B-146305, AUG. 22, 1961

B-146305: Aug 22, 1961

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WHICH RETAINED RATES WERE ADJUSTED UNDER THE PROVISIONS OF SECTION 112 (B) (2) OF THE FEDERAL EMPLOYEES SALARY INCREASE ACT OF 1960. THE QUESTIONS ARE STATED AS FOLLOWS: "1. AN EMPLOYEE AT THE TOP LONGEVITY RATE FOR GRADE GS-3 AT $4350 PER ANNUM IS PROMOTED TO GRADE GS-4 AT THE BEGINNING OF THE PAY PERIOD ON DECEMBER 27. ASSUMING ALL OTHER CONDITIONS OF ELIGIBILITY ARE MET? AN EMPLOYEE IS DOWNGRADED FROM GS-5 TO GS-4 EFFECTIVE DECEMBER 27. ASSUMING OTHER CONDITIONS OF ELIGIBILITY ARE ET? AS FOLLOWS: "IF THE OFFICER OR EMPLOYEE IS RECEIVING BASIC COMPENSATION IMMEDIATELY PRIOR TO THE EFFECTIVE DATE OF THIS SECTION AT A RATE BETWEEN * * * A SCHEDULED AND LONGEVITY RATE. HE WAS ENTITLED TO CONTINUE TO RECEIVE THE SALARY RATE OF $3.

B-146305, AUG. 22, 1961

TO CHAIRMAN UNITED STATES CIVIL SERVICE COMMISSION:

YOUR LETTER OF JUNE 29, 1961, REQUESTS OUR CONSIDERATION OF TWO QUESTIONS CONCERNING THE EFFECTIVE DATES FOR THE SECOND AND THIRD LONGEVITY STEP- INCREASES FOR EMPLOYEES WHO HOLD RETAINED RATES, EITHER UPON PROMOTION OR DOWNGRADING, WHICH RETAINED RATES WERE ADJUSTED UNDER THE PROVISIONS OF SECTION 112 (B) (2) OF THE FEDERAL EMPLOYEES SALARY INCREASE ACT OF 1960, 74 STAT. 298.

THE QUESTIONS ARE STATED AS FOLLOWS:

"1. AN EMPLOYEE AT THE TOP LONGEVITY RATE FOR GRADE GS-3 AT $4350 PER ANNUM IS PROMOTED TO GRADE GS-4 AT THE BEGINNING OF THE PAY PERIOD ON DECEMBER 27, 1959. UNDER THE MANDATORY PROMOTION RULE (TITLE VIII OF THE CLASSIFICATION ACT), HE RETAINED THE RATE OF $4350 AS A GRADE GS-4 RATE. THE 1960 PAY ACT BY A SPECIAL PROVISION, SECTION 112 (B) (2), INCREASED HIS RATE TO $4775, EQUAL TO THE FIRST LONGEVITY STEP. ON WHAT DUTIES DOES THE EMPLOYEE BECOME ENTITLED TO THE SECOND AND THIRD LONGEVITY STEPS, ASSUMING ALL OTHER CONDITIONS OF ELIGIBILITY ARE MET? UNDER OUR INTERPRETATION, THE SECOND LONGEVITY INCREASE WOULD BE DUE DECEMBER 27, 1962, AND THE THIRD ON DECEMBER 27, 1965.

"2. AN EMPLOYEE IS DOWNGRADED FROM GS-5 TO GS-4 EFFECTIVE DECEMBER 27, 1959, AND SALARY RETENTION APPLIED SO THAT HE RETAINED IN GS-4 THE RATE OF $4340, HIGHER THAN THE MAXIMUM SCHEDULED RATE. ON JULY 11, 1960, THE 1960 PAY ACT ADJUSTED HIS SALARY TO THE NEXT HIGHER RATE, THE AMOUNT PRESCRIBED FOR THE FIRST LONGEVITY STEP. UNDER THE LAW AND REGULATIONS, WHEN DOES HE BECOME ENTITLED TO THE SECOND AND THIRD LONGEVITY RATES, ASSUMING OTHER CONDITIONS OF ELIGIBILITY ARE ET? OUR ANSWER WOULD BE THE SAME AS IN EXAMPLE 1.'

