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Office of Merit Systems Oversight and Effectiveness

Date: November 20, 2001
File Number: [01-0044]
Matter of: [Claimant]

OPM Contact: Deborah Y. McKissick

The claimant is a former military member hired locally overseas, who is requesting reconsideration of his agency's decision regarding his entitlement to receive a living quarters allowance (LQA). We accepted the claim on July 25, 2001 and we received the agency's information on October 23, 2001. For the reasons discussed herein, the claim is denied.

The claimant states that he performed Reserve Active Duty on Temporary Status in [city, country] during July 5, 1999 to July 28, 2000. In December 1999 the claimant signed a housing agreement in [country], but maintained his permanent residence in the state of [name]. Some time in August 2000, he applied for a position as Arms Control Specialist, GS-301-11, in [country]. The claimant completed another temporary tour of Reserve Active Duty in [country] during October 2, 2000 to October 30, 2000. The agency offered the claimant the GS-301-11 position on December 4, 2000, and the appointment was effective on December 13, 2000.

In its response, the agency states that the claimant was residing in [agency] when he submitted his RESUMIX application on August 29, 2000. The agency notes that the claimant did not cancel his [country] residential rental agreement at the time he applied for or at the time he accepted the Arms Control Specialist, GS-301-11 position.

The agency response references DoD Regulation 1400.25-M, Dec 96, Subchapter 1250 D1 which states:

It is DoD policy that overseas allowances are not automatic salary supplements nor are they entitlements. They are specifically intended to be recruitment incentives for U.S. citizen civilian employees living in the United States to accept Federal employment in a foreign area. If a person is already living in a foreign area, that inducement is normally unnecessary.

This substantiates the agency's contention that LQA is an allowance, not an entitlement.

The agency also denied the claimant's request for LQA because the position he accepted was not considered hard-to-fill. The agency exercised the discretionary authority outlined in U.S. Army Europe (USAREUR) Regulation 690-500.592, that restricts LQA for local hires that fill positions that are pre-identified to require unique or unusual skills, knowledge or ability and a documented history of difficulty in locating qualified candidates.

We did review the merits of the agency's denial of the LQA. The Overseas Differentials and Allowances Act, Pub. L. 86-707, 74 Stat. 793, 794 (Sept. 6, 1960), as amended and codified at 5 U.S.C. § 5922-5924 provides that, under regulations prescribed by the President, LQAs "may" be paid to federal employees in foreign areas. The President, by executive order, delegated this authority to the Secretary of State, who issued Standardized Regulations concerning eligibility to receive, and payment of, LQAs. Section 013 of the Department of State Standardized Regulations (DSSR) further delegates to the heads of federal agencies the authority to grant LQAs to agency employees. Section 013 of the DSSR specifies that the head of an agency "may" grant quarters allowances and issue further implementing regulations, as he or she may deem necessary for the guidance of the agency in granting such allowances. The Department of Defense (DoD) has issued further implementing regulations through its requirements for DoD civilian employment overseas, DoD 1400.25-M, CPM 592.

Section 031.12 of the DSSR provides that quarters allowances "may" be granted to employees recruited outside the United States, when:

a.   the employee's actual place of residence in the place to which the quarters allowance applied at the time of receipt shall be fairly attributable to his employment by the United States Government; and

b.   prior to appointment, the employee was recruited in the United States . . by the United States Government, including its armed forces, . . . and has been in substantially continuous employment by such employer under conditions which provided for his/her return transportation to the United States . . .*

The DSSR further provides that the head of the agency upon determination that unusual circumstances in an individual case justify such action "may" waive Section 031.12b. Thus, the DSSR authorizes, but does not require, agency officials to grant an LQA when an employee fulfills the basic eligibility requirements in the DSSR.

The statutory and regulatory languages are permissive and give agency heads considerable discretion in determining whether to grant LQAs to agency employees. Wesley L. Goecker, 58 Comp. Gen. 738 (1979). Thus, an agency may withhold LQA payments from an employee when it finds that the circumstances justify such action, and the agency's action will not be questioned unless it is determined that the agency's action was arbitrary, capricious, or unreasonable. Joseph P. Carrigan, 60 Comp. Gen. 243, 247 (1981); Wesley L. Goecker, 58 Comp. Gen. 738 (1979).

The DoD regulation specifies further that, except in unusual circumstances, an LQA is to be used as an incentive to persuade employees in the United States to apply for overseas positions. Subchapter 1-1b of D0D 1400.25-M, CPM 592 provides in relevant part:

The foreign post differential and the foreign area allowances (except the post allowance) are not automatic salary supplements attached to all positions in the foreign area. They are intended to be recruitment and/or retention incentives for U.S. citizen civilian employees living in the United States to accept federal employment in a foreign area. If a person is already in the foreign area, that inducement normally is unnecessary. The specific circumstances under which an employee who is hired in a foreign area may be granted the allowances provided in section 031.12 of the DSSR, as supplemented by this chapter. (Emphasis added).

In view of the permissive rather than mandatory language in the applicable statutes and regulations, as noted above, the degree of discretion that heads of agencies have in determining whether to authorize these allowances, and the facts of this claim, we cannot say the agency's application of the DoD regulation in this case was arbitrary or capricious.

Where the agency's factual determination is reasonable; we will not substitute our judgment for that of the agency. See e.g., Jimmie D. Brewer, B-205452, Mar. 15, 1982. According to the agency, "[t]o be considered an employee 'recruited from the United States,' the employee must have resided permanently in the United States from the time of application until and including the date of accepting a formal employment offer." The agency also states, "Within this context, it is not legal residency but physical location and availability that are determining factors for LQA eligibility under the USAREUR policy." The claimant was hired locally and was not living in the United States at the time of his appointment to the civilian position. Also, management did not grant an LQA as an incentive for the position because it was not considered a hard-to-fill position. Accordingly, the claim is denied.

This settlement is final. No further administrative review is available within OPM. Nothing in this settlement limits the employee's right to bring an action in an appropriate United States Court.

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