[Federal Register: February 1, 2005 (Volume 70, Number 20)]
[Rules and Regulations]
[Page 5271-5347]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01fe05-13]
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Part II
Department of Homeland Security
Office of Personnel Management
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5 CFR Chapter XCVII and Part 9701
Department of Homeland Security Human Resources Management System;
Final Rule
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DEPARTMENT OF HOMELAND SECURITY
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Chapter XCVII and Part 9701
RIN 3206-AK31 and 1601-AA-19
Department of Homeland Security Human Resources Management System
AGENCY: Department of Homeland Security; Office of Personnel
Management.
ACTION: Final rule.
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SUMMARY: The Department of Homeland Security (DHS or the Department)
and the Office of Personnel Management (OPM) are issuing final
regulations to establish a new human resources management system within
DHS, as authorized by the Homeland Security Act of 2002. The affected
subsystems include those governing basic pay, classification,
performance management, labor relations, adverse actions, and employee
appeals. These changes are designed to ensure that the Department's
human resources management system aligns with its critical mission
requirements without compromising the statutorily protected civil
service rights of its employees.
DATES: Effective Date:
March 3, 2005.
FOR FURTHER INFORMATION CONTACT: At OPM: Ronald P. Sanders, 202-606-
9150; at DHS: Kay Frances Dolan, 202-357-8200.
SUPPLEMENTARY INFORMATION:
Table of Abbreviations
AFGE--American Federation of Government Employees
ALJ--Administrative Law Judge
Compensation Committee--Homeland Security Compensation Committee
DHS--Department of Homeland Security
FLRA--Federal Labor Relations Authority
FMCS--Federal Mediation and Conciliation Service
FSIP--Federal Service Impasses Panel
GAO--Government Accountability Office (former General Accounting
Office)
GS--General Schedule
HR--Human Resources
HSLRB--Homeland Security Labor Relations Board
MRO--Mandatory Removal Offense
MRP--Mandatory Removal Panel
MSPB--Merit Systems Protection Board
NAAE--National Association of Agriculture Employees
NFFE--National Federation of Federal Employees
NTEU--National Treasury Employees Union
OPM--Office of Personnel Management
SES--Senior Executive Service
SL--Senior Level
SRC--DHS Human Resource Management Senior Review Committee
ST--Scientific or Professional Positions
TSA--Transportation Security Administration
Table of Contents
This supplementary information section is organized as follows:
Introduction
The Case for Action
Pay and Classification
Performance Management
Labor-Management Relations
Adverse Actions and Appeals
Summary of the Design Process
The Meet and Confer Process
Major Issues
Specificity of the Regulations
Pay for Performance
Management Rights/Scope and Duty to Bargain
Adverse Actions and Appeals
Mandatory Removal Offenses
Response to Specific Comments and Detailed Explanation of
Regulations
Subpart A--General Provisions
Section 9701.101--Purpose
Section 9701.102--Eligibility and Coverage
Summary of Coverage Eligibility Chart
Section 9701.103--Definitions
Section 9701.105--Continuing Collaboration
Section 9701.106--Relationship to Other Provisions
Section 9701.107--Program Evaluation
Subpart B--Classification
General Comments
Section 9701.201--Purpose
Section 9701.203--Waivers
Section 9701.204--Definitions
Section 9701.211--Occupational Clusters
Section 9701.212--Bands
Section 9701.222--Reconsideration of Classification Decisions
Section 9701.232--Special Transition Rules for Federal Air
Marshal Service
Subpart C--Pay and Pay Administration
General Comments
Section 9701.301--Purpose
Section 9701.303--Waivers
Section 9701.304--Definitions
Section 9701.311--Major Features
Section 9701.312--Maximum Rates
Section 9701.314--Department of Homeland Security
Responsibilities
Section 9701.321--Structure of Bands
Section 9701.322--Setting and Adjusting Rate Ranges
Section 9701.323--Eligibility for Pay Increase Associated with a
Rate Range Adjustment
Section 9701.331--General
Section 9701.332--Locality Rate Supplements
Section 9701.333--Special Rate Supplements
Section 9701.334--Setting and Adjusting Locality and Special
Rate Supplements
Section 9701.335--Eligibility for Pay Increase Associated with a
Supplement Adjustment
Section 9701.342--Performance Pay Increases
Section 9701.343--Within Band Reductions
Section 9701.344--Special Within Band Increases for Certain
Employees
Section 9701.345--Developmental Pay Adjustments
Section 9701.346--Pay Progression for New Supervisors
Section 9701.353--Setting Pay Upon Promotion
Section 9701.356--Pay Retention
Section 9701.361--Special Skills Payment
Section 9701.362--Special Assignment Payments; and 9701.363
Special Staffing Payments
Summary of Special Rate Supplements and Special Payments
Provisions
Section 9701.373--Conversion of Employees to the DHS Pay System
Section 9701.374--Special Transition Rules for the Federal Air
Marshal Service
Subpart D--Performance Management
General Comments
Section 9701.401--Purpose
Section 9701.403--Waivers
Section 9701.404--Definitions
Section 9701.405--Performance Management Systems
Section 9701.406--Setting and Communicating Performance
Expectations
Section 9701.407--Monitoring Performance
Section 9701.408--Developing Performance
Section 9701.409--Rating Performance
Section 9701.410--Rewarding Performance
Section 9701.412--Performance Review Boards
Subpart E--Labor-Management Relations
General Comments
Section 9701.501--Purpose
Section 9701.502--Rules of Construction
Section 9701.503--Waivers
Section 9701.504--Definitions
Section 9701.505--Coverage
Section 9701.506--Impact on Existing Agreements
Section 9701.508--Homeland Security Labor Relations Board
Section 9701.509--Powers and Duties of the HSLRB and 9701.510--
Powers and Duties of the Federal Relations Authority
Section 9701.511--Management Rights
Section 9701.512--Obligation to Confer
Section 9701.513--Exclusive Recognition of Labor Organizations
Section 9701.515--Representation Rights and Duties
Section 9701.516--Allotments to Representatives
Section 9701.517--Unfair Labor Practices
Section 9701.518--Duty to Bargain, Confer, and Consult in Good
Faith
Section 9701.519--Negotiation Impasses
Section 9701.521--Grievance Procedures
Section 9701.522--Exceptions to Arbitration Awards
Section 9701.527--Savings Provision
Subpart F--Adverse Actions
General Comments
Section 9701.601--Purpose
Section 9701.602--Waivers
Section 9701.603--Definitions
Section 9701.604--Coverage
Section 9701.605--Standard for Action
Section 9701.606--Mandatory Removal Offenses
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Section 9701.608--Departmental Record
Section 9701.609--Suspension and Removal
Section 9701.614--Savings Provision
Subpart G--Appeals
Section 9701.701--Purpose
Section 9701.702--Waivers
Section 9701.704--Coverage
Section 9701.705--Alternative Dispute Resolution
Section 9701.706--MSPB Appellate Procedures
Section 9701.707--Appeals of Mandatory Removal Action
Section 9701.709--Savings Provision
Next Steps
Moving Forward
Regulatory Requirements
E.O. 12866--Regulatory Review
Regulatory Flexibility Act
E.O. 12988--Civil Justice Reform
E.O. 13132--Federalism
Introduction
The Secretary of Homeland Security, Tom Ridge, and the Director of
the Office of Personnel Management, Kay Coles James, jointly prescribe
this final regulation to establish a flexible and contemporary system
for managing the Department's human resources (HR). This system has
been developed pursuant to a process based on principles articulated by
OPM and affirmed by DHS that called for extensive and continuing
collaboration with employees and employee representatives. In addition,
DHS and OPM have engaged in unprecedented outreach to the public as
well as to the Congress and other key stakeholders. As provided by
Public Law 107-296 (the Homeland Security Act, signed into law by
President George W. Bush on November 25, 2002), 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
The Meet-and-Confer Process
Major Issues
Response to Specific Comments and Detailed Explanation of
Regulations
Next Steps
Moving Forward
The Case for Action
Since September 11, 2001, this Nation has come together with a
unity of purpose that has not been seen or felt since the attack at
Pearl Harbor in 1941. Out of that national tragedy emerged a consensus
for a comprehensive global war on terrorism. That consensus resulted in
the enactment of legislation creating the Department of Homeland
Security, and with it, the authority to create a system for managing
its human resources that would be flexible and mission-focused without
compromising the principles of merit and fitness. Indeed, the
Department's mission is to ``lead the unified national effort to secure
America'' (emphasis added), and its new HR system is aimed at that same
result. In order for the Department to sustain that unity of effort,
its HR system must also provide for the meaningful participation of
employees in its creation, and they must be treated with dignity and
respect in its implementation.
These final regulations represent a major step in that historic
transformation. They establish a new HR system for the Department of
Homeland Security (DHS) that assures its ability to attract, retain,
and reward a workforce that is able to meet the critical mission
entrusted to it by the American people. As provided by the regulations
published here, that system must and does provide for greater
flexibility and accountability in the way employees are paid,
developed, evaluated, afforded due process, and represented by labor
organizations. These regulations respond to comments on a notice of
proposed rulemaking published in the Federal Register of February 20,
2004 (69 FR 8030). The next step, following the publication of these
enabling regulations, is to implement this new system, in continuing
collaboration with employee representatives.
The mission of the Department demands that employees and
supervisors work together as never before. Managers, supervisors, and
employees of the Department must be unified in both purpose and effort
if they are to accomplish that mission. And perhaps the most important
way to bring about that unity is through an integrated HR system for
the Department--a system that assures maximum flexibility and
accountability. That system must value, reward, and reinforce high
performance, teamwork, commitment to learning and excellence, and
selfless service. It must also facilitate communication and
collaboration at all levels of the Department. The Secretary and the
Director are committed to ensuring that these goals are met.
The mission statement of the Department goes on to state that
``[w]e will prevent and deter terrorist attacks and protect against and
respond to threats and hazards to the nation. We will ensure safe and
secure borders, welcome lawful immigrants and visitors, and promote the
free-flow of commerce.'' No Federal agency has ever had a mission that
is so broad, complex, dynamic, and vital. That mission demands
unprecedented organizational agility to stay ahead of determined,
dangerous, and sophisticated adversaries. The importance of the
Department's HR system to achieving that goal has been underscored by
the President and the Congress. In signing the Homeland Security Act
into law, President Bush emphasized the Department's critical need to
``put the right people in the right place at the right time in the
defense of our country'' while ensuring that the rights of the
Department's employees ``[a]s federal workers * * * will be fully
protected * * *.'' Senator Susan Collins, Chairman of the Senate
Committee on Governmental Affairs, said, ``[w]e need to grant the new
Secretary appropriate but not unlimited authority to create a flexible,
unified new personnel system that meets the Department's unique
demands.''
This was the fundamental challenge faced by Secretary Ridge and
Director James in designing this new system--to strike a balance
between mission-essential flexibility and protection of core civil
service principles. Summarized here and discussed at length in the
pages that follow are the changes that we believe strike that balance.