SECTION 112 (B) (2) OF THE FEDERAL EMPLOYEES SALARY INCREASE ACT OF 1960, PROVIDES, IN PERTINENT PART, AS FOLLOWS:

"IF THE OFFICER OR EMPLOYEE IS RECEIVING BASIC COMPENSATION IMMEDIATELY PRIOR TO THE EFFECTIVE DATE OF THIS SECTION AT A RATE BETWEEN * * * A SCHEDULED AND LONGEVITY RATE, OF A GRADE IN THE GENERAL SCHEDULE, HE SHALL RECEIVE A RATE OF BASIC COMPENSATION AT THE HIGHER OF THE TWO CORRESPONDING RATES IN EFFECT ON AND AFTER SUCH DATE.'

CONCERNING QUESTION 1 WE REFER YOU TO OUR DECISION OF FEBRUARY 2, 1959, B -138146, INVOLVING A SIMILAR SITUATION UNDER THE FEDERAL EMPLOYEES SALARY INCREASE ACT OF 1958. THERE, THE EMPLOYEE INVOLVED HAD BEEN PROMOTED TO GRADE GS-4, FROM THE THIRD LONGEVITY STEP OF GRADE GS-3 ON MAY 5, 1957, AND BECAUSE OF THE OPERATION OF SECTION 802 (B) (B) OF THE CLASSIFICATION ACT OF 1949, HE WAS ENTITLED TO CONTINUE TO RECEIVE THE SALARY RATE OF $3,940 PER ANNUM WHICH FELL BETWEEN THE MAXIMUM SCHEDULED RATE AND THE FIRST LONGEVITY RATE OF GRADE GS-4. WE HELD THAT UNDER THE PROVISIONS OF SECTION 2 (B) (2) OF THE FEDERAL EMPLOYEES PAY ACT OF 1958, THE EMPLOYEE WAS IN EFFECT MOVED TO THE FIRST LONGEVITY STEP OF GRADE 4. ALSO, WE EXPRESSED OUR VIEW THAT THE EMPLOYEE WOULD HAVE TO HAVE AN AGGREGATE OF 10 YEARS SERVICE IN THAT GRADE (INCLUDING 3 YEARS CONTINUOUS SERVICE IN THE FIRST LONGEVITY STEP) BEFORE HE COULD BE GRANTED THE SECOND LONGEVITY STEP INCREASE IN THE GS-4 GRADE. WE SEE NO COMPELLING REASON HERE FOR APPLYING A RULE DIFFERENT FROM THAT EXPRESSED IN THE DECISION OF FEBRUARY 2, 1959; HENCE, WE HOLD THE EMPLOYEE IN QUESTION IS NOT ENTITLED TO THE SECOND LONGEVITY STEP IN GRADE GS-4 UNTIL HE COMPLETES 3 YEARS OF CONTINUOUS SERVICE (IF OTHERWISE ELIGIBLE) AT THE FIRST LONGEVITY STEP IN WHICH HE IS REGARDED AS HAVING BEEN PLACED BY THE FEDERAL EMPLOYEES SALARY INCREASE ACT OF 1960. WHEN ADVANCED TO THE SECOND LONGEVITY STEP HE THEN WOULD BE REQUIRED TO SERVE 3 CONTINUOUS YEARS IN THAT STEP BEFORE HIS BEING ENTITLED TO THE THIRD LONGEVITY INCREASE.

REFERRING TO QUESTION 2, WE HELD IN 31 COMP. GEN. 166 (SEE 7TH PARAGRAPH OF THE SYLLABUS) THAT AN EMPLOYEE WHO AS A RESULT OF A SAVINGS CLAUSE IN THE CLASSIFICATION ACT OF 1949, WAS RECEIVING A SALARY RATE BETWEEN THE MAXIMUM SCHEDULED RATE OF THE GRADE AND THE FIRST LONGEVITY RATE THEREOF, SHOULD--- BEFORE HIS BEING ADVANCED TO THE SECOND LONGEVITY RATE--- SERVE AN ADDITIONAL THREE YEARS IN THE FIRST LONGEVITY STEP OF THE GRADE TO WHICH HE WAS REGARDED AS HAVING BEEN ADVANCED BY OPERATION OF SECTION 1 (B) (2) (A), OF THE FEDERAL EMPLOYEES SALARY INCREASE ACT OF OCTOBER 24, 1951, 65 STAT. 612. THAT DECISION WAS SUSTAINED ON OUR RULING OF AUGUST 12, 1959, B-139737, CITED IN YOUR LETTER. THE PRINCIPLE INVOLVED IN THOSE DECISIONS IS THE SAME AS THAT INVOLVED IN THE DECISION OF FEBRUARY 2, 1959, B-138146, PREVIOUSLY REFERRED TO.

