Pentagon issues regulations applying federal labor relations rules to pay system

The Defense Department has released proposed regulations that would require its controversial pay-for-performance system to operate under governmentwide labor relations rules.

The draft regulations, published by Defense and the Office of Personnel Management in the Federal Register, call for modifications to the National Security Personnel System as mandated by the fiscal 2008 Defense Authorization Act.

Specifically, the proposal brings NSPS under federal regulations covering such subjects as labor relations, adverse actions, and employee appeals. Congress mandated the changes after years of litigation by federal labor unions against the Pentagon's proposed rules for NSPS.

The foundation of NSPS -- pay for performance -- will remain intact, but with some limits. The draft rules mandate that employees with ratings above unacceptable receive 60 percent of the annual pay increase, with the remaining 40 percent allocated to pay pools and distributed based on performance.

The proposal also exempts all federal wage system employees from NSPS, and requires the Government Accountability Office to conduct an annual review of employee satisfaction with the system -- both requirements of the 2008 law. The regulations also limit those employees converting to NSPS to 100,000 per year.

Defense has added more than 181,500 employees to NSPS since 2006. With wage grade employees exempted, the department is unlikely to meet its goal of converting more than 700,000 employees to the system.

Brad Bunn, program executive officer for NSPS, said last week that the proposal also adjusts and clarifies some existing regulations "to ensure uniform and consistent application of NSPS program principles."

For example, the department added regulations that provide a process for converting employees who leave their NSPS positions for non-NSPS jobs in the department. The rules promote setting more equitable pay during transfers to different pay systems.

The draft regulations also would permit coverage under NSPS for temporary employees who are appointed for 90 days or less. "Providing access to NSPS pay-setting flexibilities for these positions enhances DoD's competitive position in the labor market," said the notice.

Labor unions expressed doubt about whether the proposed regulations met the requirements of the 2008 law. "While we are still examining the new NSPS regulations released today, we are skeptical about the new regulations and their intent," John Gage, president of the American Federation of Government Employees, said last Thursday.

Susan Tsui Grundmann, general counsel for the National Federation of Federal Employees, said Tuesday that she had not yet fully examined the proposed changes, but added that the Pentagon seems to have modified portions of NSPS that were of major concern to unions. "They restored labor relations and employee appeals; they've complied with the big pieces of the law," she said. "I don't know what other surprises" are in the regulations.