Many of those changes are significant, and we have highlighted them in
the following pages. We believe they respond to the fundamental
concerns of the American public, as well as our employees. Where there
is a substantial departure from the status quo in this final plan, it
is in furtherance of the Department's statutory mission, with the
attendant need for a significant investment in communication and
understanding on the part of all parties in order to successfully
implement those changes.
Pay and Classification. One of the most fundamental changes in the
regulations is the creation of a pay-for-performance system for
Department employees that will replace the General Schedule. Under this
new system, pay increases will be based solely on performance--not time
in grade. It also provides for the establishment of a series of
occupational clusters and bands in place of the current General
Schedule grades and authorizes DHS to
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set and adjust the minimum and maximum rates of pay for each band
associated with a cluster. In addition, the system establishes locality
rate supplements to address local market conditions, as well as special
rate supplements to address special recruitment or retention needs.
Only those DHS employees whose performance meets or exceeds
expectations will be eligible for a performance- and/or market-based
pay increase.
Performance Management. The new performance management system for
DHS will complement and support the Department's new pay and
classification system by ensuring greater accountability for individual
performance expectations and organizational results. The regulations
simplify performance management, removing many administrative burdens
associated with the current system. For example, ``performance
expectations'' need no longer be in writing and may take the form of
individual, team, and/or work unit goals or objectives, as well as such
things as standard operating procedures or manuals, internal rules and
directives, and other generally available instructions applicable to an
employee's job. However, performance expectations, including those that
may affect the employee's retention, must still be communicated to the
employee prior to holding the employee accountable for them.
Labor-Management Relations. To ensure that the Department has the
flexibility to carry out its vital mission, 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. Such critical
matters as work assignments and deployments are no longer subject to
collective bargaining. However, exclusive representatives will still be
able to negotiate over significant and substantial changes, as well as
appropriate arrangements for employees adversely affected by those
changes, under certain specified conditions. Additionally, the
regulations create the Homeland Security Labor Relations Board (HSLRB)
to address those issues that are most important to accomplishing the
DHS mission, with other matters retained by the Federal Labor Relations
Authority (FLRA). The revisions strike the right balance between the
mission needs of DHS and the meaningful involvement of employees and
their representatives.
Adverse Actions and Appeals. Consistent with the Homeland Security
Act, the regulations streamline and simplify adverse action and appeals
procedures, but without compromising due process for DHS 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). We have also revised the proposed regulations to raise
the burden of proof in adverse actions from ``substantial'' to
``preponderance,'' and to permit arbitration of adverse actions as an
option for bargaining unit employees. In addition, the regulations now
allow MSPB (and arbitrators) to mitigate penalties, but only under
certain specified conditions. The final regulations also retain
authority for the Secretary to establish a number of mandatory removal
offenses (MROs) that have a direct and substantial effect on homeland
security and an independent Panel (selected from a list that will
include nominees from DHS exclusive representatives and other sources)
to hear MRO appeals.
Summary of the Design Process
As the Congress made clear, ``collaborative effort will help secure
our homeland.'' DHS and OPM have been committed to a collaborative
approach from the beginning. The General Accounting (now Government
Accountability) Office (GAO) recognized this in a report last year,
stating that ``DHS's and OPM's efforts to design a new human capital
system are collaborative and facilitate participation of employees from
all levels of the department.'' In a follow-up report issued in June
2004, GAO observed that ``to date, DHS's actions in designing its human
capital management system and its stated plans for future work on the
system are positioning the department for successful implementation.''
Those actions included an extensive process of deliberation,
discussion, and collaboration with employees, representatives of labor
organizations, supervisors, managers, and other stakeholders in order
to identify ideas and concerns.
This collaborative process was rooted in conversations Director
James held with employee representatives even prior to the passage of
the Homeland Security Act to propose a fair and principled process for
the design of the HR system. The process itself actually began in April
2003, when the Secretary and the Director established a DHS/OPM Design
Team composed of Department managers and employees, HR experts from DHS
and OPM, and professional staff from the Department's three largest
labor organizations: The American Federation of Government Employees,
the National Treasury Employees Union, and the National Association of
Agriculture Employees.
The 48 members of the Design Team conducted significant research in
the areas of pay, performance, classification, labor relations, adverse
actions, and appeals reform. The team gathered data from public and
private sector organizations; examined and evaluated successful and
promising human capital practices; interviewed leading human resources
experts, DHS employees and managers; and consulted a Field Team of
employees and managers who provided a front-line perspective. Together,
as a team, DHS and OPM also held dozens of focus groups, including
visits to Norfolk, Atlanta, Detroit, New York, Miami, El Paso, Los
Angeles, Seattle, Baltimore, and Washington, DC. Thus, DHS and OPM
heard the concerns of thousands of the Department's employees.
The Design Team developed 52 options for the various elements of
the Department's HR system. These were presented to a DHS Human
Resource Management Senior Review Committee (SRC) on October 20-23,
2003. The SRC, co-chaired by senior DHS and OPM officials, included the
presidents of the Department's three largest labor organizations, as
well as the heads of some of its largest and most critical line
operations. In addition, five non-Federal experts in public
administration were designated as technical advisors to the SRC. During
the course of two public meetings, the SRC reviewed the various Design
Team options, and thereafter its members reported their views to the
Secretary and the Director for consideration. In reaching final
decisions regarding the new HR system, the Secretary and the Director
relied on the SRC's advice and counsel, as well as the public comments
received during the SRC proceedings and the wealth of material
developed through the Design Team's research.
These extensive and collaborative design efforts all preceded the
formal process for developing the new HR system, and went far beyond
that required by the Congress in the Homeland Security Act. The Act
established a formal process in this regard, officially beginning when
the Secretary and the Director published proposed regulations to
establish the new DHS HR system in the Federal Register on February 20,
2004. That 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. More than 3,800 public comments were
received and analyzed by DHS and OPM staff. At the specific
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request of the Secretary and the Director, the formal comments of labor
organizations were given particular attention and consideration.
Commenting jointly, the three largest labor organizations rejected the
proposed regulations in their entirety. Public, employee, and labor
organization comments are summarized in detail in a subsequent section
of this Supplementary Information.
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
representatives of the Department and its major employee organizations
were to ``meet and confer'' in order to resolve differences over the
proposed regulations wherever possible. That meet-and-confer process
began officially on June 14, 2004. On that date, the Secretary and the
Director notified Congress in writing that they had not accepted the
labor organizations' recommendation to reject the proposed regulations
in their entirety. This notification was required by the Homeland
Security Act of 2002 (5 U.S.C. 9701(e)(1)(B)(i)). Even before the meet-
and-confer process began, however--and in keeping with our
determination to work collaboratively with DHS employee
representatives--staff from DHS and OPM met informally for several days
with representatives of the three largest labor organizations
representing DHS employees to discuss the proposed regulations. Our
discussions helped us better understand each other's positions and led
to several clarifications regarding the proposed regulations.
As authorized by 5 U.S.C. 9701(e)(1)(B)(iii), and in order to
facilitate the meet-and-confer process, the Secretary and the Director
issued procedures governing the conduct of this process. The procedures
provided for five employee organizations to participate in the meet-
and-confer process, including one management association; however, the
management association declined to participate. The Secretary, in
consultation with the Director, also requested the services of the
Federal Mediation and Conciliation Service. Under those procedures,
officials of the Department and OPM met with employee representatives
from June 14 through August 6, 2004, a period well in excess of the
statutory requirement. (Including informal sessions that preceded the
meet-and-confer process, DHS, OPM, and labor organization
representatives met for a total of more than 36 days--this, of course,
is in addition to the 6 months that DHS and OPM representatives spent
with employee representatives, full-time, during the HR system design
process.) The following principals participated in the actual meet-and-
confer process:
One representative from each of the four largest DHS labor
organizations: the American Federation of Government Employees (AFGE),
the National Treasury Employees Union (NTEU), the National Association
of Agriculture Employees (NAAE), and the National Federation of Federal
Employees (NFFE);
Four representatives from DHS, including the Chief Human
Capital Officer, an executive from his staff, and two senior line
managers from DHS operational components; and
Two senior executives from the Office of Personnel
Management (OPM).
Finally, at the conclusion of the meet-and-confer process, the
Secretary and the Director met with the national presidents of the
Department's two largest labor organizations (AFGE and NTEU) on
September 10, 2004, to provide them with an opportunity to present
their issues and concerns directly to the principals. Their
presentation led to further revisions to these regulations as described
in this SUPPLEMENTARY INFORMATION.
As discussed and described in great detail in subsequent sections
of this Supplementary Information, we have made substantial revisions
to the proposed regulations in response to the many recommendations
made by employees, labor organizations, and others during the public
comment period. In addition, we listened to the concerns of the
employee representatives and adopted many of the proposals made by
labor organization representatives during the extensive meet-and-confer
process. A careful comparison of the final regulations to those
proposed several months ago will show that we have kept our commitment
to an open, inclusive, and participatory process that respected and
accommodated employee and labor organization perspectives and concerns.
These extensive revisions notwithstanding, substantial
disagreements remain over such fundamental issues as performance vs.
tenure as a basis for individual pay increases, and the scope and duty
to bargain vs. operational flexibility in the assignment and deployment
of front-line personnel. These disagreements were underscored during
the meet-and-confer process, and despite the exhaustive, good faith
efforts by labor organization and management representatives during
that process, the parties were simply not able to resolve them. In
point of fact, these issues reach to the core of a flexible,
contemporary HR system for the Department, and they represent the sort
of transformational change envisioned by the Congress and the President
when the Homeland Security Act was enacted into law. And because they
are so fundamental, no one should be alarmed by these disagreements,
take them as a sign of bad faith on the part of any party, or view them
as an indication that the meet-and-confer process failed. Reasonable
and honorable people may disagree, especially over such issues as
these, but we believe the extensive involvement of employees and
employee representatives over the course of the last 18 months added
tremendous value--and that the process worked.
While the regulatory process precluded us from agreeing on final
regulatory language during the meet-and-confer process, we believe we
did reach agreement with the participating labor organizations on
numerous substantive issues. Because we could not ``sign off'' on these
agreements, as we would in a traditional collective bargaining process,
we have tried to exercise caution in characterizing the results. We
believe this understates the extent of the conceptual agreements and
understandings reached during the process, which we have tried to
reflect in the Supplementary Information section of this notice. Thus,
where we make the statement ``we agreed'' in the text of this
Supplementary Information, we are referring to agreements reached by
OPM and DHS in the regulatory process, rather than to agreements
reached between management and labor organization representatives
during the meet-and-confer process.
Major Issues
Our analysis of the more than 3,800 comments received during the
public comment period, as well as the many issues extensively discussed
during the subsequent meet-and-confer process, revealed a set of major
issues that elicited the most (or most substantive) comments,
especially from key stakeholders. They are (1) specificity of the
regulations, (2) pay for performance, (3) management rights/scope and
duty to bargain, (4) adverse actions and appeals, and (5) mandatory
removal offenses. Because these issues are critical to understanding
the objectives of the Department's new HR system, we have given them
particular attention in the following pages.