YOU SAY IN YOUR LETTER THAT THE RETAINED SALARY INVOLVED IN QUESTION 2 RESULTED FROM A DEMOTION WHICH IS COVERED BY THE PROVISIONS OF PUBLIC LAW 85-737, AMENDING SECTION 507 OF THE CLASSIFICATION ACT OF 1949, AS AMENDED, 5 U.S.C. 1107. THAT PROVISION PROVIDES IN EFFECT THAT AN EMPLOYEE REDUCED IN GRADE AND OTHERWISE ELIGIBLE THEREUNDER SHALL BE ENTITLED TO RETAIN THE SALARY OF HIS HIGHER GRADE (WITH CERTAIN LIMITATIONS) FOR A PERIOD OF TWO YEARS AFTER THE DATE OF REDUCTION IN GRADE UNLESS HE IS ENTITLED TO RECEIVE A HIGHER RATE BY OPERATION OF THE CLASSIFICATION ACT.

AS POINTED OUT IN YOUR LETTER IF AN EMPLOYEE RECEIVING A RETAINED RATE UNDER PUBLIC LAW 85-737 BE CONSIDERED AS HAVING LITERALLY MOVED TO A LONGEVITY STEP BY THE OPERATION OF SECTION 112 (B) (2) OF THE FEDERAL EMPLOYEES SALARY INCREASE ACT OF 1960, SUCH AS UNDER OUR PRIOR DECISIONS, THE RETAINED RATE WOULD HAVE TO BE REGARDED AS ELIMINATED THUS NULLIFYING THE RIGHT OF ANY AGENCY TO ADJUST SUCH RATE DOWNWARD AFTER THE EXPIRATION OF THE TWO-YEAR PERIOD.

OUR PRIOR DECISIONS ON THE EFFECT OF GENERAL SALARY INCREASES AND ADJUSTMENTS OF "ODD" RATES OF COMPENSATION WERE NOT CONCERNED WITH RETAINED OR SAVED RATES UNDER PUBLIC LAW 85-737. THE SAVINGS RATES INVOLVED IN OUR PRIOR DECISIONS CONTAINED NO LIMITATION ON THEIR DURATION SUCH AS PRESCRIBED FOR THE RETAINED RATES UNDER PUBLIC LAW 85 737. MOREOVER, LONGEVITY STEP INCREASES WERE AUTHORIZED ON CERTAIN SAVED RATES BY SECTION 703 (C) OF THE CLASSIFICATION ACT OF 1949, 63 STAT. 969 (ALSO SEE OUR DECISION OF FEBRUARY 29, 1952, 31 COMP. GEN. 436, AUTHORIZING LONGEVITY INCREASES ON SAVED RATES UNDER SECTION 25.103 (E) OF THE COMMISSION'S REGULATIONS) WHEREAS REPORT NO. 2269 OF THE HOUSE OF REPRESENTATIVES ON H.R. 1168 WHICH BECAME PUBLIC LAW 85 737, CLEARLY INDICATES THAT WITHIN-GRADE AND LONGEVITY STEP INCREASES ARE NOT AUTHORIZED ON RETAINED RATES UNDER THAT ACT.

IN VIEW OF THE TWO-YEAR DURATION OF THE RETAINED RATES GRANTED UNDER PUBLIC LAW 85-737, WE DO NOT BELIEVE THERE WAS ANY INTENTION ON THE PART OF THE LEGISLATORS IN THE ENACTMENT OF THE FEDERAL EMPLOYEES SALARY INCREASE ACT OF 1960, TO ERASE SUCH TWO-YEAR PERIOD AND THUS PREVENT ADJUSTMENT OF SUCH RETAINED RATES UPON THE EXPIRATION THEREOF. THEREFORE, WE AGREE THAT THE RETAINED RATES UNDER PUBLIC LAW 85-737, AS INCREASED BY THE FEDERAL EMPLOYEES SALARY INCREASE ACT OF 1960, DID NOT LOSE THEIR IDENTITY AS RETAINED RATES EVEN THOUGH SUCH RATES THEREAFTER WERE EQUIVALENT TO RATES OF COMPENSATION WHICH INCLUDED LONGEVITY INCREASES. HOWEVER, THAT CONCLUSION IS NOT TO BE VIEWED AS DISTURBING OUR PRIOR DECISIONS ON OTHER SAVED OR RETAINED RATES AS AFFECTED BY SALARY INCREASE ACTS.

