B-214885, AUG 20, 1984

B-214885, AUG 20, 1984

COMPENSATION - RATES - HIGHEST PREVIOUS RATE - TRANSFERS - RATE APPLICABLE DIGEST: 1. AN EMPLOYEE TRANSFERRED FROM A GRADE GS-12, STEP 4, POSITION WITH THE DEPARTMENT OF THE NAVY TO A GRADE SD-3, STEP 4, POSITION WITH THE TENNESSEE VALLEY AUTHORITY (TVA), SUBSEQUENTLY RECEIVING A WITHIN GRADE INCREASE TO GRADE SD-3, STEP 5. THE NAVY REEMPLOYED HIM IN STEP 4 OF GRADE GS-12, THE LOWEST STEP WHICH DID NOT EXCEED HIS HIGHEST PREVIOUS SALARY RATE AT TVA. THE EMPLOYEE CLAIMS A RETROACTIVE STEP ADJUSTMENT TO STEP 5 SINCE HE HAD ATTAINED STEP 5 OF GRADE SD-3 AT TVA. THE CLAIM MAY NOT BE ALLOWED BECAUSE THE HIGHEST PREVIOUS RATE RULE APPLIES ONLY TO THE SALARY RATE EARNED BY AN EMPLOYEE, NOT TO THE RELATIVE STEP LEVEL HE HAD ATTAINED BEFORE REEMPLOYMENT. COMPENSATION - PERIODIC STEP-INCREASES - EQUIVALENT INCREASES - ELIGIBILITY FOR WITHIN-GRADE INCREASE 2. AN INDIVIDUAL WHO WAS REEMPLOYED BY THE DEPARTMENT OF THE NAVY FOLLOWING SERVICE WITH TVA DISPUTES THE NAVY'S DETERMINATION THAT THE COST -OF-LIVING ALLOWANCE (COLA) AND WITHIN-GRADE INCREASE HE RECEIVED AT TVA CONSTITUTED AN "EQUIVALENT INCREASE" UNDER 5 U.S.C. SEC. 5335(A) (1982) AND 5 C.F.R. SEC. 531.403 (1984). WE FIND THAT THE COLA MAY BE REGARDED AS AN "EQUIVALENT INCREASE" SINCE IT WAS GRANTED ADMINISTRATIVELY, AND, THEREFORE, DOES NOT FALL WITHIN THE EXCLUSION FOR STATUTORY PAY INCREASES WHICH IS PROVIDED IN 5 U.S.C. SEC. 5335(D). THE EMPLOYEE'S WITHIN-GRADE INCREASE AT TVA REPRESENTS HIS LAST "EQUIVALENT INCREASE," REQUIRING THE COMMENCEMENT OF A NEW WAITING PERIOD FOR WITHIN-GRADE ADVANCEMENT.

RONALD L. FONTAINE - APPLICATION OF HIGHEST PREVIOUS RATE RULE - WITHIN- GRADE ADVANCEMENT:

THE INTERNATIONAL FEDERATION OF PROFESSIONAL AND TECHNICAL ENGINEERS, LOCAL NO. 4, REQUESTS OUR DECISION AS TO WHETHER MR. RONALD L. FONTAINE, AN EMPLOYEE OF THE DEPARTMENT OF THE NAVY, WAS ENTITLED TO BE PLACED IN A HIGHER STEP OF HIS GRADE WHEN HE RETURNED TO THE NAVY FOLLOWING SERVICE WITH THE TENNESSEE VALLEY AUTHORITY (TVA). ALSO, THE UNION QUESTIONS THE NAVY'S DETERMINATION THAT A COST-OF-LIVING ALLOWANCE (COLA) AND WITHIN- GRADE INCREASE MR. FONTAINE RECEIVED AT TVA CONSTITUTED AN "EQUIVALENT INCREASE" UNDER 5 U.S.C. SEC. 5335(A) (1982), AND 5 C.F.R. SEC. 531.403 (1984), SO AS TO REQUIRE THE COMMENCEMENT OF A NEW WAITING PERIOD FOR PERIODIC STEP INCREASES.

WE HOLD THAT THE NAVY PROPERLY SET MR. FONTAINE'S PAY UPON HIS REEMPLOYMENT IN ACCORDANCE WITH THE HIGHEST PREVIOUS RATE RULE, AS CODIFIED IN 5 C.F.R. SEC. 531.203(C) (1984). FURTHER, WE HOLD THAT BOTH THE COLA AND WITHIN-GRADE INCREASE MR. FONTAINE RECEIVED AT TVA CONSTITUTED "EQUIVALENT INCREASES" UNDER THE APPLICABLE LAW AND REGULATIONS. SINCE THE WITHIN-GRADE INCREASE REPRESENTED MR. FONTAINE'S LAST "EQUIVALENT INCREASE," THAT INCREASE COMMENCED A NEW WAITING PERIOD FOR HIS WITHIN-GRADE ADVANCEMENT.