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1. Specificity of the Regulations
One of the most significant issues raised by employees, labor
organizations, and some Members of Congress had to do with the basic
structure of the regulations. As jointly prescribed by DHS and OPM,
parts of the final regulations establish broad policy parameters for
the Department's HR system but leave many of the details of that system
to DHS implementing directives. Many of the commenters, especially
labor organizations, expressed concern about this fact, arguing that
the proposed regulations lacked sufficient detail, and they recommended
that the regulations include far greater specificity.
These comments and concerns focused almost exclusively on three of
the subparts in the proposed regulations--those dealing with
classification, pay, and performance management (subparts B, C, and D,
respectively). Those subparts were (and remain) relatively general in
nature, and they expressly provide for the Department to develop and
issue directives implementing their precepts subsequent to the
promulgation of these regulations. In contrast, the subparts dealing
with labor relations, adverse actions, and appeals (subparts E, F, and
G, respectively) are quite detailed, requiring little in the way of
implementing directives.
In response to these comments, and as a result of the meet-and-
confer process, we have added greater detail to the subparts at issue--
particularly subpart C. However, even with added detail, all three 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 directives. Comments
notwithstanding, we believe that this is the appropriate approach. In
these final regulations which have the full force and effect of law, we
have intentionally adopted a structure that mirrors the very statutes
that they replace. Moreover, this structure provides the Department the
flexibility it requires in implementing an HR system of this scope and
complexity.
In this regard, the provisions of title 5, U.S. Code, governing
classification, pay, and performance management establish general
policies and authorities, with the details left to OPM to regulate. For
example, 5 U.S.C. chapter 51 establishes the General Schedule (GS)
classification system but leaves to OPM the definition of occupational
series and families and the development and promulgation of detailed
job grading standards and qualification requirements--presently
encompassing hundreds of detailed classification standards and
qualifications requirements (note that those standards and requirements
are not subject to public notice and comment under the Administrative
Procedure Act). Subpart B of these regulations, which now replaces 5
U.S.C. chapter 51, follows suit, establishing the basic
``architecture'' of the Department's job classification system--that
is, its core elements and parameters--but it leaves the specific
definition of occupational clusters and bands and the development of
job grading standards to Departmental implementing directives (all
subject to OPM review and coordination). Chapters 53 and 43 of title 5,
U.S. Code, follow the same pattern and so too do the subparts that
replace them--subparts C and D, respectively.
While commenters did not express concern about the structure of
subparts E, F, and G, dealing with labor relations, adverse actions,
and appeals, respectively, they too reflect their statutory
underpinnings. Like their ``legacy'' chapters in title 5 (chapters 71,
75, and 77, respectively), they are extremely detailed and, except for
procedures for the operation of the two adjudicating bodies that they
establish, they require little in the way of implementing directives.
While the final regulations retain their basic structure as
originally proposed, we have added detail in subparts B, C, and D as a
result of public comment and the meet-and-confer process. These
additions are documented at length in our responses to the detailed
comments that follow. However, some of them are worth highlighting. For
example, in subpart C, we have included specific policies governing pay
adjustments upon promotion from a lower pay band to a higher one; pay
progression for employees in entry/developmental pay bands; limits on
reductions in basic pay for performance or conduct reasons; pay
adjustments for employees on pay retention; and the impact of an
``unacceptable'' performance rating on an individual's pay. Similarly,
subpart D now includes additional detail regarding requirements for
setting and communicating performance expectations (especially those
that may affect an employee's retention) and policies dealing with
rating and rewarding performance.
According to labor organization feedback during the final stages of
the meet-and-confer process, these additions still fall short of the
detail they recommend. Labor organization comments in this regard 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. 9701(e). Among
other things, that statutory process requires the Department and OPM to
provide employee organizations with an opportunity to comment on
proposed regulations and thereafter, meet with DHS 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 issuance of implementing directives.
This became a major topic of discussion during the meet-and-confer
process, with labor organizations insisting that DHS and OPM either
include all implementing details in these final regulations, or subject
Department implementing directives to collective bargaining.
We did not adopt either alternative. Including such detail in these
regulations would be inconsistent with the ``legacy'' statutes that
they replace and contrary to our best judgment--based on years of
experience administering those statutes. Moreover, such detail would
result in untenable rigidity in a Department whose mission requires
just the opposite. In authorizing these regulations, Congress mandated
that we develop a human resources system that is ``flexible'' (see 5
U.S.C. 9701(b)(1)); indeed, of all of the various objectives set by
Congress for this system in the Homeland Security Act, flexibility was
the very first it enumerated, and unnecessary and excessive detail in
subparts B, C, and D would undermine that objective.
Collective bargaining is also inappropriate for the development of
implementing directives. First, Congress could have provided for
collective bargaining to develop directives, but did not. Instead, it
expressly provided for a meet-and-confer process as a way of providing
for labor organization involvement, and there is no evidence whatsoever
that it intended that Departmental implementing directives be
collectively bargained; rather, Congress clearly provided for
``continuing collaboration'' (but implicitly, not collective bargaining
or ``meet and confer'') in this regard. Moreover, we note that no labor
organization enjoys exclusive
[[Page 5277]]
recognition at the Department level--indeed, labor organizations
represent fewer than 40 percent of the Department's eligible civilian
workforce; granting labor organizations the right to collectively
bargain implementing directives that cover all of the Department's
employees would be inappropriate.
However, from the beginning DHS and OPM have recognized the value
of involving employees and their representatives in the design of this
system and included this as one of our guiding principles. Moreover, as
noted previously, 5 U.S.C. 9701(e)(1)(D) requires the Department and
OPM to provide a means for ensuring ``continuing collaboration'' with
employee representatives in implementing these regulations. In keeping
with those objectives, we have included a ``continuing collaboration''
process at Sec. 9701.105. This is consistent with the statutory
provision which states that the Secretary and Director ``shall * * *
develop a method for each employee representative to participate in any
further planning or development (of the personnel system) which might
become necessary.'' The new section now assures employee representative
involvement in the development of the Department's implementing
directives. Named after the section in the law that requires it, this
section provides employee representatives with an opportunity to
discuss their views and concerns on implementation and design concepts
with DHS officials and/or to review and provide written comments on
proposed final draft implementing directives in advance.
In summary, three of the subparts in these final regulations remain
relatively general in nature, providing broad policy parameters but
leaving much of the details to implementing directives, while three
others are specific. We believe that this structure, patterned after
the chapters in title 5 that they replace, is appropriate. By providing
for detailed implementing directives, the subparts dealing with
classification, pay, and performance management 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 directives.
2. Pay for Performance
The pay system we described in the proposed regulations was
designed to fundamentally change the way we pay employees in the
Department of Homeland Security. Instead of a pay system based
primarily on tenure and time-in-grade, we proposed a system that bases
all individual pay increases on performance. This proposal honors major
points that were debated by the Congress and agreed upon with the
passage of the Homeland Security Act. 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 DHS continue to rely on the
General Schedule (GS) classification and pay system. Many commenters
thought that 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 DHS
managers to establish and apply performance standards fairly and
consistently to pay decisions.
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. These
expectations are difficult, if not impossible, to achieve under the
current system. The General Schedule does not provide the opportunity
to appropriately reward top performers or to pay them according to
their true value in the labor market. Under the General Schedule,
performance is rewarded as an exception rather than the rule, and
market is defined as ``one size fits all.''
The GS pay system is primarily a longevity-based system--that is,
pay increases are linked primarily to the passage of time. While time-
in-grade determines eligibility for a GS 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-the-board pay increases that range
from 3 to 5 percent, and special rates that are even higher. Over time,
even minimally productive employees will progress steadily to the top
of the GS pay range, 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 DHS 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
locality rate increase if his or her performance does not at least meet
expectations. Unlike the GS system, employees rated unacceptable will
not get an annual adjustment. Second, the DHS 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 stringent performance
expectations at the full performance level. Unlike the GS system,
tenure and time-in-grade have no bearing. An employee will progress
through the pay range based solely 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 DHS employees to perform at their best. This
is in contrast to the GS system, where it is possible for a high-
performing employee to be paid the same, or even less, than a lower
performing co-worker.
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 pay system, all employees in a
given geographic location receive the same annual pay adjustment
without regard to their
[[Page 5278]]
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 and competition. Thus, we inevitably end up
underpaying employees in some occupations and overpaying others. Even
within an occupation, the rigidities of the General Schedule sometimes
force us to underpay employees at the entry/developmental grades, with
recruiting difficulties and high attrition the result.
The new DHS pay system is designed to be much more market-
sensitive. First, it allows DHS, after coordination with OPM, to define
occupational clusters and levels of work within each cluster that are
tailored to the Department's missions and components. Second, it gives
DHS considerable discretion, after coordination with OPM, to set and
adjust the minimum and maximum rates of pay for each of those
occupational clusters 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 DHS to customize those
adjustments and optimize valuable but limited resources. This kind of
flexibility, which is lacking under the GS pay system, will enable DHS
to allocate payroll dollars to the occupations and locations where they
are most needed to carry out the Department's mission of protecting the
homeland.
Thus, the goals and principles of the new system are sound, and we
have confidence that the Department has the capability to effectively
execute them. Pay-for-performance systems like that proposed for DHS
are not new. Paybanding 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). Research shows that employees' attitudes toward such systems
change over time, as they gain experience with them. For example,
employee support for the circa 1980 ``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 performance-based pay systems.
The system we have devised is also consistent with the findings and
recommendations of the National Academy of Public Administration 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
federal agencies. The switch to a pay-for-performance policy should be
managed as an organizational change because it will alter each agency's
culture and contribute to improved performance.'' Thus, this is not a
journey into uncharted waters.
We respect the concerns of employees and agree that it is essential
to communicate with employees regarding the changes that DHS is making.
Experience has shown that one of the best ways to deal with the
concerns associated with change is to involve employees and their
representatives in the process. As stated in the Preamble to the
proposed regulations, DHS is committed to a high degree of employee
involvement in developing the details of the new classification, pay,
and performance management system, and by its actions to date, it has
lived up to that commitment.
The need for employee involvement, however, will not cease with the
publication of these regulations. That is why the final regulations
provide for the continuing involvement of employee representatives in
the development of the detailed directives that will implement this
system and in the evaluation of the system. (See Sec. Sec. 9701.105
and 9701.107.) That is also why the final regulations provide for the
establishment of a new Homeland Security Compensation Committee
(Compensation Committee) that will involve representatives from the
major DHS labor organizations in addressing strategic compensation
matters, such as Departmental compensation policies and principles. The
Compensation Committee will consider factors such as turnover,
recruitment, and local labor market conditions in providing options and
recommendations for consideration by the Secretary. (See Sec.
9701.313.) This involvement will enhance the credibility and acceptance
of the system.
The new pay system will require numerous decisions to be made on an
annual basis, and the Compensation Committee will play a key role. For
example, DHS must determine how available budgetary resources should be
allocated between market-based adjustments--such as rate range
adjustments and adjustments in locality and special rate supplements--
and performance pay increases. DHS must determine the overall amount
that will be authorized for rate range adjustments in response to
changes in the national labor market for specific occupational clusters
and bands and the amounts that will be authorized for more targeted
market-based adjustments in specific locality pay areas. The
Compensation Committee will provide options and/or recommendations for
consideration by the Secretary, who will make final decisions.
