B-209522-O.M., MAY 24, 1983

B-209522-O.M., MAY 24, 1983

SUBJECT: AGENCY PERFORMANCE APPRAISAL SYSTEMS - B-209522-O.M.

GROUP DIRECTOR, GGD - GERALD MILLER:

THE FIRST QUESTION IN YOUR MEMORANDUM OF DECEMBER 13, 1982, TO ME, CONCERNS THE IMPACT OF SCHRAMM V. DEPARTMENT OF HEALTH AND HUMAN SERVICES, 682 F.2D 85 (3D CIR., 1982) ON DENIAL OF WITHIN-GRADE PAY INCREASES TO EMPLOYEES UNDER OFFICE OF PERSONNEL MANAGEMENT (OPM) REGULATIONS. THOSE REGULATIONS DEFINE THE PROCEDURES AND FIX THE STANDARD FOR AN AGENCY TO EFFECT A DENIAL AND WERE NOT AFFECTED BY THE SCHRAMM DECISION SINCE THAT DECISION DEALT WITH THE AMOUNT OF EVIDENCE NECESSARY TO SUSTAIN THE DENIAL OF A WITHIN-GRADE INCREASE IF THAT ACTION IS APPEALED.

THE SCHRAMM DECISION HELD THAT WHEN AN AGENCY DENIES A WITHIN-GRADE PAY INCREASE BECAUSE OF AN EMPLOYEE'S SUBSTANDARD PERFORMANCE, THE MERIT SYSTEMS PROTECTION BOARD (MSPB) MUST BE ABLE TO FIND A "PREPONDERANCE OF EVIDENCE" SUPPORTING THE DENIAL IN THE RECORD DEVELOPED BY THE PARTIES IN ORDER TO SUSTAIN THE AGENCY. THIS CREATES THE ANOMALY OF REQUIRING THE MORE DIFFICULT "PREPONDERANCE OF EVIDENCE" STANDARD FOR DENIAL OF WITHIN- GRADE PAY INCREASES WHEREAS THE "SUBSTANTIAL EVIDENCE" STANDARD IS SPECIFICALLY APPLICABLE TO REMOVALS OR REDUCTIONS IN GRADE BECAUSE OF UNACCEPTABLE PERFORMANCE. IT IS NOTED THAT THE COURT OF CLAIMS PREVIOUSLY CONCLUDED THAT THE MSPB SHOULD SUSTAIN AN AGENCY'S ACTION IF SUPPORTED BY "SUBSTANTIAL EVIDENCE" - THE EASIER STANDARD FOR THE AGENCY TO MEET. MEYER V. DEPARTMENT OF HEALTH AND HUMAN SERVICES, 666 F.2D 540 (CT.CL. 1981). AFTER OCTOBER OF 1982 THE NEWLY CREATED COURT OF APPEALS FOR THE FEDERAL CIRCUIT HAS HAD EXCLUSIVE JURISDICTION OVER APPEALS FROM DECISIONS OF THE MSPB. SECTION 127 OF THE FEDERAL COURTS IMPROVEMENT ACT OF 1982, PUB.L. NO. 97-164, 96 STAT. 38. THIS COURT MAY WELL CONSIDER AGAIN THE STANDARD FOR MSPB REVIEW OF AGENCY DENIAL OF WITHIN GRADE INCREASES AND IT MAY RULE THAT THE "SUBSTANTIAL EVIDENCE" STANDARD IS TO BE APPLIED. HOWEVER, UNTIL A DECISION IS RENDERED TO RESOLVE THE DIFFERING OPINIONS OF THE TWO COURTS INVOLVED, THE MORE DIFFICULT RULE FOR THE GOVERNMENT TO COMPLY WITH - THE RULE ADOPTED IN SCHRAMM - SHOULD BE FOLLOWED BY US AS CONTROLLING. WE ALSO NOTE THAT WHILE IT MAY MAKE A DIFFERENCE IN A CLOSE CASE WHETHER MSPB USES THE "PREPONDERANCE OF EVIDENCE" OR "SUBSTANTIAL EVIDENCE" STANDARD, MANY AGENCY ACTIONS WOULD BE SUSTAINED UNDER EITHER STANDARD. SEE DREW V. U.S. DEPARTMENT OF THE NAVY, 672 F.2D 197 (D.C. CIR. 1982).