THE UNION'S REQUEST FOR A DECISION HAS BEEN HANDLED AS A LABOR MANAGEMENT RELATIONS MATTER UNDER OUR PROCEDURES IN 4 C.F.R. PART 22 (1984). COPIES OF THE REQUEST WERE SERVED UPON SEVERAL OFFICES OF THE NAVY, BUT WE RECEIVED NO COMMENTS FROM THOSE OFFICES.

BACKGROUND

DURING HIS EMPLOYMENT WITH THE PORTSMOUTH NAVAL SHIPYARD IN NEW HAMPSHIRE, ON AUGUST 1, 1980, MR. FONTAINE RECEIVED A WITHIN-GRADE INCREASE TO STEP 4 OF GRADE GS-12 ($27,172 PER YEAR). HAD HE REMAINED IN THE SAME POSITION AND GRADE, MR. FONTAINE WOULD HAVE BEEN ELIGIBLE FOR ADVANCEMENT TO STEP 5 ON OR ABOUT AUGUST 1, 1982.

ON OCTOBER 5, 1980, MR. FONTAINE TRANSFERRED TO THE TVA AS A COMPUTER SPECIALIST, GRADE SD-3, STEP 4 ($27,375 PER YEAR). /1/ IN JUNE 1981, HE RECEIVED A COLA OF $1,690, INCREASING HIS ANNUAL SALARY RATE TO $29,065. MR. FONTAINE RECEIVED AN ADDITIONAL PAY INCREASE OF $1,240 EFFECTIVE OCTOBER 4, 1981, WHEN HE WAS ADVANCED TO STEP 5 OF GRADE SD-3 ($30,305 PER YEAR). THE COLA AND WITHIN-GRADE INCREASE RESULTED IN A TOTAL PAY INCREASE OF $2,930.

ON DECEMBER 20, 1981, MR. FONTAINE RETURNED TO THE PORTSMOUTH NAVAL SHIPYARD AND WAS ASSIGNED TO THE POSITION OF MANAGEMENT ANALYST, GRADE GS- 12. APPLYING THE HIGHEST PREVIOUS RATE RULE, THE NAVY PLACED MR. FONTAINE IN STEP 4 OF GRADE GS-12, SINCE THE $30,305 ANNUAL PAY RATE HE HAD EARNED AT TVA FELL BETWEEN STEPS 3 AND 4 OF GRADE GS-12 ($30,129 AND $31,071, RESPECTIVELY, EFFECTIVE OCTOBER 4, 1981).

THE NAVY THEN DETERMINED THAT MR. FONTAINE'S WITHIN-GRADE INCREASE FROM STEP 4 TO STEP 5 OF GRADE SD-3 CONSTITUTED AN "EQUIVALENT INCREASE" UNDER 5 U.S.C. SEC. 5335(A), SO AS TO REQUIRE THE COMMENCEMENT OF A NEW WAITING PERIOD FOR WITHIN-GRADE ADVANCEMENT. IN MAKING THIS DETERMINATION, THE NAVY MISTAKENLY ASSUMED THAT THE ENTIRE $2,930 PAY INCREASE MR. FONTAINE RECEIVED AT TVA RESULTED FROM A WITHIN GRADE INCREASE, AND THAT THE WITHIN -GRADE INCREASE WAS GRANTED ON OCTOBER 1, 1981. THUS, FOR PURPOSES OF DETERMINING WHETHER MR. FONTAINE HAD RECEIVED AN "EQUIVALENT INCREASE," THE NAVY COMPARED THE $2,930 INCREASE WITH THE RATES FOR GRADE GS-12 WHICH WERE IN EFFECT PRIOR TO OCTOBER 4, 1981. SINCE THE $2,930 INCREASE EXCEEDED THE $898 DIFFERENCE BETWEEN STEPS 4 AND 5 OF GRADE GS-12, THE NAVY CONCLUDED THAT MR. FONTAINE RECEIVED AN "EQUIVALENT INCREASE" ON OCTOBER 1, 1981, COMMENCING A NEW 104-WEEK WAITING PERIOD FOR HIS ADVANCEMENT TO STEP 5 OF GRADE GS-12. ON THIS BASIS, THE NAVY CONCLUDED THAT MR. FONTAINE WOULD NOT BECOME ELIGIBLE FOR A WITHIN-GRADE INCREASE TO STEP 5 UNTIL OCTOBER 1983.