The Compensation Committee will include a total of 14 members, with
4 ``seats'' reserved for DHS labor organizations granted national
consultation rights. OPM will also serve as an ex officio member. It
will be chaired by DHS's Undersecretary for Management, who will select
a facilitator from a list of nominees developed jointly by
representatives of the Department and the labor organizations. In
addition to making recommendations to the Secretary on strategic
compensation matters, the Compensation Committee also will review
summary data regarding annual performance payouts authorized under the
new system (Sec. 9701.342). The Compensation Committee is modeled
after the Federal Salary Council, which advises the President's Pay
Agent (the Secretary of Labor and the Directors of the Office of
Management and Budget and the Office of Personnel Management) on the
ongoing administration of the locality pay program for GS employees. It
is designed to give DHS employees, through the labor organizations that
represent them, a real voice in the ongoing administration of the DHS
pay-for-performance system.
In summary, we believe the Department's pay-for-performance system
is an imperative, essential to DHS's ability to attract, retain, and
reward a workforce that is able to meet the high expectations set for
it by the American people--the security of our homeland. Its successful
implementation is well within the capability of the Department's
leadership.
3. Management Rights/Scope and Duty To Bargain
The ability to act quickly is central to the Department's mission--
not just in emergency situations but, more importantly, in order to
prepare for or prevent emergencies. This principle was critical to
President Bush and the Congress throughout the formation of
[[Page 5279]]
the legislation and the congressional debate that followed its
introduction. This ability to act quickly is necessary even in meeting
day-to-day operational demands. The Department must be able to assign
and deploy employees, and to introduce the latest security technologies
without delay. Congress clearly stated that the Department's HR system
must provide the flexibility DHS needs to respond to a variety of vital
operational challenges and to carry out its wide-ranging mission.
To achieve this mandate, the proposed regulations revised 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
prohibited from negotiation to include 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--those rights that deal directly with the Department's
homeland security operations. We also excluded from mandatory
negotiations the procedures that the Department would follow in
exercising these expanded management rights. And we proposed changes to
allow the Department to take action in any of these areas without
advance notice to labor organizations and without pre-implementation
bargaining.
Without exception, comments received from labor organizations
objected to the proposed regulations, arguing that altering the scope
of bargaining in any way was contrary to the Homeland Security Act.
Further, labor organizations asserted that these changes were not
necessary, and that current law already provided the Department with
sufficient flexibility to deal with emergencies. Labor organizations
did acknowledge the Department's need to take certain actions without
pre-implementation bargaining, and during the meet-and-confer process,
they proposed a process for accelerated post-implementation bargaining
and third-party impasse resolution. Additionally, their proposal would
have allowed the Department to temporarily suspend procedural
provisions of collective bargaining agreements in situations where
there is a direct or substantive connection to protecting homeland
security. However, even under those stringent conditions, they insisted
that employees automatically be ``made whole'' for any adverse
consequences stemming from the suspension, as if management had
violated the agreement.
We recognize the good faith effort made by these labor
organizations to meet the Department's operational needs. However,
their proposals were fundamentally flawed 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, as a mandatory matter, over the procedures it
would be required to follow in exercising management rights, especially
those that deal directly with its operations. Those procedures can and
do constrain such critical actions 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
with an ``escape clause'' that would allow the Department to suspend
those procedures and act under exceptional circumstances.
This is too high a bar. In today's operational environment, the
exceptional has become the rule. During the meet-and-confer process, we
provided numerous and frequently alarming examples where such
negotiated procedures have hindered day-to-day operations--for example,
in redeploying personnel from a seaport to an airport to meet an
unexpected operational need, port directors today must draw from a pre-
established pool of volunteers even if in so doing they would under-
staff other critical line functions. Department managers, supervisors,
and employees are on the frontlines of the war on terrorism and the
efforts to preserve homeland security. The Department must be able to
rely on the judgment and ability of these managers and supervisors to
make day-to-day decisions--even if this means deviating from
established or negotiated procedures. The reality in the Department
today is that such deviations would be constant, thereby rendering any
negotiated procedures meaningless. Moreover, the Department's managers
and supervisors must be able to make split-second decisions to deal
with operational realities free of arbitrarily imposed standards.
With respect to post-implementation bargaining, the proposals
offered by labor organizations are similarly flawed. While they would
allow for management to implement without bargaining in advance over
impact and appropriate arrangements for employees adversely affected by
the exercise of a management right, they would still require immediate
post-implementation negotiations and third-party impasse resolution
over such matters. However, the reality of DHS's operational
environment today is that change is constant, and as a consequence, so
too would be post-implementation negotiations, with the prospect of
continuous third-party involvement. These negotiations would be
required even in cases where the change has come and gone and/or where
its impact was insignificant or insubstantial. The demand on DHS's
frontline managers and supervisors to engage in constant post-
implementation negotiations would divert them, and other critical
resources, from accomplishing the mission. This is unacceptable and
inconsistent with the vision for the Department.
Further, under 5 U.S.C. chapter 71, negotiated agreements over
appropriate arrangements are binding, under the assumption that those
agreements have anticipated future changes. Once again, today's
operational environment belies that assumption. Not only are changes
necessitated by operational demands constant, but they are also of
almost infinite variety. Our frontline managers and supervisors must
not be bound by past agreements when they must face current and future
exigencies.
Nevertheless, in recognition of the concerns articulated by the
participating labor organizations and other commenters, and as a result
of the September 10 meeting with the national presidents of AFGE and
NTEU, the Secretary and the Director directed that the proposed
regulations be revised to ensure the involvement of labor organizations
in such matters. First, the regulations provide for management, at the
level of recognition, (1) to confer with an appropriate exclusive
representative to consider its views and recommendations with regard to
procedures that managers and supervisors will follow in the exercise of
those management rights that deal directly with operational matters;
(2) to meet for up to 30 days in an attempt to reach agreement on such
procedures, with the possibility of extensions and third-party
assistance; and (3) to deviate from those procedures as necessary. We
believe this strikes the right balance between the Department's need
for maximum flexibility and speed and the value of labor organization
involvement.
Second, as a result of the September 10 meeting with the national
presidents of AFGE and NTEU, the Secretary and the Director also
directed that the proposed regulations be revised to require post-
implementation negotiations over impact and
[[Page 5280]]
appropriate arrangements for employees adversely affected by the
exercise of a management right. They have also been revised to allow
for pre-implementation notice and bargaining on arrangements when
operational circumstances permit.
However, to ensure that those negotiations do not distract or
divert managers and supervisors from their operational mission, those
negotiations are required only when the action or event has a
``significant and substantial'' impact on the bargaining unit as a
whole, or on those employees in that part of the bargaining unit
affected by the management action. For example, a management action
that impacted employees from various locations could trigger
negotiations at the level of recognition under this provision, as would
a management action that impacted employees in a single district or
port covered by a nationwide bargaining unit. Those negotiations must
be consistent with the Department's general duty to bargain over
conditions of employment, as established by these final regulations. In
such instances, bargaining is not required unless the act or event is
expected to exceed or has exceeded 60 days, in order to ensure that
managers are not bargaining over short-term changes that may become
moot before negotiations can even begin. While management is not
required to negotiate when the impact is on a single employee,
Department managers will be encouraged to address individual employee
hardships that result from a management action, whether or not that
management action triggers an obligation to bargain. In addition, the
revised regulations provide for reimbursement for reasonable, actual,
and non-routine expenses incurred as a result of such actions or
events.
We have also revised the proposed regulations to require mid-term
bargaining over personnel policies, practices, and matters affecting
working conditions only insofar that they are ``foreseeable,
substantial, and significant in terms of impact and duration on the
bargaining unit, or on those employees in that part of the bargaining
unit affected by the change.'' For example, in addition to requiring
negotiations over bargaining unit-wide changes in working conditions
that are ``foreseeable, substantial, and significant,'' this provision
would also require bargaining if the change in working conditions was
limited to a location(s) or organizational unit(s) below the level of
recognition (such as a port or district), insofar as the impact of such
a change was otherwise ``foreseeable, substantial, and significant.''
In so doing, we note that this ``substantial and significant'' test is
consistent with current FLRA and private sector case law.
In addition, we have limited mid-term bargaining to 30 days.
However, in response to the comments of labor organizations, the
Secretary and the Director directed that the proposed regulations be
amended to allow for binding resolution of mid-term impasses by the
HSLRB. We have also reinstated an exclusive representative's right to
be present at formal discussions between Department representatives and
employees, except when the purpose is to discuss operational matters.
These changes are also in keeping with our attempt to strike the right
balance between operational demands and the rights of an exclusive
representative.
Taken together, the Secretary and the Director believe these
revisions meet the Department's mission needs and are consistent with
the Homeland Security Act's promise to preserve collective bargaining
rights. While labor organizations have argued that any alteration of
the scope of bargaining violates the Act, such an interpretation of the
law would have the effect of nullifying the Act itself. The Act
authorizes the Secretary and the Director to waive and/or modify 5
U.S.C. chapter 71. Clearly, case law interpreting that chapter may be
modified, as well, to carry out the language, intent, and purpose of
these regulations. The Act also requires that the Department's HR
system be flexible, and these regulations fulfill that statutory
requirement.
4. Adverse Actions and Appeals
In authorizing the creation of a new human resources system for the
Department, Congress specifically required that employees continue to
be afforded the protections of due process. It also prohibited any
change in the application of existing statutory provisions involving
merit principles, prohibited personnel practices, or protection against
whistleblower reprisal or discrimination. Recognizing the critical
nature of the Department's mission, Congress also stated in 5 U.S.C.
9701(f)(2) that the new system should provide, ``to the maximum extent
practicable, for the expeditious handling'' of appeals of disciplinary
and performance-based actions.
The proposed regulations included a number of changes to adverse
actions and appeals procedures. Consistent with the Homeland Security
Act, these changes were intended to simplify and streamline those
procedures and provide for greater individual accountability, all
without compromising guaranteed due process protections. Greater
accountability is particularly critical to the Department. By its very
nature, the Department's mission requires an exceptionally high level
of workplace order and discipline. For example, the fact that many DHS
employees have arrest authority and other enforcement powers 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 MSPB adjudication process, a
lower burden of proof to sustain the Department's action, and a bar on
any mitigation of penalty by MSPB (except in the case of a prohibited
personnel practice), as well as a bar on the arbitration of adverse
actions. 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 homeland
security that they must carry a mandatory removal penalty. The proposed
regulations also created a special, independent panel appointed by the
Secretary to adjudicate MROs; if that panel found that an MRO had been
committed, the proposed regulations provided that only the Secretary
could mitigate the removal of an employee. While Congress gave DHS and
OPM the authority to establish an adjudicatory body other than MSPB,
the Secretary and the Director decided that with the changes outlined
above, DHS could achieve the objectives of the legislation while
retaining MSPB for employee adverse action appeals, except for MROs.
