160. Memorandum From the Assistant Director of Legislative Research, Office of Management and Budget (Frey) to President Carter 1

SUBJECT

  • Enrolled Bill S. 2640—Civil Service Reform Act of 1978 Sponsor—Sen. Ribicoff (D) Conn. and 3 others

Last Day for Action

October 23, 1978—Monday

Purpose

Establishes fundamental reforms in the Federal Civil Service system which include new agencies to administer reorganized and restructured central personnel management, merit protection and labor relations functions; revised appraisal, discipline, appeals and dismissal procedures; a special personnel system for senior executives; and incentive pay plans for executives and mid-level managers which emphasize quality of performance.

Agency Recommendations

Office of Management and Budget Approval (Signing statement prepared)
Civil Service Commission Approval
Department of Defense Approval
Department of Justice Approval (Signing statement attached)2
Department of Labor Approval
Veterans Administration Approval

Discussion

S. 2640 would install nearly all of the basic reforms in the Federal civil service system which you recommended in your Message to Congress of March 2, 1978.3 The Senate passed its version of the bill 87–1, and the House its version, 385–10.4 The Conference version was adopted by voice vote in the Senate and by vote of 365–8 in the House.

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Except for omission of the Administration proposal for modification of lifetime veterans preference, the enrolled bill includes substantially all of the proposals critical to reform that were contained in the Administration bill. Thus, S. 2640 would:

—codify merit system principles and authorize discipline of employees who commit prohibited personnel practices;

—establish a new Office of Personnel Management (OPM) to supervise and direct the management of executive branch personnel, and to issue Government-wide personnel regulations, with authority to delegate certain personnel authorities to the agencies;

—establish an independent Merit Systems Protection Board (MSPB) and a Special Counsel to enforce merit system principles, and to adjudicate employee appeals;

—provide new protections to employees who disclose illegal or improper Government conduct or practices;

—streamline procedures for discipline and dismissal of employees;

—establish a new performance appraisal program, and new standards for dismissal based on unacceptable performance and suspension based on a pattern of discourteous conduct to the public;

—create a Senior Executive Service as a distinct personnel system with special procedures for selection, development and pay of high-level Federal managers;

—provide a Merit Pay Plan for mid-level (GS 13–15) managers and supervisors, linked to quality of performance;

—authorize OPM to conduct experimental and demonstration projects in personnel systems and methods; and

—provide a statutory base for labor-management relations under a new, independent Federal Labor Relations Authority (FLRA).

While most of the reforms would take effect 90 days after enactment, the Senior Executive Service feature would be effective in 9 months, and the Merit Pay Plan would not be effective until 1981.

Civil Service Reform Provisions of the Bill

The balance of this memorandum highlights some of the more significant deviations from the Administration’s recommendations. It must be noted, however, that in no case do these changes represent any major departure from the overall thrust of the bill to revamp the civil service to increase the efficiency and responsiveness of Government.

New Agency Officials: Removal, Terms, Functions

The enrolled bill would somewhat restrict the President’s power to remove members of the MSPB, its Special Counsel and the members of the FLRA, by providing for removal in each case only for inefficiency, [Page 615] neglect of duty or malfeasance in office. The Administration bill proposed unrestricted removal authority in the case of the MSPB’s Special Counsel and the members of the FLRA.

Similarly, S. 2640 would provide different terms for the Special Counsel (5 years) and the MSPB (7 years), while the Administration proposed identical 7-year terms for both. S. 2640 would establish a 4-year term for the Director, OPM, while the Administration proposed no fixed term. Finally, S. 2640 would require separate Senate confirmation of the individual selected by the President to serve as Chairman of the MSPB.

These changes were designed to ensure independence of these entities and, while they could make for some awkwardness, do not present serious obstacles to efficient functioning.

The enrolled bill would enlarge the function of the MSPB to include a form of oversight over the OPM that was not contemplated in the Administration bill. The MSPB would be empowered to declare a rule or regulation of OPM invalid as inconsistent with merit principles, and would be required to include analysis of OPM’s compliance with merit principles in its annual report to Congress.

OPM’s authority to delegate certain personnel functions to the agencies would be somewhat curtailed under the enrolled bill, which would bar delegation of authority for competitive examinations for positions common to all agencies other than in exceptional cases.

S. 2640 provides “by-pass” authority for the MSPB, under which that agency would submit its annual budget and any legislative proposals directly to Congress at the same time they are submitted to the President. The Administration has consistently opposed by-pass authority for Federal agencies as improperly diminishing Presidential control over the executive branch, and was successful in deleting by-pass authority for OPM from the bill in conference.

“Whistleblower” Protection and Role of Special Counsel

The Administration bill contemplated protection from reprisals for employees who disclose activities that are contrary to law, rule or regulation. S. 2640 would extend protection to disclosures of “mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety.” The scope of protected disclosures would thus be much broader and more subjective. In addition, S. 2640 would impose a duty on the agencies involved, and on the Special Counsel, to investigate and report on disposition of the matters disclosed.

