revision during the legislative process. 

Our proposed process as authorized by 

section 9902(m)(6) subjects certain final 

NSLRB decisions to FLRA review, 

which in turn would be subject to 

judicial review as it is under chapter 71. 

We believe this is a more expeditious 

and appropriate approach. This process 

affords the parties the opportunity to 

66180 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

obtain review of an NSLRB decision 

without the need for court proceedings 

and, in many cases, the FLRA review 

may be sufficient to resolve the dispute. 

Therefore, we have not adopted this 

suggestion. 

However, comments related to 

judicial review revealed confusion 

regarding the process for judicial 

review, and we have, therefore, 

eliminated the reference to judicial 

review in § 9901.907. We have instead 

added a new paragraph (c) in § 9901.909 

that describes the process for appellate 

review of NSLRB decisions. To be 

absolutely clear, § 9901.909 provides the 

mechanism for obtaining judicial review 

beginning with the appellate review of 

the FLRA. We have also modified 

paragraph (d) (paragraph (c) in the 

proposed regulation) of § 9901.909 by 

adding language reflecting our intent 

that judicial review of FLRA decisions 

is obtained pursuant to 5 U.S.C. 7123, 

which is modified only to conform 

relevant citations in chapter 71 to the 

corresponding provisions in subpart I. 

Although many commenters, 

including labor organizations 

participating in the meet-and-confer 

process, did not support its 

establishment, we have decided to 

retain the NSLRB. As we indicated in 

the Preamble accompanying the 

proposed regulations, it ensures that 

those who adjudicate the most critical 

labor disputes in the Department do so 

quickly and with an understanding and 

appreciation of the unique challenges 

that the Department faces in carrying 

out its mission. 

Section 9901.908—Powers and Duties of 

the Board and Section 9901.909—

Powers and Duties of the Federal Labor 

Relations Authority 

Commenters recommended that FLRA 

retain greater jurisdiction over the 

Department’s labor disputes. 

Specifically, they expressed the view 

that not all labor relations disputes 

arising under NSPS will significantly 

impact the DoD’s mission enough to 

warrant their removal from FLRA 

jurisdiction. We disagree. It is 

imperative that the NSLRB retain 

jurisdiction over matters that require 

efficient review and understanding of 

the Department’s mission. This is 

consistent with the requirement in 5 

U.S.C. 9902(m)(1) that the system OPM 

and DoD establish address the unique 

role that the Department’s civilian 

workforce plays in support of the 

Department’s national security mission. 

As a result, the final regulations give the 

NSLRB jurisdiction over disputes 

concerning the duty to bargain, the 

scope of bargaining, negotiation 

impasses, and related exceptions to 

arbitration awards. In addition, the final 

regulations clarify that the FLRA will 

review Board decisions on unfair labor 

practices (except when the Board 

declines to adjudicate the matter), 

arbitration awards under § 9901.908, 

and negotiability disputes. 

Commenters further inquired about 

the NSLRB’s authority to investigate 

unfair labor practices and other labor 

disputes. We agree that the NSLRB 

should have the authority to investigate 

and have modified the regulations to 

provide the NSLRB with authority to 

establish procedures for investigations 

in their regulations. In addition, we 

have clarified that the Board has the 

authority, similar to that exercised today 

by the FLRA General Counsel, to 

exercise unreviewable discretion to 

dismiss unfair labor practice allegations. 

Commenters expressed concern that 

the Board would not be fully equipped 

to handle the extreme workload related 

to the implementation of the labor 

relations system at stand up. We agree. 

We have added a new § 9901.908(a), to 

reflect the change discussed under 

§ 9901.907, National Security Labor 

Relations Board, which provides the 

Secretary with the authority to 

determine the date of establishment of 

the NSLRB. Pending establishment of 

the NSLRB, the regulations also provide 

the Secretary discretion, in consultation 

with the Director, to designate another 

third party to exercise the authority of 

the Board in the interim. 

Commenters questioned why the 

proposed regulations authorized the 

NSLRB to issue, at the request of any 

party, binding opinions on matters 

within its jurisdiction that would be 

subject to FLRA and judicial review. 

They further questioned who would 

have standing to seek review, other than 

the initial requester, since there would 

be no specific labor dispute at issue, and 

recommended the deletion of this 

provision. In response to these 

concerns, we have revised the language 

to strike the phrase ‘‘binding 

Department-wide opinions’’ and 

replaced it with ‘‘guidance,’’ thus 

allowing the NSLRB to issue nonbinding guidance. While we have struck 

the language that would have allowed 

FLRA and judicial review of this 

guidance, we anticipate that the 

guidance will be accorded deference by 

other third parties in the cases before 

them. We also received a comment 

suggesting that the procedures to 

request an opinion under this provision 

are confusing. We disagree and have 

made no changes to this process. 

Commenters raised concerns about 

the NSLRB’s authority under 

§ 9901.908(a)(3) of the proposed 

regulations to resolve disputes 

concerning requests for information 

under § 9901.914(b)(5). Accordingly, we 

have deleted this provision. Disputes 

concerning denial of information 

requests are processed as unfair labor 

practices, which are included in 

§ 9901.908(b)(1). 

Commenters, including labor 

organizations participating in the meetand-confer process, expressed concern 

with the NSLRB’s authority to resolve 

national consultation disputes. We agree 

and have amended the regulations to 

retain FLRA jurisdiction over disputes 

regarding the granting of National 

Consultation Rights. Accordingly, we 

have deleted § 9901.908(a)(8) of the 

proposed regulations, which had 

reserved this authority to the NSLRB. 

Some commenters expressed concern 

with the limitation on the Board’s 

authority to issue status quo ante 

awards. These commenters argued that 

the authority to order status quo ante 

remedies to make aggrieved employees 

whole was essential for employees to 

perceive the NSLRB as legitimate. We 

disagree. We believe that the limitations 

on the award of status quo ante 

remedies appropriately recognize and 

correctly balance the Department’s 

national security mission and the 

unique role that DoD civilian employees 

play in supporting that mission. We 

believe the limitations provided in the 

regulations are appropriate and have not 

accepted the recommendations. 

A labor organization expressed 

concern that the Board’s de novo review 

authority of an arbitrator’s findings of 

fact made the proposed system 

illegitimate. We disagree. We believe it 

is necessary for the Board to review the 

underlying facts in any dispute to 

ensure that a correct determination has 

been rendered. 

Commenters also recommended that 

we define the Board’s remedial 

authorities. We do not believe that this 

is necessary, just as it was unnecessary 

to define the FLRA’s remedial 

authorities under chapter 71. 

Commenters also raised concerns 

regarding the Board’s authority under 

§ 9901.908(a)(1) and (a)(5) of the 

proposed regulations to decline 

jurisdiction over individual labor 

disputes. We share their concerns and 

have amended the proposed language to 

give the Board the added authority to 

reject unfair labor practices and 

negotiation impasses. 

Section 9901.910—Management Rights 

Commenters, including labor 

organizations participating in the meetand-confer process, recommended that 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66181 

we retain the current language in 5 

U.S.C. chapter 71 with regard to 

management rights, arguing that the 

proposed regulations unduly limited the 

scope of bargaining. Specifically, 

commenters expressed concern that 

limiting collective bargaining over the 

assignment of equipment and shifts 

could compromise public safety. These 

commenters recommended that 

management retain the right to 

permissively bargain certain subjects 

when appropriate, rather than replacing 

the requirement to bargain with a 

requirement to consult with the labor 

organizations concurrent with taking 

action. Moreover, commenters suggested 

that labor organizations should be able 

to bargain appropriate arrangements 

prior to management taking an action 

that potentially could adversely affect 

bargaining unit employees rather than 

providing for post implementation 

bargaining. Commenters, most notably 

labor organizations, objected to the 

prohibition of bargaining procedures 

concerning management rights at 

§ 9901.910(a)(1) and (2). Labor 

organizations also suggested that the 

right to negotiate procedures for 

management rights at § 9901.910(a)(3) is 

illusory. Labor organizations suggested 

that no justification has been provided 

to restrict bargaining over procedures 

and this restriction is contrary to law. 

Finally, commenters objected to the 

provision that allowed management to 

deviate from established procedures 

because they believe such an action is 

unreasonable. 

Although these issues were discussed 

during the meet-and-confer process, the 

employee and management 

representatives were unable to fashion a 

recommendation to resolve these 

differences that would be acceptable to 

all parties. The labor organizations 

participating in the meet-and-confer 

process, while willing to discuss some 

modifications to the procedures in 

chapter 71, held fast to their position 

that the existing labor relations system 

only needed slight modifications to 

meet the Department’s need for 

flexibility and agility to support its 

national security mission. We disagree 

with the labor organizations’ suggestion 

that implementing issuances and 

issuances should be subject to an 

adaptation of the FLRA’s compelling 

need standard, which requires a link 

between the policy to be implemented 

and national security, to override 

collective bargaining agreements. 

Furthermore, we believe that, even with 

modifications discussed with the labor 

organizations during the meet-andconfer process, to interpret the 

emergency provisions of chapter 71 

more liberally and to allow postimplementation bargaining in certain 

limited situations, the current statute 

does not give the Department the 

flexibility necessary to carry out its vital 

national security mission. Today, the 

Department is increasingly faced with 

an enemy that can attack with little or 

no advance warning. The Department 

must be agile enough to respond to the 

emerging and rapidly evolving threats 

inherent in 21st century warfare. 

Finally, we have modified the 

regulations to permit bargaining, in the 

sole, exclusive, unreviewable discretion 

of the Secretary, over the procedures 

that would be followed in exercising the 

expanded operational management 

rights. We have also modified the 

regulations to permit bargaining, at the 

election of the Secretary, over 

appropriate arrangements on the routine 

matters related to the expanded 

operational management rights. The 

Secretary may authorize such bargaining 

to advance the Department’s mission 

accomplishment or promote 

organizational effectiveness. Mid-term 

agreements on appropriate arrangements 

and procedures for (a)(1) and (a)(2) 

management rights are not precedential 

or binding on subsequent acts, or 

retroactively applied, except at the 

Secretary’s sole, exclusive, and 

unreviewable discretion. Procedures 

and appropriate arrangements in term 

agreements are binding, except that 

nothing will delay or prevent the 

Secretary from exercising his or her 

authority under subpart I. For example, 

the Secretary may authorize deviation 

from such agreements when it is 

necessary to carry out the Department’s 

mission. This authority is comparable to 

what occurs today when an emergency 

exists. 

We have also made some minor 

changes to the section to make technical 

corrections and to clarify intent. 

Specifically, in § 9901.910(e) we have 

corrected the citation from ‘‘§ 9901.913’’

to the correct citation of ‘‘§ 9901.917.’’

In response to another commenter, we 

have removed the ‘‘foreseeable, 

substantial, and significant’’ standard 

from § 9901.910(e)(2)(i) because it is 

unnecessary given the language in 

§ 9901.917(d)(2). We have also added 

references to sections 9901.918 and 

9901.919 to conform to the authorities 

in those sections for multi-unit 

bargaining and bargaining above the 

level of recognition, respectively. 

Section 9901.911—Exclusive 

Recognition of Labor Organizations 

Labor organizations recommended 

that we delete the section as it is 

duplicative of the introductory 

provisions in 5 U.S.C. 7111. We 

disagree. Although labor organization 

recognition remains unchanged from 5 

U.S.C. chapter 71, we believe that it is 

important to affirmatively state in these 

regulations that labor organizations will 

be recognized under subpart I in the 

same manner as they are under chapter 

71. 

Section 9901.912—Determination of 

Appropriate Units for Labor 

Organization Representation 

The proposed regulations under 

§ 9901.912(b)(3) and (4) would exclude 

all employees engaged in personnel 

work and individuals employed in 

attorney positions. In response to 

comments received, particularly from 

labor organizations participating in the 

meet-and-confer process, which 

opposed these exclusions as 

unnecessary and overbroad, we have 

revised the language to reflect the 

current language in 5 U.S.C. chapter 71. 

Although the proposed regulations 

did not explicitly provide special rules 

for bargaining unit inclusion or 

exclusion for employees holding 

security clearances, there were multiple 

comments on the subject. Commenters 

suggested that employees with security 

clearances should be excluded from 

bargaining units because of national 

security concerns. Labor organizations 

participating in the meet-and-confer 

process recommended an alternative 

approach that would require an 

employee with a security clearance to be 

excluded if that employee’s duties 

required independent judgment in the 

formulation of national security policy. 

While we understand the complexity of 

the issue, we disagree with both 

recommendations because we believe 

the existing approach of case-by-case 

exclusion is appropriate. Given the 

sensitivity of the issue, we believe a 

universal approach to security clearance 

exclusion would be inflexible and 

ineffective. 

Section 9901.913—National 

Consultation 

Commenters, including labor 

organizations participating in the meetand-confer process, recommended 

deleting these provisions because, in 

their view, they are unlawful deviations 

from chapter 71. We disagree for the 

reasons stated under General 

Comments. Commenters further 

recommended that the FLRA should 

retain jurisdiction over national 

consultation issues. We have adopted 

this recommendation and modified the 

language accordingly. We also received 

comments suggesting that the phrases 

66182 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

‘‘substantial number of employees’’ and 

‘‘reasonable time’’ are vague. However, 

this is the exact language that appears 

in chapter 71 and the FLRA has a long 

history of interpreting this language. 

Therefore, we have retained the 

language. 

Section 9901.914—Representation 

Rights and Duties 

Commenters, including labor 

organizations participating in the meetand-confer process, strongly objected to 

the elimination of the right of an 

employee to request representation 

when examined by representatives of 

the Office of the Inspector General and 

other independent Department and 

Component organizations whose 

mission includes criminal 

investigations. These commenters 

argued that such representation protects 

employees against abusive or illegal 

interview techniques and provides 

reassurance and guidance to employees. 

We agree, and have revised the 

regulations to eliminate these 

restrictions on representation. 

We also received comments, 

including comments from labor 

organizations participating in the meetand-confer process, that opposed the 

restrictions on the union’s right to 

attend formal EEO proceedings. 

Alternatively, other commenters 

strongly supported this restriction. We 

have carefully considered the comments 

and have come to the conclusion that 

the often sensitive nature of 

discrimination complaints, coupled 

with the fact that the employee has 

exercised an option to not use the 

negotiated grievance procedure, 

supports this limitation on a labor 

organization’s right to attend such 

discussions. We believe the procedures 

as described in the proposed regulations 

provide the best balance between the 

unions’ institutional interest in the 

matter and the employee’s right to 

privacy. Consistent with this 

determination, we have added clarifying 

language in § 9901.915(a)(2)(C). 

Commenters, including labor 

organizations participating in the meetand-confer process, expressed the view 

that there is no valid reason to restrict 

the union’s right to attend formal 

discussions over operational matters. 

Some of these comments appear to 

confuse this right as it currently exists 

under chapter 71. Some commenters 

suggest that any formal meeting with 

employees requires an invitation for 

union attendance. This is clearly not the 

case today, and case law is clear that it 

must be a formal meeting where a 

change to existing conditions of 

employment is discussed. Many 

meetings where operational matters are 

discussed, such as the routine 

assignment of work, do not rise to the 

level of requiring union participation. 

Furthermore, we believe that allowing 

managers to respond to basic questions 

regarding conditions of employment, 

such as a routine question by a newer 

employee regarding how an overtime 

roster operates, should not require 

union participation as the manager is 

merely reiterating existing policy. 

Management and employees must be 

able to freely communicate on such 

routine matters if the Department is to 

operate efficiently. Furthermore, such a 

communication in no way diminishes 

the role of the union, and does not in 

any way authorize a manager to discuss 

changing these procedures without 

union participation. For the forgoing 

reasons, we have not accepted the 

recommendation and have retained the 

language as it appeared in the proposed 

regulation. 

Labor organizations participating in 

the meet-and-confer process and other 

commenters also recommended that we 

retain the ‘‘flagrant misconduct’’

standard for employee conduct while 

serving as union officials. Commenters 

argued that union representatives are 

different than other employees because 

they have the right to speak, write, 

associate, and petition for the redress of 

wronged employees. However, all 

employees, regardless of whether they 

are union representatives, are expected 

to express their concerns in an 

appropriate manner, particularly in 

scenarios where there could be a safety 

or security violation. The intent is not 

to prevent honest and open discussion, 

but rather to ensure that such 

discussions are undertaken in a 

professional and courteous manner. 

Under the proposed standard, there is 

no requirement that a union 

representative not assert the union’s 

position. The only conduct the revised 

standard is intended to stop is the rare, 

but utterly unacceptable use of vulgar or 

sexually explicit language, as well as 

physical intimidation by union officials. 

We believe the revised standard is 

appropriate, particularly in a military 

organization that has a longstanding 

tradition of professionalism and 

courtesy. We have therefore not 

accepted this recommendation. 

Commenters, including labor 

organizations participating in the meetand-confer process, objected to the 

limitations on management’s obligation 

to provide information to a union under 

the proposed regulations. Generally 

these comments focused on the 

provisions allowing an authorized 

official to block the release of 

information if that official determines 

the release would compromise mission, 

security, or employee safety. These 

provisions generally codify current case 

law in which the right of the union to 

information is weighed against the 

rights of employees and management. 

This language simply clarifies the 

existing state of affairs. Thus, we have 

not adopted the recommendations to 

eliminate these provisions. 

Several commenters also suggested 

that the 30-day period for agency head 

review was unreasonably short. The 

process of agency head review, 

including the 30-day limitation, as 

provided for in § 9901.914(d)(1)–(4) is 

based on, and adopts, the authority of 

heads of agencies that exists today 

under 5 U.S.C. 7114(c). This standard 

has been in effect for many years under 

5 U.S.C. chapter 71 and has worked 

efficiently. Thus, we believe that this is 

sufficient time for agency head review 

to occur and we have retained the 30- 

day time frame. We have modified 

§ 9901.914(d)(2) and (3) to conform the 

provisions to the revised definition of 

‘‘issuances’’ that could serve as the basis 

for disapproval of conflicting provisions 

of collective bargaining agreements 

upon agency head approval. We have 

also adopted a comment to revise 

§ 9901.914(d)(5) to clarify that 

agreements are unenforceable because 

they conflict with applicable law, rule 

or regulation, or issuance, rather than 

because an authorized agency official 

has made such a determination. We 

have added clarifying language to this 

paragraph in response to numerous 

comments regarding the impact of 

issuances on collective bargaining 

agreements. The revised language 

clarifies that collective bargaining 

agreement provisions that conflict with 

issuances remain in effect until 

expiration of the agreement at which 

time the agreement must be brought into 

conformance with the issuance. 

Section 9901.916—Unfair Labor 

Practices 

Commenters, including labor 

organizations participating in the meetand-confer process, recommended that 

DoD should not be permitted to enforce 

a rule or regulation that is in conflict 

with a collective bargaining agreement if 

the agreement was in effect prior to the 

issuance of the rule or regulation. We 

agree with these recommendations to 

the extent that the rule or regulation is 

not implementing NSPS and have 

amended the regulations to reflect the 

current 5 U.S.C. 7116(a)(7) unfair labor 

practice with a modification to exclude 

implementing issuances, which under 

these regulations, will immediately 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66183 

supersede conflicting provisions of 

collective bargaining agreements. 

Commenters, including labor 

organizations participating in the meetand-confer process, suggested that 

employees or employee representatives 

should have more than 90 days to file 

an unfair labor practice with the Board. 

We concur and have revised the 

regulation to provide six months, which 

is consistent with the current filing 

limits under chapter 71. Finally, to 

conform this section to the changes 

made to § 9901.908 and to clarify the 

Board’s authority with respect to 

unreviewable discretion, we have 

eliminated reference to the term 

‘‘charge’’ and inserted instead the 

generic term ‘‘allegation.’’ This also 

supports our goal for the Board to use 

a single, integrated, streamlined process 

for resolving labor relations disputes, 

including unfair labor practices. 

Section 9901.917—Duty To Bargain and 

Consult 

Commenters, including labor 

organizations participating in the meetand-confer process, objected to the 

establishment of a 30-day time limit to 

complete mid-term bargaining, as 

proposed in § 9901.917(c). We have 

modified this section to allow the 

parties, by mutual consent, to continue 

mid-term negotiations beyond the 

proposed 30-day limitation. This change 

to § 9901.917(c) parallels identical 

language in § 9901.917(b). 

Additionally, based on comments 

made during the meet-and-confer 

process that it was illogical to restrict 

the parties’ ability to seek bargaining 

assistance early in the process, we 

changed the proposed language in 

§ 9901.917(b) and (c) to allow either 

party, at any time prior to going to the 

Board, to refer matters at impasse to 

FMCS or, if mutually agreeable, to 

another third party. 

We made technical changes to the 

language in § 9901.917(d)(1) to conform 

it to the revised definitions of 

‘‘implementing issuance’’ and 

‘‘issuance.’’ Commenters found the 

§ 9901.917(d)(2) limitation on 

bargaining to be unnecessary and 

unclear. First, commenters suggested 

that the lead phrase, ‘‘except as 

otherwise provided in 910(c),’’ was 

unnecessary. We disagree. The phrase is 

intended to convey that labor 

organizations will have a right to 

consult on procedures in exercising 

management rights at § 9901.910(a)(1) 

and (2) even though § 9901.917(d)(2) 

limits consultation to otherwise 

negotiable changes in conditions of 

employment subject to the foreseeable, 

substantial and significant standard. In 

other words, this requires consultation 

on procedures for these particular 

management rights although 

‘‘bargaining’’ on procedures is 

prohibited at § 9901.910(b). Commenters 

also raised concerns about the 

application of the § 9901.917(d)(2) 

standard, given that it contains a 

number of undefined words and 

phrases, e.g., ‘‘foreseeable, substantial, 

and significant in terms of both impact 

and duration on the bargaining unit, or 

on those employees in that part of the 

bargaining unit affected by the change.’’

Commenters fear that, absent a 

definition of these terms and phrases, 

DoD management could interpret them 

in a way that would render employee 

and union rights meaningless. 

Commenters recommended that we 

delete the provision altogether and rely 

on the FLRA’s existing de minimis 

standard. We have not adopted these 

suggestions. While we agree that the 

standard is subject to interpretation, we 

anticipate that a body of case law will 

develop to guide the parties in applying 

this standard, just as there is a body of 

case law regarding the FLRA’s de 

minimis standard. 

Section 9901.918—Multi-unit 

Bargaining 

Commenters expressed concern that 

while unions could request multi-unit 

bargaining, the Secretary has sole and 

exclusive authority to grant such 

request. While we recognize this 

concern, we believe that the Secretary is 

in a unique position to determine when 

an issue is appropriate for multi-unit 

bargaining given variations in mission 

and organization across the Department. 

We are also unclear as to how one union 

could require another union to 

participate in multi-unit bargaining. We 

have therefore rejected 

recommendations to allow unions to 

require multi-unit bargaining. However, 

we have modified the language to clarify 

the Secretary’s authority to require 

multi-unit bargaining. 

Commenters, including labor 

organizations participating in the meetand-confer process, expressed strong 

opinions regarding the prohibition on 

ratification of contracts. While we 

understand that ratification is an 

internal union process, we believe it 

would be untenable to give each 

individual bargaining unit veto power 

over a multi-unit agreement after the 

parties have reached agreement. Thus, 

we have adopted the recommendation 

to eliminate the prohibition on 

ratification, but added a provision that 

when an agreement is reached under 

this section, individual bargaining units 

may not opt out of or veto that 

agreement. 

Section 9901.919—Collective Bargaining 

Above the Level of Recognition 

Several comments questioned the 

procedures that will be used for 

bargaining above the level of 

recognition, such as the approval 

process for official time requested by 

union officials who may be under 

different Military Departments. In 

response, we have added a provision 

that the Department will prescribe 

implementing issuances on the 

procedures associated with collective 

bargaining above the level of 

recognition. 

Commenters, including labor 

organizations participating in the meetand-confer process, acknowledged that 

bargaining at the national level could be 

appropriate, under certain 

circumstances. They objected, however, 

to giving the Secretary the sole and 

exclusive discretion over the use of this 

special bargaining authority as well as 

the provisions requiring these 

negotiations to supersede all conflicting 

provisions of existing collective 

bargaining agreements. We disagree. 

These provisions are required by 5 

U.S.C. 9902(g)(2). In addition, we 

believe they are necessary for effective 

national level bargaining. 

Commenters also objected to the 

prohibition on ratification in 

§ 9901.919(b)(5). Based on the same 

rationale relating to this issue with 

regard to multi-unit bargaining, we have 

adopted the recommendation to delete 

the proposed ratification language. In its 

place, § 9901.919(b)(5) now provides 

that individual labor organizations 

cannot opt out of, or veto, a final 

national level bargaining agreement. 

Section 9901.920—Negotiation 

Impasses 

Labor organizations objected to the 

NSLRB adjudicating negotiation 

impasses because they assert that the 

NSLRB is not an independent third 

party. We disagree with this assertion 

for the reasons discussed in the Major 

Issues section. During the meet-andconfer process, the participating labor 

organizations recommended using 

arbitrators to resolve negotiation 

impasses. We disagree because such a 

system would lead to inconsistent and 

inefficient results. Use of the NSLRB 

will, over time, result in an established 

body of precedent upon which both 

management and unions may rely. 

We have made a conforming change 

by adding § 9901.905 to the list of 

sections for which the parties may 

submit disputed issues to the Board. We 

66184 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

also made a technical correction 

deleting a reference to judicial review 

for unfair labor practices involving 

negotiation impasses since this is 

already provided for in § 9901.909. 

Section 9901.921—Standards of 

Conduct for Labor Organizations 

Labor organizations objected to this 

section as duplicative of 5 U.S.C. 

chapter 71. However, we have decided 

to retain it to ensure that labor 

organizations are cognizant of 

applicable standards of conduct. 

Section 9901.922—Grievance Procedure 

Commenters recommended that the 

term ‘‘administrative’’ be reinserted into 

the description of the negotiated 

grievance procedure in order to retain 

access to judicial review. As the 

Government’s brief in the pending case 

Whitman v. DOT (S. Ct. No. 04–1131) 

demonstrates, we do not believe the 

inclusion of the word ‘‘administrative’’

in chapter 71 was intended to authorize 

judicial review of grievances. 

Nonetheless, since some courts and 

parties have taken the position that the 

addition of the word ‘‘administrative’’

authorized judicial review, we have 

removed that term from the regulation 

to avoid any suggestion that this 

regulation would authorize judicial 

review. Because this change clarifies 

that judicial review over many issues is 

not available, it does not restrict an 

employee’s right to obtain MSPB or 

EEOC review of adverse actions and 

subsequent judicial review of those 

decisions. Therefore, we have rejected 

the recommendation and retained that 

language as proposed. 

Commenters, including the labor 

organizations participating in the meetand-confer process, recommended that 

classification issues should be subject to 

the grievance procedure. However, the 

classification of positions generally has 

been excluded from the grievance 

procedure. We believe that consistency 

of classification, while always 

important, becomes critical as we move 

into a pay-for-performance 

environment. Subjecting classification 

decisions to inconsistent interpretations 

by arbitrators would undermine the 

system. This would result in a 

fragmented classification system 

throughout the Department with 

similarly situated employees being 

treated differently. Such a result would 

be inconsistent with the NSPS Guiding 

Principles and KPPs, which require that 

the system be credible and trusted. 

Therefore, we have not adopted this 

recommended change. 

Commenters, including labor 

organizations participating in the meetand-confer process recommended that 

pay be subject to the grievance 

procedure. We note that pay has almost 

exclusively been excluded from the 

grievance procedure as it has 

historically been covered by 

Governmentwide regulation or law. The 

exclusion of pay from the grievance 

procedure is in keeping with this 

longstanding practice as we move into 

a pay for performance system. As with 

classification, subjecting pay 

determinations to inconsistent arbitrator 

interpretations would undermine the 

pay system and be inconsistent with 

statutory requirements that the pay 

system be fair, credible, and transparent. 

Thus, we have retained the language as 

proposed. 

Many commenters, including labor 

organizations participating in the meetand-confer process, presented strong 

arguments that employee ratings of 

record should continue to be subject to 

the grievance procedure and binding 

arbitration. Most commenters expressed 

concern that receiving an accurate 

performance rating was crucial to 

employees because that rating will be 

used in determining an employee’s pay. 

Thus, employees need a credible system 

to challenge ratings of record that they 

believe are inaccurate. We agree and 

have provided employees the right to 

grieve their performance ratings of 

record through the negotiated grievance 

procedure. Moreover, during the meetand-confer process, the unions agreed 

that the use of panels, consisting of an 

arbitrator, a management official and a 

union official, to decide grievances 

regarding ratings of record should be an 

option for employees. Thus, we have 

modified the regulations to provide that 

an employee may challenge a rating of 

record either through the negotiated 

grievance procedure using either a panel 

or traditional arbitration. Employees 

also have the option of using the 

administrative reconsideration process 

as set out in § 9901.409(g). 

We have also added language to 

reflect case law which prevents an 

arbitrator, or a panel, from conducting 

an independent evaluation of 

performance or otherwise substituting 

his or her judgment for that of a 

manager. We have made clear that the 

arbitrator or panel has no authority to 

determine appropriate share payouts 

under the pay-for-performance system, 

as such determinations are made by 

management based on the rating of 

record. We believe that these changes 

address the concerns of commenters and 

will serve to instill confidence in the 

performance rating process. 

Finally, a commenter recommended 

that appealable adverse actions be 

removed from the scope of the 

negotiated grievance procedure because 

of other available forums for redress. We 

agree that there is a statutory right to file 

an appeal with the Merit Systems 

Protection Board (MSPB), but the option 

to grieve these adverse actions as an 

alternative to the MSPB is a well 

established employee right. To address 

the requirement that the appeals process 

be fair and to ensure that the 

Department’s national security mission 

is considered, we have retained 

regulatory language ensuring uniform 

review and interpretation of arbitral 

awards and AJ decisions. Thus, we have 

rejected this comment. 

We also made a technical change to 

§ 9901.922(e) to assure that mixed cases 

processed through a negotiated 

grievance procedure can properly be 

reviewed by the Equal Employment 

Opportunity Commission. 

Section 9901.923—Exceptions to 

Arbitration Awards 

Labor organizations participating in 

the meet-and-confer process suggested 

that we reconsider subjecting exceptions 

from arbitration decisions on appealable 

adverse actions to the Merit Systems 

Protection Board for appellate review. 

We disagree. The Secretary must retain 

full authority to review an arbitrator’s 

decision on an appealable adverse 

action, similar to the need to review 

decisions of MSPB Administrative 

Judges, to ensure that the arbitrator 

interprets NSPS and these regulations in 

a way that recognizes the critical 

mission of the Department and to ensure 

that deference is provided to the 

Department’s interpretation of these 

regulations. This provision is designed 

to ensure uniformity of interpretation 

and application of NSPS and these 

regulations. Allowing direct judicial 

review of arbitration decisions would 

create an inconsistent approach in how 

MSPB Administrative Judges and 

arbitrator decisions are treated on 

identical matters. 

