President Bush on Monday signed legislation granting Defense Department officials the authority to begin setting up new rules governing hiring, pay and promotions for 700,000 civilian employees.

Details of what the new Defense personnel system will look like were not specified in the bill. Defense Secretary Donald Rumsfeld must work with Office of Personnel Management Director Kay Coles James to create the new system. Defense can move forward immediately in making changes affecting up to 300,000 workers, but must have an OPM-approved performance appraisal system in place before extending the new rules to all Defense civilians.

Similar to the process underway at the Homeland Security Department, Rumsfeld and James must consult federal labor union representatives when creating the new system.

Under the new system, Defense workers can still unionize, but the law allows Rumsfeld to limit his consultations on labor matters to the national offices of the various organizations representing Defense employees.

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

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

Union leaders and several key House Democrats, including Minority Whip Steny Hoyer, D-Md., blasted the personnel reforms, claiming they were too ambiguous, too overreaching and trampled on the rights of civilian employees. But House Government Reform Committee Chairman Tom Davis, R-Va., said the bill would allow the Defense Department "to shed the shackles of its 50-year-old civil service structure."