Pentagon: Furloughs Legal for Working Capital Fund Employees

This story has been updated.

Civilian employees at working capital fund units are subject to furloughs, a top Pentagon official has told lawmakers.

Short-term unpaid leave for those Defense Department employees is “legal” and reduces personnel costs, said Defense Comptroller Robert Hale in a July 5 response to several members of Congress. A bipartisan group of 31 lawmakers asked Defense Secretary Chuck Hagel in June whether the department could legally furlough working capital fund employees since their units do not operate on direct funding from Congress. The lawmakers, who count working capital fund employees among their constituents, questioned whether the Pentagon considers such workers to be “indirectly funded” government employees of Defense as defined under law (Title 10, Section 129).

Hale said working capital fund civilians are indirectly funded employees, but the statute allows for short-term furloughs of those workers. “Indirectly funded employees may not be subjected to constraints or limitations based on the number of such personnel who may be employed on the last day of a fiscal year, and may not be managed on the basis of man years, end strength, full-time equivalent positions or maximum number of employees,” Hale wrote, using language from the law. “They also may not be controlled under any policy of a military department secretary with respect to civilian manpower resources.” The 11-day furloughs that began on Monday and extend through Sept. 30 do not “contradict these prohibitions,” Hale said.

The comptroller also argued that the statute directs the department to manage its civilian workforce based on the workload and on the “funds made available to the department for such fiscal year,” quoting the law. Hale said the $37 billion in fiscal 2013 budget cuts to the department mandated by sequestration are “a major cause of these furloughs, and therefore our actions satisfy the requirements of Section 129.”

Patricia Niehaus, president of the Federal Managers Association, said she "respectfully disagreed" with the Pentagon's decision, "but will continue to work on behalf of all of our members who do so much to equip and protect out warfighters."

Defense has five working capital funds, which are revolving funds financing operations that the department runs like a business, such as weapons production and depot maintenance. Sales revenue from customers sustains the revolving funds rather than direct congressional appropriations. The department’s WCFs are designed to break even over time, not make a profit. About 180,000 civilians work in WCF units. They work all over the country, including at the Army Arsenal in Watervliet, N.Y., the Corpus Christi Army Depot in Texas, and Tinker Air Force Base in Oklahoma.

Hale, responding on behalf of Hagel, said the civilian furloughs across Defense will save the department about $2 billion this fiscal year, including more than $500 million related to lower personnel expenses in working capital fund units. “These working capital fund personnel savings provide us with the flexibility to adjust maintenance funding downward to meet higher-priority needs,” Hale wrote.

Defense in May sent a memo to managers listing the types of jobs exempt from furloughs. Exempt employees include those deployed or temporarily assigned to a combat zone, Navy shipyard workers, as well as Arlington National Cemetery and Defense Civil Works program employees, along with any other employees “who are not paid directly by accounts included in the Department of Defense-Military budget are excepted from furlough.” The memo expressly said that other than Navy shipyard workers, all other depot employees “whether mission-funded or working capital fund employees, will be subject to furlough.”