Section 9901.924—Official Time 

Commenters found the proposed 

regulations to be unclear as to how 

official time would be allocated among 

union officials from different locals 

when they are engaged in multi-unit 

and/or national level bargaining. We 

note that the proposed regulations 

provide that the Secretary will prescribe 

implementing issuances on the 

procedures and constraints associated 

with multi-unit bargaining. These 

issuances will address a variety of 

issues including the granting of official 

time. However, the comment revealed 

that a parallel provision for collective 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66185 

bargaining above the level of recognition 

has been inadvertently omitted for 

§ 9901.919. Although multi-unit 

bargaining may also be at the level of 

recognition, there are situations where it 

could occur above the level of 

recognition. Therefore, to ensure clarity, 

we have amended this section to 

provide that the Secretary will prescribe 

implementing issuances on the 

procedures and constraints associated 

with bargaining above the level of 

recognition. 

Section 9901.925—Compilation and 

Publication of Data 

Commenters recommended that this 

section be deleted as its sole use and 

purpose, in their view, is to facilitate the 

Board’s unlawful functioning. We 

disagree for the reasons explained under 

General Comments, and have retained 

this section. 

Section 9901.926—Regulations of the 

Board 

Commenters recommended that this 

section be deleted as its sole purpose, in 

their view, is to facilitate the Board’s 

unlawful functioning. Commenters 

asserted that the Board must develop its 

own regulations and that the 

Department does not have the authority 

to issue interim regulations for an 

independent Board’s operation. We 

agree that the Board should issue its 

own regulations and have provided the 

Board with that authority. However, we 

believe that it would be impractical for 

the Board to operate without interim 

rules until such time as the Board issues 

its own regulations. Thus, we have 

retained the Secretary’s authority to 

develop interim NSLRB regulations. 

Section 9901.927—Continuation of 

Existing Laws, Recognitions, and 

Procedures 

Commenters recommended deletion 

of this section on the basis that 

invalidation of collective bargaining 

agreements provisions before the 

expiration of their term is, in their view, 

unlawful. Again, we disagree for the 

reasons explained under General 

Comments. 

Commenters also suggested that the 

statements concerning the continuation 

of existing collective bargaining 

agreements and labor organization 

recognitions are unnecessary. We 

disagree because we want to ensure that 

there is no misunderstanding that these 

regulations will not dissolve established 

bargaining units within the Department 

nor cancel entire collective bargaining 

agreements. 

Section 9901.928—Savings Provisions 

We received comments 

recommending deletion of this section 

because the commenters believe that 

excluding administrative remedies for 

pending grievances is contrary to law. 

We disagree. To the extent that an 

award is prospective in nature, it must 

comply with the applicable procedures, 

whether established through law, rule, 

regulation or collective bargaining 

agreement. 

Next Steps 

A. NSPS Implementation 

1. Employee Transition Plan (Spiral 

Strategy) 

The Secretary adopted an ‘‘acquisition 

model’’ to design and implement NSPS. 

Eligible employees will transition to 

NSPS in phases or ‘‘spirals.’’ The spiral 

concept allows the Department to 

introduce NSPS in successive waves—to 

initially deploy the new personnel 

system to a number of organizations so 

that we can manage implementation and 

troubleshoot, evaluate, and report on the 

results in a timely manner. As with any 

new system, especially one with the size 

and complexity of NSPS, we may need 

to make refinements as we roll it out to 

the rest of the workforce. The first 

spiral, spiral one, is limited to General 

Schedule (GS and GM), Acquisition 

Demonstration Project, and certain 

alternative personnel system employees. 

As required by 5 U.S.C. 9902(l), the 

NSPS HR system under 5 U.S.C. 9902(a) 

may be implemented to a maximum of 

300,000 employees without having to 

make a determination that the 

Department has in place a performance 

management system that meets the 

criteria in 5 U.S.C. 9902(b). Spiral one 

will cover up to the statutory limit of 

300,000 employees. 

After the assessment cycle and 

certification of the performance 

management system are completed, the 

second spiral will deploy. Spiral two 

includes Federal Wage System 

employees, overseas employees, and 

other eligible employees. Spiral three 

will comprise the DoD labs, currently 

excluded by 5 U.S.C. 9902(c), should 

the Secretary make the determination 

required by that section. 

2. HR and Labor Relations Transition 

Transition to the HR system occurs 

when employees convert or spiral into 

NSPS. Employees covered by the HR 

system are under the appeals process. 

Upon conversion, employees will be 

covered by the NSPS performance 

management, classification, pay, 

reduction in force, adverse action, and 

appeals regulations. 

The labor relations provisions will be 

implemented DoD-wide for all eligible 

DoD employees at the same time. The 

labor relations provisions apply to all 

eligible employees even if the HR 

system does not cover them. 

B. Development of Implementing 

Issuances and Continuing Collaboration 

The Secretary will engage in 

continuing collaboration with employee 

representatives in developing 

implementing issuances. This will 

provide employee representatives an 

opportunity to submit written 

comments and discuss their views on 

human resources management issues. In 

some areas, such as classification and 

pay matters, law or other agency rules 

have governed decisions with no avenue 

for labor organizations to provide input 

to DoD. Continuing collaboration 

provides an historic opportunity for 

employee representatives to have input 

into the development of the 

Department’s human resources 

management system, as well as certain 

aspects of the adverse actions, appeals, 

and labor relations programs not 

specifically covered by these 

regulations. It is an opportunity for their 

views and interests to be heard and 

considered in the development process 

and gives the Secretary the benefit of 

their insight. We encourage employee 

representatives to take advantage of this 

process and the benefits it offers. 

The Secretary will provide the 

employee representatives draft copies of 

implementing issuances for review and 

comment. If necessary and appropriate, 

continuing collaboration could include 

face-to-face meetings or any other means 

to exchange information and ideas. We 

expect continuing collaboration to begin 

shortly after these final regulations 

become effective. 

C. Training 

The NSPS training plan presents a 

comprehensive, well-planned learning 

strategy to prepare the DoD workforce 

for the transition to NSPS. The plan is 

grounded in the belief that participants 

need to be informed and educated about 

NSPS and trust and value it as a system 

that fosters accountability, respects the 

individual, and protects his and her 

rights under the law. In building the 

plan, the Department seeks to educate 

employees about NSPS, teach the skills 

and behaviors necessary to implement 

and sustain NSPS, foster support and 

confidence in NSPS, and facilitate the 

transition to a performance-based, 

results-oriented culture. 

66186 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

The plan adopts a two-fold strategy 

centered around two interrelated 

training domains: The NSPS functional 

domain covering the NSPS system 

elements contained within the human 

resources, labor relations, and appeals 

sections of the regulations; and the 

change management domain, which 

focuses on the skills, attitudes, and 

behaviors necessary for success under 

NSPS. The plan incorporates a blended 

learning approach featuring Web-based 

and classroom instruction 

supplemented by a variety of learning 

products, informational materials, and 

workshops to effectively reach intended 

audiences with engaging, accurate, and 

timely content. 

Within the functional domain, the 

Department will offer specialized 

courses for all of the functional areas 

covered by the NSPS regulations, 

tailored for specialized audiences (e.g., 

supervisors/managers, human resources 

practitioners, attorneys, and nonsupervisory employees). These courses 

will cover pay banding, staffing 

flexibilities, performance management, 

labor relations, the appeals process, and 

other matters. The Department has a 

robust training infrastructure already in 

place to train and educate its personnel 

and will leverage that infrastructure as 

we implement NSPS-specific training. 

Managers and supervisors, including 

military managers and supervisors, are 

key to the success of NSPS and 

extensive training will be given to 

ensure their understanding of the 

system and the key role they play. 

Courses aimed at managers and 

supervisors will focus heavily on the 

performance management aspect of 

NSPS. DoD’s Program Executive Office 

is developing these courses now and 

will make them available to components 

in time to train employees in advance of 

NSPS implementation. Training will 

focus on improving skills needed for 

effective performance management, 

such as setting clear goals and 

expectations, communicating with 

employees, and linking individual 

expectations to the goals and objectives 

of the organization. 

The Department is also focusing 

attention on change management 

training to address the behavioral 

aspects of moving to NSPS and to better 

prepare the workforce for the changes 

NSPS will bring. The behavior-based 

training provides the foundation for 

future NSPS learning activities and 

facilitates increased communication 

between supervisors and employees as 

they discuss and jointly develop 

performance objectives tied to the 

overall organization’s mission. This is 

essential if this new system is to be 

successful. Some of the component 

behavior-based training has already 

begun, and other courses are in 

development and will be available to 

train all affected employees in advance 

of NSPS implementation. Course 

offerings include interpersonal 

communication, team building, and 

conflict management to help facilitate 

interaction between employees and 

supervisors. In addition, components 

continue to offer a variety of 

informational forums and learning 

activities with sponsorship and active 

continuing involvement by DoD’s senior 

leadership. 

The design of the pay-for-performance 

system includes the use of pay pools, 

and we will also provide training for 

pay pool managers covering the pay 

pool process, goals and objectives, 

authorities, funding considerations, 

documentation, effective panel 

characteristics, etc. Roles and 

responsibilities of the pay pool manager 

and participating supervisors will also 

be covered extensively. The training 

will also feature a mock pay pool panel 

process that takes pay pool panel 

members through the full assessment 

process to include mock payout and 

employee feedback. This training builds 

in accountability and supports the 

needs of both employees and managers 

by providing an opportunity to 

experience the process and identify and 

correct procedures prior to undergoing 

the actual pay pool experience. 

The PEO training plan was based on 

our extensive experience with previous 

demonstration projects. Training needs 

will vary by individual and organization 

depending on their familiarity with the 

fundamentals of a performance-oriented 

work environment. The core functional 

training courses available will include—

• 18 hours for managers and 

supervisors; 

• 13 hours for employees; and 

• 25 to 40 hours for HR practitioners 

(depending on the functional area of 

expertise; includes training on labor 

relations and appeals). 

Although the time spent in training 

represents the Secretary’s commitment 

to preparing the workforce, it is focusing 

on the results and outcomes of that 

training, as opposed to a prescriptive 

‘‘one size fits all’’ strategy. 

Employees will receive functional 

training through three primary vehicles: 

Print Materials —directed to various 

targeted audiences to raise awareness 

and educate them on key NSPS 

elements and performance management 

concepts. 

Web-based Training—two hour-long 

courses, ‘‘Fundamentals of NSPS’’ and 

‘‘NSPS 101,’’ providing introductory, 

on-line training delivered in a 

consistent manner in a self-paced, ondemand format. The ‘‘NSPS 101’’ course 

serves as a prerequisite for the 

classroom sessions. 

Classroom Sessions—the primary 

vehicle to communicate critical 

information, classroom sessions are 

under development for employees, 

managers and supervisors, human 

resources practitioners, and labor 

relations practitioners. The sessions will 

provide key operational information on 

all NSPS systems elements, with 

particular emphasis on performance 

management. Topics will include the 

performance management cycle, 

developing performance objectives, 

performance evaluation and assessment, 

performance coaching, and 

performance-based communication. 

Classroom training will be conducted 

using a train-the-trainer strategy, with 

trainers who participate in a train-thetrainer program leading all classroom 

training. 

Trainers will be provided with 

instructor guides and will include basic 

instructional content supplemented by 

video vignettes and interactive 

exercises. Classroom training is 

scheduled to occur on a ‘‘just-in-time’’

basis, approximately 4 to 6 weeks prior 

to NSPS implementation. 

The Department’s leadership 

recognizes and is committed to 

providing the necessary training. 

Secretary England, during testimony to 

the Senate Armed Services Committee, 

stated that ‘‘[t]raining is one of the most 

critical elements for a smooth and 

successful transition to NSPS. The 

Department is fully committed to a 

comprehensive training program for our 

managers, supervisors and employees. 

All employees will be trained to 

understand the system, how it works, 

and how it will affect them.’’

The necessary resources are available 

to provide the training. To address these 

requirements, the PEO allocated $2 

million in FY05 and anticipates 

allocating another $3 million in FY06 to 

fund development and delivery of core 

NSPS training courses and delivery of 

the ‘‘train-the-trainer’’ sessions. 

Regulatory Requirements 

E.O. 12866, Regulatory Review 

DoD and OPM have determined that 

the National Security Personnel System 

(NSPS) is a significant regulatory action 

as enacted by Section 1101 of the 

National Defense Authorization Act for 

Fiscal Year 2004 (Pub. L. 108–136, 

November 24, 2003) because there is a 

significant public interest in revisions of 

the DoD civilian employment system. 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66187 

DoD and OPM have analyzed the 

expected costs and benefits of NSPS to 

be implemented by DoD and that 

analysis is presented here. 

Integral to the administration of the 

new performance-based personnel 

system is a commitment to the DoD 

workforce to the maximum extent 

practicable, for fiscal years 2004 through 

2008, that the aggregate amount 

allocated for compensation of DoD 

employees under NSPS will not be less 

than if they had not been converted to 

NSPS. This takes into account potential 

step increases and rates of promotion 

had employees remained in their 

previous pay schedule. In addition, 

NSPS implementing issuances will 

provide a formula for calculating the 

aggregate compensation amount for 

fiscal years after fiscal year 2008. The 

formula will ensure that, to maximum 

extent practicable, in the aggregate, 

employees are not disadvantaged in the 

overall amount of pay available as a 

result of conversion to the NSPS, while 

providing flexibility to accommodate 

changes in the function of the 

organization, changes in the mix of 

employees performing those functions 

and other changed circumstances that 

might impact pay levels. 

Accordingly, the NSPS performancebased pay system carries with it 

potential implications relative to the 

base pay of individual employees, 

depending upon local labor market 

conditions and individual, team, and 

organizational performance. However, 

actual payroll costs under this system 

will be constrained by the amount 

budgeted for overall DoD payroll 

expenditures, as is the case with the 

present GS pay system. DoD anticipates 

that accessions, separations, and 

promotions will net out and, as with the 

present system, not add to the overall 

cost of administering the system. 

The creation of the performance-based 

NSPS will result in some initial 

implementation costs, which can be 

expressed in two basic categories: (1) 

Program implementation costs and (2) 

NSLRB start-up costs. The program 

category refers to the costs associated 

with designing and implementing the 

system. This includes the start-up and 

operation of the Program Executive 

Office, executing the system design 

process, developing and delivering new 

training specifically for NSPS, 

conducting outreach for employees and 

other parties, engaging in collaboration 

activities with employee 

representatives, and modifying human 

resources information systems, 

including personnel and payroll 

transaction processing systems. In the 

areas of training and HR automated 

systems, the costs associated with 

implementing NSPS will not be 

extensive, since DoD has significant 

training and information technology 

infrastructures in place for current 

operations. DoD will not have to build 

new systems or delivery mechanisms, 

but rather will modify existing systems 

and approaches to accommodate 

changes brought about by NSPS. 

The other cost category refers to the 

cost to establish the National Security 

Labor Relations Board (NSLRB). This 

includes typical organizational stand-up 

costs, as well as staffing the NSLRB with 

members and a professional staff. It is 

expected that the NSLRB will develop 

streamlined processes and procedures 

and leverage existing infrastructures and 

technology to minimize start-up and 

sustainment cost. 

As has been the practice with 

implementing other alternative 

personnel systems, DoD expects to incur 

an initial payroll cost related to the 

conversion of employees to the pay 

banding system. This is often referred to 

as a within-grade-increase (WGI) 

‘‘buyout’’ in which an employee’s basic 

pay, upon conversion, is adjusted by the 

amount of the WGI earned to date. 

While this increase is paid earlier than 

scheduled, it represents a cost that 

would have been incurred under the 

current system at some point. However, 

under the NSPS final regulations, WGIs 

no longer exist; once under NSPS, such 

pay increases will be based on 

performance. Accordingly, the total cost 

of the accelerated WGI ‘‘buyout’’ should 

not be treated as a ‘‘new’’ cost attributed 

to implementation of NSPS, since it is 

a cost that DoD would bear under the 

current HR system in the absence of the 

enabling legislation and corresponding 

regulations. The portion of the buyout 

cost attributable to NSPS 

implementation is the marginal 

difference between paying out the 

earned portion of a WGI upon 

conversion and the cost of paying the 

same WGI according to the current 

schedule. In the absence of NSPS, WGIs 

would be spread out over time instead 

of being paid ‘‘up front.’’ The marginal 

cost of the accelerated payment of 

earned WGIs is difficult to estimate, but 

is not a significant factor in the cost 

benefit analysis for regulatory review 

purposes. 

In addition, DoD will incur costs 

relating to such matters as training 

development, support, and execution; 

reprogramming automated payroll and 

human resources information systems; 

developing guiding issuances, 

implementation planning, scheduling, 

and monitoring; design, production, and 

distribution of communication 

materials; conducting employee 

education and communication 

activities; developing and conducting 

pay surveys to determine future pay 

adjustments in relation to the labor 

market; conducting surveys and data 

analysis to ensure key performance 

parameters are met; the establishment of 

the National Security Labor Relations 

Board (NSLRB); and the overall 

operation of the NSPS Program 

Executive Office. The extent of these 

costs will be directly related to the level 

of comprehensiveness desired by DoD. 

DoD estimates the overall costs 

associated with implementing the new 

DoD HR system—including the 

development and implementation of a 

new human resources system and the 

creation of the NSLRB—will be 

approximately $158 million through 

2008. Less than $100 million will be 

spent in any given 12-month period. 

The primary benefit to the public of 

this new system resides in the 

flexibilities that will enable DoD to 

build a high-performance organization 

focused on mission accomplishment. 

The new job evaluation, performancebased pay and management system 

provides DoD with an increased ability 

to attract and retain a more qualified 

and proficient workforce. The new and 

improved processes in labor 

management relations, adverse actions, 

and appeals will afford DoD greater 

flexibility to manage its workforce in the 

face of constantly changing threats to 

the United States and to successfully 

support its primary mission of Defense 

and the Global War on Terrorism. Taken 

as a whole, the changes included in 

these final regulations will result in a 

contemporary, merit-based HR system 

that focuses on performance, generates 

respect and trust, and supports the 

primary mission of DoD. 

Regulatory Flexibility Act 

DoD and OPM have determined 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. 

E.O. 12988, Civil Justice Reform 

This regulation is consistent with the 

requirements of E.O. 12988. The 

regulation clearly specifies the effects 

on existing Federal law or regulation; 

provides clear legal standards; has no 

retroactive effects; specifies procedures 

for administrative and court actions; 

defines key terms; and is drafted clearly. 

E.O. 13132, Federalism 

DoD and OPM have determined that 

these regulations will not have 

66188 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

federalism implications because they 

will apply only to Federal agencies and 

employees. The regulations will not 

have financial or other effects on States, 

the relationship between the Federal 

Government and the States, or the 

distribution of power and 

responsibilities among the various 

levels of government. 

Paperwork Reduction Act of 1995 (44 

U.S.C. Chapter 35) 

This final regulatory action will not 

impose any additional reporting or 

recordkeeping requirements under the 

Paperwork Reduction Act. 

Unfunded Mandates 

These regulations will not result in 

the expenditure by State, local, or tribal 

governments of more than $100 million 

annually. Thus, no written assessment 

of unfunded mandates is required. 

List of Subjects in 5 CFR Part 9901 

Administrative practice and 

procedure, Government employees, 

Labor management relations, Labor 

unions, Reporting and recordkeeping 

requirements, Wages. 

Linda M. Springer, 

Director, Office of Personnel Management. 

Donald Rumsfeld, 

Secretary, Department of Defense. 

■ Accordingly, under the authority of 

section 9902 of title 5, United States 

Code, the Department of Defense and 

the Office of Personnel Management 

amend title 5, Code of Federal 

Regulations, by establishing chapter 

XCIX consisting of part 9901 as follows: 

CHAPTER XCIX—DEPARTMENT OF 

DEFENSE HUMAN RESOURCES 

MANAGEMENT AND LABOR RELATIONS 

SYSTEMS (DEPARTMENT OF DEFENSE—

OFFICE OF PERSONNEL MANAGEMENT) 

PART 9901—DEPARTMENT OF 

DEFENSE HUMAN RESOURCES 

MANAGEMENT AND LABOR 

RELATIONS SYSTEMS 

Subpart A—General Provisions 

Sec. 

9901.101 Purpose. 

9901.102 Eligibility and coverage. 

9901.103 Definitions. 

9901.104 Scope of authority. 

9901.105 Coordination with OPM. 

9901.106 Continuing collaboration. 

9901.107 Relationship to other provisions. 

9901.108 Program evaluation. 

Subpart B—Classification 

General 

9901.201 Purpose. 

9901.202 Coverage. 

9901.203 Waivers. 

9901.204 Definitions. 

9901.205 Bar on collective bargaining. 

Classification Structure 

9901.211 Career groups. 

9901.212 Pay schedules and pay bands. 

Classification Process 

9901.221 Classification requirements. 

9901.222 Reconsideration of classification 

decisions. 

Transitional Provisions 

9901.231 Conversion of positions and 

employees to the NSPS classification 

system. 

Subpart C—Pay and Pay Administration 

General 

9901.301 Purpose. 

9901.302 Coverage. 

9901.303 Waivers. 

9901.304 Definitions. 

9901.305 Bar on collective bargaining. 

Overview of Pay System 

9901.311 Major features. 

9901.312 Maximum rates. 

9901.313 National security compensation 

comparability. 

Setting and Adjusting Rate Ranges 

9901.321 Structure. 

9901.322 Setting and adjusting rate ranges. 

9901.323 Eligibility for pay increase 

associated with a rate range adjustment. 

Local Market Supplements 

9901.331 General. 

9901.332 Local market supplements. 

9901.333 Setting and adjusting local market 

supplements. 

9901.334 Eligibility for pay increase 

associated with a supplement 

adjustment. 

Performance-Based Pay 

9901.341 General. 

9901.342 Performance payouts. 

9901.343 Pay reduction based on 

unacceptable performance and/or 

conduct. 

9901.344 Other performance payments. 

9901.345 Treatment of developmental 

positions. 

Pay Administration 

9901.351 Setting an employee’s starting 

pay. 

9901.352 Setting pay upon reassignment. 

9901.353 Setting pay upon promotion. 

9901.354 Setting pay upon reduction in 

band. 

9901.355 Pay retention. 

9901.356 Miscellaneous. 

Premium Pay 

9901.361 General. 

Conversion Provisions 

9901.371 General. 

9901.372 Creating initial pay ranges. 

9901.373 Conversion of employees to the 

NSPS pay system. 

Subpart D—Performance Management 

9901.401 Purpose. 

9901.402 Coverage. 

9901.403 Waivers. 

9901.404 Definitions. 

9901.405 Performance management system 

requirements. 

9901.406 Setting and communicating 

performance expectations. 

9901.407 Monitoring performance and 

providing feedback. 

9901.408 Developing performance and 

addressing poor performance. 

9901.409 Rating and rewarding 

performance. 

Subpart E—Staffing and Employment 

General 

9901.501 Purpose. 

9901.502 Scope of authority. 

9901.503 Coverage. 

9901.504 Definitions. 

External Recruitment and Internal Placement 

9901.511 Appointing authorities. 

9901.512 Probationary periods. 

9901.513 Qualification standards. 

9901.514 Non-citizen hiring. 

9901.515 Competitive examining 

procedures. 

9901.516 Internal placement. 

Subpart F—Workforce Shaping 

9901.601 Purpose and applicability. 

9901.602 Scope of authority. 

9901.603 Definitions. 

9901.604 Coverage. 

9901.605 Competitive area. 

9901.606 Competitive group. 

9901.607 Retention standing. 

9901.608 Displacement, release, and 

position offers. 

9901.609 Reduction in force notices. 

9901.610 Voluntary separation. 

9901.611 Reduction in force appeals. 

Subpart G—Adverse Actions 

General 

9901.701 Purpose. 

9901.702 Waivers. 

9901.703 Definitions. 

9901.704 Coverage. 

Requirements for Removal, Suspension, 

Furlough of 30 Days or Less, Reduction in 

Pay, or Reduction in Band (or Comparable 

Reduction) 

9901.711 Standard for action. 

9901.712 Mandatory removal offenses. 

9901.713 Procedures. 

9901.714 Proposal notice. 

9901.715 Opportunity to reply. 

9901.716 Decision notice. 

9901.717 Departmental record. 

Savings Provision 

9901.721 Savings provision. 

Subpart H—Appeals 

9901.801 Purpose. 

9901.802 Applicable legal standards and 

precedents. 

9901.803 Waivers. 

9901.804 Definitions. 

9901.805 Coverage. 

9901.806 Alternative dispute resolution. 

9901.807 Appellate procedures. 

9901.808 Appeals of mandatory removal 

actions. 

9901.809 Actions involving discrimination. 

9901.810 Savings provision. 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66189 

Subpart I—Labor-Management Relations 

9901.901 Purpose. 

9901.902 Scope of authority. 

9901.903 Definitions. 

9901.904 Coverage. 

9901.905 Impact on existing agreements. 

9901.906 Employee rights. 

9901.907 National Security Labor Relations 

Board. 

9901.908 Powers and duties of the Board. 

9901.909 Powers and duties of the Federal 

Labor Relations Authority. 

9901.910 Management rights. 

9901.911 Exclusive recognition of labor 

organizations. 

9901.912 Determination of appropriate 

units for labor organization 

representation. 

9901.913 National consultation. 

9901.914 Representation rights and duties. 

9901.915 Allotments to representatives. 

9901.916 Unfair labor practices. 

9901.917 Duty to bargain and consult. 

9901.918 Multi-unit bargaining. 

9901.919 Collective bargaining above the 

level of recognition. 

9901.920 Negotiation impasses. 

9901.921 Standards of conduct for labor 

organizations. 

9901.922 Grievance procedures. 

9901.923 Exceptions to arbitration awards. 

9901.924 Official time. 

9901.925 Compilation and publication of 

data. 

9901.926 Regulations of the Board. 

9901.927 Continuation of existing laws, 

recognitions, agreements, and 

procedures. 

9901.928 Savings provisions. 

Authority: 5 U.S.C. 9902 

Subpart A—General Provisions 

§ 9901.101 Purpose. 

(a) This part contains regulations 

governing the establishment of a new 

human resources management system 

and a new labor relations system within 

the Department of Defense (DoD), as 

authorized by 5 U.S.C. 9902. Consistent 

with 5 U.S.C. 9902, these regulations 

waive or modify various statutory 

provisions that would otherwise be 

applicable to affected DoD employees. 

These regulations are prescribed jointly 

by the Secretary of Defense and the 

Director of the Office of Personnel 

Management (OPM). 

(b)(1) This part is designed to meet a 

number of essential requirements for the 

implementation of a new human 

resources management system and a 

new labor relations system for DoD. The 

guiding principles for establishing these 

requirements are to put mission first; 

respect the individual; protect rights 

guaranteed by law, including the 

statutory merit system principles in 5 

U.S.C. 2301; value talent, performance, 

leadership, and commitment to public 

service; be flexible, understandable, 

credible, responsive, and executable; 

ensure accountability at all levels; 

balance human resources system 

interoperability with unique mission 

requirements; and be competitive and 

cost effective. 

(2) The key operational characteristics 

and requirements of NSPS and the labor 

relations system, which these 

regulations are designed to facilitate, are 

as follows: High Performing Workforce 

and Management—employees and 

supervisors are compensated and 

retained based on their performance and 

contribution to mission; Agile and 

Responsive Workforce and 

Management—workforce can be easily 

sized, shaped, and deployed to meet 

changing mission requirements; 

Credible and Trusted—system assures 

openness, clarity, accountability, and 

adherence to the public employment 

principles of merit and fitness; Fiscally 

Sound—aggregate increases in civilian 

payroll, at the appropriations level, will 

conform to OMB fiscal guidance; 

Supporting Infrastructure—information 

technology support, and training and 

change management plans are available 

and funded; and Schedule—NSPS and 

the labor relations system will be 

operational and demonstrate success 

prior to November 2009. 

§ 9901.102 Eligibility and coverage. 

(a) Pursuant to the provisions of 5 

U.S.C. 9902, all civilian employees of 

DoD are eligible for coverage under one 

or more of subparts B through I of this 

part, except to the extent specifically 

prohibited by law. 

(b) At his or her sole and exclusive 

discretion, the Secretary may, subject to 

§ 9901.105(b)—

(1) Establish or change the effective 

date for applying subpart I of this part 

to all eligible employees in accordance 

with 5 U.S.C. 9902(m); and 

(2) With respect to subparts B through 

H of this part, apply these subparts to 

a specific category or categories of 

eligible civilian employees in 

organizations and functional units of the 

Department at any time in accordance 

with the provisions of 5 U.S.C. 9902. 

However, no category of employees may 

be covered by subparts B, C, E, F, G, or 

H of this part unless that category is also 

covered by subpart D of this part. 

(c) Until the Secretary makes a 

determination under paragraph (b) of 

this section to apply the provisions of 

one or more subparts of this part to a 

particular category or categories of 

eligible employees in organizations and 

functional units, those employees, will 

continue to be covered by the applicable 

Federal laws and regulations that would 

apply to them in the absence of this 

part. All personnel actions affecting 

DoD employees will be based on the 

Federal laws and regulations applicable 

to them on the effective date of the 

action. 

(d) Any new NSPS classification, pay, 

or performance management system 

covering Senior Executive Service (SES) 

members will be consistent with the 

policies and procedures established by 

the Governmentwide SES pay-forperformance framework authorized by 5 

U.S.C. chapter 53, subchapter VIII, and 

applicable OPM regulations. If the 

Secretary determines that SES members 

employed by DoD should be covered by 

classification, pay, or performance 

management provisions that differ 

substantially from the Governmentwide 

SES pay-for-performance framework, 

the Secretary and the Director will issue 

joint regulations consistent with all of 

the requirements of 5 U.S.C. 9902. 

(e) At his or her sole and exclusive 

discretion, the Secretary may rescind 

the application under paragraph (b) of 

this section of one or more subparts of 

this part to a particular category of 

employees and prescribe implementing 

issuances for converting that category of 

employees to coverage under applicable 

title 5 or other applicable provisions. 

The Secretary will notify affected 

employees and labor organizations in 

advance of a decision to rescind the 

application of one or more subparts of 

this part to them. 

(f)(1) Notwithstanding any other 

provision of this part, but subject to the 

following conditions, the Secretary may, 

at his or her sole and exclusive 

discretion, apply one or more subparts 

of this part as of an effective date 

specified to a category of employees in 

organizational and functional units not 

currently eligible for coverage because 

of coverage under a system established 

by a provision of law outside the 

waivable or modifiable chapters of title 

5, U.S. Code, if the provision of law 

outside those waivable or modifiable 

title 5 chapters provides discretionary 

authority to cover employees under a 

given waivable or modifiable title 5 

chapter or to cover them under a 

separate system established by the 

Secretary. 

(2) In applying paragraph (f)(1) of this 

section with respect to coverage under 

subparts B and C of this part, the 

affected employees will be converted 

directly to the NSPS pay system from 

their current pay system. The Secretary 

may establish conversion rules for these 

employees similar to the conversion 

rules established under § 9901.373. 

§ 9901.103 Definitions. 

In this part: 

Band means pay band. 

66190 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

Basic pay means an employee’s rate of 

pay before any deductions and 

exclusive of additional pay of any kind, 

except as expressly provided by 

applicable law or regulation. For the 

specific purposes prescribed in 

§ 9901.332(c) only, basic pay includes 

any local market supplement. 

