CPM 2009-03 Attachment 2

U.S. Office of Personnel Management Guidance on Implementing Office of Legal Counsel Opinion

Background

On October 17, 2006, Congress amended 5 U.S.C. 5534a to provide that a member of a uniformed service who is appointed to a civilian position in the Federal Government while on terminal leave pending military retirement "is entitled to accrue annual leave with pay in the manner specified in section 6303(a) of this title for a retired member of the uniformed service." (See 5 U.S.C. 5534a as amended by Public Law 109-364, October 17, 2006.) The U.S. Office of Personnel Management (OPM) provided guidance to agencies on November 2, 2006, on implementing this legislative change. (See CPM-2006-11, November 3, 2006, at http://www.opm.gov/oca/compmemo/2006/2006-11.asp.) The statutory change was prospective; it did not address how to determine the leave accrual rate for employees hired while on terminal leave before October 17, 2006.

Under the law in effect prior to October 17, 2006, OPM advised agencies that an individual appointed to a Federal civilian position while on terminal leave pending military retirement was not a retired member of the uniformed services and was entitled to credit for annual leave accrual purposes for all of his or her military service performed up to the date of appointment. OPM took the position that once an employee received this service credit, it could not be taken away, i.e., it remained creditable unless he or she separated from civilian service.

The Department of Defense requested that the Office of Legal Counsel (OLC) in the Department of Justice provide a legal opinion regarding the annual leave entitlements of individuals appointed to a Federal civilian position while on terminal leave pending military retirement under the law in effect prior to October 17, 2006. On October 16, 2007, the OLC issued a legal opinion (Attachment 1), which supersedes previous OPM guidance.

OLC Opinion

The OLC opinion provides that under the law in effect prior to October 17, 2006, any current or former employee who was a member of the uniformed services and appointed to a Federal civilian position before October 17, 2006, while on terminal leave pending retirement from the uniformed service, was entitled to credit for all of his or her years of active military service for the purpose of determining his or her annual leave accrual rate, but only during that period of terminal leave. Once the employee became a retired member of a uniformed service, military service ceased to be creditable for annual leave accrual purposes unless the service qualified under the special circumstances described in 5 U.S.C. 6303(a)(A)-(C) or (e). Thus, the employee's annual leave accrual rate entitlement should have been re-determined effective on the first day of the first pay period occurring after the day on which the employee became a retired member of a uniformed service.

Agency Corrective Actions

The nature of the corrective actions that an agency must take to implement the OLC opinion will depend on its past practices with respect to employees appointed to a Federal civilian position while on military terminal leave. Employing agencies are responsible for making corrections to current employees who are impacted by the OLC opinion, in addition to those former employees who have separated or retired from Federal service. Affected employees will fall into one of two categories: Category 1 consists of employees who are entitled to additional annual leave accrual for a temporary period because the agency did not provide military service credit for employees in terminal leave status pending military retirement at the time of the civilian appointment. Category 2 consists of employees who received excess annual leave accrual because the agency correctly provided military service credit for employees in terminal leave status pending military retirement at the time of the civilian appointment, but then did not reduce creditable service and the annual leave accrual rate after the employee retired from military service (at which point the employee became a retired member of a uniformed service and lost credit for military service in determining the annual leave accrual rate).

Category 1 - Corrections for Employees Entitled to Additional Annual Leave

If an agency determines that a current employee is entitled to additional hours of annual leave for each full pay period the employee worked while on terminal leave pending retirement, the employee's current leave balance must be adjusted to reflect the additional annual leave hours the individual should have earned during the terminal leave period. If this additional leave credit results in an employee's leave balance being in excess of the applicable annual leave ceiling at the end of the leave year, the additional leave must be placed in a restored leave account as described in 5 CFR 550.805(g). As explained in the later section entitled "Documentation of Corrected Service Computation Dates," an agency must document the correction of an employee's service computation dates using Standard Form 50, Notification of Personnel Action. These corrections constitute the documented basis for the correction of an employee's annual leave accrual rate.

If an agency determines that an affected employee separated from Federal service and received a lump-sum payment for annual leave, the lump-sum payment must be computed to reflect the additional amount that would have been paid to the employee had these additional hours been included in the lump-sum payment.

The Government's obligation to correct an error resulting in an employee's entitlement to additional pay (including leave) is subject to the 6-year statute of limitations. (See the statute of limitations established by the Barring Act and codified at 31 U.S.C. 3702(b)(1) and the parallel statute of limitations established by the Back Pay Act and codified at 5 U.S.C. 5596(b)(4). See also OPM regulations at 5 CFR 178.104 and 550.804(e)(2).) Accordingly, additional pay or leave may not be authorized for a time period more than 6 years before the date the employee filed a timely and proper claim or the date of the administrative determination that the employee is entitled to additional pay or leave, whichever date is earlier. Questions regarding the application of the 6-year statute of limitations should be referred to each agency's Office of General Counsel (or equivalent).