Appeals: Discrimination Cases; Burden of Proof

In cases involving both discrimination issues and adverse personnel action matters appealed to the MSPB (so-called “mixed cases”), the [Page 616] Administration bill contemplated that the Board initially would hear and decide both issues, with review by the Equal Employment Opportunity Commission (EEOC) of the discrimination aspects of the MSPB decision. A compromise of the differing approaches to this issue produced the somewhat complex procedure contained in S. 2640.

The enrolled bill provides that a “mixed” case would be appealed first to the MSPB. If the decision is adverse to the employee on the discrimination aspect, it could be appealed to the EEOC. If that body takes jurisdiction and its decision conflicts with that of the MSPB, the conflict would be resolved by a third panel established for the purpose. The new panel would be comprised of one member each from the EEOC and MSPB and a chairman appointed by the President, by and with the advice and consent of the Senate for a 6-year term.

A major objective of civil service reform was to make it easier to separate marginal employees. Thus, the Administration bill proposed that an employee who appeals a dismissal or suspension or other adverse management action must bear the burden of proof in establishing that the agency’s action was unfounded. S. 2640 would shift the burden for justifying the action proposed back to the agency, as under present law, but would require a lower standard of proof, i.e., “substantial” evidence, in cases where unacceptable performance is the issue, while retaining the requirement of present law for a “preponderance” of the evidence in misconduct cases.

Veterans Preference

The Administration proposal to modify lifetime veterans preference was eliminated during Congressional consideration of the bill. As proposed by the Administration, additional preference for disabled veterans, including noncompetitive appointment for those with 30% disability, is included in S. 2640, along with elimination of veterans preference for retired military officers of the rank of Major (or equivalent) and above.

Senior Executive Service

The Administration bill contemplated that all agencies except those in the intelligence community would be covered by the SES, subject to exclusion by the President. S. 2640, in addition, would exempt the FBI, the Foreign Service, and certain positions in the Drug Enforcement Administration. Thus, some 8400 managerial and supervisory positions would be in the SES instead of the 9,000-plus originally intended.

The scope of the SES also would be expanded somewhat under the enrolled bill, compared to the Administration bill, to include, along with managers and supervisors, positions in which the employee “exercises important policy-making, policy-determining or other executive functions.”

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The Administration proposal contemplated incentive pay for Meritorious and Distinguished Executives at the annual rate of $2,500 and $5,000, respectively, for a period of five years. Under S. 2640, these amounts would be reduced to a lump sum of $10,000 and $20,000 respectively, for one year. However, the maximum limit on combined salary, performance award, and meritorious or distinguished rank would be the rate for Executive Level I, currently $66,000, instead of 95% of the rate for Executive Level II or $54,625, as proposed in the Administration bill.

Unlike the Administration proposal, the enrolled bill would restrict access to SES positions by persons outside Government. S. 2640 would set a 30% maximum on the number of positions that can be filled by persons with less than 5 years of continuous service in the civil service immediately prior to SES appointment, unless the President certifies to Congress that this limitation would hinder Government efficiency.

S. 2640 would provide somewhat greater protection than proposed to career employees in the SES during performance evaluation. The bill would require that a majority of the members of an appraisal board be career employees unless there are insufficient numbers of career employees to comply with this requirement.

Finally, under the enrolled bill, the Congress could discontinue the SES five years after its effective date by adopting a concurrent resolution to discontinue the program. While this is contrary to the position you have taken on the unconstitutionality of legislative vetoes, as a practical matter, it seems unlikely that the Congress would attempt to terminate the Senior Executive Service by concurrent resolution after it has been in full operation for five years.

Labor Relations

The Administration bill contemplated enactment of the Executive Order provisions as a statutory labor-management charter.5 Numerous changes in the labor relations proposal were made by the Congress, but most are relatively unimportant, and only in the following aspects do the changes go significantly beyond the Executive Order. Under the enrolled bill, the scope of bargaining would be amplified somewhat over the Order to permit, but not require, bargaining in areas now prohibited, e.g. numbers, types and grades of employees or positions assigned to a unit, project or tour of duty; and technology, methods and means of performing work. In addition, central agencies, such as OPM, OMB and GSA, would be required to consult, but not bargain, before issuing Government-wide regulations that effect changes in conditions of employment. The right to go to arbitration on grievances, now a matter for negotiation, would become a statutory right under the enrolled bill. Similarly, union dues check-off at no cost to the [Page 618] union would be a matter of statutory right, where now the benefit is negotiated, and employee negotiators would be entitled to conduct union business on official time, in the same manner as agency negotiators.

Finally, all contested issues in an FLRA decision, except arbitrators’ awards and bargaining unit determinations, would be reviewable by the U.S. Court of Appeals, where the Administration bill contemplated that FLRA decisions would be final and not reviewable by the courts except on constitutional issues, as is the case under the existing Order.

On the other hand, the enrolled bill would empower the FLRA to withdraw recognition from, or otherwise punish, an organization that calls for or participates in a strike, work stoppage or slowdown. Also, for the first time, the Government would be able to correct the record and make other statements in the course of a representational election without invoking an unfair labor practice penalty.