Career group means a grouping of one 

or more associated or related 

occupations. A career group may 

include one or more pay schedules. 

Competencies means the measurable 

or observable knowledge, skills, 

abilities, behaviors, and other 

characteristics that an individual needs 

to perform a particular job or job 

function successfully. 

Contribution means a work product, 

service, output, or result provided or 

produced by an employee or group of 

employees that supports the 

Departmental or organizational mission, 

goals, or objectives. 

Day means a calendar day. 

Department or DoD means the 

Department of Defense. 

Director means the Director of the 

Office of Personnel Management. 

Employee means an employee within 

the meaning of that term in 5 U.S.C. 

2105. 

Furlough means the placement of an 

employee in a temporary status without 

duties and pay because of lack of work 

or funds or other non-disciplinary 

reasons. 

General Schedule or GS means the 

General Schedule classification and pay 

system established under chapter 51 

and subchapter III of chapter 53 of title 

5, U.S. Code. 

Implementing issuance(s) means a 

document or documents issued by the 

Secretary, Deputy Secretary, Principal 

Staff Assistants (as authorized by the 

Secretary), or Secretaries of the Military 

Departments to carry out a policy or 

procedure implementing this part. 

These issuances may apply Departmentwide or to any part of DoD as 

determined by the Secretary at his or 

her sole and exclusive discretion. These 

issuances do not include internal 

operating guidance, handbooks, or 

manuals that do not change conditions 

of employment, as defined in 

§ 9901.903. 

Initial probationary period means the 

period of time, as designated by the 

Secretary, immediately following an 

employee’s appointment, during which 

an authorized management official 

determines whether the employee 

fulfills the requirements of the position 

to which assigned. 

In-service probationary period, such 

as a supervisory probationary period, 

means the period of time, as designated 

by the Secretary, during which an 

authorized management official 

determines whether the employee 

fulfills the requirements of the position 

to which assigned. 

Labor organization means an 

organization composed in whole or in 

part of employees, in which employees 

participate and pay dues, and which has 

as a purpose the dealing with the 

Department concerning grievances and 

conditions of employment, but does not 

include—

(1) An organization which, by its 

constitution, bylaws, tacit agreement 

among its members, or otherwise, 

denies membership because of race, 

color, creed, national origin, sex, age, 

preferential or nonpreferential civil 

service status, political affiliation, 

marital status, or handicapping 

condition; 

(2) An organization which advocates 

the overthrow of the constitutional form 

of government of the United States; 

(3) An organization sponsored by the 

Department; or 

(4) An organization which 

participates in the conduct of a strike 

against the Government or any agency 

thereof or imposes a duty or obligation 

to conduct, assist, or participate in such 

a strike. 

Mandatory removal offense (MRO) 

means an offense that the Secretary 

determines in his or her sole, exclusive, 

and unreviewable discretion has a direct 

and substantial adverse impact on the 

Department’s national security mission. 

Military Department means the 

Department of the Army, the 

Department of the Navy, or the 

Department of the Air Force. 

MSPB means the Merit Systems 

Protection Board. 

National Security Personnel System 

(NSPS) means the human resources 

management system established under 5 

U.S.C. 9902(a). It does not include the 

labor relations system established under 

5 U.S.C. 9902(m). 

Occupational series means a group or 

family of positions performing similar 

types of work. Occupational series are 

assigned a number for workforce 

information purposes (for example: 

0110, Economist Series; 1410, Librarian 

Series). 

OPM means the Office of Personnel 

Management. 

Pay band or band means a work level 

and associated pay range within a pay 

schedule. 

Pay schedule means a set of related 

pay bands for a specified category of 

employees within a career group. 

Performance means accomplishment 

of work assignments or responsibilities 

and contribution to achieving 

organizational goals, including an 

employee’s behavior and professional 

demeanor (actions, attitude, and manner 

of performance), as demonstrated by his 

or her approach to completing work 

assignments. 

Principal Staff Assistants means 

senior officials of the Office of the 

Secretary who report directly to the 

Secretary or Deputy Secretary of 

Defense. 

Promotion means the movement of an 

employee from one pay band to a higher 

pay band under implementing 

issuances. This includes movement of 

an employee currently covered by a 

non-NSPS Federal personnel system to 

a position determined to be at a higher 

level of work in NSPS. 

Rating of record means a performance 

appraisal prepared—

(1) At the end of an appraisal period 

covering an employee’s performance of 

assigned duties against performance 

expectations over the applicable period; 

or 

(2) As needed to reflect a substantial 

and sustained change in the employee’s 

performance since the last rating of 

record as provided in implementing 

issuances. 

Reassignment means the movement of 

an employee within DoD from his or her 

position of record to a different position 

or set of duties in the same or a 

comparable pay band under 

implementing issuances on a permanent 

or temporary/time-limited basis. This 

includes the movement of an employee 

between positions at a comparable level 

of work in NSPS and a non-NSPS 

Federal personnel system. 

Reduction in band means the 

voluntary or involuntary movement of 

an employee from one pay band to a 

lower pay band under implementing 

issuances. This includes movement of 

an employee currently covered by a 

non-NSPS Federal personnel system to 

a position determined to be at a lower 

level of work in NSPS. 

Secretary means the Secretary of 

Defense, consistent with 10 U.S.C. 113. 

SES means the Senior Executive 

Service established under 5 U.S.C. 

chapter 31, subchapter II. 

SL/ST refers to an employee serving 

in a senior-level position paid under 5 

U.S.C. 5376. The term ‘‘SL’’ identifies a 

senior-level employee covered by 5 

U.S.C. 3324 and 5108. The term ‘‘ST’’

identifies an employee who is 

appointed under the special authority in 

5 U.S.C. 3325 to a scientific or 

professional position established under 

5 U.S.C. 3104. 

Unacceptable performance means 

performance of an employee which fails 

to meet one or more performance 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66191 

expectations, as amplified through work 

assignments or other instructions, for 

which the employee is held 

individually accountable. 

§ 9901.104 Scope of authority. 

The authority for this part is 5 U.S.C. 

9902. The provisions in the following 

chapters of title 5, U.S. Code, and any 

related regulations, may be waived or 

modified in exercising the authority in 

5 U.S.C. 9902: 

(a) Chapters 31, 33, and 35, dealing 

with staffing, employment, and 

workforce shaping (as authorized by 5 

U.S.C. 9902(k)); 

(b) Chapter 43, dealing with 

performance appraisal systems; 

(c) Chapter 51, dealing with General 

Schedule job classification; 

(d) Chapter 53, dealing with pay for 

General Schedule employees, pay and 

job grading for Federal Wage System 

employees, and pay for certain other 

employees; 

(e) Chapter 55, subchapter V, dealing 

with premium pay, except section 

5545b; 

(f) Chapter 71, dealing with labor 

relations (as authorized by 5 U.S.C. 

9902(m)); 

(g) Chapter 75, dealing with adverse 

actions and certain other actions; and 

(h) Chapter 77, dealing with the 

appeal of adverse actions and certain 

other actions. 

§ 9901.105 Coordination with OPM. 

(a) As specified in paragraphs (b) 

through (e) of this section, the Secretary 

will advise and/or coordinate with OPM 

in advance, as applicable, regarding the 

proposed promulgation of certain 

implementing issuances and certain 

other actions related to the ongoing 

operation of the NSPS where such 

actions could have a significant impact 

on other Federal agencies and the 

Federal civil service as a whole. Such 

pre-decisional coordination is intended 

as an internal DoD/OPM matter to 

recognize the Secretary’s special 

authority to direct the operations of the 

Department of Defense pursuant to title 

10, U.S. Code, as well as the Director’s 

institutional responsibility to oversee 

the Federal civil service system 

pursuant to 5 U.S.C. chapter 11. 

(b) DoD will advise OPM in advance 

regarding the extension of specific 

subparts of this part to specific 

categories of DoD employees under 

§ 9901.102(b). 

(c) Subpart B of this part authorizes 

the Secretary to establish and 

administer a position classification 

system and classify positions covered by 

the NSPS; in so doing, DoD will 

coordinate with OPM prior to—

(1) Establishing or substantially 

revising career groups, occupational pay 

schedules, and pay bands under 

§§ 9901.211 and 9901.212(a); 

(2) Establishing alternative or 

additional occupational series for a 

particular career group or occupation 

under § 9901.221(b)(1) that differ from 

Governmentwide series and/or 

standards; 

(3) Establishing alternative or 

additional classification standards for a 

particular career group or occupation 

under § 9901.221(b)(1) that differ from 

Governmentwide classification 

standards; and 

(4) Establishing the process by which 

DoD employees may request 

reconsideration of classification 

decisions by the Secretary under 

§ 9901.222, to ensure compatibility 

between DoD and OPM procedures. 

(d) Subpart C of this part authorizes 

the Secretary to establish and 

administer a compensation system for 

employees of the Department covered 

by the NSPS; in so doing, DoD will 

coordinate with OPM prior to—

(1) Establishing maximum rates of 

basic pay and aggregate pay under 

§ 9901.312 that exceed those established 

under 5 U.S.C. chapter 53; 

(2) Establishing and adjusting pay 

ranges for occupational pay schedules 

and pay bands under §§ 9901.321(a), 

9901.322(a) and (b), and 9901.372; 

(3) Establishing and adjusting local 

market supplements under 

§§ 9901.332(a) and 9901.333; 

(4) Establishing alternative or 

additional local market areas under 

§ 9901.332(b) that differ from those 

established for General Schedule 

employees under 5 CFR 531.603; 

(5) Establishing policies regarding 

starting rates of pay for newly appointed 

or transferred employees under 

§§ 9901.351 through 9901.354 and pay 

retention under § 9901.355; 

(6) Establishing policies regarding 

premium pay under § 9901.361 that 

differ from those that exist in 

Governmentwide regulations; and 

(7) Establishing policies regarding the 

student loan repayment program under 

§ 9901.303(c) that differ from 

Governmentwide policies with respect 

to repayment amounts, service 

commitments, and reimbursement. 

(e) Subpart E of this part authorizes 

the Secretary to establish and 

administer authorities for the 

examination and appointment of 

employees to certain organizational 

elements of the Department covered by 

the NSPS; in so doing, DoD will 

coordinate with OPM prior to—

(1) Establishing alternative or 

additional examining procedures under 

§ 9901.515 that differ from those 

applicable to the examination of 

applicants for appointment to the 

competitive and excepted service under 

5 U.S.C. chapters 31 and 33, except as 

otherwise provided by subpart E of this 

part; 

(2) Establishing policies and 

procedures for time-limited 

appointments under § 9901.511(d) 

regarding appointment duration, 

advertising requirements, examining 

procedures, the appropriate uses of 

time-limited employees, and the 

procedures under which a time-limited 

employee in a competitive service 

position maybe be converted without 

further competition to the career 

service; and 

(3) Establishing alternative or 

additional qualification standards for a 

particular occupational series, career 

group, occupational pay schedule, and/ 

or pay band under § 9901.212(d) or 

9901.513 that significantly differ from 

Governmentwide standards. 

(f) Subpart F of this part authorizes 

the Secretary to establish and 

administer a workforce shaping system 

for employees of the Department 

covered by the NSPS; in so doing, DoD 

will coordinate with OPM prior to 

modifying coverage, retention 

procedures, or appeal rights under 

subpart F of this part. 

(g) Section 9902(l) of title 5, U.S. 

Code, requires the Secretary to make a 

determination that the Department has 

in place a performance management 

system that meets the criteria in 5 U.S.C. 

9902(b) before the Secretary may apply 

the human resources management 

system established under 5 U.S.C. 

9902(a) to an organization or functional 

unit that exceeds 300,000 civilian 

employees. In making this 

determination, the Secretary will 

coordinate with the Director. 

(h) When a matter requiring OPM 

coordination is submitted to the 

Secretary for decision, the Director will 

be provided an opportunity, as part of 

the Department’s normal coordination 

process, to review and comment on the 

recommendations and officially concur 

or nonconcur with all or part of them. 

The Secretary will take the Director’s 

comments and concurrence/ 

nonconcurrence into account, advise the 

Director of his or her determination, and 

provide the Director with reasonable 

advance notice of the effective date of 

the matter. Thereafter, the Secretary and 

the Director may take such action(s) as 

they deem appropriate, consistent with 

their respective statutory authorities and 

responsibilities. 

(i) The Secretary and the Director 

fully expect their staffs to work closely 

66192 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

together on the matters specified in this 

section, before such matters are 

submitted for official OPM coordination 

and DoD decision, so as to maximize the 

opportunity for consensus and 

agreement before an issue is so 

submitted. 

§ 9901.106 Continuing collaboration. 

(a) Continuing collaboration with 

employee representatives. (1) Consistent 

with 5 U.S.C. 9902, this section 

provides employee representatives with 

an opportunity to participate in the 

development of implementing issuances 

that carry out the provisions of this part. 

This process is the exclusive procedure 

for the participation of employee 

representatives in the planning, 

development, or implementation of the 

implementing issuances that carry out 

the provisions of this part. Therefore, 

this process is not subject to the 

requirements of 5 U.S.C. chapter 71, 

including but not limited to the exercise 

of management rights, enforcement of 

the duty to consult or negotiate, the 

duty to bargain and consult, or impasse 

procedures, or the requirements 

established by subpart I of this part, 

including but not limited to §§ 9901.910 

(regarding the exercise of management 

rights), 9901.916(a)(5) (regarding 

enforcement of the duty to consult or 

negotiate), 9901.917 (regarding the duty 

to bargain and consult), and 9901.920 

(regarding impasse procedures). 

(2)(i) For the purpose of this section, 

the term ‘‘employee representatives’’

includes representatives of labor 

organizations with exclusive recognition 

rights for units of DoD employees, as 

determined pursuant to subpart I of this 

part. 

(ii) The Secretary, at his or her sole 

and exclusive discretion, may determine 

the number of employee representatives 

to be engaged in the continuing 

collaboration process. However, each 

national labor organization with one or 

more bargaining units accorded 

exclusive recognition in the Department 

affected by an implementing issuance 

will be provided the opportunity to 

participate in the continuing 

collaboration process. 

(iii) Each national labor organization 

with multiple collective bargaining 

units accorded exclusive recognition 

will determine how its units will be 

represented within the limitations 

imposed by the Secretary under 

paragraph (a)(2)(ii) of this section. 

(3)(i) Within timeframes specified by 

the Secretary, employee representatives 

will be provided with an opportunity to 

submit written comments to, and to 

discuss their views and 

recommendations with, DoD officials on 

any proposed final draft implementing 

issuances. If views and 

recommendations are presented by 

employee representatives, the Secretary 

must consider these views and 

recommendations before taking final 

action. The Secretary will provide 

employee representatives a written 

statement of the reasons for taking the 

final action regarding the implementing 

issuance. 

(ii) To the extent that the Secretary 

determines necessary, employee 

representatives will be provided with an 

opportunity to discuss their views with 

DoD officials and/or to submit written 

comments, at initial identification of 

implementation issues and conceptual 

design and/or at review of draft 

recommendations or alternatives. 

(4) Employee representatives will be 

provided with access to information for 

their participation in the continuing 

collaboration process to be productive. 

(5) Nothing in the continuing 

collaboration process will affect the 

right of the Secretary, Deputy Secretary, 

Principal Staff Assistants, or Secretaries 

of the Military Departments to 

determine the content of implementing 

issuances and to make them effective at 

any time. 

(b) Continuing collaboration with 

other interested organizations. The 

Secretary may also establish procedures 

for continuing collaboration with 

appropriate organizations that represent 

the interests of a substantial number of 

nonbargaining unit employees. 

§ 9901.107 Relationship to other 

provisions. 

(a)(1) The provisions of title 5, U.S. 

Code, are waived, modified, or replaced 

to the extent authorized by 5 U.S.C. 

9902 to conform to the provisions of this 

part. 

(2) This part must be interpreted in a 

way that recognizes the critical national 

security mission of the Department, and 

each provision of this part must be 

construed to promote the swift, flexible, 

effective day-to-day accomplishment of 

this mission, as defined by the 

Secretary. The interpretation of the 

regulations in this part by DoD and 

OPM must be accorded great deference. 

(b) For the purpose of applying other 

provisions of law or Governmentwide 

regulations that reference provisions 

under chapters 31, 33, 35, 43, 51, 53, 55 

(subchapter V only), 71, 75, and 77 of 

title 5, U.S. Code, the referenced 

provisions are not waived but are 

modified consistent with the 

corresponding regulations in this part, 

except as otherwise provided in this 

part (including paragraph (c) of this 

section) or in implementing issuances. 

Applications of this rule include, but 

are not limited to, the following: 

(1) If another provision of law or 

Governmentwide regulations requires 

coverage under one of the chapters 

modified or waived under this part (i.e., 

chapters 31, 33, 35, 43, 51, 53, 55 

(subchapter V only), 71, 75, and 77 of 

title 5, U.S. Code), DoD employees are 

deemed to be covered by the applicable 

chapter notwithstanding coverage under 

a system established under this part. 

Selected examples of provisions that 

continue to apply to any DoD employees 

(notwithstanding coverage under 

subparts B through I of this part) 

include, but are not limited to, the 

following: 

(i) Foreign language awards for law 

enforcement officers under 5 U.S.C. 

4521 through 4523; 

(ii) Pay for firefighters under 5 U.S.C. 

5545b; 

(iii) Recruitment, relocation, and 

retention payments under 5 U.S.C. 5753 

through 5754; and 

(iv) Physicians’ comparability 

allowances under 5 U.S.C. 5948. 

(2) In applying the back pay law in 5 

U.S.C. 5596 to DoD employees covered 

by subpart H of this part (dealing with 

appeals), the reference in section 

5596(b)(1)(A)(ii) to 5 U.S.C. 7701(g) 

(dealing with attorney fees) is 

considered to be a reference to a 

modified section 7701(g) that is 

consistent with § 9901.807(f)(6). 

(3) In applying the back pay law in 5 

U.S.C. 5596 to DoD employees covered 

by subpart I of this part (dealing with 

labor relations), the references in section 

5596 to provisions in chapter 71 are 

considered to be references to those 

particular provisions as modified by 

subpart I of this part. 

(c) Law enforcement officer special 

base rates under section 403 of the 

Federal Employees Pay Comparability 

Act of 1990 (section 529 of Pub. L. 101–

509) do not apply to employees who are 

covered by an NSPS classification and 

pay system established under subparts B 

and C of this part. 

(d) Nothing in this part waives, 

modifies or otherwise affects the 

employment discrimination laws that 

the Equal Employment Opportunity 

Commission (EEOC) enforces under 42 

U.S.C. 2000e et seq., 29 U.S.C. 621 et 

seq., 29 U.S.C. 791 et seq., and 29 U.S.C. 

206(d). 

§ 9901.108 Program evaluation. 

(a) The Secretary will evaluate the 

regulations in this part and their 

implementation. The Secretary will 

provide designated employee 

representatives with an opportunity to 

be briefed and a specified timeframe to 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66193 

provide comments on the design and 

results of program evaluations. 

(b) Involvement of employee 

representatives in the evaluation 

process does not waive the rights of any 

party under applicable law or 

regulations. 

Subpart B—Classification 

General 

§ 9901.201 Purpose. 

(a) This subpart contains regulations 

establishing a classification structure 

and rules for covered DoD employees 

and positions to replace the 

classification structure and rules in 5 

U.S.C. chapter 51 and the job grading 

system in 5 U.S.C. chapter 53, 

subchapter IV, in accordance with the 

merit principle that equal pay should be 

provided for work of equal value, with 

appropriate consideration of both 

national and local rates paid by 

employers in the private sector, and 

appropriate incentives and recognition 

should be provided for excellence in 

performance. 

(b) Any classification system 

prescribed under this subpart will be 

established in conjunction with the pay 

system described in subpart C of this 

part. 

§ 9901.202 Coverage. 

(a) This subpart applies to eligible 

DoD employees and positions listed in 

paragraph (b) of this section, subject to 

a determination by the Secretary under 

§ 9901.102(b)(2). 

(b) The following employees of, or 

positions in, DoD organizational and 

functional units are eligible for coverage 

under this subpart: 

(1) Employees and positions that 

would otherwise be covered by the 

General Schedule classification system 

established under 5 U.S.C. chapter 51; 

(2) Employees and positions that 

would otherwise be covered by a 

prevailing rate system established under 

5 U.S.C. chapter 53, subchapter IV; 

(3) Employees in senior-level (SL) and 

scientific or professional (ST) positions 

who would otherwise be covered by 5 

U.S.C. 5376; 

(4) Members of the Senior Executive 

Service (SES) who would otherwise be 

covered by 5 U.S.C. chapter 53, 

subchapter VIII, subject to 

§ 9901.102(d); and 

(5) Such others designated by the 

Secretary as DoD may be authorized to 

include under 5 U.S.C. 9902. 

§ 9901.203 Waivers. 

(a) When a specified category of 

employees is covered by a classification 

system established under this subpart, 

the provisions of 5 U.S.C. chapter 51 

and 5 U.S.C. 5346 are waived with 

respect to that category of employees, 

except as provided in paragraph (b) of 

this section, §§ 9901.107, and 

9901.222(d) (with respect to OPM’s 

authority under 5 U.S.C. 5112(b) and 

5346(c) to act on requests for review of 

classification decisions). 

(b) Section 5108 of title 5, U.S. Code, 

dealing with the classification of 

positions above GS–15, is not waived 

for the purpose of defining and 

allocating senior executive service 

positions under 5 U.S.C. 3132 and 3133 

or applying provisions of law outside 

the waivable and modifiable chapters of 

title 5, U.S. Code—e.g., 5 U.S.C. 4507 

and 4507a (regarding Presidential rank 

awards) and 5 U.S.C. 6303(f) (regarding 

annual leave accrual for members of the 

SES and employees in SL/ST positions). 

§ 9901.204 Definitions. 

In this subpart: 

Band means pay band. 

Basic pay has the meaning given that 

term in § 9901.103. 

Career group has the meaning given 

that term in § 9901.103. 

Classification, also referred to as job 

evaluation, means the process of 

analyzing and assigning a job or 

position to an occupational series, 

career group, pay schedule, and pay 

band for pay and other related purposes. 

Competencies has the meaning given 

that term in § 9901.103. 

Occupational series has the meaning 

given that term in § 9901.103. 

Pay band or band has the meaning 

given that term in § 9901.103. 

Pay schedule has the meaning given 

that term in § 9901.103. 

Position or job means the duties, 

responsibilities, and related competency 

requirements that are assigned to an 

employee whom the Secretary approves 

for coverage under § 9901.202(a). 

§ 9901.205 Bar on collective bargaining. 

Pursuant to 5 U.S.C. 9902(f)(4) and 

(m)(7), any classification system 

established under this subpart is not 

subject to collective bargaining. This bar 

on collective bargaining applies to all 

aspects of the classification system, 

including, but not limited to coverage 

determinations, the design of the 

classification structure, and 

classification methods, criteria, and 

administrative procedures and 

arrangements. 

Classification Structure 

§ 9901.211 Career groups. 

For the purpose of classifying 

positions, the Secretary may establish 

career groups based on factors such as 

mission or function; nature of work; 

qualifications or competencies; career or 

pay progression patterns; relevant labormarket features; and other 

characteristics of those occupations or 

positions. The Secretary will document 

in implementing issuances the criteria 

and rationale for grouping occupations 

or positions into career groups. 

§ 9901.212 Pay schedules and pay bands. 

(a) For purposes of identifying relative 

levels of work and corresponding pay 

ranges, the Secretary may establish one 

or more pay schedules within each 

career group. 

(b) Each pay schedule may include 

one or more pay bands. 

(c) The Secretary will document in 

implementing issuances the definitions 

for each pay band which specify the 

type and range of difficulty and 

responsibility; qualifications or 

competencies; or other characteristics of 

the work encompassed by the pay band. 

(d) The Secretary will designate 

qualification standards and 

requirements for each career group, 

occupational series, pay schedule, and/ 

or pay band, as provided in § 9901.513. 

Classification Process 

§ 9901.221 Classification Requirements. 

(a) The Secretary will develop a 

methodology for describing and 

documenting the duties, qualifications, 

and other requirements of categories of 

jobs, and will make such descriptions 

and documentation available to affected 

employees. 

(b) The Secretary will—

(1) Assign occupational series to jobs 

consistent with occupational series 

definitions established by OPM under 5 

U.S.C. 5105 and 5346, or by DoD; and 

(2) Apply the criteria and definitions 

required by §§ 9901.211 and 9901.212 to 

assign jobs to an appropriate career 

group, pay schedule, and pay band. 

(c) The Secretary will establish 

procedures for classifying jobs and may 

make such inquiries of the duties, 

responsibilities, and qualification 

requirements of jobs as it considers 

necessary for the purpose of this 

section. 

(d) Classification decisions become 

effective on the date an authorized 

official approves the classification. A 

classification decision is implemented 

by a personnel action. The personnel 

action implementing a classification 

decision must occur within four pay 

periods after the date of the decision. 

Except as provided for in § 9901.222(b), 

such decisions will be applied 

prospectively and do not convey any 

retroactive entitlements. 

66194 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

§ 9901.222 Reconsideration of 

classification decisions. 

(a) An individual employee may 

request that DoD or OPM reconsider the 

classification (i.e., pay system, career 

group, occupational series, official title, 

pay schedule, or pay band) of his or her 

official position of record at any time. 

(b) The Secretary will establish 

implementing issuances for reviewing 

requests for reconsideration. Such 

issuances will include a provision 

stating that a retroactive effective date 

may be required only if the employee is 

wrongfully reduced in band. 

(c) An employee may request OPM to 

review a DoD determination made 

under paragraph (a) of this section. If an 

employee does not request an OPM 

reconsideration decision, DoD’s 

classification determination is final and 

not subject to further review or appeal. 

(d) OPM’s final determination on a 

request made under this section is not 

subject to further review or appeal. 

(e) Any determination made under 

this section will be based on criteria 

issued by the Secretary or, where the 

Secretary has adopted an OPM 

classification standard, criteria issued 

by OPM. 

Transitional Provisions 

§ 9901.231 Conversion of positions and 

employees to the NSPS classification 

system. 

(a) This section describes the 

transitional provisions that apply when 

DoD positions and employees initially 

are converted to a classification system 

established under this subpart. Affected 

positions and employees may convert 

from the GS system, a prevailing rate 

system, the SL/ST system, the SES 

system, or such other DoD systems as 

may be designated by the Secretary, as 

provided in § 9901.202. For the purpose 

of this section, the terms ‘‘convert,’’

‘‘converted,’’ ‘‘converting,’’ and 

‘‘conversion’’ refer to positions and 

employees that become covered by the 

NSPS classification system as a result of 

a coverage determination made under 

§ 9901.102(b)(2) and exclude employees 

who move from a noncovered position 

to a position already covered by NSPS. 

(b) The Secretary will issue 

implementing issuances prescribing 

policies and procedures for converting 

DoD employees to a pay band upon 

initial implementation of the NSPS 

classification system. Such procedures 

will include provisions for converting 

an employee who is retaining a grade 

under 5 U.S.C. chapter 53, subchapter 

VI, immediately prior to conversion. 

The Secretary will convert an 

employee’s rate of pay as provided in 

§ 9901.373. 

Subpart C—Pay and Pay 

Administration 

General 

§ 9901.301 Purpose. 

(a) This subpart contains regulations 

establishing pay structures and pay 

administration rules for covered DoD 

employees to replace the pay structures 

and pay administration rules 

established under 5 U.S.C. chapter 53 

and 5 U.S.C. chapter 55, subchapter V, 

as authorized by 5 U.S.C. 9902. Various 

features that link pay to employees’

performance ratings are designed to 

promote a high-performance culture 

within DoD. 

(b) Any pay system prescribed under 

this subpart will be established in 

conjunction with the classification 

system described in subpart B of this 

part. 

(c) Any pay system prescribed under 

this subpart will be established in 

conjunction with the performance 

management system described in 

subpart D of this part. 

§ 9901.302 Coverage. 

(a) This subpart applies to eligible 

DoD employees and positions in the 

categories listed in paragraph (b) of this 

section, subject to a determination by 

the Secretary under § 9901.102(b)(2). 

(b) The following employees of, or 

positions in, DoD organizational and 

functional units are eligible for coverage 

under this subpart: 

(1) Employees and positions who 

would otherwise be covered by the 

General Schedule pay system 

established under 5 U.S.C. chapter 53, 

subchapter III; 

(2) Employees and positions who 

would otherwise be covered by a 

prevailing rate system established under 

5 U.S.C. chapter 53, subchapter IV; 

(3) Employees in senior-level (SL) and 

scientific or professional (ST) positions 

who would otherwise be covered by 5 

U.S.C. 5376; 

(4) Members of the Senior Executive 

Service (SES) who would otherwise be 

covered by 5 U.S.C. chapter 53, 

subchapter VIII, subject to 

§ 9901.102(d); and 

(5) Such others designated by the 

Secretary as DoD may be authorized to 

include under 5 U.S.C. 9902. 

(c) This section does not apply in 

determining coverage under § 9901.361 

(dealing with premium pay). 

§ 9901.303 Waivers. 

(a) When a specified category of 

employees is covered under this 

subpart—

(1) The provisions of 5 U.S.C. chapter 

53 are waived with respect to that 

category of employees, except as 

provided in § 9901.107 and paragraphs 

(b) and (c) of this section; and 

(2) The provisions of 5 U.S.C. chapter 

55, subchapter V (except section 5545b), 

are waived with respect to that category 

of employees to the extent that those 

employees are covered by alternative 

premium pay provisions established by 

the Secretary under § 9901.361 in lieu of 

the provisions in 5 U.S.C. chapter 55, 

subchapter V. 

(b) The following provisions of 5 

U.S.C. chapter 53 are not waived: 

(1) Sections 5311 through 5318, 

dealing with Executive Schedule 

positions; 

(2) Section 5371, insofar as it 

authorizes OPM to apply the provisions 

of 38 U.S.C. chapter 74 to DoD 

employees in health care positions 

covered by section 5371 in lieu of any 

NSPS pay system established under this 

subpart or the following provisions of 

title 5, U.S. Code: Chapters 51, 53, and 

61, and subchapter V of chapter 55. The 

reference to ‘‘chapter 51’’ in section 

5371 is deemed to include a 

classification system established under 

subpart B of this part; and 

(3) Section 5377, dealing with the 

critical pay authority. 

(c) Section 5379 is modified. The 

Secretary may establish and administer 

a student loan repayment program for 

DoD employees, except that the 

Secretary may not make loan payments 

for any noncareer appointee in the SES 

(as defined in 5 U.S.C. 3132(a)(7)) or for 

any employee occupying a position that 

is excepted from the competitive service 

because of its confidential, policydetermining, policy-making, or policyadvocating character. Notwithstanding 

§ 9901.302(a), any DoD employee 

otherwise covered by section 5379 is 

eligible for coverage under the 

provisions established under this 

paragraph, subject to a determination by 

the Secretary under § 9901.102(b)(2). 

§ 9901.304 Definitions. 

In this part: 

Band means pay band. 

Band rate range means the range of 

rates of basic pay (excluding any local 

market supplements) applicable to 

employees in a particular pay band, as 

described in § 9901.321. Each band rate 

range is defined by a minimum and 

maximum rate. 