IN LINE WITH THE ABOVE CONCLUSION OUR VIEW IS THAT THE STATEMENT IN THE HOUSE REPORT TO THE EFFECT THAT LONGEVITY AND STEP INCREASES ARE NOT AUTHORIZED ON RETAINED RATES UNDER PUBLIC LAW 85-737, DOES NOT PRECLUDE THE PROCESSING OF LONGEVITY INCREASES ON THE SALARY RATE AN EMPLOYEE WOULD HAVE BEEN RECEIVING HAD IT NOT BEEN FOR THE RETAINED RATE PROVISIONS OF PUBLIC LAW 85-737, UNTIL SUCH TIME AS HE IS ENTITLED TO RECEIVE A RATE OF COMPENSATION HIGHER THAN THE RETAINED RATE. OTHERWISE, THE LANGUAGE IN PUBLIC LAW 85-737 INDICATING THAT AN EMPLOYEE'S RETAINED RATE MAY BE ELIMINATED WITHIN THE TWO-YEAR PERIOD BY REASON OF HIS BEING ENTITLED TO RECEIVE A HIGHER RATE BY OPERATION OF THE CLASSIFICATION ACT, WOULD HAVE LITTLE EFFECT. TO ACCOMPLISH THAT OBJECTIVE IT IS INCUMBENT UPON AN AGENCY TO SELECT AT THE TIME OF THE DOWNGRADING THE SALARY STEP OF THE GRADE IN WHICH THE EMPLOYEE WOULD HAVE BEEN PLACED HAD IT NOT BEEN FOR THE SALARY SAVINGS PROVISIONS OF PUBLIC LAW 85-737. COMPARE SECTION 25.414 OF THE COMMISSION'S REGULATIONS. THE AGENCY SHOULD THEN PROCESS ANY STEP OR LONGEVITY INCREASE ON THAT RATE TO WHICH THE EMPLOYEE BECOMES ENTITLED BEFORE THE EXPIRATION OF THE TWO-YEAR PERIOD. THIS WOULD INSURE THAT EMPLOYEES WITH SERVICE CREDITS IN THE HIGHER GRADES WOULD RECEIVE CREDIT THEREFOR IN THE GRADE TO WHICH REDUCED AND POSSIBLY AVOID ANY FURTHER REDUCTION BECAUSE OF THE TWO-YEAR LIMITATION. ON THE BASIS OF THE FOREGOING COMMENTS, AND ASSUMING THE EMPLOYEE IN QUESTION 2, HAD IT NOT BEEN FOR THE PROVISIONS OF PUBLIC LAW 85-737, WOULD HAVE BEEN PLACED IN THE MAXIMUM STEP OF GRADE GS-4 (NOW $4,670 PER ANNUM), HE WOULD BE ENTITLED TO THE FRST LONGEVITY STEP OF SUCH GRADE ($4,775) IN DECEMBER, 1962. OF COURSE, IN THIS PARTICULAR SITUATION, THE EMPLOYEE'S SALARY WOULD BE REDUCED TO $4,670 FROM $4,775, THE RETAINED RATE, IN DECEMBER 1961 BECAUSE OF THE EXPIRATION OF THE TWO-YEAR PERIOD. THE EMPLOYEE WOULD NOT BE ENTITLED TO THE SECOND LONGEVITY STEP OF GRADE GS-4 UNTIL HE COMPLETES ANOTHER 3 YEARS OF CONTINUOUS SERVICE IN THE FIRST LONGEVITY STEP, AND THE THIRD LONGEVITY STEP WOULD NOT BE DUE UNTIL HE COMPLETES 3 CONTINUOUS YEARS OF SERVICE IN THE SECOND LONGEVITY STEP.

WE SUGGEST THAT THE COMMISSION'S REGULATIONS BE AMENDED ALONG THE LINES OF THE HOLDING HEREIN TO PROPERLY REFLECT THE DIFFERENT TREATMENT OF RETAINED RATES UNDER PUBLIC LAW 85-737 AND THE RETAINED RATES UNDER OTHER PROVISIONS OF LAW OR REGULATIONS. COMPARE SECTIONS 25.54 AND 25.414 OF THE COMMISSION'S REGULATIONS.