November 7, 2003

By Shawn Zeller
szeller@govexec.com

Legislation granting Defense Secretary Donald Rumsfeld authority to set up new rules governing hiring, pay and promotions of civilian employees cleared a major hurdle on Friday when House legislators passed the fiscal 2004 defense authorization bill. The Senate is expected to follow suit next week.

With the Homeland Security Department also set to put in place a new personnel system, the authorization bill's approval leaves less than a quarter of government workers under the current civil service system, and more agencies are expected to request new personnel flexibilities shortly. Created more than a hundred years ago to eliminate rampant patronage, the civil service system is now viewed by most government personnel experts as out-of-step with current management needs. In proposing the changes at Defense, Rumsfeld argued that the old civil service rules make it too difficult for government managers to hire and promote top workers, and to fire poor performers.

The bill passed Friday was the product of months of negotiating between House GOP leaders and Senate Governmental Affairs Committee Chairman Susan Collins, R-Maine, over exactly how much latitude to grant Rumsfeld in designing a new civilian personnel system. The House passed legislation last May that was viewed as far more generous to Rumsfeld than legislation passed by Collins' committee over the summer, which placed more restrictions on Rumsfeld's ability to make changes in the personnel structure. The bill passed Friday is a compromise, allowing Rumsfeld to move ahead with the changes quickly as House legislators wanted, but limiting his authority to make changes, as the Senate bill had prescribed.

Several House Democrats spoke out against the civilian personnel reforms, claiming they were too ambiguous, too overreaching and trampled on the rights of civilian employees. Among the critics was House Minority Whip Steny Hoyer, D-Md. "Among its most egregious provisions, the legislation effectively grants the secretary of Defense the authority to strip federal workers of their collective bargaining rights, deny employees their right to appeal unfair treatment, and grant supervisors complete discretion in setting salaries and determining raises," Hoyer said.

Union representatives also blasted the bill. "Under the guise of flexibility, employee union rights were gutted," said American Federation of Government Employees President John Gage. "This measure was passed in the name of homeland security but instead will only serve to pave the way for a patronage system where hard work and merit are not rewarded but political loyalty is paramount."

But House Government Reform Committee Chairman Tom Davis, R-Va., said that the bill would allow the Defense Department "to shed the shackles of its 50-year-old civil service structure." The new authorities granted by Congress are "about dropping old thinking, old rules, old relationships--while preserving merit principles, respecting the contribution of employee representatives, and protecting veterans' preferences," he added.

Still, many of the details of what a new Defense personnel system will look like were not prescribed in the bill, which requires that Rumsfeld work with Office of Personnel Management Director Kay Coles James to create the new system, a process that should take up much of next year. The bill does state that Defense workers have a right to unionize, and it requires that Rumsfeld and James consult union advocates in creating the new system, but it ultimately gives Rumsfeld and James full authority to make the changes they see fit.

The bill also allows Rumsfeld to limit his consultations to the national offices of the various unions representing Defense employees. Under the current system, Defense management must negotiate with more than 1,300 local union offices.

While allowing Rumsfeld and James to set new rules for classifying employees and setting pay rates, the bill also requires that the overall amount of pay allotted for Defense employees not decline from what it would have been under the old General Schedule pay system, at least until the end of 2008.

Under the bill, Rumsfeld may establish an internal system for adjudicating employee appeals of management disciplinary decisions. Employees currently have the right to appeal disciplinary actions against them to the Merit Systems Protection Board, an independent federal agency. If Rumsfeld opts to create an in-house appeals system at Defense, the bill allows employees to appeal decisions of the in-house arbiter to the MSPB in Washington, and in turn, appeal decisions of the MSPB to the federal courts.

That provision is a defeat for the MSPB Professional Association, which represents administrative judges at the agency and had fought any challenge to their jurisdiction. The association argued that an in-house system would not be credible with Defense employees, and that the secondary appeal to the MSPB would only serve as a rubber stamp for the in-house system. That's because, under the bill, appeals would go straight to the three-member MSPB in Washington, not to an MSPB administrative judge. The three-member panel in Washington is made up of political appointees, who normally hear appeals of cases decided by the MSPB's administrative judges. However, the bill still stops short of what Rumsfeld proposed. The Defense Secretary wanted Congress to allow Defense to adjudicate appeals in-house, with no third-party review.

Other sections of the legislation allow the Defense Department to offer early retirement incentives to up to 25,000 employees a year; to tender special pay rates to hire up to 2,500 "highly qualified experts" each year; to rehire Defense retirees without reducing the retirees' annuities; and to raise pay rates for members of the Senior Executive Service up to the level of the vice president's total annual compensation.