B-152040, AUG. 20, 1963, 43 COMP. GEN. 169

B-152040, AUG. 20, 1963, 43 COMP. GEN. 169

COMPENSATION - DOWNGRADING - SAVED COMPENSATION - EFFECT OF FEDERAL SALARY REFORM ACT OF 1962 AN ADMINISTRATIVE ACTION FIXING THE SALARY FOR DEMOTED EMPLOYEES WHEN THEIR 2-YEAR SALARY RETENTION PERIOD EXPIRED AFTER THE ENACTMENT OF THE FEDERAL SALARY REFORM ACT OF 1962, APPROVED OCTOBER 11, 1962, 76 STAT. 841, AT A HIGHER RATE IN THE LOWER POSITION THAN THE RATE FIXED AT THE TIME OF THE DEMOTION ACTION ON THE BASIS OF A MISINTERPRETATION OF A FEDERAL PERSONNEL MANUAL LETTER 531-17, WHICH ANNOUNCED THE ELIMINATION OF REFERENCES TO SCHEDULED AND LONGEVITY RATES UNDER THE 1962 ACT, WAS NOT PROPER, THE FPM LETTER BEING APPLICABLE TO MANDATORY PROMOTIONS AND WITHIN -GRADE INCREASES RATHER THAN TO THE HIGHEST PREVIOUS SALARY RATE REGULATION; THEREFORE, THE EMPLOYEES' RIGHT TO THE SALARY RATE IN THE DEMOTED GRADE HAVING BEEN FIXED AT THE TIME OF THE DEMOTION ACTION, THE SELECTION OF A NEW RATE UPON THE EXPIRATION OF THE SALARY RETENTION PERIOD WAS NOT PROPER AND A READJUSTMENT IN THE SALARY RATES IS REQUIRED.

TO THE ADMINISTRATOR, VETERANS ADMINISTRATION, AUGUST 20, 1963:

ON JULY 15, 1963, YOU REQUESTED OUR DECISION CONCERNING THE PROPRIETY OF THE SALARY RATES ESTABLISHED BY YOUR ADMINISTRATION FOR CERTAIN EMPLOYEES UPON TERMINATION OF THEIR SALARY RETENTION PERIODS FOLLOWING THEIR DEMOTIONS.

THE CASES ARE SET FORTH IN YOUR LETTER AS FOLLOWS:

CASE I

11/20/60 A GS-4 EMPLOYEE WAS DEMOTED TO GS-3 WITH "SAVED" SALARY OF $4,670 P.A.--- THE 7TH OR MAXIMUM SCHEDULED RATE FOR GS-4. AT THAT TIME DETERMINATION WAS MADE THAT HIS SALARY WOULD BE ADJUSTED TO THE 7TH OR MAXIMUM SCHEDULED RATE OF GS-3 UPON TERMINATION OF THE SALARY RETENTION PERIOD.

10/14/62 "SAVED" SALARY ADJUSTED TO $4,950 P.A. (PL 87-793).

11/20/62 SALARY RETENTION PERIOD TERMINATED. SALARY ADJUSTED TO $4,830 P.A.--- 10TH OR MAXIMUM STEP RATE OF GS-3. (CS REG. 25.414 AND 25.103 (B)

CASE II

12/18/60 A GS-11 EMPLOYEE WAS DEMOTED TO GS-10 WITH "SAVED" SALARY OF $8,600 P.A.--- THE 5TH SCHEDULED STEP OF GS-11. AT THAT TIME DETERMINATION WAS MADE THAT HIS SALARY WOULD BE ADJUSTED TO THE 7TH OR MAXIMUM SCHEDULED RATE FOR GS-10 UPON TERMINATION OF THE SALARY RETENTION PERIOD.

10/14/62 "SAVED" SALARY ADJUSTED TO $9,105 P.A. (PL 87-793).

12/18/62 SALARY RETENTION PERIOD TERMINATED. SALARY ADJUSTED TO $9,250 P.A.--- THE 9TH STEP RATE OF GS-10. (CS REG. 25.414 AND 25.103 (B) ).