YOUR SECOND QUESTION INQUIRES ABOUT OPM'S RESPONSIBILITY UNDER 5 U.S.C. SEC. 4304(B)(1) (1978) TO "*** REVIEW EACH PERFORMANCE APPRAISAL SYSTEM DEVELOPED BY ANY AGENCY ***." THE MOST PERSUASIVE ANALYSIS OF OPM'S RESPONSIBILITY WHICH WE HAVE FOUND IS IN WELLS V. HARRIS, 1 MSPB 199 (1979). THAT DECISION CONSIDERED WHETHER OPM'S REGULATIONS IMPLEMENTING THE CIVIL SERVICE REFORM ACT PROPERLY PROVIDED FOR DISMISSALS ACCORDING TO THE NEW ACT'S DEFINITION OF UNACCEPTABLE PERFORMANCE. IT HELD THAT BEFORE A PERFORMANCE BASED REMOVAL COULD OCCUR, AN AGENCY MUST HAVE SUBMITTED ITS PERFORMANCE APPRAISAL SYSTEM OR SYSTEMS TO OPM FOR REVIEW AND RECEIVED APPROVAL. IT ALSO CONTAINS A DETAILED ANALYSIS OF THE LEGISLATIVE HISTORY OF SUBCHAPTER 1 OF CHAPTER 43, INCLUDING 5 U.S.C. SEC. 4304(B)(1).

THE WELLS DECISION MADE CLEAR THAT EACH EMPLOYEE MUST BE COVERED BY A PERFORMANCE APPRAISAL SYSTEM AND THAT OPM MUST APPROVE EACH SYSTEM DEVELOPED BY AN AGENCY. HOWEVER, THE EMPHASIS WAS ON THE OVERALL SYSTEM AND WE UNDERSTAND THAT OPM REVIEWS ONLY THE PROCESS BY WHICH AGENCIES ESTABLISH PERFORMANCE STANDARDS (A DESCRIPTION OF THAT PROCESS HAS TO BE PART OF EACH PERFORMANCE APPRAISAL SYSTEM SUBMITTED TO OPM FOR APPROVAL). OPM DOES NOT VERIFY ALL THE PERFORMANCE STANDARDS IN THE GOVERNMENT AND WE DO NOT FIND THAT THE WELLS DECISION REQUIRES OPM TO DO MORE.

REGARDING THE TREASURY DEPARTMENT "UMBRELLA" PLAN, THAT PLAN DESCRIBES THE PROCESS BY WHICH THE INTERNAL REVENUE SERVICE (IRS) IS TO ESTABLISH PERFORMANCE STANDARDS. WE UNDERSTAND THIS WAS ACCEPTABLE TO OPM AND THAT THEY "APPROVED" THE PERFORMANCE APPRAISAL SYSTEM AS APPLICABLE TO IRS EMPLOYEES. WE DO NOT QUESTION THAT APPROACH TO OPM APPROVALS. THUS, TO THE EXTENT THAT OPM APPROVAL OF THE IRS PERFORMANCE APPRAISAL SYSTEM HAS BEEN QUESTIONED ON THE BASIS OF THE CONTENT OF SOME INDIVIDUAL PERFORMANCE STANDARDS, WE WOULD NOT FIND THAT THE SYSTEM LACKS OPM APPROVAL SINCE OPM IS NOT RESPONSIBLE FOR REVIEWING INDIVIDUAL STANDARDS.

YOUR THIRD QUESTION CONCERNS OPM'S CHARGE TO AGENCIES FOR TECHNICAL ASSISTANCE IN THE AGENCIES' DEVELOPMENT OF PERFORMANCE APPRAISAL SYSTEMS AND OPM'S USE OF THE PAYMENTS RECEIVED.