Basic pay has the meaning given that 

term in § 9901.103. 

Bonus means an element of the 

performance payout that consists of a 

one-time lump-sum payment made to 

employees. It is not part of basic pay. 

Career group has the meaning given 

that term in § 9901.103. 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66195 

Competencies has the meaning given 

that term in § 9901.103. 

Contribution has the meaning given 

that term in § 9901.103. 

Contribution assessment means the 

determination made by the pay pool 

manager as to the impact, extent, and 

scope of contribution that the 

employee’s performance made to the 

accomplishment of the organization’s 

mission and goals. 

CONUS or Continental United States 

means the States of the United States, 

excluding Alaska and Hawaii, but 

including the District of Columbia. 

Extraordinary pay increase or EPI 

means a discretionary basic pay increase 

or bonus to reward an employee at the 

highest performance level who has been 

assigned the maximum number of 

shares available under the rating and 

contribution scheme when the payout 

formula does not adequately 

compensate them for the employee’s 

extraordinary performance and 

contribution, as described in 

§ 9901.344(b). 

Local market supplement means a 

geographic- and occupation-based 

supplement to basic pay, as described in 

§ 9901.332. 

Modal rating means, for the purpose 

of pay administration, the most frequent 

rating of record assigned to employees 

in the same pay band within a particular 

pay pool for a particular rating cycle. 

Pay band or band has the meaning 

given that term in § 9901.103. 

Pay pool means the organizational 

elements/ units or other categories of 

employees that are combined for the 

purpose of determining performance 

payouts. Each employee is in only one 

pay pool at a time. Pay pool also means 

the amount designated for performance 

payouts to employees covered by a pay 

pool. 

Pay schedule has the meaning given 

that term in § 9901.103. 

Performance has the meaning given 

that term in § 9901.103. 

Performance payout means the total 

monetary value of a performance pay 

increase and bonus provided under 

§ 9901.342. 

Performance share means a unit of 

performance payout awarded to an 

employee based on performance. 

Performance shares may be awarded in 

multiples commensurate with the 

employee’s performance and 

contribution rating level. 

Performance share value means a 

calculated value for each performance 

share based on pay pool funds available 

and the distribution of performance 

shares across employees within a pay 

pool, expressed as a percentage or fixed 

dollar amount. 

Promotion has the meaning given that 

term in § 9901.103. 

Rating of record has the meaning 

given that term in § 9901.103. 

Reassignment has the meaning given 

that term in § 9901.103. 

Reduction in band has the meaning 

given that term in § 9901.103. 

Standard local market supplement 

means the local market supplement that 

applies to employees in a given pay 

schedule or band who are stationed 

within a specified local market area (the 

boundaries of which are defined under 

§ 9901.332(b)), unless a targeted local 

market supplement applies. 

Targeted local market supplement 

means a local market supplement 

established to address recruitment or 

retention difficulties or other 

appropriate reasons and which applies 

to a defined category of employees 

(based on occupation or other 

appropriate factors) in lieu of the 

standard local market supplement that 

would otherwise apply. 

Unacceptable performance has the 

meaning given that term in § 9901.103. 

§ 9901.305 Bar on collective bargaining. 

Pursuant to 5 U.S.C. 9902(f)(4) and 

(m)(7), any pay program established 

under authority of this subpart is not 

subject to collective bargaining. This bar 

on collective bargaining applies to all 

aspects of the pay program, including 

but not limited to coverage decisions, 

the design of pay structures, the setting 

and adjustment of pay levels, pay 

administration rules and policies, and 

administrative procedures and 

arrangements. 

Overview of Pay System 

§ 9901.311 Major features. 

Through the issuance of 

implementing issuances, the Secretary 

will establish a pay system that governs 

the setting and adjusting of covered 

employees’ rates of pay and the setting 

of covered employees’ rates of premium 

pay. The NSPS pay system will include 

the following features: 

(a) A structure of rate ranges linked to 

various pay bands for each career group, 

in alignment with the classification 

structure described in subpart B of this 

part; 

(b) Policies regarding the setting and 

adjusting of band rate ranges based on 

mission requirements, labor market 

conditions, and other factors, as 

described in §§ 9901.321 and 9901.322; 

(c) Policies regarding the setting and 

adjusting of local market supplements to 

basic pay based on local labor market 

conditions and other factors, as 

described in §§ 9901.331 through 

9901.333; 

(d) Policies regarding employees’

eligibility for pay increases based on 

adjustments in rate ranges and 

supplements, as described in 

§§ 9901.323 and 9901.334; 

(e) Policies regarding performancebased pay, as described in §§ 9901.341 

through 9901.345; 

(f) Policies on basic pay 

administration, including movement 

between career groups, positions, pay 

schedules, and pay bands, as described 

in §§ 9901.351 through 9901.356; 

(g) Linkages to employees’ ratings of 

record, as described in subpart D of this 

part; and 

(h) Policies regarding the setting of 

and limitations on premium payments, 

as described in § 9901.361. 

§ 9901.312 Maximum rates. 

The Secretary will establish 

limitations on maximum rates of basic 

pay and aggregate pay for covered 

employees. 

§ 9901.313 National security compensation 

comparability. 

(a) To the maximum extent 

practicable, for fiscal years 2004 through 

2008, the overall amount allocated for 

compensation of the DoD civilian 

employees who are included in the 

NSPS may not be less than the amount 

that would have been allocated for 

compensation of such employees for 

such fiscal years if they had not been 

converted to the NSPS, based on at a 

minimum—

(1) The number and mix of employees 

in such organizational or functional 

units prior to conversion of such 

employees to the NSPS; and 

(2) Adjustments for normal step 

increases and rates of promotion that 

would have been expected, had such 

employees remained in their previous 

pay schedule. 

(b) To the maximum extent 

practicable, implementing issuances 

will provide a formula for calculating 

the overall amount to be allocated for 

fiscal years beyond fiscal year 2008 for 

compensation of the civilian employees 

included in the NSPS. The formula will 

ensure that in the aggregate employees 

are not disadvantaged in terms of the 

overall amount of compensation 

available as a result of conversion to the 

NSPS, while providing flexibility to 

accommodate changes in the function of 

the organization and other changed 

circumstances that might impact 

compensation levels. 

(c) For the purpose of this section, 

‘‘compensation’’ for civilian employees 

means basic pay, taking into account 

any applicable locality payment under 5 

U.S.C. 5304, special rate supplement 

66196 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

under 5 U.S.C. 5305, local market 

supplement under § 9901.332, or similar 

payment under other legal authority. 

Setting and Adjusting Rate Ranges 

§ 9901.321 Structure. 

(a) The Secretary will establish ranges 

of basic pay for pay bands, with 

minimum and maximum rates set and 

adjusted as provided in § 9901.322. 

(b) For each pay band within a career 

group, the Secretary will establish a 

common rate range that applies in all 

locations. 

§ 9901.322 Setting and adjusting rate 

ranges. 

(a) Within his or her sole and 

exclusive discretion, the Secretary may, 

subject to § 9901.105(d)(2), set and 

adjust the rate ranges established under 

§ 9901.321. In determining the rate 

ranges, the Secretary may consider 

mission requirements, labor market 

conditions, availability of funds, pay 

adjustments received by employees of 

other Federal agencies, and any other 

relevant factors. 

(b) The Secretary may determine the 

effective date of newly set or adjusted 

band rate ranges. Established rate ranges 

will be reviewed for possible adjustment 

at least annually. 

(c) The Secretary may establish 

different rate ranges and provide 

different rate range adjustments for 

different pay bands. 

(d) The Secretary may adjust the 

minimum and maximum rates of a pay 

band by different percentages. 

§ 9901.323 Eligibility for pay increase 

associated with a rate range adjustment. 

(a) Employees with a current rating of 

record above ‘‘unacceptable’’ and 

employees who do not have a current 

rating of record for the most recently 

completed appraisal period will receive 

a percentage increase in basic pay equal 

to the percentage by which the 

minimum of their rate range is 

increased. This section does not apply 

to employees receiving a retained rate 

under § 9901.355. 

(b) Employees with a current rating of 

record of ‘‘unacceptable’’ will not 

receive a pay increase under this 

section. 

Local Market Supplements 

§ 9901.331 General. 

The basic pay ranges established 

under §§ 9901.321 through 9901.323 

may be supplemented in appropriate 

circumstances by local market 

supplements, as described in 

§§ 9901.332, 9901.333, and 9901.334. 

These supplements are expressed as a 

percentage of basic pay and are set and 

adjusted as described in § 9901.333. 

§ 9901.332 Local market supplements. 

(a) The Secretary may establish local 

market supplements that apply in 

specified local market areas whose 

boundaries are set at the Secretary’s sole 

and exclusive discretion, subject to 

paragraph (b) of this section and 

§ 9901.105(d)(4). Local market 

supplements apply to employees whose 

official duty station is located in the 

given local market area. The Secretary 

may establish standard or targeted local 

market supplements. 

(b)(1) The establishment or 

modification of geographic area 

boundaries for standard local market 

supplements by the Secretary will be 

effected by regulations which, 

notwithstanding 5 U.S.C. 553(a)(2), will 

be promulgated in accordance with the 

notice and comment requirements of 5 

U.S.C. 553. As provided by the nonwaived provisions of 5 U.S.C. 5304(f)(2) 

(modified here to apply to DoD 

regulations issued under the authority 

of this paragraph), judicial review of any 

such regulation is limited to whether or 

not it was promulgated in accordance 

with such requirements. 

(2) Notwithstanding paragraph (b)(1) 

of this section, the Secretary’s 

establishment of a standard local market 

area boundary or boundaries identical to 

those used for locality pay areas 

established under 5 U.S.C. 5304 does 

not require separate DoD regulations. 

(c) Local market supplements are 

considered basic pay for only the 

following purposes: 

(1) Retirement deductions, 

contributions, and benefits under 5 

U.S.C. chapter 83 or 84; 

(2) Life insurance premiums and 

benefits under 5 U.S.C. chapter 87; 

(3) Premium pay under 5 U.S.C. 

chapter 55, subchapter V, or similar 

payments under other legal authority, 

including this subpart; 

(4) Severance pay under 5 U.S.C. 

5595; 

(5) Cost-of-living allowances and post 

differentials under 5 U.S.C. 5941; 

(6) Overseas allowances and 

differentials under 5 U.S.C. chapter 59, 

subchapter III, to the extent authorized 

by the Department of State; 

(7) Recruitment, relocation, and 

retention incentives, supervisory 

differentials, and extended assignment 

incentives under 5 U.S.C. chapter 57, 

subchapter IV, and 5 CFR part 575; 

(8) Lump-sum payments for 

accumulated and accrued annual leave 

under 5 CFR 550, subpart L; 

(9) Determining the rate of basic pay 

upon conversion to the NSPS pay 

system as provided in § 9901.373(b); 

(10) Other payments and adjustments 

authorized under this subpart as 

specified by implementing issuances; 

(11) Other payments and adjustments 

under other statutory or regulatory 

authority for which locality-based 

comparability payments under 5 U.S.C. 

5304 are considered part of basic pay; 

and 

(12) Any provisions for which DoD 

local market supplements are treated as 

basic pay by law. 

§ 9901.333 Setting and adjusting local 

market supplements. 

(a) Within his or her sole and 

exclusive discretion, the Secretary may, 

subject to § 9901.105(d)(3), set and 

adjust local market supplements. In 

determining the amounts of the 

supplements, the Secretary will 

consider mission requirements, labor 

market conditions, availability of funds, 

pay adjustments received by employees 

of other Federal agencies, allowances 

and differentials under 5 U.S.C. chapter 

59, and any other relevant factors. 

(b) The Secretary may determine the 

effective date of newly set or adjusted 

local market supplements. Established 

supplements will be reviewed for 

possible adjustment at least annually in 

conjunction with rate range adjustments 

under § 9901.322. 

§ 9901.334 Eligibility for pay increase 

associated with a supplement adjustment. 

(a) When a local market supplement 

is adjusted under § 9901.333, employees 

to whom the supplement applies with a 

current rating of record above 

‘‘unacceptable,’’ and employees who do 

not have a current rating of record for 

the most recently completed appraisal 

period, will receive any pay increase 

resulting from that adjustment. 

(b) Employees with a current rating of 

record of ‘‘unacceptable’’ will not 

receive a pay increase under this 

section. 

Performance-Based Pay 

§ 9901.341 General. 

Sections 9901.342 through 9901.345 

describe the performance-based pay that 

is part of the pay system established 

under this subpart. These provisions are 

designed to provide the Secretary with 

the flexibility to allocate available funds 

to employees based on individual 

performance or contribution or team or 

organizational performance as a means 

of fostering a high-performance culture 

that supports mission accomplishment. 

§ 9901.342 Performance payouts. 

(a) Overview. (1) The NSPS pay 

system will be a pay-for-performance 

system and, when implemented, will 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66197 

result in a distribution of available 

performance pay funds based upon 

individual performance, individual 

contribution, team or organizational 

performance, or a combination of those 

elements. The NSPS pay system will use 

a pay pool concept to manage, control, 

and distribute performance-based pay 

increases and bonuses. The performance 

payout is a function of the amount of 

money in the performance pay pool and 

the number of shares assigned to 

individual employees. 

(2) The rating of record used as the 

basis for a performance pay increase is 

the one assigned for the most recently 

completed appraisal period, except that 

if an appropriate rating official 

determines that an employee’s current 

performance is inconsistent with that 

rating, that rating official may prepare a 

more current rating of record, consistent 

with § 9901.409(b). Unless otherwise 

provided in implementing issuances, if 

an employee is not eligible to have a 

rating of record for the current rating 

cycle for reasons other than those 

identified in paragraphs (f) and (g) of 

this section, such employee will not be 

eligible for a performance payout under 

this part. 

(3) Pay pools will be managed by a 

pay pool manager and/or pay pool 

panel. The Secretary will define in 

implementing issuances the 

responsibilities of pay pool managers 

and pay pool panels to include the 

review of proposed rating and share 

assignments to ensure that employees 

are treated fairly and consistently and in 

accordance with the merit system 

principles. 

(b) Performance pay pools. (1) The 

Secretary will issue implementing 

issuances for the establishment and 

management of pay pools for 

performance payouts. 

(2) The Secretary may determine a 

percentage of pay to be included in pay 

pools and paid out in accordance with 

accompanying implementing issuances 

as—

(i) A performance-based pay increase; 

(ii) A performance-based bonus; or 

(iii) A combination of a performancebased pay increase and a performancebased bonus. 

(c) Performance shares. (1) The 

Secretary will issue implementing 

issuances regarding the assignment of a 

number or range of shares for each 

rating of record level, subject to 

paragraphs (c)(2) and (c)(3) of this 

section. Performance shares will be used 

to determine performance pay increases 

and/or bonuses. 

(2) Employees with unacceptable 

ratings of record will be assigned zero 

shares. 

(3) Where the Secretary establishes a 

range of shares for a rating of record 

level, he or she will provide guidance in 

implementing issuances on the use of 

share ranges. DoD organizations will 

notify employees at least 90 days prior 

to the end of the appraisal period of the 

factors that may be considered in 

making specific share assignments. Pay 

pool managers and/or pay pool panels 

will review proposed share assignments 

to ensure that factors are applied 

consistently across the pay pool and in 

accordance with the merit system 

principles. 

(d) Performance payout. (1) The 

Secretary will establish a methodology 

that authorized officials will use to 

determine the value of a performance 

share. A performance share may be 

expressed as a percentage of an 

employee’s rate of basic pay (exclusive 

of local market supplements under 

§ 9901.332) or as a fixed dollar amount, 

or both. 

(2) To determine an individual 

employee’s performance payout, the 

share value determined under paragraph 

(d)(1) of this section will be multiplied 

by the number of performance shares 

assigned to the employee. 

(3) The Secretary may provide for the 

establishment of control points within a 

band that limit increases in the rate of 

basic pay. The Secretary may require 

that certain criteria be met for increases 

above a control point. 

(4) A performance payout may be an 

increase in basic pay, a bonus, or a 

combination of the two. However, an 

increase in basic pay may not cause the 

employee’s rate of basic pay to exceed 

the maximum rate or applicable control 

point of the employee’s band rate range. 

Implementing issuances will provide 

guidance for determining the payout 

amount and the appropriate distribution 

between basic pay and bonus. 

(5) The Secretary will determine the 

effective date(s) of increases in basic pay 

made under this section. 

(6) Notwithstanding any other 

provision of this section, the Secretary 

will issue implementing issuances to 

address the circumstances under which 

an employee receiving a retained rate 

under § 9901.355 may receive a lumpsum performance payout. Any 

performance payout in the form of a 

bonus for a retained rate employee may 

not exceed the amount that would be 

received by an employee in the same 

pay pool with the same rating of record 

whose rate of pay is at the maximum 

rate of the same band. 

(e) Proration of performance payouts. 

The Secretary will issue implementing 

issuances regarding the proration of 

performance payouts for employees 

who, during the period between 

performance payouts, are—

(1) Hired, transferred, reassigned, or 

promoted; 

(2) In a leave-without-pay status 

(except as provided in paragraphs (f) 

and (g) of this section); or 

(3) In other circumstances where 

prorating is considered appropriate. 

(f) Adjustments for employees 

returning after performing honorable 

service in the uniformed services. The 

Secretary will issue implementing 

issuances regarding how to set the rate 

of basic pay prospectively for an 

employee who leaves a DoD position to 

perform service in the uniformed 

services (in accordance with 38 U.S.C. 

4303 and 5 CFR 353.102) and returns 

through the exercise of a reemployment 

right provided by law, Executive order, 

or regulation under which accrual of 

service for seniority-related benefits is 

protected (e.g., 38 U.S.C. 4316). The 

Secretary will credit the employee with 

increases under § 9901.323 and 

increases to basic pay under this section 

based on the employee’s DoD rating of 

record for the appraisal period upon 

which these adjustments are based. If an 

employee does not have a rating of 

record for the appraisal period serving 

as a basis for these adjustments, the 

Secretary will base such adjustments on 

the average basic pay increases granted 

to other employees in the same pay pool 

and pay band who received the same 

rating as the employee’s last DoD rating 

of record or the modal rating, whichever 

is most advantageous to the employee. 

In unusual cases where insufficient 

statistical information exists to 

determine the modal rating or when 

previous ratings do not convert to the 

NSPS rating scale, the Secretary may 

establish alternative procedures for 

determining a basic pay increase under 

this section. 

(g) Adjustments for employees 

returning to duty after being in workers’

compensation status. The Secretary will 

issue implementing issuances regarding 

how to set the rate of basic pay 

prospectively for an employee who 

returns to duty after a period of 

receiving injury compensation under 5 

U.S.C. chapter 81, subchapter I (in a 

leave-without-pay status or as a 

separated employee). For the 

intervening period, the Secretary will 

credit the employee with increases 

under § 9901.323 and increases to basic 

pay under this section based on the 

employee’s DoD rating of record for the 

appraisal period upon which these 

adjustments are based. If an employee 

does not have a rating of record for the 

appraisal period serving as a basis for 

these adjustments, such adjustments 

66198 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

will be based on the average basic pay 

increases granted to other employees in 

the same pay pool and pay band who 

received the same rating as the 

employee’s last DoD rating of record or 

the modal rating, whichever is most 

advantageous to the employee. In 

unusual cases where insufficient 

statistical information exists to 

determine the modal rating or when 

previous ratings do not convert to the 

NSPS rating scale, the Secretary may 

establish alternative procedures for 

determining a basic pay increase under 

this section. 

§ 9901.343 Pay reduction based on 

unacceptable performance and/or conduct. 

An employee’s rate of basic pay may 

be reduced based on a determination of 

unacceptable performance, conduct, or 

both. Such reduction may not exceed 10 

percent unless the employee has been 

changed to a lower pay band and a 

greater reduction is needed to set the 

employee’s pay at the maximum rate of 

the pay band. (See also §§ 9901.352 and 

9901.354.) An employee’s rate of basic 

pay may not be reduced more than once 

in a 12-month period based on 

unacceptable performance, conduct, or 

both. 

§ 9901.344 Other performance payments. 

(a) In accordance with implementing 

issuances authorized officials may make 

other payments to—

(1) Recognize organizational or team 

achievement; 

(2) Reward extraordinary individual 

performance through an extraordinary 

pay increase (EPI), as described in 

paragraph (b) of this section; and 

(3) Provide for other special 

circumstances. 

(b) An EPI is paid in addition to 

performance payouts under § 9901.342 

and will usually be made effective at the 

time of those payouts. The future 

performance and contribution level 

exhibited by the employee will be 

expected to continue at an 

extraordinarily high level. 

§ 9901.345 Treatment of developmental 

positions. 

The Secretary may issue 

implementing issuances regarding pay 

increases for developmental positions. 

These issuances may require employees 

to meet certain standardized assessment 

or certification points as part of a formal 

training/developmental program. The 

Secretary may provide adjustments 

under this section in lieu of or in 

addition to adjustments under 

§ 9901.342. 

Pay Administration 

§ 9901.351 Setting an employee’s starting 

pay. 

Subject to implementing issuances, 

the Secretary may set the starting rate of 

pay for individuals who are newly 

appointed or reappointed to the Federal 

service anywhere within the assigned 

pay band. 

§ 9901.352 Setting pay upon 

reassignment. 

(a) Subject to paragraphs (b) and (c) of 

this section and subject to implementing 

issuances, the Secretary may set pay 

anywhere within the assigned pay band 

when an employee is reassigned, either 

voluntarily or involuntarily, to a 

position in the same or comparable pay 

band. 

(b) Subject to the adverse action 

procedures set forth in subpart G of this 

part and implementing issuances (or 

other appropriate adverse action 

procedures for employees not covered 

by subpart G of this part, such as 

procedures for National Guard 

Technicians under 32 U.S.C. 709(f)), the 

Secretary may reduce an employee’s 

rate of basic pay within a pay band for 

unacceptable performance and/or 

conduct. A reduction in pay under this 

paragraph may not be more than 10 

percent or cause an employee’s rate of 

basic pay to fall below the minimum 

rate of the employee’s pay band. Such 

a reduction may be made effective at 

any time. 

(c) The Secretary will prescribe 

policies in implementing issuances 

regarding setting pay for an employee 

whose pay is reduced involuntarily, but 

not through adverse action procedures. 

In the case of completion of a temporary 

reassignment or failure to successfully 

complete an in-service probationary 

period, the employee’s rate of basic pay 

will be set at the same rate the employee 

received prior to the temporary 

reassignment or placement in the 

position requiring the probationary 

period, with appropriate adjustment of 

the employee’s rate of basic pay based 

on rate range increases or performance 

payouts that occurred during the time 

the employee was assigned to the new 

position. Any resulting reduction in 

basic pay is not considered an adverse 

action under subpart G of this part (or 

similar authority). 

§ 9901.353 Setting pay upon promotion. 

Except as otherwise provided in 

implementing issuances, upon an 

employee’s promotion, the employee 

will receive an increase in his or her 

rate of basic pay equal to at least 6 

percent, unless this minimum increase 

results in a rate of basic pay higher than 

the maximum rate of the applicable pay 

band. An employee’s rate of basic pay 

upon promotion may not be less than 

the minimum of the rate range. 

§ 9901.354 Setting pay upon reduction in 

band. 

(a) Subject to paragraphs (b) and (c) of 

this section, pay may be set anywhere 

within the assigned pay band when an 

employee is reduced in band, either 

voluntarily or involuntarily. As 

applicable, pay retention provisions 

established under § 9901.355 will apply. 

(b) Subject to the adverse action 

procedures set forth in subpart G of this 

part (or other appropriate adverse action 

procedures for employees not covered 

by subpart G of this part, such as 

procedures for National Guard 

Technicians under 32 U.S.C. 709(f)), the 

Secretary may assign an employee 

involuntarily to a position in a lower 

pay band for unacceptable performance 

and/or conduct, and may 

simultaneously reduce the employee’s 

rate of basic pay. A reduction in basic 

pay under this paragraph may not cause 

an employee’s rate of basic pay to fall 

below the minimum rate of the 

employee’s new pay band, or be more 

than 10 percent unless a larger 

reduction is needed to place the 

employee at the maximum rate of the 

lower band. 

(c) The Secretary will prescribe 

policies in implementing issuances 

regarding setting pay for an employee 

who is reduced in band involuntarily, 

but not through adverse action 

procedures. In the case of termination of 

a temporary promotion or failure to 

successfully complete an in-service 

probationary period, the employee’s rate 

of basic pay will be set at the same rate 

the employee received prior to the 

temporary promotion or placement in 

the position requiring the probationary 

period, with appropriate adjustment of 

the employee’s rate of basic pay based 

on rate range increases or performance 

payouts that occurred during the time 

the employee was assigned to the new 

position. Any resulting reduction in 

basic pay is not considered an adverse 

action under subpart G of this part (or 

similar authority). 

§ 9901.355 Pay retention. 

(a) Subject to the requirements of this 

section, the Secretary will issue 

implementing issuances regarding pay 

retention. Pay retention prevents a 

reduction in basic pay that would 

otherwise occur by preserving the 

former rate of basic pay within the 

employee’s new pay band or by 

establishing a retained rate that exceeds 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66199 

the maximum rate of the new pay band. 

Local market supplements are not 

considered part of basic pay in applying 

pay retention. 

(b) Pay retention will be based on the 

employee’s rate of basic pay in effect 

immediately before the action that 

would otherwise reduce the employee’s 

rate. A retained rate will be compared 

to the range of rates of basic pay 

applicable to the employee’s position. 

(c) Subject to any employee eligibility 

requirements the Secretary may 

prescribe, pay retention will apply 

when an employee is reduced in band 

through reduction in force (RIF), 

reclassification, or other appropriate 

circumstances, as specified in 

implementing issuances. Pay retention 

will be granted for a period of 2 years 

(that is, 104 weeks). 

(d) Employees entitled to a retained 

rate will receive any performance 

payouts in the form of bonuses, rather 

than salary adjustments, as provided in 

§ 9901.342(d)(6). 

(e) Employees entitled to a retained 

rate will not receive minimum rate 

range adjustments under § 9901.323(a), 

but are entitled to receive any 

applicable local market supplement 

adjustments under § 9901.334(a). 

§ 9901.356 Miscellaneous. 

(a) Except in the case of an employee 

who does not receive a pay increase 

under § 9901.323 because of an 

unacceptable rating of record, an 

employee’s rate of basic pay may not be 

less than the minimum rate of the 

employee’s pay band. 

(b) Except as provided in § 9901.355, 

an employee’s rate of basic pay may not 

exceed the maximum rate of the 

employee’s band rate range. 

(c) The Secretary will follow the rules 

for establishing pay periods and 

computing rates of pay in 5 U.S.C. 5504 

and 5505, as applicable. For employees 

covered by 5 U.S.C. 5504, annual rates 

of pay will be converted to hourly rates 

of pay in computing payments received 

by covered employees. 

(d) The Secretary may promulgate 

implementing issuances that provide for 

a special increase prior to an employee’s 

movement in recognition of the fact that 

the employee will not be eligible for a 

promotion increase under the GS 

system, if a DoD employee moves from 

the pay system established under this 

subpart to a GS position having a higher 

level of duties and responsibilities. 

Premium Pay 

§ 9901.361 General. 

(a) This section applies to eligible 

DoD employees and positions which 

would otherwise be covered by 5 U.S.C. 

chapter 55, subchapter V, subject to a 

determination by the Secretary under 

§ 9901.102(b)(2). As provided in 

§ 9901.303(a)(2), for employees covered 

by such a determination, the provisions 

of 5 U.S.C. chapter 55, subchapter V 

(except section 5545b), are waived or 

modified to the extent that the Secretary 

establishes alternative premium pay 

provisions for such employees in lieu of 

the provisions in 5 U.S.C. chapter 55, 

subchapter V. 

(b) The Secretary may establish 

alternative or additional forms of 

premium pay, or make modifications in 

premium payments under 5 U.S.C. 

chapter 55, subchapter V (except section 

5545b), for specified categories of 

employees through implementing 

issuances. The types of premium 

payments the Secretary may establish or 

modify include, but are not limited to—

(1) Overtime pay (excluding overtime 

pay under the Fair Labor Standards 

Act); 

(2) Compensatory time off; 

(3) Sunday, holiday, and night pay; 

(4) Annual premium pay for standby 

duty and administratively 

uncontrollable overtime work; 

(5) Availability pay for criminal 

investigators; and 

(6) Hazardous duty differentials. 

(c) The Secretary will determine the 

conditions of eligibility for the amounts 

of and the limitations on payments 

made under the authority of this 

section. 

Conversion Provisions 

§ 9901.371 General. 

(a) This section and §§ 9901.372 and 

9901.373 describe the provisions that 

apply when DoD employees are 

converted to the NSPS pay system 

established under this subpart. An 

affected employee may convert from the 

GS system, a prevailing rate system, the 

SL/ST system, or the SES system (or 

such other systems designated by the 

Secretary as DoD may be authorized to 

include under 5 U.S.C. 9902), as 

provided in § 9901.302. For the purpose 

of this section and §§ 9901.372 and 

9901.373, the terms ‘‘convert,’’

‘‘converted,’’ ‘‘converting,’’ and 

‘‘conversion’’ refer to employees who 

become covered by the pay system 

without a change in position (as a result 

of a coverage determination made under 

§ 9901.102(b)(2)) and exclude 

employees who move from a 

noncovered position to a position 

already covered by the NSPS pay 

system. 

(b) The Secretary will issue 

implementing issuances prescribing the 

policies and procedures necessary to 

implement these transitional provisions. 

§ 9901.372 Creating initial pay ranges. 

DoD will set the initial band rate 

ranges for the NSPS pay system 

established under this subpart. The 

initial ranges may link to the ranges that 

apply to converted employees in their 

previously applicable pay system 

(taking into account any applicable 

locality payment under 5 U.S.C. 5304, 

special rate supplement under 5 U.S.C. 

5305, local market supplement under 

§ 9901.332, or similar payment under 

other legal authority). 

§ 9901.373 Conversion of employees to 

the NSPS pay system. 

(a) When the NSPS pay system is 

established under this subpart and 

applied to a category of employees, 

employees will be converted to the 

system without a reduction in their rate 

of pay (including basic pay and any 

applicable locality payment under 5 

U.S.C. 5304, special rate supplement 

under 5 U.S.C. 5305, local market 

supplement under § 9901.332, or similar 

payment under other legal authority). 

(b) When an employee receiving a 

special rate under 5 U.S.C. 5305 before 

conversion is converted to an equal rate 

of pay under the NSPS pay system that 

consists of a basic rate and a local 

market supplement, the conversion is 

not a reduction in pay for the purpose 

of applying subpart G of this part (or 

similar authority). 

(c) If another personnel action (e.g., 

promotion, geographic movement) takes 

effect on the same day as the effective 

date of an employee’s conversion to the 

new pay system, the other action will be 

processed under the rules pertaining to 

the employee’s former system before 

processing the conversion action. 

(d) An employee on a temporary 

promotion at the time of conversion will 

be returned to his or her official position 

of record prior to processing the 

conversion. If the employee is 

temporarily promoted immediately after 

the conversion, pay will be set under 

the rules for promotion increases under 

the NSPS pay system. 

