Lawyers, Unions, Pay and Federal Employees: DoD Moving Forward Despite Obstacles

The Department of Defense is moving ahead with pay-for-performance for another 66,000 employees beginining in October.

The National Security Personnel System (NSPS) has been getting considerable press recently–most of it proclaiming the program is going down in flames because of successful legal challenges brought into federal court by federal employee unions.

But with the hype surrounding the losses in court, some readers may have missed a more important feature of the program in the Department of Defense: pay-for-performance is still moving forward in the agency. And, when the Department of Defense starts implementing a new program, it is usually one that will impact a large number of federal employees.

Pay-for-performance will be a big deal for a large number of federal employees. While it is just starting, the first 11,000 DoD employees were brought into the new pay system in April. The first group has been given a title that sounds like it came from a science fiction movie: "Spiral 1.1."

The agency apparently likes the name as "Spiral 1.2" is now moving forward. Defense is moving another 66,000 employees into the new pay system starting in October. Spiral 1.2 affects a variety of organizations throughout the Department of Defense. (For a listing of the organizations impacted, download this Spiral 1.2 file.) Ultimately, the system will apply to more than 650,000 DoD civilian employees if the agency is able to move forward as it would like to do. Spiral 1.2 will be implemented over a four-month period, through January 2007.

"NSPS is critical to the department’s transformation to a results-oriented, mission-focused culture," according to Michael Dominguez, principal deputy assistant secretary of defense for personnel and readiness. He states in an agency press release that "The performance-based system will create an environment where our employees will be focused on outcomes that support our national security mission, and they will be rewarded for the results."

But what about the losses in court everyone has been reading about? Didn’t some judge rule that the new system was illegal or unfair or contrary to law in some way?

Yes, that did happen. And it has happened for DoD and for the Department of Homeland Security. (See Court Strikes Down Labor Relations Portion of New DHS System.) But look beyond the hoopla and you will find out that the portion of NSPS that was shot down in court was not the pay-for-performance system. Federal employee unions were successful in creating big problems for the labor relations portion of the system. Pay-for-performance will ultimately be impacted by the ability of employees to file appeals or the ability of unions to negotiate for employees that are represented.

As we noted previously, the labor relations setbacks in court are significant. It is conceivable that the Departments of Defense and Homeland Security may wind up bargaining on pay for employees in bargaining units under a new pay system. (See Is Pay Bargaining Around the Corner in DHS and DoD?) The agency anticipates another ruling on its appeal of an initial court decision before the end of the year.

Under the labor relations system as proposed for DoD, the ability of unions to bargain and the ability of employees to appeal decisions would be much more restricted than under the provisions of the current labor relations law as it has been interpreted and applied since 1978. The proposed system more closely resembled the labor relations structure under Presidents Kennedy and Nixon in the 1960’s (See Labor Relations in Government: Back to the Future?)

NSPS, in its entirety, is one of Defense Secretary Donald H. Rumsfeld’s key initiatives. Agency officials wanted a system to enable DoD to be able to make and implement decisions quickly rather than working within the current labor and pay structures in place for the civil service. DoD officials refer to the current structure as an outdated, 50-year-old civilian personnel management system that rewards employees for length of service rather than performance.

The new pay system has been in development since 2003 and replaces the current general-schedule personnel system with broad pay bands.

At a minimum, without a new labor relations system in place, the agency will find itself spending considerable time and effort in litigating a wide variety of topics and then bargaining on the implemention of a new system. Under the current labor relations structure, negotiating and litigating the implementation of a new system could take a few years.

So far at least, the employees moving into the pay-for-performance system are not in bargaining units. In other words, they are not represented by a union. The labor relations portion of the system does not apply to these federal workers in any event.

DoD says that the transition for the first group went smoothly. DoD says there was an accuracy rate of 99.9 percent in completing affected employees’ personnel actions and no glitches in processing their pay through the Defense Finance and Accounting Service. "We are pleased with what we are seeing thus far, at least with the technical aspects of the conversion," according to Mary Lacey, the NSPS program executive officer.

Lacey notes that the affected components will have the discretion to convert their workforce any time between October 2006 and January 2007. "Training is critical to the successful transition to NSPS," Lacey said. "We want to give organizations sufficient time to train employees, do it right and implement when they are ready."

Employees being converted to the new system will receive new performance plans that linked to their organization’s mission and strategic goals. They also will be converted to pay bands that replace the grade ratings under the General Schedule.

No employee will lose any pay–at least during the conversion to NSPS. In fact, most employees will receive an an increase in pay because of the time already earned toward their next within-grade increase.

The performance appraisal cycle for Spiral 1.2 employees will begin on the actual day of their conversion to NSPS and continue through Sept. 30, 2007. These employees will receive their first performance pay increase in January 2008.

Those first 77,000 DoD employees are now moving into DoD’s version of the 21st century pay system. The DoD employees in bargaining units may have to wait awhile.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47