Commenters, including the labor organizations participating in the
meet-and-confer process, generally expressed concern that these
changes, separately and together, would vitiate the due process rights
of DHS employees. They argued that the changes would substantially
diminish (or in the case of arbitrators eliminate) the authority of
third parties such as MSPB to fully and fairly review and adjudicate
adverse actions. Commenters, as well as some Members of Congress,
expressed particular concern over the proposal to adopt a lower
``substantial evidence'' standard of proof for adverse actions, as well
as the proposal to bar MSPB from mitigating the Department's penalty
determination in an adverse action, except in the case of a prohibited
personnel practice. Labor organizations argued that the right to
arbitrate an adverse action was fundamental to collective bargaining,
and that by
[[Page 5281]]
removing adverse actions from arbitral review, the proposed regulations
were inconsistent with statutory guarantees in this regard.
OPM and DHS have carefully considered these comments, including
those received from participating labor organizations during the meet-
and-confer process. Accordingly, major revisions have been made to the
proposed regulations in four areas.
First, while DHS and OPM continue to provide for a shorter, 15-day
minimum notice to an employee of a proposed adverse action (compared to
a 30-day notice under current law), we have given employees a minimum
of 10 days to respond to the charges specified in the notice of
proposed adverse action. This reply period runs concurrently with the
notice period; it represents an increase over the 5-day reply period
initially proposed, as well as the 7-day reply period provided in
current law. Employees have a right to be heard before a proposed
adverse action is taken against them. This is a fundamental element of
due process in adverse actions. This change protects that right while
still providing for a more streamlined process. Similarly, in the
performance management section of the regulations, we have also ensured
that employees are apprised in advance of performance expectations that
may affect their retention.
Second, we re-examined the issue of burden of proof and decided to
adopt the ``preponderance of the evidence'' standard for all adverse
actions, whether conduct-or performance-based, instead of the
``substantial evidence'' standard set forth in the proposed
regulations. ``Preponderance of the evidence'' is that 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. This is the standard that currently
applies to conduct actions taken under chapter 75 of title 5. This is a
higher standard of proof than ``substantial evidence,'' which currently
applies to performance actions taken under chapter 43.
Third, in response to comments from labor organizations and others,
the Secretary and the Director decided to provide bargaining unit
employees the option of grieving and, subject to the approval of their
exclusive representative, arbitrating adverse actions. Thus, consistent
with current law, bargaining unit employees may contest an adverse
action either by filing an appeal with MSPB or by grieving and
arbitrating the matter through any applicable negotiated grievance
procedure. However, when adjudicating such adverse actions, arbitrators
will be bound by the same rules and standards governing such things as
burden of proof and mitigation that these regulations require of MSPB;
this has been a matter of law, and the regulations reiterate this
requirement to ensure consistent adjudication, regardless of forum. In
order to ensure that consistency, the Department's two largest labor
organizations at the September 10 meeting recommended the establishment
of a mutually acceptable panel of arbitrators who have been trained and
qualified to hear adverse action grievances. The Secretary and the
Director concurred with this recommendation, and the regulations have
been revised accordingly.
Finally, the Secretary and the Director have authorized MSPB (as
well as arbitrators) to mitigate penalties in adverse action cases, but
only under very limited circumstances. We continue to believe that,
because the Department bears full accountability for homeland security,
it is in the best position to determine the most appropriate adverse
action for poor performance or misconduct. Thus, its judgment in regard
to penalty should be given deference.
We are persuaded by the concern expressed by commenters, as well as
the national presidents of AFGE and NTEU at the September 10 meeting,
that the Department's authority over penalties should not be unlimited.
Although there is a presumption that DHS officials will exercise that
authority in good faith, the Secretary and the Director concluded that
it is appropriate to provide an employee affected by an adverse action
with an opportunity to rebut that presumption. In this regard, we are
persuaded that providing MSPB (and arbitrators) limited authority to
mitigate is an appropriate check regarding the exercise of the
Department's imposition of penalties. Accordingly, the final
regulations preclude mitigation of the penalty selected by DHS except
where, after granting deference to the Department, a determination is
made that the penalty is so disproportionate to the basis for the
action as to be wholly without justification.
This authority is significantly more limited than MSPB's current
mitigation authority under the standard first enunciated in Douglas v.
Veterans Administration (5 M.S.P.R. 280 (1981)). Under that 1981
decision, MSPB stated that it would evaluate agency penalties to
determine not only whether they were too harsh or otherwise arbitrary
but also whether they were unreasonable under all the circumstances. In
practice, this has meant that MSPB has exercised considerable latitude
in modifying agency penalties. With this new, substantially more
limited standard for MSPB mitigation of penalties selected by DHS, our
intent is to explicitly restrict the authority of MSPB to modify those
penalties to situations where there is simply no justification for the
penalty. MSPB may not modify the penalty imposed by the Department
unless such penalty is so disproportionate to the basis for the action
as to be wholly without justification. In cases of multiple charges,
MSPB or an arbitrator may mitigate a penalty where not all of the
charges are sustained. The third party's judgment is based on the
justification for the penalty as it relates to the sustained charge(s).
The regulations are intended to ensure that when a penalty is
mitigated, the maximum justifiable penalty must be applied.
With the changes outlined above, we believe we have addressed and
resolved the concerns raised by commenters regarding the preservation
of due process for DHS employees. Due process is protected 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.
5. Mandatory Removal Offenses
The proposed regulations authorized the Secretary to identify
offenses that, because they have a direct and substantial impact on the
ability of the Department to protect homeland security, 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 an independent DHS panel, which
could reverse the action but could not mitigate the removal penalty.
This panel would be composed of three members, who would be appointed
by the Secretary. Two examples of possible mandatory removal offenses
were provided and comments were solicited on the best and most
effective way to provide notice to all employees well in advance of
their application.
Commenters expressed a number of objections to the concept of MROs.
Since only two examples of potential MROs were provided in the proposed
regulations, they feared that removal could be too harsh a penalty for
as-yet-
[[Page 5282]]
unspecified offenses and that local management might misuse MROs to
target individual employees. They also were concerned that employees
would not be given full and complete notice of such offenses prior to
their application. Finally, they expressed an overriding concern about
the independence and objectivity of the proposed internal DHS panel.
As proposed, an MRO should have a direct and substantial impact on
homeland security such that there is ``zero tolerance'' for the
offense. Accordingly, we have decided to retain MROs and the Mandatory
Removal Panel (MRP). However, in response to comments, the Secretary
and the Director directed several modifications to the proposed
regulations. First, we 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
by providing them a preliminary list of potential mandatory removal
offenses, as follows:
Intentionally or willfully aiding or abetting an act, or
potential act, of terrorism.
Intentionally or willfully purchasing, using, selling,
and/or transporting weapons of mass destruction or materials related
thereto for the purpose of committing or contributing to a terrorist
act.
Intentionally or willfully allowing the improper
transportation or importation of illegal weapons (including but not
limited to weapons of mass destruction) or materials to be used for the
purpose of committing or contributing to a terrorist act.
Intentionally or willfully allowing the improper entry of
an individual to the U.S. who could compromise, or potentially
compromise, homeland security.
Soliciting or intentionally accepting a bribe or other
personal benefit that compromises, or could compromise, homeland
security, when the employee knew or reasonably should have known of the
compromise or potential compromise.
Intentionally or willfully misusing and/or divulging law
enforcement sensitive or confidential information (including, but not
limited to, classified material) to unauthorized recipients that
compromises, or could compromise, homeland security, when the employee
knew or reasonably should have known of the compromise or potential
compromise, subject to applicable whistleblower and free speech
protections.
Intentionally or willfully engaging in activities that
compromise, or could compromise, the information, economic, or
financial infrastructure of the Federal Government, 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 when 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. The
labor organizations participating in the meet-and-confer process were
especially concerned about this issue. Accordingly, we agreed to revise
the proposed regulations to provide, at a minimum, that MROs will be
(1) identified in advance as part of the Department's implementing
directives, (2) publicized via notice in the Federal Register, and (3)
made known to all employees on an annual basis. These offenses should
not be a surprise to anyone. The Secretary also intends to consult with
the Department of Justice in preparing the list of offenses for
publication.
Labor organizations participating in the meet-and-confer process
were also apprehensive that managers could misuse MROs. At their
specific suggestion, we agreed to add a requirement that every proposed
notice of mandatory removal be approved by a Departmental level
official before being issued to the employee. This requirement,
combined with the Secretary's authority to mitigate the removal
penalty, guards against the potential for such abuse and assures
consistency of application.
Finally, labor organizations participating in the meet-and-confer
process indicated that assurance regarding the independence of the
Panel would improve credibility and acceptance, and help resolve any
concerns about due process protections. The Secretary and the Director
agreed and directed that the proposed regulations be revised to provide
that (1) members will be ``independent, distinguished citizens * * *
who are well known for their integrity, impartiality, and expertise in
labor or employee relations and law enforcement/homeland security'';
(2) the Secretary will select members from a list that will include
nominees submitted by labor organizations and other sources; and (3)
decisions of the Panel will be subject to MSPB record review and
appropriate judicial review under the same criteria applicable to other
MSPB decisions. We believe these changes effectively resolve the major
concerns regarding MROs and the Panel.
With these changes, the final regulations provide for the
independence demanded by commenters while assuring DHS's ability to
remove employees who engage in conduct or performance that has a direct
and substantial impact on homeland security. The Secretary is
accountable to the President and the American people for safeguarding
homeland security. No other agency or department bears this burden.
These regulations ensure that the Secretary's authority aligns with
that responsibility.
Response to Specific Comments and Detailed Explanation of Regulations
Subpart A--General Provisions
Section 9701.101--Purpose
Section 9701.101 explains the overall purpose of the regulations in
5 CFR part 9701 to implement the DHS human resources (HR) management
system authorized by 5 U.S.C. 9701. In the proposed regulations, this
section provided the design goals of the DHS HR system.
During the meet-and-confer process, participating labor
organizations recommended that the regulations be revised to clarify
the DHS HR system design goals. We have amended Sec. 9701.101 by
moving the system goals to a new paragraph (b) and by revising the
goals to be consistent with the ``Guiding Principles'' adopted by the
Senior Review Committee in 2003 when reviewing options for the DHS HR
system.
Section 9701.102--Eligibility and Coverage
Section 9701.102 of the proposed regulations provided the Secretary
with the authority to approve the coverage of specific employee
categories under one or more provisions in 5 CFR part 9701. During the
meet-and-confer process, the participating labor organizations
recommended that the regulations clarify the Secretary's authority to
cover (and rescind the coverage of) various employee categories under
part 9701 and the coverage eligibility of employee categories. Other
commenters requested clarification regarding how employees who are not
immediately covered by the new HR system (i.e., as the system is phased
in) will be treated. In response to these comments, we have revised and
reordered Sec. 9701.102 (and made conforming changes elsewhere in the
final regulations) to clarify which categories of employees are
eligible for coverage under these regulations, and
[[Page 5283]]
we have also clarified the Secretary's authority to make coverage
determinations and the timing of such determinations, as follows:
New Sec. 9701.102(a) (formerly Sec. 9701.102(d))
clarifies that all civilian DHS employees are eligible for coverage
under one or more subparts of these regulations, except those covered
by a provision of law outside the chapters of title 5, United States
Code, that DHS may waive under 5 U.S.C. 9701.
New Sec. 9701.102(b) replaces the proposed Sec.