YOU POINT OUT THAT WHEN THE EMPLOYEES WERE DEMOTED IN 1960 BOTH THE CLASSIFICATION ACT COMPENSATION SCHEDULES AND CONTROLLING CIVIL SERVICE REGULATIONS CONTAINED REFERENCES TO SCHEDULED AND LONGEVITY STEP RATES BUT THAT THE FEDERAL SALARY REFORM ACT OF 1962, PUBLIC LAW 87-793, APPROVED OCTOBER 11, 1962, 76 STAT. 841, 5 U.S.C. 1171 NOTE, AMENDED THE CLASSIFICATION ACT BY ELIMINATING LONGEVITY STEP INCREASES AND INCLUDING THEM IN THE REGULAR RATE RANGE. THE CIVIL SERVICE COMMISSION'S LETTER ACCOMPANYING CERTAIN REVISED REGULATIONS UNDER THE NEW PAY ACT (FPM LET. 531-17, OCTOBER 11, 1962), STATED:

LONGEVITY STEP INCREASE PROVISIONS AND OBSOLETE REFERENCES TO SCHEDULED AND LONGEVITY RATES AND INCREASES ARE ELIMINATED FROM THE REGULATIONS. ABSORPTION OF LONGEVITY RATES INTO THE REGULAR RATE RANGES HAS DONE AWAY WITH THE STATUTORY REQUIREMENTS GOVERNING INCREASES TO THE TOP THREE RATES IN GRADES GS-1 THROUGH GS-15.

YOU SAY THAT THE VETERANS ADMINISTRATION INTERPRETED THAT STATEMENT TO MEAN THAT REFERENCE TO ,SCHEDULED" RATES HAD BEEN ELIMINATED FROM SECTION 25.103 (B) OF THE FEDERAL EMPLOYEES PAY REGULATIONS (HIGHEST PREVIOUS RATE RULE), SO THAT, UPON TERMINATION OF THE SALARY RETENTION PERIODS AFTER THE EFFECTIVE DATE OF THE NEW PAY ACT, IT WAS PERMISSIBLE TO ADJUST THE EMPLOYEES' SALARIES TO ANY RATE OF THEIR RESPECTIVE GRADES WHICH DID NOT EXCEED THEIR HIGHEST PREVIOUS RATES.

SECTION 507 OF THE CLASSIFICATION ACT OF 1949, AS AMENDED, 5 U.S.C. 1107, CONTAINING THE AUTHORIZATION FOR SALARY RETENTION HERE INVOLVED, PROVIDES THAT THE RETAINED RATE SHALL CONTINUE FOR A 2-YEAR PERIOD UNLESS OR UNTIL THE EMPLOYEE BECAME ENTITLED TO A HIGHER RATE BY REASON OF THE OPERATION OF THE ACT. BECAUSE OF THE REQUIREMENT THAT THE EMPLOYEE BE GIVEN THE BENEFIT OF ANY INCREASES UNDER THE ACT WHEN A RATE HIGHER THAN THE RETAINED RATE WOULD BE PRODUCED, IT WAS INCUMBENT UPON THE AGENCY AT THE TIME OF DEMOTION TO SELECT THE RATE IN THE GRADE TO WHICH HE WAS DEMOTED AND WHICH HE WOULD HAVE RECEIVED BUT FOR THE SALARY RETENTION PROVISIONS, AND TO PROCESS ON THAT RATE ANY STEP OR LONGEVITY INCREASES WHICH ACCRUED DURING THE RETENTION PERIOD. B-146305, AUGUST 22, 1961.