THE UNION MAINTAINS THAT THE NAVY SHOULD HAVE REEMPLOYED MR. FONTAINE IN STEP 5 OF GRADE GS-12, SINCE HE HAD ATTAINED STEP 5 OF GRADE SD-3 DURING HIS SERVICE WITH TVA. ALTERNATIVELY, THE UNION ARGUES THAT MR. FONTAINE SHOULD HAVE BEEN AWARDED A WITHIN-GRADE INCREASE TO STEP 5 OF GRADE GS-12 ON OR ABOUT AUGUST 1, 1982, BASED ON THE SCHEDULE IN EFFECT PRIOR TO HIS TRANSFER TO TVA. IN THIS REGARD, THE UNION DISPUTES THE NAVY'S DETERMINATION THAT THE $2,930 PAY INCREASE MR. FONTAINE RECEIVED AT TVA CONSTITUTED AN "EQUIVALENT INCREASE," POINTING OUT THAT $1,690 OF THE $2,930 INCREASE REPRESENTED A COLA. THE UNION CONTENDS THAT THE APPLICABLE LAW AND REGULATIONS EXCLUDE COLAS FROM THE DEFINITION OF AN "EQUIVALENT INCREASE."

DISCUSSION

APPLICATION OF THE HIGHEST PREVIOUS RATE RULE

AS INDICATED PREVIOUSLY, THE NAVY'S DETERMINATION TO REEMPLOY MR. FONTAINE IN STEP 4 OF GRADE GS-12 WAS BASED ON THE SO-CALLED "HIGHEST PREVIOUS RATE RULE," CODIFIED IN 5 C.F.R. SEC. 531.203(C). UNDER THE PROVISIONS OF SECTION 531.203(C), AN AGENCY HAS DISCRETIONARY AUTHORITY TO SET THE SALARY OF AN EMPLOYEE WHO IS REEMPLOYED, TRANSFERRED, PROMOTED, OR DEMOTED, AT ANY RATE OF THE EMPLOYEE'S GRADE WHICH DOES NOT EXCEED HIS HIGHEST PREVIOUS RATE OF PAY. IF THE EMPLOYEE'S HIGHEST PREVIOUS RATE FALLS BETWEEN TWO RATES OF HIS GRADE, THE AGENCY MAY PAY HIM AT THE HIGHER RATE. FEDERAL PERSONNEL MANUAL, CH. 531, SEC. 2-4A (INST. 243, JUNE 9, 1977).

THE NAVY ADHERED TO THE FOREGOING PRINCIPLES BY REEMPLOYING MR. FONTAINE IN STEP 4 OF GRADE GS-12, SINCE THE $30,305 PAY RATE HE HAD EARNED AT TVA FELL BETWEEN THE APPLICABLE RATES FOR STEPS 3 AND 4 OF GRADE GS-12 ($30,129 AND $31,071, RESPECTIVELY). ALTHOUGH THE UNION ARGUES THAT THE NAVY SHOULD HAVE SET MR. FONTAINE'S PAY AT THE RATE FOR STEP 5 OF GRADE GS -12, SINCE HE PREVIOUSLY HAD ATTAINED STEP 5 OF GRADE SD-3, THERE IS NO LEGAL FOUNDATION FOR THIS ARGUMENT. THE HIGHEST PREVIOUS RATE RULE APPLIES ONLY TO THE SALARY RATE EARNED BY AN EMPLOYEE, AND NOT TO THE RELATIVE STEP LEVEL HE HAD PREVIOUSLY ATTAINED. SEE 34 COMP.GEN. 691, 694 (1955). ACCORDINGLY, THERE IS NO BASIS FOR RETROACTIVELY PLACING MR. FONTAINE IN STEP 5 OF GRADE GS-12.

"EQUIVALENT INCREASE" DETERMINATION

SECTION 5335(A) OF TITLE 5, U.S.C. PROVIDES THAT AN EMPLOYEE IS ELIGIBLE FOR PERIODIC STEP INCREASES IN PAY UPON COMPLETION OF 104 CALENDAR WEEKS OF SERVICE IN PAY RATES 4, 5, AND 6, AS LONG AS HE DID NOT RECEIVE AN "EQUIVALENT INCREASE" IN PAY FROM ANY CAUSE DURING THAT PERIOD. "EQUIVALENT INCREASE" IS DEFINED IN 5 C.F.R. SEC. 531.403 AS FOLLOWS:

"'EQUIVALENT INCREASE' MEANS AN INCREASE OR INCREASES IN AN EMPLOYEE'S RATE OF BASIC PAY EQUAL TO OR GREATER THAN THE DIFFERENCE BETWEEN THE RATE OF PAY FOR THE GENERAL SCHEDULE GRADE AND STEP OCCUPIED BY THE EMPLOYEE AND THE RATE OF PAY FOR THE NEXT HIGHER STEP OF THAT GRADE."