9701.102(a).
New Sec. 9701.102(b)(1) provides that subpart A becomes
applicable to all eligible employees when the regulations take effect--
i.e., 30 days after the date of publication of the final regulations in
the Federal Register.
New Sec. 9701.102(b)(2) provides that subparts E, F, and
G are applicable to all eligible employees on the effective date
established by the Secretary or designee, at his or her sole and
exclusive discretion and after coordination with OPM; however, the
effective date may not be later than 180 days after the date of
publication of the final regulations in the Federal Register unless
otherwise determined by the Secretary and the Director.
New Sec. 9701.102(b)(3) provides that, with respect to
subparts B, C, and D, the Secretary of DHS (or designee), at his or her
sole and exclusive discretion and after coordination with OPM, may
apply one or more of these subparts to a specific category or
categories of eligible employees at any time. The regulations provide
that the Secretary may apply some subparts, but not others, to a
specific category or categories of eligible employees and that such
coverage determinations may be made effective on different dates.
New Sec. 9701.102(b)(4) contains the requirement (also
included in the proposed regulations) that DHS will notify affected
employees and labor organizations of all coverage determinations.
New Sec. 9701.102(c) provides that until the Secretary
makes a coverage determination, DHS employees will continue to be
covered by the Federal laws and regulations that would apply to them in
the absence of the authorities provided by these regulations. For
example, GS employees in DHS will continue to be covered by the laws
and regulations governing General Schedule classification and pay
(i.e., 5 U.S.C. chapter 51 and 5 U.S.C. chapter 53, subchapter III)
until the effective date of the Secretary's decision to cover such
employees under the classification and pay provisions authorized by 5
CFR part 9701, subparts B and C.
New Sec. 9701.102(e) (formerly Sec. 9701.102(c))
clarifies that the Secretary or designee may prescribe implementing
directives for converting employees to coverage under title 5 if, at
his or her sole and exclusive discretion and after coordination with
OPM, coverage under one or more subparts of these regulations is
rescinded. (See Section 9701.103--Definitions and Section 9701.105--
Continuing collaboration for additional information on the process for
developing implementing directives.) We have also clarified that DHS
will notify affected employees and labor organizations in advance of a
decision to rescind coverage under these regulations.
In addition, a number of commenters requested clarification
regarding the specific categories of employees that are eligible and
ineligible for coverage under various subparts of these regulations.
The following chart provides additional information on the categories
of employees that are eligible (annotated with ``Yes'') and ineligible
(annotated with ``No'') for coverage under each subpart of these
regulations. The chart and its footnotes must be read together for full
coverage information. Employee categories that are eligible for
coverage under one or more subparts of these regulations will actually
be covered by such subparts only upon approval of the Secretary or
designee under Sec. 9701.102(b). DHS will provide advance notice to
affected employees and labor organizations regarding coverage
decisions.
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Section 9701.102(e) of the proposed regulations provided that
nothing in 5 CFR part 9701 prevents DHS from using an independent
discretionary authority to establish a parallel system that follows
some or all of the requirements in these regulations for a category of
employees ineligible for coverage under 5 U.S.C. 9701, as described in
this chart. Commenters recommended that DHS cover all employees by the
same HR system provisions. For example, commenters urged DHS to treat
employees appointed under the Robert T. Stafford Disaster Relief and
Emergency Assistance Act consistently with other employees who are
eligible for coverage under these regulations and to recognize the
value of the contributions of intermittent employees in emergency
disaster assignments by creating an equivalent parallel system for them
and closing the gap in compensation between this cadre and regular DHS
employees. Conversely, another commenter recommended that such
employees not be subject to the new DHS HR system. Other commenters
recommended that DHS cover U.S. Coast Guard academy faculty in a
parallel system, while keeping its existing HR system intact. Finally,
a commenter felt that the Secretary should not be allowed to use
independent discretionary authority to establish a parallel system for
categories of employees who are ineligible for coverage and that such
authority should be subject to congressional approval.
We have redesignated Sec. 9701.102(e) as Sec. 9701.102(f) and
revised it to clarify that the Secretary or other authorized DHS
official may exercise an independent legal authority to establish a
parallel system that follows some or all of the requirements in these
regulations for a category of employees who are not eligible for
coverage. DHS may decide to treat each employee category that is
ineligible for coverage differently. In all cases, DHS may invoke its
independent authority to establish a new or parallel pay system for
categories of employees ineligible for coverage under these regulations
only to the extent provided under such independent legislation and
subject to any procedural protections that such legislation provides.
For example, DHS may establish a parallel classification and pay system
for Stafford Act employees.
Other commenters requested clarification regarding the coverage of
members of the Senior Executive Service (SES) and employees in senior-
level (SL) and scientific or professional (ST) positions under the
classification, pay, and performance management system in subparts B,
C, and D of these regulations in light of the new performance
management certification requirements under 5 U.S.C. 5307 and the new
pay-for-performance system for SES members under 5 U.S.C. 5383.
Section 1322 of the Homeland Security Act of 2002 amended 5 U.S.C.
5307 to provide a higher limit on the aggregate compensation that SES
members and employees in SL/ST positions may receive in a calendar
year. In addition, section 1125 of the National Defense Authorization
Act of 2003 amended 5 U.S.C. chapter 53, subchapter VIII, to establish
a performance-based pay system for SES members.
These final regulations provide DHS with discretionary authority to
cover SES members and SL/ST employees under the classification, pay,
and performance management provisions of 5 U.S.C. part 9701, subparts
B, C, and D. (See Sec. Sec. 9701.202(b)(3) and (4), 9701.302(b)(3) and
(4), and 9701.402(a).) The aggregate pay limitation law and regulations
under 5 U.S.C. 5307 and 5 CFR part 530, subpart B, cannot be waived and
must continue to apply to SES members and SL/ST employees covered by
the DHS pay system under 5 CFR part 9701, subpart C. DHS must obtain
certification of its performance appraisal system, as required by 5 CFR
part 430, subpart D, in order to apply the higher aggregate cap. (See
Sec. 9701.303(f).)
In addition, Sec. 9701.102(d) of these final regulations (Sec.
9701.102(b) in the proposed regulations) allows DHS to cover its SES
members under a classification, pay, and performance management system
under these regulations. However, the provisions of such a system must
be consistent with the performance-based features and pay caps that
apply to employees covered by the new Governmentwide SES pay-for-
performance system under 5 U.S.C. chapter 53, subchapter VIII, and OPM
implementing regulations. If DHS wishes to establish a system for SES
members that differs from the Governmentwide SES pay-for-performance
system, DHS and OPM must issue joint regulations consistent with the
requirements of 5 U.S.C. 9701. DHS and OPM will involve SES members and
other interested parties in the design and implementation of any new
pay system for SES members.
Other commenters requested clarification regarding why
Transportation Security Administration (TSA) screeners are not covered
by the new system. Commenters stated that the applicability of the
regulations to TSA is addressed ambiguously and the regulations do not
appear to recognize certain statutory impediments to coverage (whether
implemented administratively as a ``parallel system'' or under the
coverage of regulation) that differ with respect to screeners and
nonscreeners.
Under section 111(d) of the Aviation and Transportation Security
Act, TSA screeners are employed outside the provisions of title 5,
United States Code. Thus, they cannot be covered by the DHS HR system
established under 5 U.S.C. 9701. Similarly, other TSA employees
(nonscreeners) are covered by an independent personnel management
system established under the authority of 49 U.S.C. 114(n). Under that
authority, TSA nonscreeners are covered by the personnel management
system established by the Federal Aviation Administration under 49
U.S.C. 40122, subject to any modifications TSA may make. Under 49
U.S.C. 40122(g), TSA employees are not covered by most provisions in
title 5, U.S. Code, including the DHS HR system authority in 5 U.S.C.
9701. While TSA employees are excluded from coverage under the HR
system established by these regulations, DHS can direct that the TSA
personnel systems align administratively with the new DHS HR system
except to the extent that aspects of those systems conflict with the
statutory authorities applicable to TSA employees.
Commenters also recommended that the regulations be modified to
allow DHS to cover administrative law judges (ALJs) and to develop a
parallel job evaluation, pay, and performance management system
tailored to ALJs consistent with the treatment of DHS SES members and
employees in SL/ST positions, including the higher basic pay cap that
applies to SES members under Sec. 9701.312(b). The commenters
recommended that DHS develop a performance management system that is
consistent with the requirements of the Administrative Procedure Act
and in line with the guiding principles of the proposed regulations.
DHS believes it is desirable to cover its ALJs under the system that
applies to other ALJs throughout the Government.
Section 9701.103--Definitions
During the meet-and-confer process, the participating labor
organizations requested clarification regarding the exception to the
definition of ``employee'' under Sec. 9701.103 of the proposed
regulations. We agree that this exception is confusing and have revised
5 CFR part 9701, subpart E, to eliminate the need for the exception
language in
[[Page 5288]]
Sec. 9701.103. (See Section 9701.505--Coverage.)
During the meet-and-confer process, the participating labor
organizations requested that the definition of ``coordination'' be
revised so that the OPM coordination process involve employees and
employee representatives. Alternatively, the labor organizations
recommended that the definition of ``coordination'' be deleted and that
all requirements for DHS to coordinate with OPM be replaced with more
detailed regulations.
While we understand the desire for the regulations to provide more
specificity and assurances on how the HR system will operate, we have
not removed the definition of ``coordination'' from these regulations.
The regulations must provide DHS with sufficient flexibility to design
a classification, pay, and performance management system that can be
tailored to DHS's varied mission requirements, performance priorities,
and strategic human capital needs.
However, we agree that the DHS HR system must be designed in a
transparent and credible manner that involves employees and employee
representatives. For this reason, we have added a definition of
``implementing directives'' to Sec. 9701.103. The term ``implementing
directives'' is defined as the directives issued by the Secretary or
designee at the Department level to carry out any system established
under 5 CFR part 9701. Such implementing directives will be developed
with the involvement of employee representatives using the continuing
collaboration provisions in revised Sec. 9701.105. (See Section
9701.105--Continuing collaboration.) In addition, we have made a number
of revisions in other sections of these regulations to require DHS to
establish implementing directives to carry out the HR authority
provided by these regulations.
Section 9701.105--Continuing Collaboration
Section 9701.105 of the proposed regulations provided DHS with the
authority to establish internal Departmental directives to further
define the design characteristics of any system established under these
regulations. During the meet-and-confer process, the participating
labor organizations expressed concerns that such directives would be
developed without the involvement of employees and employee
representatives. The labor organizations recommended that DHS consult
with employees and employee representatives before issuing any internal
directives.
We agree that the DHS HR system must be designed in a transparent
and credible manner and that the development of any internal directives
implementing the HR system authorities provided by these regulations
involve employees and employee representatives. Although not expressly
stated in the proposed regulations, DHS, in the spirit of collaboration
used throughout the design process, intends to involve employees and
their representatives in the development of the implementing
directives. In addition, we have revised and retitled Sec. 9701.105 as
``Continuing collaboration.'' This section requires DHS to issue
implementing directives, as newly defined in Sec. 9701.103, to
implement these regulations. As required by 5 U.S.C. 9701, employee
representatives will be provided with an opportunity to collaborate in
developing and issuing these implementing directives. DHS will
determine the number of employee representatives that may engage in
continuing collaboration and will establish timeframes to provide
information and comments. National labor organizations with multiple
local labor organizations accorded exclusive recognition will determine
how their units will be represented within this framework.