(e) The Secretary has discretion to 

make one-time pay adjustments for 

employees when they are converted to 

the NSPS pay system. The Secretary 

will issue implementing issuances 

governing any such pay adjustment, 

including rules governing employee 

eligibility, pay computations, and the 

timing of any such pay adjustment. 

Subpart D—Performance Management 

§ 9901.401 Purpose. 

(a) This subpart provides for the 

establishment in DoD of a performance 

66200 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

management system as authorized by 5 

U.S.C. 9902. 

(b) The performance management 

system established under this subpart is 

designed to promote and sustain a highperformance culture by incorporating 

the following elements: 

(1) Adherence to merit principles set 

forth in 5 U.S.C. 2301; 

(2) A fair, credible, and transparent 

employee performance appraisal 

system; 

(3) A link between the performance 

management system and DoD’s strategic 

plan; 

(4) A means for ensuring employee 

involvement in the design and 

implementation of the system; 

(5) Adequate training and retraining 

for supervisors, managers, and 

employees in the implementation and 

operation of the performance 

management system; 

(6) A process for ensuring ongoing 

performance feedback and dialogue 

among supervisors, managers, and 

employees throughout the appraisal 

period, and setting timetables for 

review; 

(7) Effective safeguards to ensure that 

the management of the system is fair 

and equitable and based on employee 

performance; 

(8) A means for ensuring that 

adequate agency resources are allocated 

for the design, implementation, and 

administration of the performance 

management system; and 

(9) A pay-for-performance evaluation 

system to better link individual pay to 

performance, and provide an equitable 

method for appraising and 

compensating employees. 

§ 9901.402 Coverage. 

(a) This subpart applies to eligible 

DoD employees and positions in the 

categories listed in paragraph (b) of this 

section, subject to a determination by 

the Secretary under § 9901.102(b)(2), 

except as provided in paragraph (c) of 

this section. 

(b) The following employees and 

positions in DoD organizational and 

functional units are eligible for coverage 

under this subpart: 

(1) Employees and positions who 

would otherwise be covered by 5 U.S.C. 

chapter 43; 

(2) Employees and positions who 

were excluded from chapter 43 by OPM 

under 5 CFR 430.202(d) prior to the date 

of coverage of this subpart; and 

(3) Such others designated by the 

Secretary as DoD may be authorized to 

include under 5 U.S.C. 9902. 

(c) This subpart does not apply to 

employees who have been, or are 

expected to be, employed in an NSPS 

position for less than a minimum period 

(as defined in § 9901.404) during a 

single 12-month period. 

§ 9901.403 Waivers. 

When a specified category or group of 

employees is covered by the 

performance management system(s) 

established under this subpart, the 

provisions of 5 U.S.C. chapter 43 are 

waived with respect to that category of 

employees. 

§ 9901.404 Definitions. 

In this subpart—

Appraisal means the review and 

evaluation of an employee’s 

performance. 

Appraisal period means the period of 

time established under a performance 

management system for reviewing 

employee performance. 

Competencies has the meaning given 

that term in § 9901.103. 

Contribution has the meaning given 

that term in § 9901.103. 

Minimum period means the period of 

time established by the Secretary during 

which an employee will perform under 

applicable performance expectations 

before receiving a rating of record. 

Pay-for-performance evaluation 

system means the performance 

management system established under 

this subpart to link individual pay to 

performance and provide an equitable 

method for appraising and 

compensating employees. 

Performance has the meaning given 

that term in § 9901.103. 

Performance expectations means the 

duties, responsibilities, and 

competencies required by, or objectives 

associated with, an employee’s position 

and the contributions and demonstrated 

competencies management expects of an 

employee, as described in § 9901.406(d). 

Performance management means 

applying the integrated processes of 

setting and communicating performance 

expectations, monitoring performance 

and providing feedback, developing 

performance and addressing poor 

performance, and rating and rewarding 

performance in support of the 

organization’s goals and objectives. 

Performance management system 

means the policies and requirements 

established under this subpart, as 

supplemented by implementing 

issuances, for setting and 

communicating employee performance 

expectations, monitoring performance 

and providing feedback, developing 

performance and addressing poor 

performance, and rating and rewarding 

performance. It incorporates the 

elements set forth in § 9901.401(b). 

Rating of record has the meaning 

given that term in § 9901.103. 

Unacceptable performance has the 

meaning given that term in § 9901.103. 

§ 9901.405 Performance management 

system requirements. 

(a) The Secretary will issue 

implementing issuances that establish a 

performance management system for 

DoD employees, subject to the 

requirements set forth in this subpart. 

(b) The NSPS performance 

management system will—

(1) Specify the employees covered by 

the system(s); 

(2) Provide for the appraisal of the 

performance of each employee at least 

annually; 

(3) Specify the minimum period 

during which an employee will perform 

before being eligible to receive a rating 

of record; 

(4) Hold supervisors and managers 

accountable for effectively managing the 

performance of employees under their 

supervision as set forth in paragraph (c) 

of this section; 

(5) Specify procedures for setting and 

communicating performance 

expectations, monitoring performance 

and providing feedback, and 

developing, rating, and rewarding 

performance; and 

(6) Specify the criteria and procedures 

to address the performance of 

employees who are detailed or 

transferred and for employees in other 

special circumstances. 

(c) In fulfilling the requirements of 

paragraph (b) of this section, supervisors 

and managers are responsible for—

(1) Clearly communicating 

performance expectations and holding 

employees responsible for 

accomplishing them; 

(2) Making meaningful distinctions 

among employees based on performance 

and contribution; 

(3) Fostering and rewarding excellent 

performance; 

(4) Addressing poor performance; and 

(5) Assuring that employees are 

assigned a rating of record when 

required by implementing issuances. 

§ 9901.406 Setting and communicating 

performance expectations. 

(a) Performance expectations will 

support and align with the DoD mission 

and its strategic goals, organizational 

program and policy objectives, annual 

performance plans, and other measures 

of performance. 

(b) Performance expectations will be 

communicated in writing, including 

those that may affect an employee’s 

retention in the job. Performance 

expectations will be communicated to 

the employee prior to holding the 

employee accountable for them. 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66201 

However, notwithstanding this 

requirement, employees are always 

accountable for demonstrating 

professionalism and standards of 

appropriate conduct and behavior, such 

as civility and respect for others. 

(c) Performance expectations for 

supervisors and managers will include 

assessment and measurements of how 

well supervisors and managers plan, 

monitor, develop, correct, and assess 

subordinate employees’ performance. 

(d) Performance expectations may 

include—

(1) Goals or objectives that set general 

or specific performance targets at the 

individual, team, and/or organizational 

level; 

(2) Organizational, occupational, or 

other work requirements, such as 

standard operating procedures, 

operating instructions, manuals, 

internal rules and directives, and/or 

other instructions that are generally 

applicable and available to the 

employee; and 

(3) Competencies an employee is 

expected to demonstrate on the job, 

and/or the contributions an employee is 

expected to make. 

(e) Performance expectations may be 

amplified through particular work 

assignments or other instructions 

(which may specify the quality, 

quantity, accuracy, timeliness, or other 

expected characteristics of the 

completed assignment, or some 

combination of such characteristics). 

Such assignments and instructions need 

not be in writing. 

(f) Supervisors will involve 

employees, insofar as practicable, in the 

development of their performance 

expectations. However, final decisions 

regarding performance expectations are 

within the sole and exclusive discretion 

of management. 

§ 9901.407 Monitoring performance and 

providing feedback. 

In applying the requirements of the 

performance management system and 

its implementing issuances and policies, 

supervisors will—

(a) Monitor the performance of their 

employees and their contribution to the 

organization; and 

(b) Provide ongoing (i.e., regular and 

timely) feedback to employees on their 

actual performance with respect to their 

performance expectations, including 

one or more interim performance 

reviews during each appraisal period. 

§ 9901.408 Developing performance and 

addressing poor performance. 

(a) Implementing issuances will 

prescribe procedures that supervisors 

will use to develop employee 

performance and to address poor 

performance. 

(b) If at any time during the appraisal 

period a supervisor determines that an 

employee’s performance is 

unacceptable, the supervisor will—

(1) Consider the range of options 

available to address the performance 

deficiency, which include, but are not 

limited to, remedial training, an 

improvement period, a reassignment, an 

oral warning, a letter of counseling, a 

written reprimand, or adverse action as 

defined in subpart G of this part, 

including a reduction in rate of basic 

pay or pay band; and 

(2) Take appropriate action to address 

the deficiency, taking into account the 

circumstances, including the nature and 

gravity of the unacceptable performance 

and its consequences. 

(c) As specified in subpart H of this 

part (or other appropriate appeal 

procedures, if not covered by subpart H 

of this part, such as procedures for 

National Guard Technicians under 32 

U.S.C. 709(f)), employees may appeal 

adverse actions (e.g., suspensions of 

more than 14 days, reductions in pay 

and pay band, and removal) based on 

unacceptable performance and/or 

conduct. 

§ 9901.409 Rating and rewarding 

performance. 

(a) The NSPS performance 

management system will establish a 

multi-level rating system as described in 

the implementing issuances. 

(b) An appropriate rating official will 

prepare and issue a rating of record after 

the completion of the appraisal period. 

In accordance with implementing 

issuances, an additional rating of record 

may be issued to reflect a substantial 

and sustained change in the employee’s 

performance since the last rating of 

record. A rating of record will be used 

as a basis for—

(1) A pay determination under any 

applicable pay rules; 

(2) Determining reduction in force 

retention standing; and 

(3) Such other action that the 

Secretary considers appropriate, as 

specified in implementing issuances. 

(c) A rating of record will assess an 

employee’s performance with respect to 

his or her performance expectations, as 

amplified through work assignments or 

other instructions, and/or relative 

contributions and is considered final 

when issued to the employee with all 

appropriate reviews and signatures. 

(d) An appropriate rating official will 

communicate the rating of record and 

number of shares to the employee prior 

to payout. 

(e) A rating of record issued under 

this subpart is an official rating of 

record for the purpose of any provision 

of title 5, Code of Federal Regulations, 

for which an official rating of record is 

required. Ratings of record will be 

transferred between subordinate 

organizations and to other Federal 

departments or agencies in accordance 

with implementing issuances. 

(f) The Secretary may not lower the 

rating of record of an employee based on 

an approved absence from work, 

including the absence of a disabled 

veteran to seek medical treatment as 

provided in Executive Order 5396. 

(g) A rating of record may be 

challenged by a nonbargaining unit 

employee only through a 

reconsideration process as provided in 

implementing issuances. This process 

will be the sole and exclusive method 

for all nonbargaining unit employees to 

challenge a rating of record. A payout 

determination will not be subject to the 

reconsideration process. 

(h) A bargaining unit employee may 

choose a negotiated grievance procedure 

or the administrative reconsideration 

process established under paragraph (g) 

of this section, but not both, to 

challenge his or her rating of record. An 

employee who chooses the 

administrative reconsideration process 

may not revert to a negotiated grievance 

procedure. A payout determination will 

not be subject to the negotiated 

grievance procedure. Any individual or 

panel reviewing a rating of record under 

a negotiated grievance procedure may 

not conduct an independent evaluation 

of the employee’s performance, 

determine the appropriate share payout, 

or otherwise substitute his or her 

judgment for that of the rating official. 

(i) A supervisor or other rating official 

may prepare an additional performance 

appraisal for the purposes specified in 

the applicable performance management 

system (e.g., transfers and details) at any 

time after the completion of the 

minimum period. Such an appraisal is 

not a rating of record. 

(j) Implementing issuances will 

establish policies and procedures for 

crediting performance in a reduction in 

force in accordance with subpart F of 

this part (or other appropriate workforce 

shaping procedures for those not 

covered by subpart F of this part, such 

as National Guard Technicians under 32 

U.S.C. 709). 

Subpart E—Staffing and Employment 

General 

§ 9901.501 Purpose. 

(a) This subpart sets forth policies and 

procedures for the establishment of 

qualification requirements; recruitment 

66202 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

for, and appointment to, positions; and 

assignment, reassignment, detail, 

transfer, or promotion of employees, 

consistent with 5 U.S.C. 9902(a) and (k). 

(b) The Secretary will comply with 

merit principles set forth in 5 U.S.C. 

2301 and with 5 U.S.C. 2302 (dealing 

with prohibited personnel practices). 

(c) The Secretary will adhere to 

veterans’ preference principles set forth 

in 5 U.S.C. 2302(b)(11), consistent with 

5 U.S.C. 9902(a) and (k). 

§ 9901.502 Scope of authority. 

When a specified category of 

employees, applicants, and positions is 

covered by the system established under 

this subpart, the provisions of 5 U.S.C. 

3301, 3302, 3304, 3317(a), 3318 and 

3319 (except with respect to veterans’

preference), 3321, 3324, 3325, 3327, 

3330, 3341, and 5112(a) are modified 

and replaced with respect to that 

category, except as otherwise specified 

in this subpart. In accordance with 

§ 9901.105, the Secretary will prescribe 

implementing issuances to carry out the 

provisions of this subpart. 

§ 9901.503 Coverage. 

(a) This subpart applies to eligible 

DoD employees and positions in the 

categories listed in paragraph (b) of this 

section, subject to a determination by 

the Secretary under § 9901.102(b). 

(b) The following employees and 

positions in DoD organizational and 

functional units are eligible for coverage 

under this subpart: 

(1) Employees and positions who 

would otherwise be covered by 5 U.S.C. 

chapters 31 and 33 (excluding members 

of the Senior Executive Service); and 

(2) Such others designated by the 

Secretary as DoD may be authorized to 

include under 5 U.S.C. 9902. 

§ 9901.504 Definitions. 

In this subpart—

Career employee means an individual 

appointed without time limit to a 

competitive or excepted service position 

in the Federal career service. 

Initial probationary period has the 

meaning given that term in § 9901.103. 

In-service probationary period has the 

meaning given that term in § 9901.103. 

Promotion has the meaning given that 

term in § 9901.103. 

Reassignment has the meaning given 

that term in § 9901.103. 

Reduction in band has the meaning 

given that term in § 9901.103. 

Temporary employee means an 

individual not on a career appointment 

who is employed for a limited period of 

time not to exceed 1 year. The 

appointment may be extended, up to a 

maximum established by implementing 

issuances, to perform the work of a 

position that does not require an 

additional permanent employee. 

Term employee means an individual 

not on a career appointment who is 

employed for a period of more than 1 

year up to a maximum established by 

implementing issuances, when the need 

for an employee’s service is not 

permanent. 

Time-limited employee means an 

individual appointed to a position for a 

period of limited duration (e.g., term or 

temporary) in either the competitive or 

excepted service. 

External Recruitment and Internal 

Placement 

§ 9901.511 Appointing authorities. 

(a) Competitive and excepted 

appointing authorities. The Secretary 

may continue to use excepted and 

competitive appointing authorities and 

entitlements under chapters 31 and 33 

of title 5, U.S. Code, Governmentwide 

regulations, or Executive orders, as well 

as other statutes, and those individuals 

will be given career or time-limited 

appointments, as appropriate. 

(b) Additional appointing authorities. 

(1) The Secretary and the Director may 

enter into written agreements providing 

for new excepted and competitive 

appointing authorities for positions 

covered by the National Security 

Personnel System, including 

noncompetitive appointments, and 

excepted appointments that may lead to 

a subsequent noncompetitive 

appointment to the competitive service. 

(2)(i) DoD and OPM will jointly 

publish a notice in the Federal Register 

when establishing a new competitive 

appointing authority or a new excepted 

appointing authority that may lead to a 

subsequent noncompetitive 

appointment to a competitive position 

in the career service. DoD and OPM will 

issue a notice with a public comment 

period before establishing such 

authority, except as provided in 

paragraph (b)(2)(ii) of this section. 

(ii) If the Secretary determines that a 

critical mission requirement exists, DoD 

and OPM may establish a new 

appointing authority as described in 

paragraph (b)(2)(i) of this section 

effective upon publication of a Federal 

Register notice without a preceding 

comment period. However, the notice 

will invite public comments, and DoD 

and OPM will issue another notice if the 

authority is revised based on those 

comments. 

(3) The Secretary will prescribe 

appropriate implementing issuances to 

administer a new appointing authority 

established under paragraph (b) of this 

section. 

(4) At least annually, a consolidated 

list of all appointing authorities 

established under this section and 

currently in effect will be published in 

the Federal Register. 

(c) Severe shortage/critical need 

hiring authority. (1) The Secretary may 

determine that there is a severe shortage 

of candidates or a critical hiring need, 

as defined in 5 U.S.C. 3304(a)(3) and 5 

CFR part 337, subpart B, for particular 

occupations, pay bands, career groups, 

and/or geographic locations, and 

establish a specific authority to make 

appointments without regard to 

§ 9901.515. Public notice will be 

provided in accordance with 5 U.S.C. 

3304(a)(3)(A). 

(2) For each specific authority, the 

Secretary will document the basis for 

the severe shortage or critical hiring 

need, consistent with 5 CFR 337.204(b) 

or 337.205(b), as applicable. 

(3) The Secretary will terminate or 

modify a specific authority to make 

appointments under this section when it 

determines that the severe shortage or 

critical need upon which the authority 

was based no longer exists. 

(4) The Secretary will prescribe 

appropriate implementing issuances to 

administer this authority and will notify 

OPM of determinations made under this 

section. 

(d) Time-limited appointing 

authorities. (1) The Secretary may 

prescribe the procedures for appointing 

employees, the duration of such 

appointments, and the appropriate uses 

of time-limited employees. These 

procedures will preclude the use of 

employees on term appointments in 

positions that should be filled on a 

permanent basis. Term appointments 

may be used to accomplish permanent 

work in circumstances where the 

position cannot be filled permanently, 

e.g., the incumbent will be out of the 

position for a significant period of time, 

but is expected to return. 

(2) The Secretary will prescribe 

implementing issuances establishing the 

procedures under which a time-limited 

employee serving in a competitive 

service position may be converted 

without further competition to the 

career service if—

(i) The vacancy announcement met 

the requirements of § 9901.515(a) and 

included the possibility of 

noncompetitive conversion to a 

competitive position in the career 

service at a later date; 

(ii) The individual was appointed 

using the competitive examining 

procedures set forth in § 9901.515(b) 

and (c); and 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66203 

(iii) The employee completed at least 

2 years of continuous service at the fully 

successful level of performance or 

better. 

§ 9901.512 Probationary periods. 

(a) The Secretary may establish initial 

probationary periods of at least 1 year, 

but not to exceed 3 years, as deemed 

appropriate for employees appointed to 

positions in the competitive and 

excepted service covered by NSPS. The 

Secretary will prescribe the conditions 

for such periods, such as creditable 

service, in implementing issuances. 

Initial probationary periods established 

for more than 1 year will be applied to 

categories of positions or types of work 

that require a longer time period to 

evaluate the employee’s ability to 

perform the work. A preference eligible 

who has completed 1 year of an initial 

probationary period is covered by 

subparts G and H of this part. 

(b) The Secretary may establish inservice probationary periods. The 

Secretary will prescribe the conditions 

for such periods, such as creditable 

service and groups of positions or 

occupations to be covered, in 

implementing issuances. An employee 

who does not satisfactorily complete an 

in-service probationary period will be 

returned to a grade or band no lower 

than that held before the in-service 

probationary period and will have his or 

her rate of basic pay set in accordance 

with § 9901.352(c) or 9901.354(c), as 

applicable. Nothing in this section 

prohibits an action against an individual 

serving an in-service probationary 

period for cause unrelated to 

performance. 

§ 9901.513 Qualification standards. 

The Secretary may continue to use 

qualification standards established or 

approved by OPM. The Secretary also 

may establish qualification standards for 

positions covered by NSPS. 

§ 9901.514 Non-citizen hiring. 

The Secretary may establish 

procedures for appointing non-citizens 

to positions within NSPS under the 

following conditions: 

(a) In the absence of a qualified U.S. 

citizen, the Secretary may appoint a 

qualified non-citizen in the excepted 

service; and 

(b) Immigration and security 

requirements will apply to these 

appointments. 

§ 9901.515 Competitive examining 

procedures. 

(a) In recruiting applicants from 

outside of the civil service for 

competitive appointments to 

competitive service positions in NSPS, 

the Secretary will provide public notice 

for all vacancies in the career service in 

accordance with 5 CFR part 330 and—

(1) Will accept applications for the 

vacant position from all U.S. citizens; 

(2) Will, at a minimum, consider 

applicants from the local commuting 

area; 

(3) May concurrently consider 

applicants from other targeted 

recruitment areas, as specified in the 

vacancy announcement, in addition to 

those applicants from the minimum area 

of consideration; and 

(4) May consider applicants from 

outside that minimum area(s) of 

consideration as necessary to provide 

sufficient qualified candidates. 

(b) The Secretary may establish 

procedures for the examination of 

applicants for entry into competitive 

and excepted service positions in the 

National Security Personnel System. 

Such procedures will adhere to the 

merit system principles in 5 U.S.C. 2301 

and veterans’ preference requirements 

as set forth in 5 U.S.C. 1302(b) and (c) 

and 3309 through 3320, as applicable, 

and will be available in writing for 

applicant review. These procedures will 

also include provisions for employees 

entitled to priority consideration 

referred to in 5 U.S.C. 8151. 

(c) In establishing examining 

procedures for appointing employees in 

the competitive service under paragraph 

(b) of this section, the Secretary may use 

traditional numerical rating and ranking 

or alternative ranking and selection 

procedures (category rating) in 

accordance with 5 U.S.C. 3319(b) and 

(c). 

(d) The Secretary will apply the 

requirements of paragraphs (a) through 

(c) of this section to the recruitment of 

applicants for time-limited positions in 

the competitive service in order to 

qualify an appointee for noncompetitive 

conversion to a competitive position in 

the career service, in accordance with 

§ 9901.511. 

§ 9901.516 Internal placement. 

The Secretary may prescribe 

implementing issuances regarding the 

assignment, reassignment, 

reinstatement, detail, transfer, and 

promotion of individuals or employees 

into or within NSPS. Such 

implementing issuances will be made 

available to applicants and employees. 

Internal placement actions may be made 

on a permanent or temporary basis 

using competitive and noncompetitive 

procedures. Those exceptions to 

competitive procedures set forth in 5 

CFR part 335 apply to NSPS. 

Subpart F—Workforce Shaping 

§ 9901.601 Purpose and applicability. 

This subpart contains the regulations 

implementing the provisions of 5 U.S.C. 

9902(k) concerning the Department’s 

system for realigning, reorganizing, and 

reshaping its workforce. This subpart 

applies to categories of positions and 

employees affected by such actions 

resulting from the planned elimination, 

addition, or redistribution of functions, 

duties, or skills within or among 

organizational units, including 

realigning, reshaping, delayering, and 

similar organizational-based 

restructuring actions. This subpart does 

not apply to actions involving the 

conduct and/or performance of 

individual employees, which are 

covered by subpart G of this part. 

§ 9901.602 Scope of authority. 

When a specified category of 

employees is covered by the system 

established under this subpart, the 

provisions of 5 U.S.C. 3501 through 

3503 (except with respect to veterans’

preference) are modified and replaced 

with respect to that category, except as 

otherwise specified in this subpart. In 

accordance with § 9901.105, the 

Secretary will prescribe implementing 

issuances to carry out the provisions of 

this subpart. 

§ 9901.603 Definitions. 

In this subpart: 

Competing employee means a career 

employee (including an employee 

serving an initial probationary period), 

an employee serving on a term 

appointment, and other employees as 

identified in implementing issuances. 

Competitive area means the 

boundaries within which employees 

compete for retention under this 

subpart, based on factors described in 

§ 9901.605(a). 

Competitive group means employees 

within a competitive area who are on a 

common retention list for the purpose of 

exercising displacement rights. 

Displacement right means the right of 

an employee who is displaced from his 

or her present position because of 

position abolishment, or because of 

displacement resulting from the 

abolishment of a higher-standing 

employee on the retention list, to 

displace a lower-standing employee on 

the list on the basis of the retention 

factors. 

Modal rating means, for the purpose 

of reduction in force, the rating of 

record that occurs most frequently in a 

particular competitive group. 

Notice means a written 

communication to an individual 

66204 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

employee stating that the employee will 

be displaced from his or her position as 

a result of a reduction in force action 

under this subpart. 

Rating of record has the meaning 

given that term in § 9901.103. 

Retention factors means tenure, 

veterans’ preference, performance, 

length of service, and such other factors 

as the Secretary considers necessary and 

appropriate to rank employees within a 

particular retention list. 

Retention list means a list of all 

competing employees occupying 

positions in the competitive area, who 

are grouped in the same competitive 

group on the basis of retention factors. 

While all positions in the competitive 

group are listed, only competing 

employees have retention standing. 

Tenure group means a group of 

employees with a given appointment 

type. In a reduction in force, employees 

are first placed in a tenure group and 

then ranked within that group according 

to other retention factors. 

Undue interruption means a degree of 

interruption that would prevent the 

completion of required work by an 

employee within 90 days after the 

employee has been placed in a different 

position. 

§ 9901.604 Coverage. 

(a) Employees covered. The following 

employees and positions in DoD 

organizational and functional units are 

eligible for coverage under this subpart: 

(1) Employees and positions who 

would otherwise be covered by 5 U.S.C. 

chapter 35 (excluding members of the 

Senior Executive Service and employees 

who are excluded from coverage by 

other statutory authority); and 

(2) Such others designated by the 

Secretary as DoD may be authorized to 

include under 5 U.S.C. 9902. 

(b) Actions covered. (1) Reduction in 

force. This subpart will apply when a 

displacement action occurs within a 

retention list or when releasing a 

competing employee from a retention 

list by separation, reduction in band, or 

assignment involving displacement, and 

the release results from an action 

described in § 9901.601. 

(2) Transfer of function. The Secretary 

will issue implementing issuances 

consistent with 5 U.S.C. 3503 

prescribing procedures to be used when 

a function transfers from one 

competitive area to a different 

competitive area. 

(3) Furlough. The provisions in 5 CFR 

351.604 will apply when furloughing a 

competing employee for more than 30 

consecutive calendar days, or more than 

22 workdays in 1 calendar year if done 

on a discontinuous basis, except as 

otherwise provided in this subpart. 

(c) Actions excluded. This subpart 

does not apply to—

(1) The termination of a temporary 

promotion or temporary reassignment 

and the subsequent return of an 

employee to the position held before the 

temporary promotion or temporary 

reassignment (or to a position with 

comparable pay band, pay, status, and 

tenure); 

(2) A reduction in band based on the 

reclassification of an employee’s 

position due to the application of new 

classification standards or the correction 

of a classification error or classification 

actions covered under § 9901.222; 

(3) Placement of an employee serving 

on a seasonal basis in a nonpay, 

nonduty status in accordance with 

conditions established at time of 

appointment; 

(4) A change in an employee’s work 

schedule from other-than-full-time to 

full-time; 

(5) A change in an employee’s mixed 

tour work schedule in accordance with 

conditions established at time of 

appointment; 

(6) A change in the scheduled tour of 

duty of an other-than-full-time 

schedule; 

(7) A reduction in band based on the 

reclassification of an employee’s 

position due to erosion of duties, except 

that this exclusion does not apply to 

such reclassification actions that will 

take effect after an agency has formally 

announced a reduction in force in the 

employee’s competitive area and when 

the reduction in force will take effect 

within 180 days; or 

(8) Any other personnel action not 

covered by paragraph (b) of this section. 

§ 9901.605 Competitive area. 

(a) Basis for competitive area. The 

Secretary may establish a competitive 

area on the basis of one or more of the 

following considerations: 

(1) Geographical location(s); 

(2) Line(s) of business; 

(3) Product line(s); 

(4) Organizational unit(s); and 

(5) Funding line(s). 

(b) Employees included in competitive 

area. A competitive area will include all 

competing employees holding official 

positions of record in the defined 

competitive area. 

(c) Review of competitive area 

determinations. The Secretary will make 

all competitive area definitions 

available for review. 

(d) Change of competitive area. 

Competitive areas will be established for 

a minimum of 90 days before the 

effective date of a reduction in force. In 

implementing issuances, the Secretary 

will establish approval procedure 

requirements for any competitive area 

identified less than 90 days before the 

effective date of a reduction in force. 

(e) Limitations. The Secretary will 

establish a competitive area only on the 

basis of legitimate organizational 

reasons, and competitive areas will not 

be used for the purpose of targeting an 

individual employee for reduction in 

forces on the basis of nonmerit factors. 

(f) Bar on collective bargaining. 

Pursuant to 5 U.S.C. 9902(f)(4) and 

(m)(7), the establishment of a 

competitive area under the authority of 

this subpart is not subject to collective 

bargaining. 

§ 9901.606 Competitive group. 

(a) The Secretary will establish 

separate competitive groups for 

employees—

(1) In the excepted and competitive 

service; 

(2) Under different excepted service 

appointment authorities; and 

(3) With different work schedules 

(e.g., full-time, part-time, seasonal, 

intermittent). 

(b) The Secretary may further define 

competitive groups on the basis of one 

or more of the following considerations: 

(1) Career group; 

(2) Pay schedule; 

(3) Occupational series or specialty; 

(4) Pay band; or 

(5) Trainee status. 

(c) An employee is placed into a 

competitive group based on the 

employee’s official position of record. 

An employee’s official position 

description may be supplemented with 

other applicable records that document 

the employee’s actual duties and 

responsibilities. 

(d) The competitive group includes 

the official positions of employees on a 

detail or other nonpermanent 

assignment to a different position from 

the competitive group. 

(e) Pursuant to 5 U.S.C. 9902(f)(4) and 

(m)(7), the establishment of a 

competitive group under the authority 

of this subpart is not subject to 

collective bargaining. 

§ 9901.607 Retention standing. 

(a) Retention list. Within each 

competitive group, the Secretary will 

establish a retention list of competing 

employees in descending order based on 

the following: 

(1) Tenure, with career employees 

listed first, followed by employees 

serving an initial probationary period, 

and then followed by employees on 

term appointments and other employees 

as identified in implementing issuances; 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66205 

(2) Veterans’ preference, in 

accordance with the preference 

requirements in 5 CFR 351.501(c) and 

(d), including the preference restrictions 

found in 5 U.S.C. 3501(a); 

(3) The ratings of record, as 

determined in accordance with 

implementing issuances; 

(4) Creditable civilian and/or 

uniformed service in accordance with 5 

U.S.C. 3502(a)(A) and (B) and 5 CFR 

351.503, but without regard to 

provisions covering additional service 

credit for performance in 5 CFR 

351.503(c)(3) and (e); and 

(5) The Secretary may establish tiebreaking procedures when two or more 

employees have the same retention 

standing. 

(b) Active uniformed service member 

not on list. The retention list does not 

include the name of an employee who, 

on the effective date of the reduction in 

force, is on active duty in the uniformed 

services with a restoration right under 5 

CFR part 353. 

(c) Access to retention list. An 

employee who received a specific 

reduction in force notice and the 

employee’s representative have access 

to the applicable retention list in 

accordance with 5 CFR 351.505. Where 

5 CFR 351.505 uses the terms 

‘‘competitive level’’ or ‘‘retention 

register,’’ the term retention list (as 

defined in this subpart) is substituted. 

