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The Defense Department will replace the decades-old General Schedule pay and classification system with a new system based on pay for performance, according to proposed regulations that will be published in the Federal Register on Monday.

In a briefing at the Pentagon Thursday, Defense and Office of Personnel Management officials said that the new system also will restrict union bargaining rights and implement stricter disciplinary rules for 650,000 Defense civilian workers.

After the proposed rules are published, Defense will take comments from the public for 30 days and then confer with employee unions about them for another 30 days.

The announcement of the proposal was met with immediate denunciations from Democratic members of Congress and unions. The American Federation of Government Employees, Association of Civilian Technicians, Laborers International Union, National Association of Government Employees and National Federation of Federal Employees said they would file a lawsuit next week in federal court arguing that Defense did not follow congressionally prescribed procedures in developing the new labor relations rules.

The Bush administration earlier this month announced that it would seek congressional approval to use the Defense system, and another system in the works at the Homeland Security Department, as models for implementing civil service reform governmentwide. The result of such a move would be the end of the guaranteed annual pay raises that most federal employees now enjoy, and the strict career progressions prescribed by the General Schedule's 15-grade, 10-step system.

Navy Secretary Gordon England, who has overseen the development of the National Security Personnel System, said the department needed more flexibility to recruit and retain the best workers. "People who enter the federal government, they want to know that they can be promoted based on their performance and not their time-in-grade," he said.

To that end, the new system will set up pay bands to replace General Schedule grades. Employees will be grouped with other entry-level staff, journeymen or supervisors. Workers will move up the pay bands and receive annual raises based primarily on performance evaluations performed by their managers. Market conditions affecting professions and localities also will have an impact on how much of a pay raise an employee receives. Workers who receive unacceptable performance ratings will not receive raises. Defense officials said they would set up an administrative process under which employees dissatisfied with their performance evaluations could protest.

About 60,000 employees will enter the new pay system in July, and will receive their first performance-based pay raises a year later. The employees selected to be part of this "spiral one" were announced in December and listed on a Defense Department Web site.

Also in July, the entire Defense Department will move to a new labor relations system, according to the proposed rules. Authority to adjudicate labor disputes will shift from the National Labor Relations Authority to a new, internal National Security Labor Relations Board.

Like the Homeland Security Department personnel rules, announced last month, Defense no longer will bargain over the assignment of work, deployments, or the use of new technology. In other areas, Defense management will reserve the right to change workplace rules without a bargaining agreement in place, and then bargain about the changes later.

The department also will retain the right to alter local labor agreements made at Defense facilities around the country if they don't comply with national-level agreements. But local agreements will remain in force unless altered by the Pentagon.

England said the department decided to phase in the new rules over the course of a few years so that problems could be caught and corrected. Spiral One will last about 18 months and will include three phases. At its conclusion, about 300,000 Defense civilians will fall under the new rules. A second spiral will follow during which the remainder of the Defense civilian workforce will shift to the new system, but the timing of that has yet to be determined. Full implementation is expected by 2008.

Employees in the new system who face disciplinary action for either poor performance or misconduct will find new rules governing the adjudication of their appeals. The Merit Systems Protection Board, an independent federal agency, will continue to hear those appeals, but it will treat poor performance and misconduct cases using the same standard of evidence.

Under the new rules, MSPB will have to find that Defense managers erred by a preponderance of the evidence to overturn a disciplinary action. MSPB judges will no longer be able to mitigate an agency penalty unless they find that the agency action was "wholly unjustified." Defense will also retain the right to overturn an MSPB judge's ruling if it finds that the ruling has an adverse impact on national security. Certain offenses also will be designated as requiring "mandatory removal." Employees will retain the right to protest decisions in federal court.

In addition, the new system will allow Defense to work with OPM to design new hiring authorities whenever they are deemed necessary. Previously, an agency would have to seek congressional approval for new authorities. Also, when conducting reductions in force, the new rules will allow Defense to consider performance as the first factor in laying off workers, instead of length of service. Veterans' preference, however, would be retained during RIFs.

Daniel Blair, acting director of the Office of Personnel Management, said the new system will require a commitment by Defense to train its managers. "We are going to be holding our managers accountable for results," he said. "It's going to take training. It'll take time and communication."

Unions, however, blasted the proposal, as they did rules issued last month by the Homeland Security Department. "As with the DHS regulations, those advanced by the Defense Department will go a long way toward demoralizing the DoD workforce," said Colleen Kelley, president of the National Treasury Employees Union .

Mark Roth, general counsel at AFGE, said that the union lawsuit will seek to force Defense to remove the new labor relations rules from its proposed regulations. Defense did not follow procedures set up by Congress to ensure that the unions had a say in the development of those rules, Roth said. Later, when final regulations are issued, Roth said he expected the unions would take further legal action based on the substance of the rules.

AFGE sued Homeland Security last month, arguing that its final regulations violated congressional intent in their restrictions on union bargaining and new disciplinary procedures.

Democrats in Congress also attacked the new rules. Sen. Joseph Lieberman, D-Conn., ranking member of the Homeland Security and Governmental Affairs Committee, said in a news release that he was "deeply disappointed with the proposed personnel rules" and that they "would undermine key employee protections that prevent workplace abuses and improve employee performance."

COMMENTS

• The only people who will benefit from this new system are the supervisors who do not want to manage fair and effectively, and their pets. Also, employees who have fair supervisors will benefit from this new system. The morale is already low in our office because of the daily micromanaging, gossip, talking negatively to employees about their coworkers, borderline racial comments, etc. Upper management has turned their heads the other way because they don’t want to deal with the problems. That is pretty sad. Why would anyone assume that all management is fair and impartial? They are putting a blank check in the hands of incompetent supervisors who will continue to do more damage to the morale and productivity of the workplace. GovExec.com reader Posted May 31, 2006 4:41 PM
• I fully agree with VA Contracting Officer. It does not take a genius or a career employee to figure out who will be rewarded. When contract employees are hired as a Federal worker and comes in at a higher grade and are promoted yearly, what does this tell you? It is those individuals and the so-called manager's pet that will benefit from this new system. This does not help career employess and the nerve to say that this, as well as outsourcing has the moral up, is outrageous. GovExec.com reader Posted February 28, 2005 9:09 AM
• Worker Bee in KC hit the nail on the head. I have been verbally and physically threatend by a PET. I finally got out of that office. I work for DFAS and they cut out annual performance awards years ago. We are just doing our job, so upper mangement says. Only one person in a section can get an outstanding appraisal. I quit working at 110 percent years ago. Pay for performance will be worse. I am seriously considering taking an early retirement, taking a 14% cut for age. Don't forget, this administration wants to change retirement based on high 3 to 5 years. We are just sacrificial lambs. GovExec.com reader Posted February 26, 2005 6:43 PM