THE PROVISIONS OF 5 U.S.C. SEC. 5335(D) AND 5 C.F.R. SEC. 531.407(C)(1) STATE THAT AN INCREASE IN AN EMPLOYEE'S RATE OF BASIC PAY SHALL NOT BE CONSIDERED AN "EQUIVALENT INCREASE" IF IT RESULTS FROM A STATUTORY PAY ADJUSTMENT.

IN APPARENT RELIANCE ON THE PROVISIONS OF 5 U.S.C. SEC. 5335(D) AND 5 C.F.R. SEC. 531.407(C)(1), THE UNION ARGUES THAT THE NAVY SHOULD NOT HAVE INCLUDED THE $1,690 COLA RECEIVED BY MR. FONTAINE IN ITS "EQUIVALENT INCREASE" CALCULATION. HOWEVER, THE CITED PROVISIONS EXCLUDE ONLY STATUTORY PAY INCREASES FROM THE DEFINITION OF AN "EQUIVALENT INCREASE." THE TVA BOARD OF DIRECTORS GRANTS ANNUAL COLAS TO ITS EMPLOYEES UNDER THE AUTHORITY OF 16 U.S.C. SEC. 831B, WHICH VESTS THE BOARD WITH DISCRETION TO FIX AND ADJUST THE WAGES OF TVA EMPLOYEES WITHOUT REGARD TO THE CIVIL SERVICE LAWS OR OTHER LEGISLATIVE STANDARDS. IN VIEW OF THE BROAD WAGE- SETTING DISCRETION AFFORDED THE TVA BOARD, ANNUAL COLAS GRANTED TO TVA EMPLOYEES MUST BE REGARDED AS ADMINISTRATIVE PAY INCREASES WHICH ARE SUBJECT TO CONSIDERATION AS "EQUIVALENT INCREASES." SEE GENERALLY 54 COMP.GEN. 305 (1974). ON THIS BASIS, THE $1,690 COLA GRANTED TO MR. FONTAINE IN JUNE 1981 MUST BE CONSIDERED IN DETERMINING THE DATE OF HIS LAST "EQUIVALENT INCREASE."

WHEN MR. FONTAINE RECEIVED THE $1,690 COLA IN JUNE 1981, THE DIFFERENCE BETWEEN THE RATES FOR STEPS 4 AND 5 OF GRADE GS-12 AMOUNTED TO $898. SINCE THE $1,690 COLA EXCEEDED THE $898 STEP INCREASE FOR GRADE GS-12, THE COLA MUST BE CONSIDERED AN "EQUIVALENT INCREASE" WITHIN THE MEANING OF 5 U.S.C. SEC. 5335(A) AND 5 C.F.R. SEC. 531.403.

MR. FONTAINE RECEIVED A FURTHER PAY INCREASE OF $1,240 ON OCTOBER 4, 1981, WHEN HE WAS ADVANCED FROM STEP 4 TO STEP 5 OF GRADE SD-3. THIS INCREASE EXCEEDED THE $942 DIFFERENCE BETWEEN THE RATES FOR STEPS 4 AND 5 OF GRADE GS-12, EFFECTIVE OCTOBER 4, 1981, AND, THEREFORE, REPRESENTED AN "EQUIVALENT INCREASE." ACCORDINGLY, THIS LAST "EQUIVALENT INCREASE" ON OCTOBER 4, 1981, COMMENCED A NEW 104-WEEK WAITING PERIOD FOR MR. FONTAINE'S ADVANCEMENT TO STEP 5 OF GRADE GS 12.

AS NOTED PREVIOUSLY, THE NAVY'S "EQUIVALENT INCREASE" DETERMINATION WAS BASED ON MISTAKEN ASSUMPTIONS THAT THE ENTIRE $2,930 PAY INCREASE MR. FONTAINE RECEIVED AT TVA RESULTED FROM A WITHIN-GRADE INCREASE, AND THAT THE WITHIN-GRADE INCREASE WAS GRANTED ON OCTOBER 1, 1981. HOWEVER, BASED ON OUR INDEPENDENT ANALYSIS, WE AGREE WITH THE NAVY'S CONCLUSION THAT MR. FONTAINE DID NOT BECOME ELIGIBLE FOR WITHIN-GRADE ADVANCEMENT TO STEP 5 OF GRADE GS-12 UNTIL OCTOBER 1983.

FOR THE REASONS STATED ABOVE, MR. FONTAINE'S CLAIM MAY NOT BE ALLOWED.

/1/ THE DESIGNATION "SD" REFERS TO TVA'S PAY AND CLASSIFICATION SYSTEM FOR PROFESSIONAL EMPLOYEES.