§ 9901.608 Displacement, release, and 

position offers. 

(a) Displacement to other positions on 

the retention list. (1) An employee who 

is displaced because of position 

abolishment, or because of displacement 

resulting from the abolishment of the 

position of a higher-standing employee 

on the retention list, may displace a 

lower-standing employee on the list if—

(i) The higher-standing employee is 

qualified for the position consistent, as 

applicable, with 5 CFR 351.702, or the 

Department’s own qualifications 

applied consistent with other 

requirements in 5 CFR 351.702; 

(ii) No undue interruption would 

result from the displacement; and 

(iii) The position of the lowerstanding employee is in the same pay 

band, or in a lower pay band, as the 

position of the higher-standing 

employee. 

(2) A displacing employee retains his 

or her status and tenure. 

(b) Release from the retention list. (1) 

Employees are selected for release from 

the list on the basis of the ascending 

order of retention standing set forth in 

§ 9901.607(a). 

(2) A competing employee may not be 

released from a retention list that 

contains a position held by a temporary 

employee when the competing 

employee is qualified to perform in that 

position under § 9901.608(a)(1)(i). 

(3) The release of an employee from 

the retention list may be temporarily 

postponed when appropriate under 5 

CFR 351.506, 351.606, 351.607, and 

351.608. Where part 351 uses the term 

‘‘competitive level’’ in these four 

sections, the term retention list (as 

defined in this subpart) is substituted. 

(c) Placement in vacant positions. At 

the Secretary’s option, an employee 

affected by § 9901.608(a)(1) may be 

offered a vacant position within the 

competitive area in lieu of reduction in 

force, based on relative retention 

standing as specified in § 9901.607(a). 

(d) Actions for employees with no 

offer. If a released employee does not 

receive an offer of another position 

under paragraph (c) of this section to a 

position on a different retention list, the 

Secretary may—

(1) Separate the employee by 

reduction in force; or 

(2) Furlough the employee under 

§ 9901.604(b)(3). 

§ 9901.609 Reduction in force notices. 

The Secretary will provide a specific 

written notice to each employee reached 

for an action in reduction in force 

competition at least 60 days before the 

reduction in force becomes effective. 

When a reduction in force is caused by 

circumstances not reasonably 

foreseeable, the Secretary, at the request 

of a Component head or designee, may 

approve a notice period of less than 60 

days. The shortened notice period must 

cover at least 30 full days before the 

effective date of release. The content of 

the notice will be prescribed in 

implementing issuances. 

§ 9901.610 Voluntary separation. 

(a) The Secretary may—

(1) Separate from the service any 

employee who volunteers to be 

separated even though the employee is 

not otherwise subject to separation due 

to a reduction in force; and 

(2) For each employee voluntarily 

separated under paragraph (a)(1) of this 

section, retain an employee in a similar 

position who would otherwise be 

separated due to a reduction in force. 

(b) The separation of an employee 

under paragraph (a) of this section will 

be treated as an involuntary separation 

due to a reduction in force. 

§ 9901.611 Reduction in force appeals. 

(a) An employee who believes the 

provisions of this subpart were not 

properly applied may appeal the 

reduction in force action to the Merit 

Systems Protection Board as provided 

for in 5 CFR 351.901 if the employee 

was—

(1) Separated by reduction in force; 

(2) Reduced in band by reduction in 

force; or 

(3) Furloughed by reduction in force 

under § 9901.604(b)(3). 

(b) Paragraph (a) of this section does 

not apply to actions taken under 

internal DoD placement programs, 

including the DoD Priority Placement 

Program. 

Subpart G—Adverse Actions 

General 

§ 9901.701 Purpose. 

This subpart contains regulations 

prescribing the requirements for 

employees who are removed, 

suspended, furloughed for 30 days or 

less, reduced in pay, or reduced in pay 

band (or comparable reduction). The 

Secretary may prescribe implementing 

issuances to carry out the provisions of 

this subpart. 

§ 9901.702 Waivers. 

With respect to any category of 

employees covered by this subpart, 

subchapters I and II of 5 U.S.C. chapter 

75, in addition to those provisions of 5 

U.S.C. chapter 43 specified in subpart D 

of this part, are waived and replaced by 

this subpart. 

§ 9901.703 Definitions. 

In this subpart: 

Adverse action means a removal, 

suspension, furlough for 30 days or less, 

reduction in pay, or reduction in pay 

band (or comparable reduction). 

Band has the meaning given that term 

in § 9901.103. 

Day has the meaning given that term 

in § 9901.103. 

Furlough has the meaning given that 

term in § 9901.103. 

Indefinite suspension means the 

placement of an employee in a 

temporary status without duties and pay 

pending investigation, inquiry, or other 

administrative action. An indefinite 

suspension continues for an 

indeterminate period of time and ends 

with the occurrence of pending 

conditions set forth in the notice of 

actions which may include the 

completion of any subsequent 

administrative action. 

Initial probationary period has the 

meaning given that term in § 9901.103. 

In-service probationary period has the 

meaning given that term in § 9901.103. 

Mandatory removal offense (MRO) has 

the meaning given that term in 

§ 9901.103. 

Reduction in pay means a decrease in 

an employee’s rate of basic pay fixed by 

66206 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

law or administrative action for the 

position held by the employee before 

any deductions and exclusive of 

additional pay of any kind. Basic pay 

does not include local market 

supplements under subpart C of this 

part or similar payments. Nonreceipt of 

a pay increase is not a reduction in pay. 

Removal means the involuntary 

separation of an employee from the 

Federal service. 

Suspension means the temporary 

placement of an employee, for 

disciplinary reasons, in a nonduty/ 

nonpay status. 

§ 9901.704 Coverage. 

(a) Actions covered. This subpart 

covers removals, suspensions, furloughs 

of 30 days or less, reductions in pay, or 

reductions in band (or comparable 

reductions). 

(b) Actions excluded. This subpart 

does not cover—

(1) An action taken against an 

employee during an initial probationary 

period established under § 9901.512(a), 

except when the employee is a 

preference eligible who has completed 1 

year of that probationary period; 

(2) A reduction in pay or pay band of 

an employee who does not satisfactorily 

complete an in-service probationary 

period under § 9901.512(b) if the 

employee is returned to a grade or band 

and rate of basic pay no lower than that 

held before the in-service probationary 

period. 

(3) An action that terminates a 

temporary or term promotion and 

returns the employee to the position 

from which temporarily promoted, or to 

a different position in a comparable pay 

band, if the employee was informed that 

the promotion was to be of limited 

duration; 

(4) A reduction in force action under 

subpart F of this part; 

(5) An action imposed by the Merit 

Systems Protection Board under 5 

U.S.C. 1215; 

(6) A voluntary action by an 

employee; 

(7) An action taken or directed by 

OPM based on suitability under 5 CFR 

part 731; 

(8)(i) Termination of appointment on 

the expiration date specified as a basic 

condition of employment at the time the 

appointment was made; 

(ii) Termination of appointment 

before the expiration date specified as a 

basic condition of employment at the 

time the appointment was made, except 

when the termination is taken against—

(A) A preference eligible employee 

who has completed 1 year under a timelimited appointment; or 

(B) An employee who has completed 

a probationary period under a term 

appointment; 

(9) Cancellation of a promotion to a 

position not classified prior to the 

promotion; 

(10) Placement of an employee 

serving on an intermittent or seasonal 

basis in a temporary non-duty, non-pay 

status in accordance with conditions 

established at the time of appointment; 

(11) Reduction of an employee’s rate 

of basic pay from a rate that is contrary 

to law or regulation; 

(12) An action taken under a 

provision of statute, other than one 

codified in title 5, U.S. Code, which 

excludes the action from 5 U.S.C. 

chapter 75 or this subpart; 

(13) A classification determination, 

including a classification determination 

under subpart B of this part; 

(14) Suspension or removal under 5 

U.S.C. 7532; and 

(15) An action to terminate grade 

retention upon conversion to the NSPS 

pay system established under subpart C 

of this part. 

(c) Employees covered. Subject to a 

determination by the Secretary under 

§ 9901.102(b)(2), this subpart applies to 

DoD employees, except as excluded by 

paragraph (d) of this section. 

(d) Employees excluded. This subpart 

does not apply to—

(1) An employee who is serving a 

probationary period, except when the 

employee is a preference eligible who 

has completed 1 year of that 

probationary period; 

(2) A member of the Senior Executive 

Service; 

(3) An employee who is terminated in 

accordance with terms specified as 

conditions of employment at the time 

the appointment was made; 

(4) An employee whose appointment 

is made by and with the advice and 

consent of the Senate; 

(5) An employee whose position has 

been determined to be of a confidential, 

policy-determining, policy-making, or 

policy-advocating character by—

(i) The President, for a position that 

the President has excepted from the 

competitive service; 

(ii) OPM, for a position that OPM has 

excepted from the competitive service; 

or 

(iii) The President or the Secretary for 

a position excepted from the 

competitive service by statute; 

(6) An employee whose appointment 

is made by the President; 

(7) A reemployed annuitant who is 

receiving an annuity from the Civil 

Service Retirement and Disability Fund 

or the Foreign Service Retirement and 

Disability Fund; 

(8) An employee who is an alien or 

non-citizen occupying a position 

outside the United States, as described 

in 5 U.S.C. 5102(c)(11); 

(9) A member of the National Security 

Labor Relations Board; 

(10) A non-appropriated fund 

employee; 

(11) A National Guard technician who 

is employed under 32 U.S.C. 709; and 

(12) An employee against whom an 

adverse personnel action is taken or 

imposed under any statute or regulation 

other than this subpart. 

Requirements for Removal, Suspension, 

Furlough of 30 Days or Less, Reduction 

in Pay, or Reduction in Band (or 

Comparable Reduction) 

§ 9901.711 Standard for action. 

The Secretary may take an adverse 

action under this subpart only for such 

cause as will promote the efficiency of 

the service. 

§ 9901.712 Mandatory removal offenses. 

(a) The Secretary has the sole, 

exclusive, and unreviewable discretion 

to identify offenses that have a direct 

and substantial adverse impact on the 

Department’s national security mission. 

Such offenses will be identified in 

advance in implementing issuances, 

publicized upon establishment via 

notice in the Federal Register, and 

made known to all employees on a 

periodic basis, as appropriate, through 

means determined by the Secretary. 

(b) The procedures in §§ 9901.713 

through 9901.716 apply to actions taken 

under this section. However, a proposed 

notice required by § 9901.714 may be 

issued to the employee in question only 

after the Secretary’s review and 

approval. 

(c) The Secretary has the sole, 

exclusive, and unreviewable discretion 

to mitigate the removal penalty on his 

or her own initiative or at the request of 

the employee in question. 

(d) Nothing in this section limits the 

discretion of the Secretary to remove 

employees for offenses other than those 

identified by the Secretary as an MRO. 

§ 9901.713 Procedures. 

An employee against whom an 

adverse action is proposed is entitled to 

the following: 

(a) A proposal notice under 

§ 9901.714; 

(b) An opportunity to reply under 

§ 9901.715; and 

(c) A decision notice under 

§ 9901.716. 

§ 9901.714 Proposal notice. 

(a) Notice period. An employee will 

receive a minimum of 15 days advance 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66207 

written notice of a proposed adverse 

action. However, if there is reasonable 

cause to believe the employee has 

committed a crime for which a sentence 

of imprisonment may be imposed, the 

notice period may be shortened to a 

minimum of 5 days. No notice of 

proposed action is necessary for 

furlough without pay due to unforeseen 

circumstances, such as sudden 

breakdown in equipment, acts of God, 

or sudden emergencies requiring 

immediate curtailment of activities. 

(b) Contents of notice. (1) The 

proposal notice will inform the 

employee of the factual basis for the 

proposed action in sufficient detail to 

permit the employee to reply to the 

notice, and inform the employee of his 

or her right to review the evidence 

supporting the proposed action. 

Evidence may not be used that cannot 

be disclosed to the employee, his or her 

representative, or designated physician 

pursuant to 5 CFR 297.204. 

(2) When some but not all employees 

in a given category and/or 

organizational unit are being 

furloughed, the proposal notice will 

state the basis for selecting a particular 

employee for furlough, as well as the 

reasons for the furlough. 

(c) Duty status during notice period. 

An employee will remain in a duty 

status in his or her regular position 

during the notice period. However, if it 

is determined that the employee’s 

continued presence in the workplace 

during the notice period may pose a 

threat to the employee or others, result 

in loss of or damage to Government 

property, adversely impact the 

Department’s mission, or otherwise 

jeopardize legitimate Government 

interests, one or a combination of the 

following alternatives may be taken: 

(1) Assign the employee to duties 

where it is determined that the 

employee is no longer a threat to the 

employee or others, the Department’s 

mission, or Government property or 

interests; 

(2) Allow the employee to take leave, 

or place him or her in an appropriate 

leave status (annual leave, sick leave, or 

leave without pay) or absence without 

leave if the employee has absented 

himself or herself from the worksite 

without approved leave; or 

(3) Place the employee in a paid, nonduty status for such time as is necessary 

to effect the action. 

§ 9901.715 Opportunity to reply. 

(a) An employee will be provided a 

minimum of 10 days, which will run 

concurrently with the notice period, to 

reply orally and/or in writing to a notice 

of proposed adverse action. However, if 

there is reasonable cause to believe the 

employee has committed a crime for 

which a sentence of imprisonment may 

be imposed, the reply period may be 

reduced to a minimum 5 days, which 

will run concurrently with the notice 

period. No opportunity to reply is 

necessary for furlough without pay due 

to unforeseen circumstances, such as 

sudden breakdown in equipment, acts 

of God, or sudden emergencies requiring 

immediate curtailment of activities. 

(b) The opportunity to reply orally 

does not include the right to a formal 

hearing with examination of witnesses. 

(c) During the opportunity to reply 

period, the employee will be provided 

a reasonable amount of official time to 

review the evidence, and to furnish 

affidavits and other documentary 

evidence, if the employee is otherwise 

in an active duty status. 

(d) An official will be designated to 

receive the employee’s written and/or 

oral response. The official will have 

authority to make or recommend a final 

decision on the proposed adverse 

action. 

(e) The employee may be represented 

by an attorney or non-Federal employee 

representative, at the employee’s 

expense, or other representative of the 

employee’s choice, subject to paragraph 

(f) of this section. The employee will 

provide a written designation of his or 

her representative. 

(f) An employee’s representative may 

be disallowed if the representative is—

(1) An individual whose activities as 

representative would cause a conflict 

between the interest or position of the 

representative and that of the 

Department, 

(2) An employee of the Department 

whose release from his or her official 

position would give rise to unreasonable 

costs or whose work assignments 

preclude his or her release; or 

(3) An individual whose activities as 

representative could compromise 

security. 

(g)(1) An employee who wishes 

consideration of any medical condition 

that may be relevant to the proposed 

adverse action will provide medical 

documentation, as that term is defined 

at 5 CFR 339.104, during the 

opportunity to reply, whenever 

possible. 

(2) A medical examination may be 

required or offered pursuant to 5 CFR 

part 339, subpart C, when an employee’s 

medical documentation is under 

consideration. 

(3) Withdrawal or delay of a proposed 

adverse action is not required when an 

employee’s medical condition is under 

consideration . However—

(i) The employee will be allowed to 

provide medical documentation during 

the opportunity to reply; 

(ii) Compliance with 29 CFR 1614.203 

and relevant Equal Employment 

Opportunity Commission rules will 

occur; and 

(iii) Compliance with 5 CFR 831.1205 

or 844.202, as applicable, will occur in 

the issuance of a decision to remove. 

§ 9901.716 Decision notice. 

(a) Any reasons for the action other 

than those specified in the proposal 

notice may not be considered in a 

decision on a proposed adverse action. 

(b) Any response from the employee 

and the employee’s representative, if the 

response is provided to the official 

designated under § 9901.715(d) during 

the opportunity to reply period, and any 

medical documentation furnished under 

§ 9901.715(g) will be considered. 

(c) The decision notice will specify in 

writing the reasons for the decision and 

advise the employee of any appeal or 

grievance rights under subparts H or I of 

this part. 

(d) To the extent practicable, the 

notice to the employee will be delivered 

on or before the effective date of the 

action. If delivery cannot be made to the 

employee in person, the notice may be 

delivered to the employee’s last known 

address of record on or before the 

effective date of the action. 

§ 9901.717 Departmental record. 

(a) Document retention. The 

Department will keep a record of all 

relevant documentation concerning the 

action for a period of time pursuant to 

the General Records Schedule and the 

Guide to Personnel Recordkeeping. The 

record will include the following: 

(1) A copy of the proposal notice; 

(2) The employee’s written response, 

if any, to the proposal; 

(3) A summary of the employee’s oral 

response, if any; 

(4) A copy of the decision notice; and 

(5) Any supporting material that is 

directly relevant and on which the 

action was substantially based. 

(b) Access to the record. The 

Department will make the record 

available for review by the employee 

and furnish a copy of the record upon 

the employee’s request or the request of 

the Merit Systems Protection Board 

(MSPB), but not less than 15 days after 

such a request. 

Savings Provision 

§ 9901.721 Savings provision. 

This subpart does not apply to 

adverse actions proposed prior to the 

date of an affected employee’s coverage 

under this subpart. 

66208 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

Subpart H—Appeals 

§ 9901.801 Purpose. 

This subpart implements the 

provisions of 5 U.S.C. 9902(h), which 

establishes the process for Department 

employees to appeal certain adverse 

actions covered under subpart G of this 

part. 

§ 9901.802 Applicable legal standards and 

precedents. 

In accordance with 5 U.S.C. 

9902(h)(3), in applying existing legal 

standards and precedents, MSPB and 

arbitrators, in applicable cases, are 

bound by the legal standard set forth in 

§ 9901.107(a)(2). 

§ 9901.803 Waivers. 

When a specified category of 

employees is covered by an appeals 

process established under this subpart, 

the provisions of 5 U.S.C. 7701 are 

waived with respect to that category of 

employees to the extent they are 

inconsistent with the provisions of this 

subpart. The provisions of 5 U.S.C. 7702 

are modified as provided in § 9901.809. 

The appellate procedures specified 

herein supersede those of MSPB to the 

extent MSPB regulations are 

inconsistent with this subpart. MSPB 

will follow the provisions in this 

subpart until it issues conforming 

regulations, which may not conflict 

with this part. 

§ 9901.804 Definitions. 

In this subpart: 

Administrative judge or AJ means the 

official, including an administrative law 

judge, authorized by MSPB to hold a 

hearing in a matter covered by this 

subpart and subpart G of this part, or to 

decide such a matter without a hearing. 

Class appeal means an appeal brought 

by a representative(s) of a group of 

similarly situated employees consistent 

with the provisions of Rule 23 of the 

Federal Rules of Civil Procedure. 

Harmful error means error by the 

Department in the application of its 

procedures that is likely to have caused 

it to reach a conclusion different from 

the one it would have reached in the 

absence or cure of the error. The burden 

is on the appellant to show that the 

error was harmful, i.e., that it caused 

substantial harm or prejudice to his or 

her rights. 

Mandatory removal offense (MRO) has 

the meaning given that term in 

§ 9901.103. 

MSPB means the Merit Systems 

Protection Board. 

Petition for Review (PFR) means a 

request for full MSPB review of a final 

Department decision. 

Preponderance of the evidence means 

the degree of relevant evidence that a 

reasonable person, considering the 

record as a whole, would accept as 

sufficient to find that a contested fact is 

more likely to be true than untrue. 

Request for Review (RFR) means a 

preliminary request for review of an 

initial decision of an MSPB 

administrative judge before that 

decision has become a final Department 

decision. 

§ 9901.805 Coverage. 

(a) Subject to a determination by the 

Secretary under § 9901.102(b)(2), this 

subpart applies to employees in DoD 

organizational and functional units that 

are included under NSPS who appeal 

removals; suspensions for more than 14 

days, including indefinite suspensions; 

furloughs of 30 days or less; reductions 

in pay; or reductions in pay band (or 

comparable reductions), which 

constitute appealable adverse actions for 

the purpose of this subpart, provided 

such employees are covered by 

§ 9901.704. 

(b) This subpart does not apply to a 

reduction in force action taken under 

subpart F of this part, nor does it apply 

to actions taken under internal DoD 

placement programs, including the DoD 

Priority Placement Program. 

(c) Appeals of suspensions of 14 days 

or less and other lesser disciplinary 

measures are not covered under this 

subpart but may be grieved through a 

negotiated grievance procedure or an 

administrative grievance procedure, 

whichever is applicable. 

(d) The appeal rights in 5 CFR 

315.806 apply to the termination of an 

employee in the competitive service 

while serving a probationary period. 

(e) Actions taken under 5 U.S.C. 7532 

are not appealable to MSPB. 

(f) Except as expressly provided in 

subpart C of this part, actions taken 

under that subpart are not appealable to 

MSPB. 

§ 9901.806 Alternative dispute resolution. 

The Secretary recognizes the value of 

using alternative dispute resolution 

methods such as mediation, an 

ombudsman, or interest-based problemsolving to address employee-employer 

disputes arising in the workplace, 

including those which may involve 

disciplinary or adverse actions. Such 

methods can result in more efficient and 

more effective outcomes than 

traditional, adversarial methods of 

dispute resolution. The use of 

alternative dispute resolution is 

encouraged. Such methods will be 

subject to collective bargaining to the 

extent permitted by subpart I of this 

part. 

§ 9901.807 Appellate procedures. 

(a) General. (1) A covered Department 

employee may appeal to MSPB an 

adverse action listed in § 9901.805(a). 

Such an employee has a right to be 

represented by an attorney or other 

representative of his or her own 

choosing. The procedures in this 

subpart do not apply when the action is 

taken under the special national 

security provisions established by 5 

U.S.C. 7532. 

(2)(i) This section modifies MSPB’s 

appellate procedures with respect to 

appeals under this subpart, as 

applicable. 

(ii) MSPB will refer appeals to an AJ 

for adjudication. The AJ must make a 

decision at the close of the review and 

provide a copy of the decision to each 

party to the appeal and to OPM. 

(3) The Director of OPM may, as a 

matter of right at any time in the 

proceeding, intervene or otherwise 

participate in any proceeding under this 

section in any case in which the 

Director believes that an erroneous 

decision will have a substantial impact 

on a civil service law, rule, regulation, 

or policy directive. 

(4) If the AJ is of the opinion that an 

appeal could be processed more 

expeditiously without adversely 

affecting any party, the AJ may—

(i) Consolidate appeals filed by two or 

more appellants; or 

(ii) Join two or more appeals filed by 

the same appellant and hear and decide 

them concurrently. 

(5) If an employee has been removed 

under subpart G of this part, neither the 

employee’s status under any retirement 

system established by Federal statute 

nor any election made by the employee 

under any such system will affect the 

employee’s appeal rights. 

(6) All appeals, including class 

appeals, will be filed no later than 20 

days after the effective date of the action 

being appealed, or no later than 20 days 

after the date of service of a decision 

under subpart G of this part, whichever 

is later. 

(7) Either party may file a motion to 

disqualify a party’s representative at any 

time during the proceedings. 

(b) Case suspension. Requests for case 

suspensions must be submitted jointly 

by the parties. 

(c) Settlement. (1) An MSPB AJ may 

not require any party to engage in 

settlement discussions in connection 

with any action appealed under this 

section. Where the parties voluntarily 

agree to enter into settlement 

discussions under paragraph (c)(2) of 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66209 

this section, if either party decides that 

such discussions are not appropriate, 

the matter will proceed to adjudication. 

(2) Where the parties agree to engage 

in formal settlement discussions, these 

discussions will be conducted by an 

official other than the AJ assigned to 

adjudicate the case. Nothing prohibits 

the parties from engaging in settlement 

discussions on their own. 

(d) Discovery. The parties may seek 

discovery regarding any matter that is 

relevant to any of their claims or 

defenses. However, by motion, either 

party may seek to limit such discovery 

because the burden or expense of 

providing the material outweighs its 

benefit, or because the material sought 

is privileged, not relevant, unreasonably 

cumulative or duplicative, or can be 

secured from some other source that is 

more convenient, less burdensome, or 

less expensive. 

(1) Prior to filing a motion to limit 

discovery, the parties must confer and 

attempt to resolve any pending 

objection(s). 

(2) Neither party may submit more 

than one set of interrogatories, one set 

of requests for production, and one set 

of requests for admissions. The number 

of interrogatories or requests for 

production or admissions may not 

exceed 25 per pleading, including 

subparts; in addition, neither party may 

conduct/compel more than 2 

depositions. 

(3) The AJ may grant a party’s motion 

for additional discovery only upon a 

showing of necessity and good cause. 

(e) Hearing. (1) Burden of proof. An 

adverse action taken against an 

employee will be sustained by the 

MSPB AJ if it is supported by a 

preponderance of the evidence, unless 

the employee shows by a preponderance 

of the evidence—

(i) That there was harmful error in the 

application of Department procedures in 

arriving at the decision; 

(ii) That the decision was based on 

any prohibited personnel practice 

described in 5 U.S.C. 2302(b); or 

(iii) That the decision was not in 

accordance with law. 

(2) Decisions without a hearing. If the 

AJ determines upon his or her own 

initiative or upon request by either party 

that some or all material facts are not in 

genuine dispute, he or she may, after 

giving notice to the parties and 

providing them an opportunity to 

respond in writing, including filing 

evidence and/or arguments, within 15 

calendar days, issue an order limiting 

the scope of the hearing or issue a 

decision without holding a hearing. 

(f) Initial decision. (1) Time limit. An 

initial decision must be made by an AJ 

no later than 90 days after the date on 

which the appeal is filed. 

(2) Mitigation. (i) An AJ will give great 

deference to the determination 

regarding the penalty imposed. 

(ii) An AJ may not modify the penalty 

imposed unless such penalty is totally 

unwarranted in light of all pertinent 

circumstances. In evaluating the 

appropriateness of the penalty, the AJ 

will give primary consideration to the 

impact of the sustained misconduct or 

poor performance on the Department’s 

national security mission in accordance 

with § 9901.107(a)(2). 

(iii) In cases of multiple charges, the 

third party’s determination in this 

regard is based on the justification for 

the penalty as it relates to the sustained 

charge(s). 

(iv) When a penalty is mitigated, the 

maximum justifiable penalty must be 

applied. The maximum justifiable 

penalty is the severest penalty that is 

not so disproportionate to the basis for 

the action as to be totally unwarranted 

in light of all pertinent circumstances. 

(v) If the adverse action is based on an 

MRO, the penalty may only be mitigated 

as prescribed in § 9901.808. 

(3) Reviewing charges. Neither the 

MSPB AJ, nor the full MSPB, may 

reverse an action based on the way in 

which the charge is labeled or the 

conduct characterized, provided the 

employee has sufficient notice to 

respond to the charge. 

(4) Performance expectations. Neither 

the MSPB AJ, nor the full MSPB, may 

reverse an action based on the way a 

performance expectation is expressed, 

provided that the expectation would be 

clear to a reasonable person. 

(5) Interim relief. Pursuant to 5 U.S.C. 

9902(h)(4), employees will not be 

granted interim relief, nor will an action 

taken against an employee be stayed, 

unless specifically ordered by the full 

MSPB following final decision by the 

Department. 

(i) If the interim relief ordered by the 

full MSPB provides that the employee 

will return or be present at the place of 

employment pending the outcome of 

any petition for review, and the 

Secretary determines, in his or her sole, 

exclusive, and unreviewable discretion, 

that the employee’s return to the 

workplace is impracticable or the 

presence of the employee is unduly 

disruptive to the work environment, the 

employee may be placed in an 

alternative position, or may be placed 

on excused absence pending final 

disposition of the employee’s appeal. 

(ii) Nothing in paragraph (f)(5) of this 

section may be construed to require that 

any award of back pay or attorney fees 

be paid before an MSPB decision 

becomes final. 

(6) Attorney fees. (i) Except as 

provided in paragraph (f)(6)(ii) of this 

section or as otherwise provided by law, 

the AJ may require payment by the 

Department of reasonable attorney fees 

incurred by an employee if the 

employee is the prevailing party and the 

AJ determines that payment by the 

Department is warranted in the interest 

of justice, including any case in which 

a prohibited personnel practice was 

engaged in by the agency or any case in 

which the agency’s action was clearly 

without merit. 

(ii) If the employee is the prevailing 

party and the decision is based on a 

finding of discrimination prohibited 

under 5 U.S.C. 2302(b)(1), the payment 

of reasonable attorney fees must be in 

accordance with the standards 

prescribed in § 706(k) of the Civil Rights 

Act of 1964 (42 U.S.C. 2000e–5(k)). 

(g) Department’s final decision. (1) 

Request for Review. The initial AJ 

decision will become the Department’s 

final decision 30 days after its issuance, 

unless either party files an RFR with 

MSPB and the Department concurrently 

(with service on the other party) within 

that 30-day period in accordance with 5 

U.S.C. 9902(h), MSPB’s regulations, and 

this subpart. If a party does not submit 

an RFR within the above time limit, the 

RFR will be dismissed as untimely filed 

unless a good reason for the delay is 

shown. 

(2) Department review process. (i) 

Thirty days after the timely filing of an 

RFR, the initial AJ decision will become 

the Department’s final, nonprecedential 

decision, unless notice is served on the 

parties and MSPB within that 30-day 

period that the Department will act on 

the RFR. When no such notice is served, 

MSPB will docket and process a party’s 

RFR as a petition for full MSPB review 

in accordance with 5 U.S.C. 9902(h), 

MSPB’s regulations, and this subpart. 

Timeframes will be established in 

implementing issuances for those 

instances where action is taken on an 

RFR. 

(ii) If a decision is made to act on the 

RFR, the other party to the case will be 

provided 15 days to respond to the RFR. 

An extension to the filing period may be 

granted for good cause. After receipt of 

a timely response to the RFR—

(A) If a determination is made that 

there has been a material error of fact, 

or that there is new and material 

evidence available that, despite due 

diligence, was not available when the 

record closed, the matter will be 

remanded to the assigned AJ for further 

adjudication or a final DoD decision 

will be issued modifying or reversing 

66210 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

that initial decision or decision after 

remand. Any remand will be served on 

all parties with an opportunity for those 

parties to comment to the AJ. An AJ 

decision after remand must be made no 

later than 30 days after the date of 

receipt of the remand. However, if the 

Department’s remand order includes 

instructions to hold a hearing, the AJ 

decision will be made not later than 45 

days after receipt of the remand order. 

Decisions on remand will be treated as 

initial decisions for purpose of further 

review. 

(B) Where it is determined that the 

initial AJ decision has a direct and 

substantial adverse impact on the 

Department’s national security mission, 

or is based on an erroneous 

interpretation of law, Governmentwide 

rule or regulation, or this part, a final 

DoD decision will be issued modifying 

or reversing that initial decision; or 

(C) Where it is determined that the 

initial AJ decision should serve as 

precedent, a final DoD decision will be 

issued affirming that initial decision for 

such purposes. 

(3) Precedential effect. Any decision 

issued by the Department after 

reviewing an initial AJ decision is 

precedential unless—

(i) The Secretary determines that the 

DoD decision is not precedential; or 

(ii) The final DoD decision is reversed 

or modified by the full MSPB. 

(4) Publication of decisions. 