THE OFFICE OF PERSONNEL MANAGEMENT IS REQUIRED TO MAKE TECHNICAL ASSISTANCE AVAILABLE TO AGENCIES "IN THE DEVELOPMENT OF PERFORMANCE APPRAISAL SYSTEMS." 5 U.S.C. SEC. 4304(A). SINCE OPM IS REQUIRED BY LAW TO PROVIDE TECHNICAL ASSISTANCE TO AGENCIES, ANY CHARGE BY OPM FOR TECHNICAL ASSISTANCE "IN THE DEVELOPMENT OF PERFORMANCE APPRAISAL SYSTEMS" WOULD BE PRECLUDED AS AN UNAUTHORIZED AUGMENTATION OF ITS APPROPRIATIONS. SEE MATTER OF MERIT SYSTEMS PROTECTION BOARD, 59 COMP.GEN. 415 (1980). IT SHOULD BE NOTED THAT 5 U.S.C. SEC. 4305 AUTHORIZES OPM TO PRESCRIBE REGULATIONS FOR CARRYING OUT THE TECHNICAL ASSISTANCE REQUIRED TO BE FURNISHED UNDER SECTION 4304(A), AND OPM COULD LIMIT THE AMOUNT OF TECHNICAL ASSISTANCE IT WILL PROVIDE. BUT, THAT IN ITSELF WOULD NOT PROVIDE AUTHORITY FOR CHARGING AGENCIES FOR THESE SERVICES.

HOWEVER, OPM IS AUTHORIZED TO PERFORM SERVICES ON A REIMBURSABLE BASIS AND DEPOSIT REIMBURSEMENTS IN THE REVOLVING FUND AUTHORIZED BY 5 U.S.C. SEC. 1304(E). TECHNICAL ASSISTANCE PROVIDED BY OPM TO AGENCIES FOR ACTIVITIES WHICH ARE RELATED TO PERFORMANCE APPRAISAL SYSTEMS BUT NEED NOT BE CONSIDERED AS CONCERNING "THE DEVELOPMENT OF" PERFORMANCE APPRAISAL SYSTEMS COULD BE PERFORMED ON A REIMBURSABLE BASIS UNDER THAT PROVISION. BUT ANY SERVICE PERFORMED ON A REIMBURSABLE BASIS MUST CLEARLY BE A SERVICE WHICH OPM IS NOT REQUIRED TO PERFORM WITHOUT REIMBURSEMENT. FURTHER, REIMBURSEMENTS RECEIVED AND CREDITED TO THE REVOLVING FUND MUST BE ACCOUNTED FOR AS REQUIRED BY 5 U.S.C. SEC. 1304(E) AND IMPLEMENTING REGULATIONS. IF REIMBURSEMENT TO OPM IS AUTHORIZED THERE IS NO PARTICULAR RESTRICTION ON THE WAY OPM SPENDS THE FUNDS, ALTHOUGH AN ANALYSIS OF THE USE OF THE REVOLVING FUND MUST BE PROVIDED THE CONGRESS. 5 U.S.C. SEC. 1304(E)(5).

YOUR FOURTH QUESTION CONCERNS THE IMPACT OF LABOR-MANAGEMENT NEGOTIATIONS (REGARDING THE METHODS AND PROCEDURES USED IN A PERFORMANCE APPRAISAL SYSTEM) ON THE IMPLEMENTATION OF A PERFORMANCE APPRAISAL SYSTEM UNDER 5 U.S.C. SEC. 4302. AS INDICATED IN THE ANSWER TO QUESTION 1, THE "PREPONDERANCE OF EVIDENCE" STANDARD MUST BE APPLIED IN AFFIRMING THE DENIAL OF A WITHIN-GRADE SALARY INCREASE. UNLESS THE CONTROLLING COURT DECISIONS ARE REVERSED THIS STANDARD APPLIES EVEN THOUGH A PERFORMANCE APPRAISAL SYSTEM AS REQUIRED BY 5 U.S.C. SEC. 4302 IS IN OPERATION. WITH RESPECT TO DISMISSALS AND DOWNGRADINGS BASED ON SUBSTANDARD PERFORMANCE, IN ORDER FOR THE MSPB TO BE ABLE TO USE THE "SUBSTANTIAL EVIDENCE" STANDARD RATHER THAN THE MORE DIFFICULT "PREPONDERANCE OF EVIDENCE" STANDARD, THE AGENCY MUST HAVE IMPLEMENTED A PERFORMANCE APPRAISAL SYSTEM UNDER 5 U.S.C. SEC. 4302 (1978). IT IS NOT SUFFICIENT THAT THE AGENCY HAS CREATED PERFORMANCE STANDARDS AND CRITICAL ELEMENTS. THESE MUST HAVE BEEN INTEGRATED INTO A PERFORMANCE APPRAISAL SYSTEM. WELLS V. HARRIS, 1 MSPB 199 (1979); DREW V. U.S. DEPARTMENT OF THE NAVY, 672 F.2D 197 (1982).