As the Department determines necessary, employee representatives
will be provided with an opportunity to discuss their views with DHS
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. Employee representatives also
will be given a copy of the proposed final draft and will be provided
with an opportunity for written and/or oral comment. These comments
will become part of the record and will be forwarded with the final
directive to the Secretary or designee for a final decision. However,
nothing in the continuing collaboration process affects the right of
the Secretary to determine the content of implementing directives and
to make them effective at any time.
As required by the Homeland Security Act, Sec. 9701.105(f)
provides that the Secretary and the Director will jointly establish any
procedures necessary to carry out the continuing collaboration process
as internal rules of Departmental procedure which are not subject to
review.
Section 9701.106--Relationship to Other Provisions
Section 9701.106 describes the relationship of the authority
provided DHS under 5 U.S.C. 9701 and these regulations to the
authorities in other sections of law and regulations. During the meet-
and-confer process, the participating labor organizations requested
clarification regarding when waived laws and regulations will and will
not apply to categories of employees approved for coverage under one or
more subparts of these regulations.
We agree and have revised Sec. 9701.106 to clarify that, for the
purpose of applying other provisions of law or Governmentwide
regulations that reference provisions under the waivable chapters
(i.e., chapters 43, 51, 53, 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 part 9701, except as otherwise
provided in that part or in DHS implementing directives. For example,
hazardous duty differentials under 5 U.S.C. 5545(d) are payable only to
General Schedule employees covered by 5 U.S.C. chapter 51 and
subchapter III of chapter 53. To ensure that DHS employees continue to
be eligible for hazardous duty differentials when they convert from the
General Schedule to the DHS pay system, they will be deemed to be
covered by the referenced General Schedule provisions of law for the
purpose of applying section 5545(d). In addition, in applying the back
pay law in 5 U.S.C. 5596 to DHS employees covered by subpart G of these
proposed regulations (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 Sec. 9701.706(h).
We also revised paragraph (c) to clarify that the listed provisions
in paragraph (c) do not apply to categories of employees upon
conversion to a new classification and pay system established under 5
CFR part 9701, subparts B and C.
We also added a new paragraph (a) to clarify that provisions of
title 5 are waived or modified to the extent authorized by 5 U.S.C.
9701 to conform with these regulations--i.e., these regulations
supersede the corresponding laws they replace. In addition, for
clarification purposes, we have restated the rule of construction,
which was located in Sec. 9701.502 of subpart E of the proposed
regulations, as a general rule of construction applicable to the entire
part. However, in so doing, we do not intend to imply that the rule of
construction is limited only to that subpart; rather, the express
language of
[[Page 5289]]
Sec. 9701.106(a) extends that rule of construction to the entire part.
Section 9701.107--Program Evaluation
During the meet-and-confer process, the labor organizations
recommended that the regulations require DHS to conduct ongoing
evaluations of these regulations and that employees and employee
representatives be involved in such evaluations. Other commenters also
recommended that regulations include a formal evaluation of the HR
system with implementation goals, including predetermined benchmarks
for success.
Consistent with the commitment made in the Preamble to the proposed
regulations, DHS intends to conduct evaluations of its HR system. We
added a new Sec. 9701.107 to carry out this intent by requiring DHS to
establish procedures for evaluating the regulations and their
implementation. DHS will provide employee representatives with an
opportunity to be briefed and comment on the design and results of the
program evaluation. This opportunity includes participation in
identifying the scope, objectives, and methodology to be used in the
program evaluation and reviewing draft findings and recommendations,
subject to any time limits prescribed in DHS's procedures. Involvement
in this process does not waive the rights of DHS or the employee
representatives under the applicable laws and these regulations.
Subpart B--Classification
General Comments
As a result of concerns expressed during the meet-and-confer
process, we have replaced the term ``job evaluation'' with the term
``classification'' throughout these regulations.
Commenters were concerned about the lack of specificity in subpart
B of the proposed regulations regarding the structure and rules for the
DHS classification system. Commenters found it difficult to ascertain
where their positions would fit within the classification framework of
occupational clusters and bands. Although some found the classification
concepts simple and clear, most commenters felt the proposed
regulations were too vague and difficult to understand because of the
lack of detailed information on such features as how occupational
clusters and bands will be established, which occupations will be
assigned to each cluster, how GS grades will ``cross-walk'' to bands,
and which positions will be assigned to each band. Because of the lack
of details in the proposed regulations, commenters questioned whether
the proposed classification system would be fair and credible.
Commenters expressed a strong desire that the regulations be more
transparent and that DHS closely involve employees and employee
representatives in the design of the DHS classification system.
Because of the lack of specificity, commenters recommended a number
of amendments to subpart B of the regulations to provide more detailed
criteria and conditions for the DHS classification system or to clarify
how positions will be converted into the system. The comments included
recommendations on and clarifications regarding the criteria for
grouping occupations into clusters and the specific occupational
clusters DHS will create, how competencies will be identified and used
in the system, the definitions of the bands and the criteria DHS will
use to assign positions to bands, the purpose of the Senior Expert band
and the criteria that DHS will use to promote employees to that band,
how manager and team leader positions will be assigned to clusters and
bands, how law enforcement officer positions will be treated, the
standards DHS will use to qualify and promote employees to higher bands
(e.g., time-in-service, formal education requirements), and the process
for converting positions to the DHS classification system. In reaction
to the lack of detail in the regulations, the labor organizations
recommended that the bar on collective bargaining of the DHS
classification system under Sec. 9701.205(b) of the proposed
regulations be removed.
We understand the desire for the regulations to provide more
specificity and assurances regarding how the DHS classification system
will operate. However, the regulations must provide DHS with sufficient
flexibility to design a classification system with occupational
clusters and bands that support the market-based features of the DHS
pay system and that can be tailored to DHS's mission requirements and
strategic human capital needs. 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. DHS will consider
the suggestions and recommendations made by commenters as it develops
implementing directives for the DHS classification system.
We agree that the DHS classification 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 Sec. 9701.205, we have made a number of revisions
throughout subpart B that require DHS to carry out the new
classification system through detailed implementing directives, as
defined in Sec. 9701.103. As previously discussed, these implementing
directives will be established using the ``continuing collaboration''
provisions in revised Sec. 9701.105. (See Section 9701.103--
Definitions and Section 9701.105--Continuing collaboration.)
Other Comments on Specific Sections of Subpart B
Section 9701.201--Purpose
Section 9701.201 explains the purpose of subpart B, which contains
regulations establishing a classification structure and rules for
covered DHS employees and positions. During the meet-and-confer
process, the participating labor organizations recommended that the
definition of ``classification'' under Sec. 9701.204 include a
reference to the principle of equal pay for equal work. We agree, but
rather than revising this definition, we have added the merit principle
of ``equal pay for work of equal value'' to the end of the purpose
description in new Sec. 9701.201(a).
For clarification purposes, we also moved Sec. 9701.205(a) in the
proposed regulations to a new Sec. 9701.201(b) in the final
regulations. We have retitled Sec. 9701.205 as Bar on collective
bargaining, consistent with the title of Sec. 9701.305.
Section 9701.203--Waivers
Section 9701.203 of the regulations specifies the provisions of
title 5, United States Code, that are waived for employees covered by
the DHS classification system established under subpart B. During the
meet-and-confer process, the participating labor organizations
requested that the regulations clarify when such waivers will be
applied. We have amended Sec. 9701.203(a) to clarify that the waivers
apply when a category of DHS employees is covered by a classification
system established under subpart B.
We also have amended Sec. 9701.203(a) by adding Sec. 9701.222(d)
to the list of exceptions to the waiver of 5 U.S.C. chapter 51. See
Section 9701.222--Reconsideration of classification decisions for
additional information on this exception.
Section 9701.204--Definitions
A commenter suggested adding a definition of ``competency'' to
Sec. 9701.204 to clarify its meaning in the definition of ``position''
or ``job.'' We agree and have added a definition of ``competencies''
that is identical to the
[[Page 5290]]
definition of that term in Sec. 9701.404 concerning the DHS
performance management system.
To help respond to commenters' general confusion with the
classification provisions, we also have--
Added a definition of ``basic pay'' that is identical to
the definition of that term in Sec. 9701.304 to clarify its use under
Sec. 9701.231, regarding conversion into the DHS classification
system.
Revised the definition of ``classification'' to clarify
that this term, also referred to as job evaluation, means the process
of analyzing and assigning a job or position to an occupational series,
cluster, and band for pay and other related purposes.
Amended the definition of ``occupational cluster'' to
clarify that an occupational cluster may include one or more
occupational series.
Section 9701.211--Occupational Clusters
Section 9701.211 provides DHS with the authority to establish
occupational clusters after coordination with OPM. In response to
commenters' concerns about the lack of specificity in the regulations
regarding how DHS will define occupational clusters, we have revised
Sec. 9701.211 to clarify that DHS must document in writing the
rationale, as well as the criteria, for grouping occupations or
positions into occupational clusters.
Section 9701.212--Bands
Section 9701.212 provides DHS with the authority to establish one
or more bands within each occupational cluster after coordination with
OPM. Section 9701.212(a)(1)(iv) of the proposed regulations provided
that each occupational cluster may include a Supervisory band reserved
primarily for first-level supervisors. Commenters observed that
limiting Supervisory bands to first-level supervisors does not
adequately accommodate the range of supervisory and managerial
positions at DHS that are below the executive level. Some commenters
questioned whether the Senior Expert band should be used for other
supervisory/managerial levels or team leader positions. Others
questioned whether the number of Supervisory bands should be limited
above the first-level in an effort to ``flatten-out'' organizational
structures. We agree that the description of Supervisory band in the
proposed regulations was too narrow. To clarify, we have reordered
Sec. 9701.212 and revised Sec. 9701.212(b)(4) (formerly Sec.
9701.212(a)(1)(iv)) to provide that a Supervisory band includes work
that may involve hiring or selecting employees, assigning work,
managing performance, recognizing and rewarding employees, and other
associated duties. DHS will address the number and use of Supervisory
bands and the assignment of team leaders to bands in its implementing
directives.
Section 9701.212(b) of the proposed regulations provided DHS with
the discretionary authority to establish qualification standards and
requirements for occupational series, occupational clusters, and/or
bands after coordination with OPM. During the meet-and-confer process,
the participating labor organizations were concerned that DHS may
choose not to establish qualifications standards. To clarify our
intent, we have redesignated Sec. 9701.212(b) as Sec. 9701.212(d) and
revised this paragraph to require DHS to establish qualifications
standards and requirements. Under this provision, DHS has the
flexibility to (1) adopt the qualifications standards and requirements
issued by OPM and/or (2) establish different qualifications standards
and requirements after coordination with OPM. In addition, we have
clarified this section to reflect the fact that DHS retains its
authority to establish qualification standards under 5 U.S.C. chapters
31 and 33 and implementing regulations.