Precedential DoD decisions will be 

published. Further details regarding the 

publication of DoD precedential 

decisions will be provided in 

implementing issuances. 

(h) Appeal of Department’s final 

decision. (1) OPM Petition for Review. 

Any decision under paragraph (a)(2) of 

this section is final unless a party to the 

appeal or the Director of OPM petitions 

the full MSPB for review within 30 

days. The Director, after consultation 

with the Secretary, may petition the full 

MSPB for review if the Director believes 

the decision is erroneous and will have 

a substantial impact on a civil service 

law, rule, regulation, or policy directive. 

MSPB, for good cause shown, may 

extend the filing period. 

(2) Petition for Review. (i) Upon 

receipt of a final DoD decision issued 

under paragraph (g)(2)(ii) of this section, 

an employee or OPM may file a PFR 

with the full MSPB within 30 days in 

accordance with 5 U.S.C. 9902(h), 

MSPB’s regulations, and this subpart. 

(ii) The Board may dismiss any 

petition that, in the view of the Board, 

does not raise substantial questions of 

fact or law. 

(iii) The full MSPB may order 

corrective action only if the Board 

determines that the decision was—

(A) Arbitrary, capricious, and abuse of 

discretion, or otherwise not in 

accordance with law; 

(B) Obtained without procedures 

required by law, rule, or regulation 

having been followed; or 

(C) Unsupported by substantial 

evidence. 

(iv) Upon receipt of a petition for full 

MSPB review or an RFR that becomes a 

PFR as a result of the expiration of the 

Department’s review period in 

accordance with paragraph (g)(2)(i) of 

this section, the other party to the case 

and/or OPM, as applicable, will have 30 

days to file a response to the petition. 

The full MSPB will act on a PFR within 

90 days after receipt of a timely 

response, or the expiration of the 

response period, as applicable, in 

accordance with 5 U.S.C. 9902(h), 

MSPB’s regulations, and this subpart. 

(3) Request for reconsideration of 

final MSPB decision. The Director of 

OPM, after consultation with the 

Secretary, may seek reconsideration by 

MSPB of a final MSPB decision in 

accordance with 5 U.S.C. 7703(d), 

which is modified for this purpose. The 

Director of OPM must seek 

reconsideration within 35 days after the 

date of service of the Board’s final order. 

If the Director seeks such 

reconsideration, the full MSPB must 

render its decision no later than 60 days 

after receipt of a response to OPM’s 

petition in support of such 

reconsideration. The full MSPB must 

state the reasons for its decision. 

(4) Failure of MSPB to meet deadlines. 

Failure of MSPB to meet the deadlines 

imposed by paragraphs (f)(1), (h)(2)(iv), 

and (h)(3) of this section in a case will 

not prejudice any party to the case and 

will not form the basis for any legal 

action by any party. If the AJ or full 

MSPB fails to meet the above time 

limits, the full MSPB will inform the 

Secretary in writing of the cause of the 

delay and will recommend future 

actions to remedy the problem. 

(i) Judicial review. The Secretary or an 

employee adversely affected by a final 

order or decision of MSPB may seek 

judicial review under 5 U.S.C. 

9902(h)(6). 

§ 9901.808 Appeals of mandatory removal 

actions. 

(a) Procedures for appeals of adverse 

actions to MSPB based on MROs will be 

the same as for other offenses except as 

otherwise provided by this section. 

(b) If one or more MROs are sustained, 

the MSPB AJ may not mitigate the 

penalty. 

(c) Only the Secretary may mitigate 

the penalty within the Department. 

(d) If the MSPB AJ or the full MSPB 

sustains an employee’s appeal based on 

a finding that the employee did not 

commit an MRO, a subsequent proposed 

adverse action (other than an MRO) 

based in whole or in part on the same 

or similar evidence is not precluded. 

§ 9901.809 Actions involving 

discrimination. 

(a) In considering any appeal of an 

action filed under 5 U.S.C. 7702, the 

Board will apply the provisions of 5 

U.S.C. 9902 and this part. 

(b) In any appeal of an action filed 

under 5 U.S.C. 7702 that results in a 

final Department decision, if no petition 

for review of the Department’s decision 

is filed with the full Board, and if 

requested by the appellant, the 

Department will refer only the 

discrimination issue to the full Board 

for adjudication. 

(c) All references in 5 U.S.C. 7702 to 

5 U.S.C. 7701 are modified to read 5 

CFR part 9901, subpart H. 

§ 9901.810 Savings provision. 

This subpart does not apply to 

adverse actions proposed prior to the 

date of an affected employee’s coverage 

under this subpart. 

Subpart I—Labor-Management 

Relations 

§ 9901.901 Purpose. 

This subpart contains the regulations 

which implement the provisions of 5 

U.S.C. 9902(m) relating to the 

Department’s labor-management 

relations system. This labor 

management relations system addresses 

the unique role that the Department’s 

civilian workforce plays in supporting 

the Department’s national security 

mission and promotes a collaborative 

issue-based approach to labor 

management relations. These 

regulations recognize the rights of DoD 

employees to organize and bargain 

collectively, as provided for in 5 U.S.C. 

9902 and this part and subject to any 

exclusion from coverage or limitation on 

the scope of bargaining pursuant to law, 

including this part, issuances, and 

implementing issuances, applicable 

Presidential issuances (e.g., Executive 

orders), and any other applicable legal 

authority. 

§ 9901.902 Scope of authority. 

When a specified category of 

employees is covered by the labormanagement relations system 

established under this subpart, the 

provisions of 5 U.S.C. 7101 through 

7135 are modified and replaced by the 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66211 

provisions in this subpart with respect 

to that category, except as otherwise 

specified in this subpart. Implementing 

issuances may be prescribed to carry out 

the provisions of this subpart. 

§ 9901.903 Definitions. 

In this subpart: 

Authority means the Federal Labor 

Relations Authority described in 5 

U.S.C. 7104(a). 

Board means the National Security 

Labor Relations Board established by 

this subpart. 

Collective bargaining means the 

performance of the mutual obligation of 

a management representative of the 

Department and an exclusive 

representative of employees in an 

appropriate unit in the Department to 

meet at reasonable times and to bargain 

in a good faith effort to reach agreement, 

pursuant to 5 U.S.C. 9902 and this 

subpart, with respect to the conditions 

of employment affecting such 

employees and to execute, if requested 

by either party, a written document 

incorporating any collective bargaining 

agreement reached, but the obligation 

referred to in this paragraph does not 

compel either party to agree to a 

proposal or to make a concession. 

Collective bargaining agreement 

means an agreement entered into as a 

result of collective bargaining pursuant 

to the provisions of 5 U.S.C. 9902 and 

this subpart. 

Component means an organizational 

unit so prescribed and designated by the 

Secretary in his or her sole and 

exclusive discretion, such as, for 

example, the Office of the Secretary of 

Defense, a Military Department, a 

Defense Agency, or a DoD Field 

Activity. 

Conditions of employment means 

personnel policies, practices, and 

matters affecting working conditions—

whether established by rule, regulation, 

or otherwise—except that such term 

does not include policies, practices, and 

matters relating to—

(1) Political activities prohibited 

under 5 U.S.C. chapter 73, subchapter 

III; 

(2) The classification of any position, 

including any classification 

determinations under subpart B of this 

part; 

(3) The pay of any employee or for 

any position, including any 

determinations regarding pay or 

adjustments thereto under subpart C of 

this part; or 

(4) Any matters specifically provided 

for by Federal statute. 

Confidential employee means an 

employee who acts in a confidential 

capacity with respect to an individual 

who formulates or effectuates 

management policies in the field of 

labor-management relations. 

Consult means to consider the 

interests, opinions, and 

recommendations of a recognized labor 

organization in rendering decisions. 

This can be accomplished in face-to-face 

meetings or through other means, e.g., 

teleconferencing, e-mail, and written 

communications. 

Dues means dues, fees, and 

assessments. 

Exclusive representative means any 

labor organization which is recognized 

as the exclusive representative of 

employees in an appropriate unit 

consistent with the Department’s 

organizational structure, pursuant to 5 

U.S.C. 7111 or as otherwise provided by 

§ 9901.911. 

FMCS means Federal Mediation and 

Conciliation Service. 

Grade means a level of work under a 

position classification or job grading 

system. 

Grievance means any complaint—

(1) By any employee concerning any 

matter relating to the conditions of 

employment of the employee; 

(2) By any labor organization 

concerning any matter relating to the 

conditions of employment of any 

employee; or 

(3) By any employee, labor 

organization, or the Department 

concerning—

(i) The effect or interpretation, or a 

claim of breach, of a collective 

bargaining agreement; or 

(ii) Any claimed violation, 

misinterpretation, or misapplication of 

any law, rule, regulation, or issuance 

issued for the purpose of affecting 

conditions of employment. 

Implementing issuance or issuances 

has the meaning given that term in 

§ 9901.103. 

Issuance or issuances means a 

document issued by the Secretary, 

Deputy Secretary, Principal Staff 

Assistants (as authorized by the 

Secretary), or Secretaries of the Military 

Departments to carry out a policy or 

procedure of the Department other than 

those issuances implementing this part. 

Labor organization has the meaning 

given that term in § 9901.103. 

Management official means an 

individual employed by the Department 

in a position the duties and 

responsibilities of which require or 

authorize the individual to formulate, 

determine, or influence the policies of 

the Department. 

Person has the meaning given that 

term in 5 U.S.C. 7103(a)(1). 

Professional employee has the 

meaning given that term in 5 U.S.C. 

7103(a)(15). 

Supervisor means an individual 

employed by the Department having 

authority in the interest of the 

Department to hire, direct, assign, 

promote, reward, transfer, furlough, 

layoff, recall, suspend, discipline, or 

remove employees; to adjust their 

grievances; or to effectively recommend 

such action, if the exercise of the 

authority is not merely routine or 

clerical in nature but requires the 

consistent exercise of independent 

judgment, except that, with respect to 

any unit which includes firefighters or 

nurses, the term ‘‘supervisor’’ includes 

only those individuals who devote a 

preponderance of their employment 

time to exercising such authority. It also 

means an individual employed by the 

Department who exercises supervisory 

authority over military members of the 

armed services, such as directing or 

assigning work or evaluating or 

recommending evaluations. 

§ 9901.904 Coverage. 

(a) Employees covered. This subpart 

applies to eligible DoD employees, 

subject to a determination by the 

Secretary under § 9901.102(b)(1), except 

as provided in paragraph (b) of this 

section. DoD employees who would 

otherwise be eligible for bargaining unit 

membership under 5 U.S.C. chapter 71, 

as modified by § 9901.912, are eligible 

for bargaining unit membership under 

this subpart. In addition, this subpart 

applies to an employee whose 

employment in the Department has 

ceased because of any unfair labor 

practice under § 9901.916 of this 

subpart and who has not obtained any 

other regular and substantially 

equivalent employment. 

(b) Employees excluded. This subpart 

does not apply to—

(1) An alien or noncitizen of the 

United States who occupies a position 

outside the United States; 

(2) A military member of the armed 

services; 

(3) A supervisor or a management 

official; 

(4) Any person who participates in a 

strike in violation of 5 U.S.C. 7311; or 

(5) Any employee excluded pursuant 

to § 9901.912 or any other legal 

authority. 

§ 9901.905 Impact on existing agreements. 

(a) Any provision of a collective 

bargaining agreement that is 

inconsistent with this part and/or 

implementing issuances is 

unenforceable on the effective date of 

the applicable subpart(s) or such 

issuances. The exclusive representative 

may appeal a determination that a 

provision is unenforceable to the 

66212 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

National Security Labor Relations Board 

in accordance with the procedures and 

time limits pursuant to § 9901.908 and 

the Board’s regulations. However, the 

Secretary, in his or her sole and 

exclusive discretion, may continue all 

or part of a particular provision(s) with 

respect to a specific category or 

categories of employees and may cancel 

such continuation at any time; such 

determinations are not precedential. 

(b) Upon request by an exclusive 

representative, the parties will have 60 

days after the effective date of coverage 

under the applicable subpart and/or 

implementing issuance to bring into 

conformance those remaining negotiable 

collective bargaining agreement 

provisions directly affected by the 

collective bargaining agreement 

provisions rendered unenforceable by 

the applicable subpart and/or 

implementing issuance. During that 

period, the parties may utilize the 

negotiation impasse provisions of 

§ 9901.920 to assist in resolving any 

impasses. 

(c) Any provision of a collective 

bargaining agreement that is 

inconsistent with an issuance remains 

in effect until the expiration, renewal, or 

extension of the term of the agreement, 

whichever occurs first. 

§ 9901.906 Employee rights. 

Each employee has the right to form, 

join, or assist any labor organization, or 

to refrain from any such activity, freely 

and without fear of penalty or reprisal, 

and each employee will be protected in 

the exercise of such right. Except as 

otherwise provided under this subpart, 

such right includes the right—

(a) To act for a labor organization in 

the capacity of a representative and the 

right, in that capacity, to present the 

views of the labor organization to heads 

of agencies and other officials of the 

executive branch of the Government, the 

Congress, or other appropriate 

authorities; and 

(b) To engage in collective bargaining 

with respect to conditions of 

employment through representatives 

chosen by employees under this 

subpart. 

§ 9901.907 National Security Labor 

Relations Board. 

(a) The Secretary has sole, exclusive, 

and unreviewable authority to 

determine the effective date for the 

establishment of the National Security 

Labor Relations Board. 

(b)(1) The National Security Labor 

Relations Board is composed of at least 

three members who are appointed by 

the Secretary for terms of 3 years, except 

that the appointments of the initial 

Board members will be for terms of 1, 

2, and 3 years, respectively. The 

Secretary may extend the term of any 

member beyond 3 years when necessary 

to provide for an orderly transition and/ 

or appoint the member for up to two 

additional 1-year terms. The Secretary, 

in his or her sole and exclusive 

discretion, may appoint additional 

members to the Board; in so doing, he 

or she will make such appointments to 

ensure that the Board consists of an odd 

number of members. 

(2) Members of the Board will be 

independent, distinguished citizens of 

the United States who are well known 

for their integrity, impartiality, and 

expertise in labor relations, and/or the 

DoD mission and/or other related 

national security matters, and will be 

able to acquire and maintain an 

appropriate security clearance. Members 

may be removed by the Secretary only 

for inefficiency, neglect of duty, or 

malfeasance in office. 

(3) An individual chosen to fill a 

vacancy on the Board will be appointed 

for the unexpired term of the member 

who is replaced and, at the Secretary’s 

option, an additional term or terms. 

(c) Appointment of the Chair. The 

Secretary, at his or her sole and 

exclusive discretion, will appoint one 

member to serve as Chair of the NSLRB. 

(d) Appointment procedures for nonChair NSLRB members. (1) The 

appointments of the two non-Chair 

NSLRB members will be made by the 

Secretary, at his or her sole and 

exclusive discretion, after he or she 

considers any lists of nominees 

submitted by labor organizations that 

represent employees in the Department. 

(2) The submission of lists of 

recommended nominees by labor 

organizations must be in accordance 

with timelines and requirements set 

forth by the Secretary, who may provide 

for consultation in order to obtain 

further information about a 

recommended nominee. The ability of 

the Secretary to appoint NSLRB 

members may not be delayed or 

otherwise affected by the failure of any 

labor organization to provide a list of 

nominees that meets the timeframe and 

requires established by the Secretary. 

(e) Appointment of additional nonChair NSLRB members. If the Secretary 

determines that additional members are 

needed, he or she may, subject to the 

criteria set forth in paragraph (b)(2) of 

this section, appoint the additional 

members according to the procedures 

established by paragraph (d) of this 

section. 

(f) A Board vacancy will be filled 

according to the procedure used to 

appoint the member whose position was 

vacated. 

(g)(1) The Board will establish 

procedures for the fair, impartial, and 

expeditious assignment and disposition 

of cases, including standards for 

asserting or declining jurisdiction. 

(2) To the extent practicable, the 

Board will use a single, integrated 

process to address all matters associated 

with a negotiations dispute, including 

unfair labor practices, negotiability 

disputes, and bargaining impasses. The 

Board may, pursuant to its regulations, 

use a combination of mediation, 

factfinding, and any other appropriate 

dispute resolution methods to resolve 

all such disputes at the earliest 

practicable time and with a minimum 

administrative burden. 

(3) A vote of the majority of the Board 

(or a three-person panel of the Board) 

will be final. A vacancy on the Board 

does not impair the right of the 

remaining members to exercise all of the 

powers of the Board. The vote of the 

Chair will be dispositive in the event of 

a tie. 

(h) Decisions of the Board are final 

and binding. 

§ 9901.908 Powers and duties of the 

Board. 

(a) Section 9902(m)(6) of title 5, U.S. 

Code, requires that the labor relations 

system established under this subpart 

provide for an independent third party 

review of labor relations issues set out 

in § 9901.908(b), including defining the 

third party to provide the review. 

Notwithstanding § 9901.907 and 

pending establishment of the Board, the 

Secretary, in consultation with the 

Director, may designate a third party to 

exercise the authority of the Board in 

accordance with this subpart. 

(b) The Board may to the extent 

provided in this subpart and in 

accordance with regulations prescribed 

by the Board—

(1) Conduct investigations and 

hearings, and resolve allegations of 

unfair labor practices, including 

allegations concerning strikes, work 

stoppages, slowdowns, and picketing, or 

condoning such activity by failing to 

take action to prevent or stop such 

activity; 

(2) Resolve issues relating to the scope 

of bargaining and the duty to bargain in 

good faith under § 9901.917; 

(3) Resolve exceptions to arbitration 

awards. In doing so, the Board will 

conduct any review of an arbitral award 

in accordance with 5 U.S.C. 7122(a) as 

modified in § 9901.923; 

(4) Resolve negotiation impasses in 

accordance with § 9901.920; 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66213 

(5) Conduct de novo review involving 

all matters within the Board’s 

jurisdiction; and 

(6) Have discretion to evaluate the 

evidence presented in the record and 

reach its own independent conclusions 

with respect to the matters at issue, but 

in no case may the Board issue status 

quo ante remedies, where such remedies 

are not intended to cure egregious 

violations of this subpart or where such 

an award would impose an economic 

hardship or interfere with the efficiency 

or effectiveness of the Department’s 

mission or impact national security. 

(c) In any case in which the Board or 

its authorized agent, in the Board’s or 

the agent’s unreviewable discretion, 

declines to adjudicate any unfair labor 

practice allegation(s) because the 

allegation(s) was not timely filed, fails 

to state an unfair labor practice, or for 

other appropriate reasons, the Board or 

the agent, as applicable, will provide the 

person making the allegation(s) a 

written statement of the reasons for such 

determination. 

(d) Upon the request of a DoD 

Component or a labor organization 

concerned, the Board may issue 

guidance for matters within its 

jurisdiction. 

(e) The Board’s decisions will be 

written and published. 

§ 9901.909 Powers and duties of the 

Federal Labor Relations Authority. 

(a) To the extent provided in this 

subpart (pursuant to the authority in 5 

U.S.C. 9902), the Federal Labor 

Relations Authority, in accordance with 

conforming regulations prescribed by 

the Authority, may—

(1) Determine the appropriateness of 

bargaining units pursuant to the 

provisions of § 9901.912; 

(2) Supervise or conduct elections to 

determine whether a labor organization 

has been selected as an exclusive 

representative by a majority of the 

employees in an appropriate unit and 

otherwise administer 5 U.S.C. 7111 

(relating to the according of exclusive 

recognition to labor organizations), 

which is not waived for the purpose of 

this subpart; 

(3) Resolve disputes regarding the 

granting of national consultation rights; 

and 

(4) Upon request of a party, review 

only those Board decisions on—

(i) Unfair labor practices, except those 

issued under § 9901.908(c); 

(ii) Arbitral awards under § 9901.908; 

and 

(iii) Negotiability disputes. 

(b) In any matter filed with the 

Authority, if the responding party 

believes that the Authority lacks 

jurisdiction, that party will timely raise 

the issue with the Authority and 

simultaneously file a copy of its 

response with the Board in accordance 

with regulations established by the 

Authority. The Authority will promptly 

transfer the case to the Board, which 

will determine whether the matter is 

within the Board’s jurisdiction. If the 

Board determines that the matter is not 

within its jurisdiction, the Board will 

return the matter to the Authority for a 

decision on the merits of the case. The 

Board’s determination with regard to its 

jurisdiction in a particular matter is 

final and not subject to review by the 

Authority. The Authority will promptly 

decide those cases that the Board has 

determined are within the jurisdiction 

of the Authority. 

(c)(1) To obtain review by the 

Authority of a Board decision, a party 

will request a review of the record of a 

Board decision by the Authority by 

filing such a request in writing within 

15 days after the issuance of the 

decision. A copy of the request will be 

served on all parties. Within 15 days 

after service of the request, any response 

will be filed. The Authority will 

establish, in conjunction with the 

Board, standards for the sufficiency of 

the record and other procedures, 

including notice to the parties. The 

Authority will accept the findings of 

fact and interpretations of this part 

made by the Board and sustain the 

Board’s decision unless the requesting 

party shows that the Board’s decision 

was—

(i) Arbitrary, capricious, an abuse of 

discretion, or otherwise not in 

accordance with law; 

(ii) Caused by harmful error in the 

application of the Board’s procedures in 

arriving at such decision; or 

(iii) Unsupported by substantial 

evidence. 

(2) The Authority will complete its 

review of the record and issue a final 

decision within 30 days after receiving 

the party’s response to such request for 

review. If the Authority does not issue 

a final decision within this mandatory 

time limit, the Authority will be 

considered to have denied the request 

for review of the Board’s decision, 

which will constitute a final decision of 

the Authority and is subject to judicial 

review in accordance with 5 U.S.C. 

7123. 

(d) Judicial review of any Authority 

decision is as prescribed in 5 U.S.C. 

7123(a). The references in 5 U.S.C. 

7123(a) to other provisions in 5 U.S.C. 

chapter 71 are considered to be 

references to those particular provisions 

as modified by this subpart. 

§ 9901.910 Management rights. 

(a) Subject to paragraphs (b) through 

(e) of this section, nothing in this 

subpart may affect the authority of any 

management official or supervisor of the 

Department—

(1) To determine the mission, budget, 

organization, number of employees, and 

internal security practices of the 

Department; 

(2) To hire, assign, and direct 

employees in the Department; to assign 

work, make determinations with respect 

to contracting out, and to determine the 

personnel by which Departmental 

operations may be conducted; to 

determine the numbers, types, pay 

schedules, pay bands and/or grades of 

employees or positions assigned to any 

organizational subdivision, work project 

or tour of duty, and the technology, 

methods, and means of performing 

work; to assign employees to meet any 

operational demand; and to take 

whatever other actions may be 

necessary to carry out the Department’s 

mission; and 

(3) To lay off and retain employees, or 

to suspend; remove; reduce in pay, pay 

band, or grade; or take other 

disciplinary action against such 

employees or, with respect to filling 

positions, to make selections for 

appointments from properly ranked and 

certified candidates for promotion or 

from any other appropriate source. 

(b) Management is prohibited from 

bargaining over the exercise of any 

authority under paragraph (a) of this 

section or the procedures that it will 

observe in exercising the authorities set 

forth in paragraphs (a)(1) and (a)(2) of 

this section. 

(c) Notwithstanding paragraph (b) of 

this section, the Secretary in his or her 

sole, exclusive, and unreviewable 

discretion, may authorize bargaining 

over the procedures that will be 

observed in exercising the authorities 

set forth in paragraphs (a)(1) and (a)(2) 

of this section. This authorization will 

be based on a determination by the 

Secretary, in his or her sole, exclusive, 

and unreviewable discretion, that 

bargaining is necessary to advance the 

Department’s mission or promote 

organizational effectiveness. Any 

specific authorization remains in effect 

until an agreement is reached or 

management withdraws from 

negotiations, whichever occurs first. 

(d) Unless the Secretary elects to 

bargain under paragraph (c) of this 

section, management will consult at the 

request of an exclusive representative as 

required under § 9901.917 over the 

procedures that will be observed in 

exercising the authorities set forth in 

paragraphs (a)(1) and (a)(2) of this 

66214 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

section. Consultation does not require 

that the parties reach agreement on any 

covered matter. The parties may, upon 

mutual agreement, provide for FMCS or 

another third party to assist in this 

process. Neither the Board nor the 

Authority may intervene in this process. 

(e) If an obligation exists under 

§ 9901.917 to bargain or consult 

regarding any authority under paragraph 

(a) of this section, management will 

provide notice to the exclusive 

representative concurrently with the 

exercise of that authority. However, at 

its sole, exclusive, and unreviewable 

discretion, management may provide 

notice to an exclusive representative of 

its intention to exercise an authority 

under paragraph (a) of this section as far 

in advance as practicable. Further, 

nothing in paragraph (e) of this section 

establishes an independent right to 

bargain or consult. 

(f) When an obligation exists under 

§ 9901.917, management will provide 

notice to the exclusive representative 

and an opportunity to present its views 

and recommendations regarding the 

exercise of an authority under paragraph 

(a) of this section, and the parties will 

bargain at the level of recognition 

(unless otherwise delegated below that 

level, at their mutual agreement, or as 

provided for in §§ 9901.917 and 

9901.918) over otherwise negotiable—

(1)(i) Appropriate arrangements for 

employees adversely affected by the 

exercise of any authority under 

paragraph (a)(3) of this section and 

procedures which management officials 

and supervisors will observe in 

exercising any authority under 

paragraph (a)(3) of this section; and 

(ii) Appropriate arrangements for 

employees adversely affected by the 

exercise of any authority under 

paragraphs (a)(1) and (a)(2) of this 

section. Appropriate arrangements 

within the duty to bargain include 

proposals on matters such as personal 

hardships and safety measures. 

(2) Appropriate arrangements within 

the duty to bargain do not include 

proposals on matters such as the routine 

assignment to specific duties, shifts, or 

work on a regular or overtime basis 

except when the Secretary in his or her 

sole, exclusive, and unreviewable 

discretion authorizes such bargaining. 

This authorization will be based on a 

determination by the Secretary, in his or 

her sole, exclusive, and unreviewable 

discretion, that bargaining is necessary 

to advance the Department’s mission or 

promote organizational effectiveness. 

Any specific authorization remains in 

effect until an agreement is reached or 

management withdraws from 

negotiations, whichever occurs first. 

(g) Where a proposal falls within the 

coverage of both paragraph (a)(1) and 

(a)(3) of this section or paragraph (a)(2) 

and (a)(3) of this section, the matter will 

be determined to be covered by 

paragraph (a)(1) or (a)(2) of this section 

for the purpose of collective bargaining. 

(h) Any mid-term agreements, reached 

with respect to paragraphs (c), (f)(1)(ii), 

or (f)(2) of this section will not be 

precedential or binding on subsequent 

acts, or retroactively applied, except at 

the Secretary’s sole, exclusive, and 

unreviewable discretion. 

(i) Nothing will delay or prevent the 

Secretary from exercising his or her 

authority under this subpart. 

§ 9901.911 Exclusive recognition of labor 

organizations. 

Exclusive recognition will be 

accorded to a labor organization if the 

organization has been selected as the 

representative, in a secret ballot 

election, by a majority of the employees, 

in an appropriate unit as determined by 

the Authority, who cast valid ballots in 

the election. 

§ 9901.912 Determination of appropriate 

units for labor organization representation. 

(a) The Authority will determine the 

appropriateness of any unit. The 

Authority will determine in each case 

whether, in order to ensure employees 

the fullest freedom in exercising the 

rights guaranteed under this subpart, the 

appropriate unit should be established 

on a Department, plant, installation, 

functional, or other basis and will 

determine any unit to be an appropriate 

unit only if the determination will 

ensure a clear and identifiable 

community of interest among the 

employees in the unit and will promote 

effective dealings with, and efficiency of 

the operations of the Department, 

consistent with the Department’s 

mission and organizational structure 

and § 9901.107(a). 

(b) A unit may not be determined to 

be appropriate under this section solely 

on the basis of the extent to which 

employees in the proposed unit have 

organized, nor may a unit be determined 

to be appropriate if it includes—

(1) Except as provided under 5 U.S.C. 

7135(a)(2), which is not waived for the 

purpose of this subpart, any 

management official or supervisor; 

(2) A confidential employee; 

(3) An employee engaged in personnel 

work in other than a purely clerical 

capacity; 

(4) An employee engaged in 

administering the provisions of this 

subpart; 

(5) Both professional employees and 

other employees, unless a majority of 

the professional employees vote for 

inclusion in the unit; 

(6) Any employee engaged in 

intelligence, counterintelligence, 

investigative, or security work which 

directly affects national security; or 

(7) Any employee primarily engaged 

in investigation or audit functions 

relating to the work of individuals 

employed by the Department whose 

duties directly affect the internal 

security of the Department, but only if 

the functions are undertaken to ensure 

that the duties are discharged honestly 

and with integrity. 

(c) Any employee who is engaged in 

administering any provision of law or 

this subpart relating to labormanagement relations may not be 

represented by a labor organization—

(1) Which represents other 

individuals to whom such provision or 

subpart applies; or 

(2) Which is affiliated directly or 

indirectly with an organization which 

represents other individuals to whom 

such provision or subpart applies. 

(d) Two or more units in the 

Department for which a labor 

organization is the exclusive 

representative may, upon petition by the 

Secretary or labor organization, be 

consolidated with or without an 

election into a single larger unit if the 

Authority considers the larger unit to be 

appropriate. The Authority will certify 

the labor organization as the exclusive 

representative of the new larger unit. 

§ 9901.913 National consultation. 

(a) If, in connection with the 

Department or Component, no labor 

organization has been accorded 

exclusive recognition on a Department 

or Component basis, a labor 

organization that is the exclusive 

representative of a substantial number 

of the employees of the Department or 

Component, as determined in 

accordance with criteria prescribed by 

the Authority, will be granted national 

consultation rights by the Department or 

Component. National consultation 

rights will terminate when the labor 

organization no longer meets the criteria 

prescribed by the Authority. Any issue 

relating to any labor organization’s 

eligibility for, or continuation of, 

national consultation rights will be 

subject to determination by the 

Authority. 

(b)(1) Any labor organization having 

national consultation rights in 

connection with any Department or 

Component under subsection (a) of this 

section will—

(i) Be informed of any substantive 

change in conditions of employment 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66215 

proposed by the Department or 

Component; and 

(ii) Be permitted reasonable time to 

present its views and recommendations 

regarding the changes. 

(2) If any views or recommendations 

are presented under paragraph (b)(1) of 

this subsection to the Department or 

Component by any labor organization—

(i) The Department or Component will 

consider the views or recommendations 

before taking final action on any matter 

with respect to which the views or 

recommendations are presented; and 

(ii) The Department or Component 

will provide the labor organization a 

written statement of the reasons for 

taking the final action. 

(c) Section 9901.913(b) does not apply 

where the proposed change is bargained 

at the national level or where 

continuing collaboration procedures 

under § 9901.106 apply. 

(d) Nothing in this section precludes 

the Department or the Component from 

seeking views and recommendations 

from labor organizations having 

exclusive representation within the 

Department or Component which do not 

have national consultation rights. 

(e) Nothing in this section will be 

construed to limit the right of the 

agency or exclusive representative to 

engage in collective bargaining. 

