OPM proposes new limits on back pay for federal employees, unions

The Office of Personnel Management wants to limit the kinds of scenarios where federal employees can receive back pay — and exclude unions who represent their members in those cases from receiving attorney fees.

In new draft regulations published Wednesday, OPM is reinterpreting its own 39-year-old reading of the Back Pay Act and subsequent revisions from the Civil Service Reform Act (CSRA) of 1978. OPM hasn’t updated its regulations on back pay for federal employees since 1981.

The original 1966 law provides back pay to federal employees who undergo an “unjustified or unwarranted personnel action.” The Civil Service Reform Act later clarified the kinds of personnel actions for which employees may be eligible for back pay to include actions that have “resulted in the withdrawal or reduction of all or any part of the pay, allowance or differentials of the employee.”

Under that definition, federal employees for decades have sought back pay for disputes over improper performance awards, retirement annuities, overtime and other “debt,” such as a denial of leave or official time.

But under OPM’s new proposed regulations, federal employees could no longer seek back pay for those situations.

Instead, federal employees would only be eligible for back pay if they’re involved in one of a few specific personnel actions, which include a firing, suspension, demotion, change in grade or step, or a prohibited personnel action, OPM said.

In proposing these changes, OPM revisited past Supreme Court law and other litigation involving the Back Pay Act and came to a new conclusion.

“Based upon a review of these decisions, the text and legislative history of the Back Pay Act, and Supreme Court precedent, the regulatory definition of ‘unjustified or unwarranted personnel action’ now appears to have exceeded OPM’s statutory authority,” the agency wrote. “The text of the Back Pay Act only mentions personnel actions, which Congress expressly understood to mean changes in grade, suspensions, removals or separations, reassignments or changes to full- or part-time work. In the CSRA Congress expanded the definition of ‘personnel action’ but only with regard to defining prohibited personnel practices, such as coercing political activities or retaliation against a whistleblower.”

OPM said it also has policy concerns with its existing back pay regulations. It cited an example involving an employee at the Department of Veterans Affairs. An arbitrator ruled VA should have given the employee a $1,000 performance award. It also ordered VA to pay $30,000 in attorney fees under the Back Pay Act.

“Requiring agencies to pay tens of thousands of dollars in attorney fees in litigation over much smaller performance awards wastes agency resources,” OPM said. “It also encourages agencies to broadly distribute performance awards, to avoid litigation. This undermines the purpose of performance awards, which is to recognize, reward and incentivize high performance.”

If OPM finalizes these draft regulations, employees who do challenge a performance award or an overtime determination, for example, will have to conduct a cost-benefit analysis to determine whether it’s worth the effort and the expense, said Stephanie Rapp-Tully, a partner with Tully-Rinckey’s federal employment practice.

Hiring an attorney to appeal the denial of $1,000 performance award may no longer be worth it if the employee prevails but won’t receive attorney fees.

“This would have a potential chilling impact on employees and their perspective in terms of the options afforded to them in seeking legal counsel, whether it be by a union or seeking private counsel in terms of these other smaller areas that are now being excluded,” Rapp-Tully said in an interview.

Unions no longer eligible for attorney fees

Perhaps most notably, OPM’s proposed changes would also exclude federal employee unions and other labor organizations from receiving attorney fees under the Back Pay Act.

Neither OPM nor Congress intended the Back Pay Act to extend attorney fees to labor organizations, the agency argued.

“OPM recognizes that the courts have construed the Back Pay Act to authorize attorney fee awards to labor organizations, and not just the employee or employees they represent. As discussed, this judicial holding rests on a misinterpretation of OPM regulations,” the agency wrote.

The National Treasury Employees Union said OPM’s changes would “unduly narrow” the scope of the Back Pay Act for the federal workforce.

“These ill-advised changes — yet another baseless attack from this administration on federal employees and the organizations that represent them — would weaken the statutory mechanism that Congress created,” Tony Reardon, NTEU’s national president, said in a statement to Federal News Network. 

NTEU said it plans to submit formal comments opposing the proposed regulation. 

OPM’s proposed changes, if they’re finalized, may have an especially significant impact on employee unions, said Rapp-Tully.

“It would be all loss in terms of financials for unions to help their employees defend against these actions,” she said. “There would be no compensat[ion] for that work. Dues alone will not cover these types of litigations. There’s even a question of if a union were to get outside counsel involved, would they be able to recover those fees? It’s going to limit what the unions can do, from even just a practical standpoint, because they won’t have the resources.”

The Trump administration has already taken several steps aimed at limiting the financial utility of federal employee unions in recent years. The 2018 executive orders on official time and collective bargaining, for example, forced some unions to pay for government-owned office space. Those orders have also restricted official time use among union representatives, prompting some long-time labor officials to retire and conduct union business on a volunteer or paid basis.

The timing of OPM’s proposed back pay changes is also noteworthy, Rapp-Tully said. Again, OPM hasn’t changed its own interpretation of the Back Pay Act in nearly 40 years, which begs the question: Why now?

Members of the public have until Nov. 6 — after the presidential election — to comment on OPM’s draft regulations.

“There’s a chance that if Vice President [Joe] Biden is elected that this is almost a non-issue, should precedent hold up,” Rapp-Tully said. “Usually administrations that are outgoing don’t pass regulations or rules when a new administration is coming in.”

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