IN EACH OF THE CASES PRESENTED, YOU SELECTED THE 7TH OR MAXIMUM SCHEDULED RATE OF THE GRADE TO WHICH THE EMPLOYEES WERE DEMOTED AS THE RATE TO WHICH THE RESPECTIVE SALARIES WOULD BE ADJUSTED UPON TERMINATION OF THE RETENTION PERIOD. THAT ACTION WAS IN ACCORDANCE WITH SECTION 25.103 (B) (1) OF THE PAY REGULATIONS (AS IN EFFECT PRIOR TO THE REVISION OF MAY 10, 1963) WHICH, FOR EMPLOYEES WHO ARE "TRANSFERRED, REASSIGNED, PROMOTED, REPROMOTED OR DEMOTED," AUTHORIZED A SALARY AT ANY SCHEDULED RATE OF THE GRADE WHICH DID NOT EXCEED THEIR HIGHEST PREVIOUS RATE. SUCH ACTION FIXED THE EMPLOYEES' RIGHTS UNDER THE HIGHEST PREVIOUS RATE RULE AND THE RULE WAS NOT AGAIN SUBJECT TO INVOCATION UNLESS AND UNTIL THERE OCCURRED ONE OF THE EVENTS MENTIONED IN THE REGULATIONS FOR APPLYING THE RULE. B-151298, MAY 13, 1963. THE CHANGE IN THE LAW PREVIOUSLY MENTIONED ABOLISHING THE DISTINCTION BETWEEN SCHEDULED RATES AND LONGEVITY RATES DID NOT CONSTITUTE ANY AUTHORITY FOR RESELECTING A NEW RATE UNDER THE RULE. FURTHERMORE, THE STATEMENT IN THE EXCERPT FROM FPM LET. 531-17, QUOTED ABOVE, THAT LONGEVITY INCREASE PROVISIONS AND REFERENCES TO SCHEDULED AND LONGEVITY RATES AND INCREASES ARE "ELIMINATED FROM THE REGULATIONS" LOGICALLY HAD REFERENCE ONLY TO THE REVISED REGULATIONS TRANSMITTED WITH THE LETTER, HAVING TO DO WITH MANDATORY PROMOTIONS IN GRADE GS-3 AND WITHIN-GRADE INCREASES, AND NOT TO ANY OTHER PAY REGULATION WHICH MIGHT BE SUBJECT TO REVISION BY THE CIVIL SERVICE COMMISSION. THE COMMISSION'S REVISED SALARY RETENTION REGULATIONS LAWFULLY COULD HAVE BEEN MADE PROSPECTIVELY EFFECTIVE, ONLY. IN THAT CONNECTION THE TRANSMITTING FPM LET. 531-27 EXPRESSLY STATED AT PAGE 2 THAT:

THE SELECTION OF A RATE AT THE TIME OF THE DEMOTION CANNOT BE CHANGED AT A LATER DATE IN THE ABSENCE OF SOME PERSONNEL OR POSITION CHANGE. FOR EXAMPLE, PRIOR TO THE FEDERAL SALARY REFORM ACT LONGEVITY RATES WERE NOT AVAILABLE UNLESS THE EMPLOYEE HAD PREVIOUSLY EARNED A LONGEVITY RATE. EVEN THOUGH THE HIGHER RATES ARE NOW AVAILABLE AS A RESULT OF THE ELIMINATION OF LONGEVITY RATES AS SUCH, AGENCIES MAY NOT CHANGE THE RATE WHICH WAS SELECTED AT THE EMPLOYEE'S DEMOTION.

IN SPECIFIC ANSWER TO YOUR LETTER, WE MUST ADVISE THAT WE ARE REQUIRED TO OBJECT TO THE RATES TO WHICH THE SUBJECT EMPLOYEES' SALARIES WERE ADJUSTED. THEREFORE, APPROPRIATE ACTION SHOULD BE TAKEN TO ADJUST THE RATES TO STEP 7 OF THEIR RESPECTIVE GRADES, PLUS SUCH OTHER WITHIN-GRADE INCREASES BASED UPON CREDITABLE SERVICE WITHOUT AN EQUIVALENT INCREASE IN COMPENSATION AS MAY BE WARRANTED UNDER APPLICABLE LAW AND REGULATIONS.