Other Provisions of the Bill

In addition to its civil service reform provisions, the enrolled bill includes a number of amendments which the Administration supported, or did not oppose.

Grade and pay retention

The enrolled bill includes the Administration’s retained grade and pay proposal which was submitted by the Civil Service Commission last year, in response to your assurances to employees that they would not be hurt by reorganization activity. This proposal would allow employees downgraded as a result of reorganization, transfer of function, closing of a base or other facility, reduction in force, or job reclassification action, to retain the higher grade for two years, after which they would revert to the lower, proper grade. They would, however, continue to receive the pay of the former grade indefinitely. Such employees whose pay is thus “saved” would receive only 50% of annual comparability adjustments so that gradually their pay would catch up with the proper pay rate for the reduced grade.

Limitation on employment

This amendment would impose a ceiling on the total number of civilian employees in the executive branch (excluding the Postal Service and Postal Rate Commission) for three years. It would require that on September 30, 1979, 1980, and 1981, total executive branch employment not exceed the number of employees that existed on September 30, 1977. This would require a reduction of about 43,000 positions below the currently planned 1979 ceilings.

Part-time employees in excess of those employed in September 1977 could be counted on a full-time equivalent basis; and employment [Page 619] in excess of the 1977 ceiling could be authorized by the President if he deems it necessary in the national interest, but not to exceed the percentage increase in the population from September 30, 1978. The President, further, is to direct that no increase in contracting out occurs as a result of the ceiling unless it is financially advantageous for the Government to do so. The ceiling provision would be inapplicable during a war or national emergency.

Limitation on Executive Level Positions

The enrolled bill would require the Director of OPM, six months after enactment, to determine and publish in the Federal Register the number of Executive Level positions in the executive branch as of the date of enactment. The bill would set the published number as the ceiling on such positions. In addition, by January 1, 1980, the President would be required to transmit to Congress a plan for authorizing executive level positions in the executive branch, together with the maximum number necessary and a justification for the positions.

Restriction on Pay of “Double Dippers”

The enrolled bill would impose a new ceiling on the combined pay of a retired military officer employed in a civilian position in the executive branch. The new limitation would be the rate of Executive Level V; when the combined retired and civilian pay exceed that limit, military retired pay would be reduced accordingly. The amendment is prospective, and would apply only to military personnel who become entitled to military retired pay after enactment. The Director of OPM, for the first 5 years following enactment, could authorize an exception to this restriction only when necessary to meet emergency employment needs for medical officers.

Other miscellaneous provisions added to the civil service reform bill include (1) authorizing the hiring of interpreters for deaf employees; (2) requiring OPM to establish a minority recruitment program to eliminate underrepresentation of minority groups in Federal civil service positions; (3) requiring the Office of Management and Budget to conduct a study looking to greater decentralization of Federal offices outside Washington; and (4) requiring OPM and agencies to report to local United States Employment Service offices vacancies in positions for which applicants from outside the Government are sought.

This Office has prepared a signing statement for your consideration which has been forwarded separately to your staff.

In its two attached letters on the enrolled bill,6 the Department of Justice expresses concern about the constitutionality of the authority [Page 620] proposed for the MSPB to overturn the regulations of an executive agency such as OPM. Further, the Department reiterates the view expressed in its earlier opinions to the Civil Service Commission and to Senator Ribicoff, that the MSPB Special Counsel would be performing executive functions, and that individuals performing such functions must be removable at the discretion of the President. Finally, the Department notes that a similar question is raised by the limitation on removal of members of the FLRA. The Department states, however, that a determination as to the extent of the FLRA’s executive functions must await fuller development of the manner in which the FLRA performs its functions.

The Department concludes, however, that despite the restrictions on removal of the Special Counsel, the President may legitimately approve the Civil Service Reform Act. The Department also suggests that, in so doing, the President should make clear by way of a signing statement that he does not believe the restrictions on his authority to remove the Special Counsel are valid, and that a similar question may arise with respect to the FLRA. The Department attaches such a statement for consideration.

If you should decide to include the suggestion of the Department of Justice in a signing statement, we would suggest that reference to termination of the Senior Executive Service by concurrent resolution also be made in such a statement.

As noted earlier, these many changes do not substantially modify the thrust of the bill. They were accepted in the spirit of compromise that was essential to timely enactment of a reform bill “of which the Congress and the President can be most proud,” as noted by Senator Ribicoff.7

James M. Frey 8
Assistant Director for Legislative Reference
  1. Source: Carter Library, White House Central Files, Box PE–4, PE–1, 10/1/78–3/31/79. No classification marking.
  2. Not found attached.
  3. See footnote 4, Document 152.
  4. H.R. 11280 passed in the House on September 13.
  5. A reference to E.O. 11491; see footnote 5, Document 153.
  6. Not found attached.
  7. Carter signed S. 2640 into law on October 13 as P.L. 95–454. For the text of his signing statement, see Public Papers: Carter , 1978, Book II, pp. 1765–1766.
  8. Printed from a copy that bears this typed signature.