AGENCIES ARE REQUIRED TO DEVELOP PERFORMANCE APPRAISAL SYSTEMS WHICH WILL, AMONG OTHER THINGS, PROVIDE FOR:

"*** AS SOON AS PRACTICABLE, BUT NOT LATER THAN OCTOBER 1, 1981, WITH RESPECT TO INITIAL APPRAISAL PERIODS, COMMUNICATING TO EACH EMPLOYEE THE PERFORMANCE STANDARDS AND CRITICAL ELEMENTS OF THE EMPLOYEE'S POSITION ***."

5 U.S.C. SEC. 4302(B)(2). IT SEEMS THAT CONGRESS INTENDED THAT APPRAISAL SYSTEMS, AS REQUIRED BY 5 U.S.C. SEC. 4302, WOULD BE READY FOR FULL IMPLEMENTATION BY OCTOBER 1, 1981. BUT FULL IMPLEMENTATION HAS BEEN DELAYED BY THE REQUIREMENT THAT CERTAIN ASPECTS OF THE TOTAL SYSTEM BE SUBJECTED TO BARGAINING WITH EMPLOYEE ORGANIZATIONS UNDER THE REQUIREMENTS OF CHAPTER 71 OF TITLE 5. 3 FLRA NO. 119 (1980); 10 FLRA NO. 35 (1982). THE FULL IMPLICATIONS OF THESE DECISIONS OF THE FEDERAL LABOR RELATIONS AUTHORITY AS THEY RELATE TO THE RULINGS OF THE MERIT SYSTEMS PROTECTION BOARD, DISCUSSED IN ANSWER TO QUESTION 1, ARE NOT ENTIRELY CLEAR. HOWEVER, IT SEEMS THAT THE MSPB WILL NOT PERMIT THE "SUBSTANTIAL EVIDENCE" CRITERIA TO BE USED UNTIL A PERFORMANCE APPRAISAL SYSTEM COMPLYING WITH 5 U.S.C. SEC. 4302 IS IN FORCE AND THAT FLRA WILL NOT PERMIT SUCH A SYSTEM TO BE PUT INTO EFFECT UNTIL ANY REQUIRED NEGOTIATIONS BETWEEN LABOR AND MANAGEMENT HAVE BEEN COMPLETED.

THESE REQUIRED NEGOTIATIONS CANNOT BE INDEFINITELY DEFERRED, BUT IT IS NOT OBJECTIONABLE IF THEY CAUSE CONSIDERABLE DELAY. VETERANS ADMINISTRATION MEDICAL CENTER V. FLRA, 675 F.2D 260 (11TH CIR. 1982). HOWEVER, UNTIL THE FULL PROCESS OF IMPLEMENTING AN APPRAISAL SYSTEM UNDER SECTION 4302 HAS BEEN COMPLETED, IT APPEARS THAT AGENCIES SHOULD BE PREPARED TO SUPPORT REMOVAL AND DOWNGRADING ACTIONS FOR INADEQUATE PERFORMANCE UNDER THE "PREPONDERANCE OF EVIDENCE" RULE.