Section 9701.222--Reconsideration of Classification Decisions
Section 9701.222 of the proposed regulations required DHS to
establish policies and procedures for handling an employee's request
for reconsideration of classification decisions. The proposed
regulations limited reconsideration requests to occupational series or
pay system assignment and provided employees no right to appeal
classification decisions outside DHS.
Because the proposed regulations provided no authority for
independent review of DHS classification decisions, the labor
organizations recommended that the regulations be revised to provide
bargaining unit employees with the authority to challenge
classification determinations through negotiated grievance procedures.
They also recommended that employees be provided the right to challenge
classification decisions beyond occupational series and pay system
assignment. Other commenters advised that DHS's authority to reconsider
classification decisions should be appealable to an independent
arbitrator.
We agree that the DHS classification system should provide covered
employees with the right to a broader scope of review of the
classification of their position by an independent third party. We have
therefore revised Sec. 9701.222 to provide employees with the right to
request that DHS or OPM reconsider the occupational cluster and band
assignment as well as the pay system and occupational series of their
official position of record at any time. This right is parallel to the
classification appeal right of current General Schedule employees under
5 U.S.C. 5112(b). In addition, the regulations require both DHS and OPM
to establish implementing directives for reviewing these requests,
including, but not limited to, policies on nonreviewable issues, rights
of representation, and effective dates of any corrective actions.
Section 9701.222(c) of the regulations allows an employee to
request that OPM reconsider a DHS classification reconsideration
decision. However, an employee may not request that DHS review an OPM
reconsideration decision. If an employee does not request an OPM
reconsideration decision, Sec. 9701.222(c) provides that a DHS
classification determination is final and not subject to further review
or appeal. Section 9701.222(d) provides that OPM's final determination
on an employee's request is not subject to further review or appeal.
This provision, in conjunction with the waiver exception in Sec.
9701.203(a), is intended to preserve OPM's authority under 5 U.S.C.
5112(b) and 5 U.S.C. 5346(c) to review and issue final classification
decisions without judicial review.
During the meet-and-confer process, the participating labor
organizations suggested that the regulations authorize retroactive
effective dates for promotions if an employee's position is found by
OPM to be misclassified. 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. 372
(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 be wrongfully demoted.
Any similar retroactive effective date provisions regarding
classification reconsideration decisions will be addressed in DHS's and
OPM's policies and procedures for reviewing these requests.
[[Page 5291]]
Section 9701.232--Special Transition Rules for Federal Air Marshal
Service
Section 9701.232 provides that if DHS transfers Federal Air Marshal
Service positions from the Transportation Security Administration (TSA)
to another organization within DHS, DHS may cover such positions under
a classification system that is parallel to the classification system
that was applicable to the Federal Air Marshal Service within TSA.
These revised regulations provide that DHS will issue implementing
directives on converting Federal Air Marshal Service employees to any
new classification system under subpart B, consistent with the
conversion rules in Sec. 9701.231.
Labor organization commenters recommended that the regulations
provide DHS with the authority to transfer Federal Air Marshal Service
positions only if Federal Air Marshals are granted full collective
bargaining rights and the ability to join a labor organization of their
choice. We disagree. Federal Air Marshals are excluded from collective
bargaining by section 1-123 of E.O. 12666, January 12, 1989.
Subpart C--Pay and Pay Administration
General Comments
Commenters expressed concerns about the lack of specificity in
subpart C of the proposed regulations on the pay structure and the pay
administration rules governing the proposed DHS pay system. Commenters
felt the proposed regulations were too vague and difficult to
understand because of the lack of detailed information on such issues
as how band rate ranges will be established and adjusted, how locality
and special pay supplements (hereafter called locality and special rate
supplements) will be established and adjusted, and how performance pay
pools will be funded and operated. Commenters had difficulty
ascertaining how their pay and pay adjustments would be determined
under the new system and how individual and team performance would
affect pay. They also were concerned that their pay would not keep up
with their counterparts in other Federal agencies. Commenters expressed
a strong desire that the regulations be more transparent and that DHS
closely involve employees and employee representatives in the design of
the pay system. Because of the lack of details in the proposed
regulations, commenters questioned whether the proposed pay system
would be fair and equitable.
Because of the lack of specificity, commenters recommended a number
of different amendments to subpart C of the regulations to provide
detailed criteria and conditions for setting and adjusting basic rate
ranges and granting rate range increases to employees; setting and
adjusting locality and special rate supplements and providing for
increases in those supplements; addressing staffing issues that may
result from geographic pay differences; funding pay pools; determining
and granting performance pay increases; setting pay upon promotion,
demotion, initial appointment, and other actions; granting within-band
pay increases; granting special skills, assignment, and staffing
payments; and transitioning and converting employees into the new pay
system. In reaction to the lack of specificity, the labor organizations
recommended that the regulations be revised to remove the bar on
collective bargaining of the DHS pay structure and system in Sec.
9701.305; require the new pay system to be faithful to merit system
principles and protect against prohibited personnel practices; require
DHS to assess the impact of the system on employees prior to
implementation to maximize fairness, uniformity, and objectivity;
implement the current locality pay program, modified to be occupation
specific; and establish a Department-level compensation board to
address and make recommendations on continuing issues regarding the
administration of the new pay system. Labor organization commenters
felt that such a compensation board would make pay decisions more
credible and transparent. Other commenters felt that employees should
receive pay increases equivalent to the increases they would have
received under the General Schedule.
We understand the desire for the regulations to provide more
specificity and assurances regarding how the pay system will operate.
However, the regulations also must provide DHS with sufficient
flexibility to design a nimble pay system that is performance-
sensitive, market-based, and tailored to DHS'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 agree that the DHS 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 Sec. 9701.305, we made a number of revisions throughout
subpart C that require DHS to establish more detailed policies to carry
out the new pay system through implementing directives, as defined in
Sec. 9701.103. As previously discussed, these implementing directives
will be developed using the ``continuing collaboration'' provisions in
revised Sec. 9701.105. (See Section 9701.103--Definitions and Section
9701.105--Continuing collaboration.) DHS will consider the suggestions
and recommendations made by commenters as it develops implementing
directives for the DHS pay system.
In addition, we agree that labor organization involvement in both
the design and administration of the pay system can contribute to its
credibility and acceptance with bargaining unit employees. Therefore,
we have provided for such involvement by giving the Department's
national labor organizations four seats on the newly established
Homeland Security Compensation Committee (Compensation Committee). As
part of the Compensation Committee, the labor organization
representatives and some of the Department's most senior leaders will
be able to participate in the development of recommendations and
options for the Secretary's consideration on strategic compensation
matters such as Departmental compensation policies and principles, the
annual allocation of funds between market and performance pay
adjustments, and the annual adjustment of rate ranges and locality and
special rate supplements. While the Secretary retains the final
decisionmaking authority in all of these matters, we believe this
degree of labor organization involvement is consistent with our guiding
principles. The Department will prescribe procedures governing the
membership and operation of the Compensation Committee, including
setting schedules for discussions and submission of recommendations. In
addition, the establishment of the Compensation Committee will not
affect the right of the Secretary to make determinations regarding the
annual allocation of funds between market and performance pay
adjustments and the annual adjustment of rate ranges and locality and
special rate supplements, and to make such determinations effective at
any time. See new Sec. 9701.313 of these regulations for additional
information.
Finally, as previously discussed, we have added a new paragraph (b)
to Sec. 9701.101, which provides the overall criteria for the design
of the DHS human resources system, to include a requirement that the
system be designed to generate respect and trust and be
[[Page 5292]]
based on the principles of merit and fairness embodied in the merit
system principles contained in 5 U.S.C. 2301. We also have added a new
paragraph (c) to Sec. 9701.301 to require that the DHS pay system,
working in conjunction with the performance management system
established under subpart D, be designed to incorporate a number of
elements, including adherence to the merit system principles, and that
it must be implemented and managed in a fair, transparent, and
inclusive manner. These criteria are based on similar criteria that
Congress recently enacted with respect to chapters 47, 54, and 99 of
title 5, United States Code.
Other Comments on Specific Sections of Subpart C
Section 9701.301--Purpose
In addition to the new Sec. 9701.301(c) discussed in the General
Comments section, we also have added a new paragraph (b) to Sec.
9701.301 to clarify that any pay system under subpart C must be
established in conjunction with the classification system described in
subpart B. This addition is consistent with a similar provision in
Sec. 9701.201(b).
Section 9701.303--Waivers
Section 9701.303(a) specifies the provisions of title 5, United
States Code, that are waived for employees covered by the DHS pay
system established under subpart C. During the meet-and-confer process,
the participating labor organizations requested that the regulations
clarify when such waivers will be applied. We have amended Sec.
9701.303(a) to clarify that the waivers apply when a category of DHS
employees is covered by a pay system established under subpart C. We
have also reordered some of the paragraphs in this section for
clarification.
Section 9701.303(c)(2) of the proposed regulations raised the
limitation on rates of basic pay payable under 5 U.S.C. 5373--for
categories of DHS employees whose pay is fixed by administrative
action--to the rate for level III of the Executive Schedule, consistent
with the level III basic pay cap that applies to employees paid under
the DHS pay system established under subpart C of these regulations.
(See Sec. 9701.312 of these regulations.) Currently, 5 U.S.C. 5373
provides a basic pay limitation equal to the rate for Executive Level
IV. During the meet-and-confer process, the participating labor
organizations requested clarification regarding which categories of
employees were covered by the pay limitation under 5 U.S.C. 5373. In
reordering this section, we have redesignated paragraph (c)(2) as
paragraph (c) and revised it to clarify that the pay limitation under 5
U.S.C. 5373 applies to DHS employees whose pay is set by administrative
action, such as Coast Guard Academy faculty. We note that 5 U.S.C. 5373
does not apply to employees covered by a pay system established under
subpart C. The basic pay limitation for employees covered by subpart C
is provided in Sec. 9701.312.
Section 9701.303(c)(3) of the proposed regulations revised 5 U.S.C.
5379 to provide DHS with the authority to establish a student loan
repayment program for DHS employees. During the meet-and-confer
process, the participating labor organizations requested clarification
regarding the process for establishing a new student loan repayment
authority. In reordering this section, we have redesignated paragraph
(c)(3) as paragraph (d) and revised it to provide that a DHS student
loan repayment program under this authority will be established by
implementing directives (as defined in Sec. 9701.103). In addition, we
have revised Sec. 9701.303(d) to clarify that DHS will coordinate
those implementing directives with OPM.
Section 9701.304--Definitions
The definition of ``control point'' has been removed consistent
with the removal of the control point provisions in Sec. 9701.321 and
other sections of the regulations. (See Section 9701.321--Structure of
bands.) We have added a definition of ``competencies'' that is
identical to the definition of that term in Sec. 9701.404 concerning
the DHS performance management system. This is consistent with the
addition of that term to the definitions section in subpart B. (See
Section 9701.204--Definitions.) We have added a reference to the
description of ``performance expectations'' in Sec. 9701.406(c) to
clarify the use of that term in the definitions of ``rating of record''
and ``unacceptable performance'' in Sec. 9701.304. As a result of
comments