§ 9901.914 Representation rights and 

duties. 

(a)(1) A labor organization which has 

been accorded exclusive recognition is 

the exclusive representative of the 

employees in the unit it represents and 

is entitled to act for, and negotiate 

collective bargaining agreements 

covering, all employees in the unit. An 

exclusive representative is responsible 

for representing the interests of all 

employees in the unit it represents 

without discrimination and without 

regard to labor organization 

membership. 

(2) An exclusive representative of an 

appropriate unit will be given the 

opportunity to be represented at—

(i) Any formal discussion between a 

Department management official(s) and 

bargaining unit employees, the purpose 

of which is to discuss and/or announce 

new or substantially changed personnel 

policies, practices, or working 

conditions. This right does not apply to 

meetings between a management 

official(s) and bargaining unit 

employees for the purpose of discussing 

operational matters where any 

discussion of personnel policies, 

practices or working conditions—

(A) Constitutes a reiteration or 

application of existing personnel 

policies, practices, or working 

conditions; 

(B) Is incidental or otherwise 

peripheral to the announced purpose of 

the meeting; or 

(C) Does not result in an 

announcement of a change to, or a 

promise to change, an existing 

personnel policy(s), practice(s), or 

working condition(s); 

(ii) Any discussion between one or 

more Department representatives and 

one or more bargaining unit employees 

concerning any grievance filed under 

the negotiated grievance procedure; 

(iii) Any examination of a bargaining 

unit employee by a representative of the 

Department in connection with an 

investigation if the employee reasonably 

believes that the examination may result 

in disciplinary action against the 

employee and the employee requests 

such representation; or 

(iv) Any discussion between one or 

more Department representatives and 

one or more bargaining unit employees 

in connection with a formal complaint 

of discrimination only if the 

employee(s), in his or her sole and 

exclusive discretion, requests such 

representation. 

(3) Bargaining unit employees will be 

informed annually of their rights under 

paragraph (a)(2)(iii) of this section. 

(4) Employee representatives 

employed by the Department are subject 

to the same expectations regarding 

conduct as any other employee, whether 

they are serving in their representative 

capacity or not. 

(5) Except in the case of grievance 

procedures negotiated under this 

subpart, the rights of an exclusive 

representative under this section may 

not be construed to preclude an 

employee from—

(i) Being represented by an attorney or 

other representative of the employee’s 

own choosing, other than the exclusive 

representative, in any grievance or 

appeal action; or 

(ii) Exercising grievance or appellate 

rights established by law, rule, or 

regulation. 

(b) The duty of the Secretary or 

appropriate Component(s) of the 

Department and an exclusive 

representative to negotiate in good faith 

under paragraph (a) of this section 

includes the obligation—

(1) To approach the negotiations with 

a sincere resolve to reach a collective 

bargaining agreement; 

(2) To be represented at the 

negotiations by duly authorized 

representatives prepared to discuss and 

negotiate on any condition of 

employment; 

(3) To meet at reasonable times and 

convenient places as frequently as may 

be necessary, and to avoid unnecessary 

delays; 

(4) If agreement is reached, to execute 

on the request of any party to the 

negotiation, a written document 

embodying the agreed terms, and to take 

such steps as are necessary to 

implement such agreement; and 

(5) In the case of the Department or 

appropriate Component(s) of the 

Department, to furnish information to 

an exclusive representative, or its 

authorized representative, when—

(i) Such information exists, is 

normally maintained in the regular 

course of business, and is reasonably 

available; 

(ii) The exclusive representative has 

requested such information and 

demonstrated a particularized need for 

the information in order to perform its 

representational functions in grievance 

or unfair labor practice proceedings, or 

in negotiations; and 

(iii) Disclosure is not prohibited by 

law. 

(c) Disclosure of information in 

paragraph (b)(5) of this section does not 

include the following: 

(1) Disclosure prohibited by law or 

regulations, including, but not limited 

to, the regulations in this part, 

Governmentwide rules and regulations, 

Departmental implementing issuances 

and other policies and regulations, and 

Executive orders; 

(2) Disclosure of information if 

adequate alternative means exist for 

obtaining the requested information, or 

if proper discussion, understanding, or 

negotiation of a particular subject 

within the scope of collective bargaining 

is possible without recourse to the 

information; 

(3) Internal Departmental guidance, 

counsel, advice, or training for managers 

and supervisors relating to collective 

bargaining; 

(4) Any disclosures where an 

authorized official has determined that 

disclosure would compromise the 

Department’s mission, security, or 

employee safety; and 

(5) Personal addresses, personal 

telephone numbers, personal e-mail 

addresses, or any other information not 

related to an employee’s work. 

(d)(1) An agreement between the 

Department or appropriate 

Component(s) of the Department and 

the exclusive representative is subject to 

approval by the Secretary. 

(2) The Secretary will approve the 

agreement within 30 days after the date 

the agreement is executed if the 

agreement is in accordance with the 

provisions of these regulations and any 

66216 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

other applicable law, rule, regulation, 

issuance, or implementing issuance. 

(3) If the Secretary does not approve 

or disapprove the agreement within the 

30-day period specified in paragraph 

(d)(2) of this section, the agreement will 

take effect and is binding on the 

Department or Component(s), as 

appropriate, and the exclusive 

representative, but only to the extent it 

is consistent with Federal law, 

Presidential issuance (e.g., Executive 

order), Governmentwide regulations, 

issuances and implementing issuances, 

or the regulations in this part. 

(4) A local agreement subject to a 

national or other controlling agreement 

at a higher level may be approved under 

the procedures of the controlling 

agreement or, if none, under 

Departmental regulations. Bargaining 

will be at the level of recognition except 

where delegated. 

(5) Provisions in existing collective 

bargaining agreements are 

unenforceable if they are contrary to 

Federal law, Presidential issuance (e.g., 

Executive order), the regulations in this 

part, or implementing issuances. 

Provisions in existing collective 

bargaining agreements that are 

inconsistent with Governmentwide 

regulations or issuances (other than 

implementing issuances), are 

unenforceable upon expiration, 

extension, renewal, or renegotiation of 

the collective bargaining agreement, 

whichever occurs first. 

§ 9901.915 Allotments to representatives. 

(a) If the Department has received 

from an employee in an appropriate unit 

a properly executed written or 

electronic assignment which authorizes 

the Department to deduct from the pay 

of the employee amounts for the 

payment of regular and periodic dues 

and other financial assessments of the 

exclusive representative of the unit, the 

Department will honor the assignment 

and make an appropriate allotment 

pursuant to the assignment. Any such 

allotment will be made at no cost to the 

exclusive representative or the 

employee. Except as provided under 

paragraph (b) of this section, any such 

assignment may not be revoked for a 

period of 1 year. 

(b) An allotment under paragraph (a) 

of this section for the deduction of dues 

with respect to any employee terminates 

when—

(1) The agreement between the 

Department or Department Component 

and the exclusive representative 

involved ceases to be applicable to the 

employee; or 

(2) The employee is suspended or 

expelled from membership by the 

exclusive representative. 

(c)(1) Subject to paragraph (c)(2) of 

this section, if a petition has been filed 

with the Authority by a labor 

organization alleging that 10 percent of 

the employees in an appropriate unit in 

the Department have membership in the 

labor organization, the Authority will 

investigate the petition to determine its 

validity. Upon certification by the 

Authority of the validity of the petition, 

the Department has a duty to negotiate 

with the labor organization solely 

concerning the deduction of dues of the 

labor organization from the pay of the 

members of the labor organization who 

are employees in the unit and who make 

a voluntary allotment for such purpose. 

(2)(i) The provisions of paragraph 

(c)(1) of this section do not apply in the 

case of any appropriate unit for which 

there is an exclusive representative. 

(ii) Any agreement under paragraph 

(c)(1) of this section between a labor 

organization and the Department or 

Department Component with respect to 

an appropriate unit becomes null and 

void upon the certification of an 

exclusive representative of the unit. 

§ 9901.916 Unfair labor practices. 

(a) For the purpose of this subpart, it 

is an unfair labor practice for the 

Department—

(1) To interfere with, restrain, or 

coerce any employee in the exercise by 

the employee of any right under this 

subpart; 

(2) To encourage or discourage 

membership in any labor organization 

by discrimination in connection with 

hiring, tenure, promotion, or other 

conditions of employment; 

(3) To sponsor, control, or otherwise 

assist any labor organization, other than 

to furnish, upon request, customary and 

routine services and facilities on an 

impartial basis to other labor 

organizations having equivalent status; 

(4) To discipline or otherwise 

discriminate against an employee 

because the employee has filed a 

complaint or petition, or has given any 

information or testimony under this 

subpart; 

(5) To refuse, as determined by the 

Board, to negotiate in good faith or to 

consult with a labor organization, as 

required by this subpart; 

(6) To fail or refuse, as determined by 

the Board, to cooperate in impasse 

procedures and impasse decisions, as 

required by this subpart; 

(7) To enforce any issuance (other 

than an implementing issuance), or 

Governmentwide regulation, which is in 

conflict with an applicable collective 

bargaining agreement if the agreement 

was in effect before the issuance or 

regulation was prescribed. 

(8) To fail or refuse otherwise to 

comply with any provision of this 

subpart. 

(b) For the purpose of this subpart, it 

is an unfair labor practice for a labor 

organization—

(1) To interfere with, restrain, or 

coerce any employee in the exercise by 

the employee of any right under this 

subpart; 

(2) To cause or attempt to cause the 

Department to discriminate against any 

employee in the exercise by the 

employee of any right under this 

subpart; 

(3) To coerce, discipline, fine, or 

attempt to coerce a member of the labor 

organization as punishment, reprisal, or 

for the purpose of hindering or 

impeding the member’s work 

performance or productivity as an 

employee or the discharge of the 

member’s duties as an employee; 

(4) To discriminate against an 

employee with regard to the terms and 

conditions of membership in the labor 

organization on the basis of race, color, 

creed, national origin, sex, age, 

preferential or nonpreferential civil 

service status, political affiliation, 

marital status, or handicapping 

condition; 

(5) To refuse, as determined by the 

Board, to negotiate in good faith or to 

consult with the Department as required 

by this subpart; 

(6) To fail or refuse, as determined by 

the Board, to cooperate in impasse 

procedures and impasse decisions as 

required by this subpart; 

(7)(i) To call, or participate in, a 

strike, work stoppage, or slowdown, or 

picketing of the Department in a labormanagement dispute if such picketing 

interferes with an agency’s operations; 

or 

(ii) To condone any activity described 

in paragraph (b)(7)(i) of this section by 

failing to take action to prevent or stop 

such activity; or 

(8) To otherwise fail or refuse to 

comply with any provision of this 

subpart. 

(c) Notwithstanding paragraph (b)(7) 

of this section, informational picketing 

which does not interfere with the 

Department’s operations will not be 

considered an unfair labor practice. 

(d) For the purpose of this subpart, it 

is an unfair labor practice for an 

exclusive representative to deny 

membership to any employee in the 

appropriate unit represented by the 

labor organization, except for failure to 

meet reasonable occupational standards 

uniformly required for admission or to 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66217 

tender dues uniformly required as a 

condition of acquiring and retaining 

membership. This does not preclude 

any labor organization from enforcing 

discipline in accordance with 

procedures under its constitution or 

bylaws to the extent consistent with the 

provisions of this subpart. 

(e) The Board will not consider any 

allegation of an unfair labor practice 

filed more than 6 months after it 

occurred, unless the Board determines, 

pursuant to its regulations, that there is 

good cause for the late filing. 

(f) Unfair labor practice issues which 

can properly be raised under an appeals 

procedure may not be raised as unfair 

labor practices prohibited under this 

section. Except where an employee has 

an option of using the negotiated 

grievance procedure or an appeals 

procedure in connection with an 

adverse action, issues which can be 

raised under a grievance procedure may, 

in the discretion of the aggrieved party, 

be raised under the grievance procedure 

or as an unfair labor practice under this 

section, but not under both procedures. 

(g) The expression of any personal 

view, argument, opinion, or the making 

of any statement which publicizes the 

fact of a representational election and 

encourages employees to exercise their 

right to vote in such an election, 

corrects the record with respect to any 

false or misleading statement made by 

any person, or informs employees of the 

Government’s policy relating to labormanagement relations and 

representation, will not, if the 

expression contains no threat of reprisal 

or force or promise of benefit or was not 

made under coercive conditions—

(1) Constitute an unfair labor practice 

under any provision of this subpart; or 

(2) Constitute grounds for the setting 

aside of any election conducted under 

any provision of this subpart. 

§ 9901.917 Duty to bargain and consult. 

(a) The Department or appropriate 

Component(s) of the Department and 

any exclusive representative in any 

appropriate unit in the Department, 

through appropriate representatives, 

will meet and negotiate in good faith as 

provided by this subpart for the purpose 

of arriving at a collective bargaining 

agreement. In addition, the Department 

or appropriate Component(s) of the 

Department and the exclusive 

representative may determine 

appropriate techniques, consistent with 

the operational rules of the Board, to 

assist in any negotiation. 

(b) If bargaining over an initial 

collective bargaining agreement or any 

successor agreement is not completed 

within 90 days after such bargaining 

begins, the parties may mutually agree 

to continue bargaining, or either party 

may refer the matter to the Board for 

resolution in accordance with 

procedures established by the Board. At 

any time prior to going to the Board, 

either party may refer the matter to 

FMCS for assistance. 

(c) If the parties bargain during the 

term of an existing collective bargaining 

agreement, or in the absence of a 

collective bargaining agreement, over a 

proposed change affecting bargaining 

unit employees’ conditions of 

employment, and no agreement is 

reached within 30 days after such 

bargaining begins, the parties may 

mutually agree to continue bargaining, 

or either party may refer the matter to 

the Board for resolution in accordance 

with procedures established by the 

Board. Either party may refer the matter 

to FMCS for assistance at any time. 

(d)(1) Management may not bargain 

over any matters that are inconsistent 

with law or the regulations in this part, 

Governmentwide rules and regulations, 

issuances and implementing issuances, 

or Executive orders. 

(2) Except as otherwise provided in 

§ 9901.910(d), management has no 

obligation to bargain or consult over a 

change to a condition of employment 

unless the change is otherwise 

negotiable pursuant to these regulations 

and is foreseeable, substantial, and 

significant in terms of both impact and 

duration on the bargaining unit, or on 

those employees in that part of the 

bargaining unit affected by the change. 

(3) Nothing in paragraphs (b) or (c) of 

this section prevents management from 

exercising the rights enumerated in 

§ 9901.910. 

(e) If a management official involved 

in collective bargaining with an 

exclusive representative alleges that the 

duty to bargain in good faith does not 

extend to any matter, the exclusive 

representative may appeal the allegation 

to the Board in accordance with 

procedures established by the Board. 

§ 9901.918 Multi-unit bargaining. 

(a) Negotiations can occur at 

geographical or organizational levels 

within DoD or a Component with the 

local exclusive representatives impacted 

by the proposed change. 

(b) Any such negotiations will—

(1) Be binding on all parties afforded 

the opportunity to bargain with 

representatives of DoD or the 

Component; 

(2) Supersede all conflicting 

provisions of applicable collective 

bargaining agreements of the labor 

organization(s) affected by the 

negotiations; and 

(3) Be subject to impasse resolution by 

the Board under procedures prescribed 

by the Board. In resolving impasses, the 

Board will ensure that agreement 

provisions are consistent with regard to 

all similarly situated employees. The 

determination as to which organizations 

are covered under multi-unit bargaining 

is not subject to review by the Board. 

(c) When agreement is reached under 

this section, individual bargaining units 

cannot opt out of or veto the agreement. 

(d) Any party may request the services 

of FMCS to assist with these 

negotiations. 

(e) Labor organizations may request 

multi-unit bargaining, as appropriate. 

The Secretary has sole and exclusive 

authority to grant the labor 

organizations’ request. 

(f) The Department will prescribe 

implementing issuances on the 

procedures and constraints associated 

with multi-unit bargaining. 

§ 9901.919 Collective bargaining above the 

level of recognition. 

(a) Negotiations can occur at the DoD 

or Component level with labor 

organization(s) at an organizational level 

above the level of exclusive recognition. 

The decision to negotiate at a level 

above the level of recognition as well as 

the unions involved, is within the sole 

and exclusive discretion of the Secretary 

to determine and will not be subject to 

review. 

(b) Any such agreement reached in 

these negotiations will—

(1) Be binding on all subordinate 

bargaining units of the labor 

organization(s) afforded the opportunity 

to bargain above the level of recognition, 

and on DoD and its Components, 

without regard to levels of recognition; 

(2) Supersede all conflicting 

provisions of other collective bargaining 

agreements of the labor organization(s), 

including collective bargaining 

agreements negotiated with an exclusive 

representative at the level of 

recognition, except as otherwise 

determined by the Secretary; 

(3) Not be subject to further 

negotiations with the labor 

organizations for any purpose, including 

bargaining at the level of recognition, 

except as the Secretary may decide, in 

his or her sole and exclusive discretion; 

and 

(4) Be subject to review by the Board 

only to the extent provided by this 

subpart. 

(c) When agreement is reached under 

this section, individual labor 

organizations or bargaining units cannot 

opt out of or veto the agreement. 

(d) Negotiations will be subject to 

impasse resolution by the Board under 

66218 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

procedures prescribed by the Board. In 

resolving impasses, the Board will 

ensure that agreement provisions are 

consistent with regard to all similarly 

situated employees. The determination 

as to which organizations are covered 

under national level bargaining is not 

subject to review by the Board; 

(e) The National Guard Bureau and 

the Army and Air Force National Guard 

are excluded from coverage under this 

section. Where National Guard 

employees are impacted, negotiations at 

the level of recognition are authorized. 

(f) The Secretary may require and a 

labor organization or organizations may 

request bargaining above the level of 

recognition, as appropriate. The 

Secretary has sole and exclusive 

authority to grant such requests; and 

(g) The Department will prescribe 

implementing issuances on the 

procedures and constraints associated 

with collective bargaining above the 

level of recognition. 

§ 9901.920 Negotiation impasses. 

(a) If the Department and exclusive 

representative are unable to reach an 

agreement under §§ 9901.905, 9901.914, 

9901.917, 9901.918, or 9901.919, either 

party may submit the disputed issues to 

the Board for resolution. 

(b) The Board may take whatever 

action is necessary and not inconsistent 

with this subpart to resolve the impasse, 

to include use of settlement efforts. 

(c) Pursuant to §§ 9901.907 and 

9901.926, the Board’s regulations will 

provide for a single, integrated process 

to address all matters associated with a 

negotiations dispute, including unfair 

labor practices, negotiability disputes, 

and negotiation impasses. 

(d) Notice of any final action of the 

Board under this section will be 

promptly served upon the parties. The 

action will be binding on such parties 

during the term of the agreement, unless 

the parties agree otherwise. 

§ 9901.921 Standards of conduct for labor 

organizations. 

Standards of conduct for labor 

organizations are those prescribed under 

5 U.S.C. 7120, which is not modified. 

§ 9901.922 Grievance procedures. 

(a)(1) Except as provided in paragraph 

(a)(2) of this section, any collective 

bargaining agreement will provide 

procedures for the settlement of 

grievances, including questions of 

arbitrability. Except as provided in 

paragraphs (e), (f) and (h) of this section, 

the procedures will be the exclusive 

procedures for grievances which fall 

within its coverage. 

(2) Any collective bargaining 

agreement may exclude any matter from 

the application of the grievance 

procedures which are provided for in 

the agreement. 

(b)(1) Any negotiated grievance 

procedure referred to in paragraph (a) of 

this section will be fair and simple, 

provide for expeditious processing, and 

include procedures that—

(i) Assure an exclusive representative 

the right, in its own behalf or on behalf 

of any employee in the unit represented 

by the exclusive representative, to 

present and process grievances; 

(ii) Assure such an employee the right 

to present a grievance on the employee’s 

own behalf, and assure the exclusive 

representative the right to be present 

during the grievance proceeding; and 

(iii) Provide that any grievance not 

satisfactorily settled under the 

negotiated grievance procedure is 

subject to binding arbitration, which 

may be invoked by either the exclusive 

representative or the Department. 

(2) The provisions of a negotiated 

grievance procedure providing for 

binding arbitration in accordance with 

paragraph (b)(1)(iii) of this section will, 

to the extent that an alleged prohibited 

personnel practice is involved, allow 

the arbitrator to order a stay of any 

personnel action in a manner similar to 

the manner described in 5 U.S.C. 

1221(c) with respect to the Merit 

Systems Protection Board and order the 

Department to take any disciplinary 

action identified under 5 U.S.C. 

1215(a)(3) that is otherwise within the 

authority of the Department to take. 

(3) Any employee who is the subject 

of any disciplinary action ordered under 

paragraph (b)(2) of this section may 

appeal such action to the same extent 

and in the same manner as if the 

Department had taken the disciplinary 

action absent arbitration. 

(c) The preceding paragraphs of this 

section do not apply with respect to any 

matter concerning—

(1) Any claimed violation of 5 U.S.C. 

chapter 73, subchapter III (relating to 

prohibited political activities); 

(2) Retirement, life insurance, or 

health insurance; 

(3) Any examination, certification, or 

appointment; 

(4) A removal taken under mandatory 

removal authority as defined in 

§ 9901.712; 

(5) Any subject not within the 

definition of grievance in § 9901.903 

(e.g., the classification or pay of any 

position), except for an adverse action 

under applicable authority, including 

subpart G of this part, which is not 

otherwise excluded by paragraph (c) of 

this section; or 

(6) A suspension or removal taken 

under 5 U.S.C. 7532. 

(d) To the extent not already excluded 

by existing collective bargaining 

agreements, the exclusions contained in 

paragraph (c) of this section apply upon 

the effective date of this subpart, as 

determined under § 9901.102(b)(1). 

(e)(1) An aggrieved employee affected 

by a prohibited personnel practice 

under 5 U.S.C. 2302(b)(1) which also 

falls under the coverage of the 

negotiated grievance procedure may 

raise the matter under the applicable 

statutory procedures, or the negotiated 

procedure, but not both. 

(2) An employee is deemed to have 

exercised his or her option under 

paragraph (e)(1) of this section to raise 

the matter under the applicable 

statutory procedures, or the negotiated 

procedure, at such time as the employee 

timely initiates an action under the 

applicable statutory or regulatory 

procedure or timely files a grievance in 

writing in accordance with the 

provisions of the parties’ negotiated 

grievance procedure, whichever event 

occurs first. 

(3) Selection of the negotiated 

grievance procedure in no manner 

prejudices the right of an aggrieved 

party to request the Merit Systems 

Protection Board to review the final 

decision pursuant to 5 U.S.C. 7702 in 

the case of any personnel action that 

could have been appealed to the Board, 

or, where applicable, to request the 

Equal Employment Opportunity 

Commission to review a final decision 

in any other matter involving a 

complaint of discrimination of the type 

prohibited by any law administered by 

the Equal Employment Opportunity 

Commission. 

(f)(1) For appealable matters, except 

for mandatory removal offenses under 

§ 9901.712, an aggrieved employee may 

raise the matter under an applicable 

appellate procedure or under the 

negotiated grievance procedure, but not 

both. An employee will be deemed to 

have exercised his or her option under 

this section when the employee timely 

files an appeal under the applicable 

appellate procedures or a grievance in 

accordance with the provisions of the 

parties’ negotiated grievance procedure, 

whichever occurs first. 

(2) An arbitrator hearing a matter 

appealable under 5 U.S.C. 7701 or 

subpart H of this part is bound by the 

applicable provisions of this part. 

(g)(1) This paragraph applies with 

respect to a prohibited personnel 

practice other than a prohibited 

personnel practice to which paragraph 

(e) of this section applies. 

(2) An aggrieved employee affected by 

a prohibited personnel practice 

described in paragraph (g)(1) of this 

Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 66219 

section may elect not more than one of 

the procedures described in paragraph 

(g)(3) of this section with respect 

thereto. A determination as to whether 

a particular procedure for seeking a 

remedy has been elected will be made 

as set forth under paragraph (g)(4) of 

this section. 

(3) The procedures for seeking 

remedies described in this paragraph are 

as follows: 

(i) An appeal under 5 U.S.C. 7701 or 

under subpart H of this part; 

(ii) A negotiated grievance under this 

section; and 

(iii) Corrective action under 5 U.S.C. 

chapter 12, subchapters II and III. 

(4) For the purpose of this paragraph, 

an employee is considered to have 

elected one of the following, whichever 

election occurs first: 

(i) The procedure described in 

paragraph (g)(3)(i) of this section if such 

employee has timely filed a notice of 

appeal under the applicable appellate 

procedures; 

(ii) The procedure described in 

paragraph (g)(3)(ii) of this section if 

such employee has timely filed a 

grievance in writing in accordance with 

the provisions of the parties’ negotiated 

procedure; or 

(iii) The procedure described in 

paragraph (g)(3)(iii) of this section if 

such employee has sought corrective 

action from the Office of Special 

Counsel by making an allegation under 

5 U.S.C. 1214(a)(1). 

(h)(1) An employee may challenge a 

rating of record issued under subpart D 

of this part, through either the 

negotiated grievance procedure or an 

administrative reconsideration process 

under § 9901.409(h), but not both, so 

long as the rating of record has not been 

raised in connection with an appeal 

under the provisions of 5 U.S.C. 7701 or 

subpart H of this part. Once an 

employee raises an issue on his or her 

rating of record issue in an appeal under 

5 U.S.C. 7701 or subpart H of this part, 

any pending grievance, arbitration, or 

request for administrative 

reconsideration under § 9901.409(h), 

will be dismissed with prejudice. 

(2) Final decision authority in the 

negotiated grievance procedure may rest 

with—

(i) An independent arbitrator; or 

(ii) A panel consisting of an 

independent arbitrator, a union 

representative, and a management 

representative. 

(3) An arbitrator or panel may not 

conduct an independent evaluation of 

the employee’s performance, determine 

the appropriate share payout, or 

otherwise substitute his or her judgment 

for that of the supervisor or pay pool 

panel. 

(i) An arbitrator or panel hearing a 

matter under this subpart is bound by 

all applicable laws, rules, regulations, 

including applicable provisions of this 

part, issuances, and implementing 

issuances. 

§ 9901.923 Exceptions to arbitration 

awards. 

(a) Either party to arbitration under 

this subpart may file with the Board an 

exception to any arbitrator’s award, 

except an award issued in connection 

with an appealable matter under 

§ 9901.922(f) or matters similar to those 

covered under 5 U.S.C. 4303 and 7512 

arising under other personnel systems, 

which will be adjudicated under 

procedures described in § 9901.807(g) 

and (h). Such procedures are adopted in 

this subpart for these purposes. 

(b) In addition to the bases contained 

in 5 U.S.C. 7122, exceptions may also be 

filed by the parties based on the 

arbitrator’s failure to properly consider 

the Department’s national security 

mission or to comply with applicable 

issuances and implementing issuances. 

The Board may take such action 

concerning the award as is consistent 

with this subpart. 

(c) If no exception to an arbitrator’s 

award is filed under paragraph (a) of 

this section during the 30-day period 

beginning on the date of such award, the 

award is final and binding. Either party 

will take the actions required by an 

arbitrator’s final award. The award may 

include the payment of back pay (as 

provided under 5 U.S.C. 5596 and 5 

CFR part 550, subpart H). 

(d) Nothing in this section prevents 

the Board from determining its own 

jurisdiction without regard to whether 

any party has raised a jurisdictional 

issue. 

§ 9901.924 Official time. 

(a) Any employee representing an 

exclusive representative in the 

negotiation of a collective bargaining 

agreement under this subpart will be 

authorized official time for such 

purposes, including attendance at 

impasse proceedings, during the time 

the employee otherwise would be in a 

duty status. The number of employees 

for whom official time is authorized 

under this section may not exceed the 

number of individuals designated as 

representing the Department for such 

purposes. 

(b) Any activities performed by any 

employee relating to the internal 

business of the labor organization, 

including but not limited to the 

solicitation of membership, elections of 

labor organization officials, and 

collection of dues, will be performed 

during the time the employee is in a 

nonduty status. 

(c) Except as provided in paragraph 

(a) of this section, the Authority or the 

Board, as appropriate, will determine 

whether an employee participating for, 

or on behalf of, a labor organization in 

any phase of proceedings before the 

Authority or the Board will be 

authorized official time for such 

purpose during the time the employee 

would otherwise be in a duty status. 

(d) Except as provided in the 

preceding paragraphs of this section, 

any employee representing an exclusive 

representative or, in connection with 

any other matter covered by this 

subpart, any employee in an appropriate 

unit represented by an exclusive 

representative, will be granted official 

time in any amount the agency and the 

exclusive representative involved agree 

to be reasonable, necessary, and in the 

public interest. 

(e) Official time for representational 

activities will not extend to the 

representation of employees outside the 

representative’s bargaining unit, except 

for multi-unit bargaining and/or 

bargaining above the level of 

recognition, in accordance with 

§§ 9901.918 and 9901.919 and mutual 

agreement of the agency and the 

exclusive representatives involved. 

§ 9901.925 Compilation and publication of 

data. 

(a) The Board will maintain a file of 

its proceedings. 

(b) All files maintained under 

paragraph (a) of this section will be 

open to inspection and reproduction in 

accordance with 5 U.S.C. 552 and 552a. 

The Board will establish rules in 

consultation with the Department for 

maintaining and making available for 

inspection sensitive information. 

§ 9901.926 Regulations of the Board. 

The Department may issue initial 

interim rules for the operation of the 

Board and will consult with labor 

organizations granted national 

consultation rights on the rules. The 

Board will prescribe and publish rules 

for its operation in the Federal Register. 

§ 9901.927 Continuation of existing laws, 

recognitions, agreements, and procedures. 

(a) Except as otherwise provided by 

§§ 9901.905 or 9901.912, nothing 

contained in this subpart precludes the 

renewal or continuation of an exclusive 

recognition, certification of an exclusive 

representative, or an agreement that is 

otherwise consistent with law, the 

regulations in this part and DoD or 

66220 Federal Register / Vol. 70, No. 210 / Tuesday, November 1, 2005 / Rules and Regulations 

Component issuances between the 

Department or a Component thereof and 

an exclusive representative of its 

employees, which is entered into before 

the effective date of this subpart, as 

determined under § 9901.102(b)(1). 

(b) Policies, regulations, and 

procedures established under and 

decisions issued under Executive 

Orders 11491, 11616, 11636, 11787, and 

11838 or any other Executive order, in 

effect on the effective date of this 

subpart (as determined under 

§ 9901.102(b)(1)), will remain in full 

force and effect until revised or revoked 

by the President, or unless superseded 

by specific provisions of this subpart or 

by implementing issuances or decisions 

issued pursuant to this subpart. 

§ 9901.928 Savings provisions. 

This subpart does not apply to 

grievances or other administrative 

proceedings already pending on the date 

of coverage of this subpart, as 

determined under § 9901.102(b)(1). Any 

remedy that applies after the date of 

coverage under any provision of this 

part and that is in conflict with 

applicable provisions of this part is not 

enforceable. 

[FR Doc. 05–21494 Filed 10–27–05; 8:45 am] 

BILLING CODE 6325–39–P; 5001–06–P