Premium Pay and Pay Limits for Some Federal Employees

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By on March 30, 2017 in Pay & Benefits with 0 Comments

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Title 5 of the United States Code, which provides the statutory basis for compensation for most Federal employees, contains one provision that limits the amount of premium pay that an employee can earn, and a second provision that limits the total amount of compensation an employee can earn in a calendar year.

Two pieces of guidance recently issued by the U.S. Office of Personnel Management (OPM), the personnel policy agency for the Federal government, remind us about these limits and how they affect a few specific groups of employees.

The first was a Compensation Policy Memorandum (CPM 2017-04, 13 March 2017), and the second was a reissue of Guidance for Administrative Furloughs (March 2017). This article will look at the impacts each one of these pieces of guidance have on the specified employees.

Compensation Policy Memorandum

The CPM 2017-04 summarized several provisions that were established by or extended by the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017 (PL 114-328, 23 December 2016). I want to focus on two of these provisions that affect a group of employees stationed in Japan, and another group of employees stationed in the Middle East and North Africa.

The first group is temporarily stationed in Japan to perform work aboard, or dockside in direct support of, the nuclear aircraft carrier that is forward deployed in Japan. Such employees would be FLSA Nonexempt if they were stationed in the United States.

You may know that the FLSA or Fair Labor Standards Act applies only to employees who are stationed within the boundaries of the U.S. and its possessions. When such employees are stationed in a foreign location, like this group who are stationed in Japan, the FLSA no longer applies to them. As a result, the employees become eligible for overtime under the FEPA or Federal Employees Pay Act (aka Title 5).

But there is a catch with FEPA overtime: it is limited to 1 ½ times the rate paid to a GS-10 step 1. This portion of the 2017 NDAA extends a provision first enacted in 2011 that says such employees who directly support the nuclear aircraft carrier in Japan will be paid 1 ½ times their real basic rate of pay for their overtime without any limits. Thus, the FEPA limit on the overtime rate will not apply to this particular group of employees. The removal of the FEPA limit on the overtime rate applies only to this group of employees in Japan, and remains in effect until 30 September 2018.

The second group consists of those temporarily stationed in the area of responsibility of the United States Central Command (CENTCOM) or the area formerly the responsibility of CENTCOM but that has been moved to the area of responsibility of the Commander of the United States Africa Command (AFRICOM).

To be covered by this provision, the employee must be performing work in direct support of, or directly related to, a military operation or an operation in response to a national emergency declared by the President.

“Military operation” is a Department of Defense (DOD) term of art, defined in the DOD Dictionary of Military and Associated Terms. These countries are mostly in the Middle East and North Africa, and include employees assigned to Operation Freedom’s Sentinel in Afghanistan and Operation Inherent Resolve in Iraq and Syria.

For this group of employees, this provision waives the usual biweekly and annual premium pay cap, and replaces it through calendar year 2017 with an amount equal to the established annual salary rate of the Vice President, which is $240,100 for 2017. Thus, this higher limit on basic pay and premium pay will apply to those employees stationed in the specified areas for at least 42 consecutive days and meet the other requirements outlined in the attachment to this CPM 2017-04.

Guidance for Administrative Furloughs

In the Guidance for Administrative Furloughs reissued by OPM with an eye to the possibility that the debt limit may not be raised in time to prevent a shutdown of Federal government functions and other possible contingencies, another issue related to pay limits is discussed.

This guidance deals with a rather esoteric part of the provisions that limit basic pay and premium pay in a biweekly pay period. The guidance applies only to employees who receive certain kinds of premium pay, i.e., those who receive Law Enforcement Availability Pay (LEAP), administratively uncontrollable overtime (AUO), standby duty premium pay, and regularly scheduled firefighter overtime pay. The regulations prohibit an employee from earning basic pay and overtime pay in a biweekly pay period that is more than the greater of Executive Level V (EX-V) or the basic rate for GS-15 step 10. The guidance helpfully tells us that for all locality pay areas in the United States, the GS-15 step 10 rate is higher than the EX-V rate and, therefore, is the effective cap.

The guidance helpfully tells us that for all locality pay areas in the United States, the GS-15 step 10 rate is higher than the EX-V rate and, therefore, is the effective cap. Many employees receiving these four different kinds of premium pay have their pay limited in most biweekly pay periods because their basic pay plus one of these special forms of premium pay put them over the cap.

The Guidance for Administrative Furloughs reminds us that if this special group of employees is furloughed for part of a biweekly pay period, their basic pay will be reduced because the number of days they would be working in a biweekly pay period would be reduced. If this occurs, then the difference between their basic pay and the premium pay cap would increase.

This larger difference between their reduced basic pay and the premium pay cap may enable the employees to receive a larger percentage of one of these four forms of premium pay than they ordinarily would.

Although the pay cap cannot be breached by this group of employees, this particular quirk in how the law is applied may provide a larger percentage of the employee’s special form of premium pay than she or he might get during a biweekly pay period during which she or he is not furloughed.

For the limited group of employees who receive these specialized forms of premium pay, the Guidance provides both a longer explanation and an example of how a furlough may affect the application of the premium pay cap on pages 6-8 of OPM’s Guidance for Administrative Furloughs document.

It is hoped that the payroll system which cranks out your biweekly pay check (or electronic funds transfer) every two weeks will know how to deal with these issues if you are one of the affected employees. However, I hope this article helps to make these rather esoteric and highly specific provisions that apply to limited numbers of employees a little bit clearer even if you are not directly affected by them.

Wayne Coleman is a federal pay expert available to help your agency avoid premium pay claims through on-site training. Contact him for more information.

© 2019 Wayne Coleman. All rights reserved. This article may not be reproduced without express written consent from Wayne Coleman.

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About the Author

Wayne Coleman is a compensation consultant whose career at various Federal agencies and in private practice spans almost 40 years. During this time he has written about and provided training on overtime and premium pay, on the principles of FLSA coverage and exemption, and on related Federal compensation issues. Wayne is available to help your agency avoid premium pay claims through consulting services and training. You can contact him at [email protected].

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