Category 2 - Corrections for Employees Who Received Excess Annual Leave Accrual

If an agency determines that a current or former employee received excess annual leave accrual because his or her accrual rate was not properly reduced upon military retirement (to reflect the fact that certain military service ceased to be creditable), it must take the following actions, as appropriate, for each affected employee:

• Determine the correct service computation date (SCD) (reflecting only service that was properly creditable for annual leave accrual purposes) that should have been applied after the employee's period of terminal leave and document the SCD correction using Standard Form 50, Notification of Personnel Action, as described in the later section entitled "Documentation of Corrected Service Computation Dates."
• Correct the current annual leave accrual rate based on the corrected SCD.
• Seek recovery of the excess accrual of annual leave for past periods unless a waiver is granted.

With regard to the reconstruction of leave records and the collection of erroneously accrued leave from current leave balances consistent with the requirements of the OLC opinion, an agency's decision to waive recovery of excess leave pursuant to the waiver authority under 5 U.S.C. 5584, as delegated to agencies by the Office of Management and Budget (OMB), is an appropriate use of the waiver authority. See OMB Memo "Determination with Respect to Transfer of Functions Pursuant to Public Law 104-316" (December 17, 1996). Under 5 U.S.C. 5584, a waiver decision is based on a finding that collection would be against equity and good conscience and not in the best interests of the United States.

This waiver encompasses all excess leave that was credited to the employee's annual leave balance under this set of circumstances. Agencies do not need to reconstruct the employee's leave records on a leave year-by-leave year basis to determine the amount of excess annual leave: (1) was used by the employee, (2) was paid to the employee as a lump sum, or (3) remains in the employee's current annual leave balance.

Based on the unique set of circumstances surrounding military terminal leave practices and the onerous and costly implementation requirements, it is appropriate as a matter of policy for each agency to consider using its delegated waiver authority to waive the recovery of all excess leave resulting from implementation of the OLC opinion, including leave from employees' positive leave balances, should the agency determine that the standards for waiver are met. Under these circumstances and terms, waiver of recovery of excess leave from employees' positive leave balances would be a special exception to the usual requirements and would not become standard practice for future corrective actions (i.e., for waiver of claims for erroneously accrued leave which are unrelated to recovery of excess leave generated by compliance with the requirements of the OLC opinion).

Documentation of Corrected Service Computation Dates

In order to retroactively correct an employee's annual leave accrual rate, an agency must document a correction of the employee's service computation date for leave purposes (SCD-Leave). Correction of the SCD-Leave requires processing a Standard Form 50 (SF-50), Notification of Personnel Action, which will correct the information shown in Block 31, consistent with the instructions below. The guidance below on processing the SF-50 is also being sent to agencies' Human Resources Office.

Category 1 - Employees Entitled to Additional Annual Leave

For any employee entitled to additional annual leave (because he or she was not credited with military service in determining the accrual rate during the period of terminal leave pending military retirement), agencies must process two Nature of Actions "882/Chg in SCD" SF-50s as explained below.

The effective date of the first SF-50 is the date the employee was appointed at the agency, and the corrected service credit computation date shown in Block 31 will be inclusive of all active duty military service prior to the date of the appointment. The corrected date shown in Block 31 will be the basis for higher leave accrual from the date of appointment at the agency through the end of the pay period in which the employee separated from military service, thus becoming a retired member of a uniformed service. Additionally, existing remark code B35 must be shown on the SF-50.

The effective date of the second SF-50 is the first day of the first pay period occurring after the day on which the employee separated from military service thus becoming a retired member of a uniformed service. Since we are dealing with employees in terminal leave status, the military separation date is the last day of the employee's terminal leave. In regard to credit for active duty military service, the corrected date shown in Block 31 will reflect the fact that military service is not creditable except as allowed under 5 U.S.C. 6303(a)(A)-(C) or (e). If an employee had no other prior creditable service, the corrected date in Block 31 will be the effective date of the employee's civilian appointment made while the employee was in terminal leave status. This second SF-50 will be the basis for reducing the temporarily enhanced leave accrual rate which was provided under the first SF-50. Additionally, new remark code B30 must be shown on the SF-50. Remark B30 states: "Changes SCD-Leave from (date) upon employee's retirement from the uniformed service."

Category 2- Employees Who Received Excess Annual Leave Accrual

For any employee who received excess annual leave accrual (because his or her accrual rate was not re-determined after completion of a terminal leave period pending military retirement), agencies must process an SF-50 with an effective date of the first day of the first pay period occurring after the day on which the employee separated from military service. The corrected service computation date shown in Block 31 will reflect the fact that military service is not creditable except as allowed under 5 U.S.C. 6303(a)(A)-(C) or (e). This document will be the basis for correcting the employee's leave accrual rate. Additionally, assuming the agency also approves a waiver of recovery of all excess leave, new remark code B37 must be shown on the SF-50. Remark B37 states: "Changes SCD-Leave from (date) upon employee's retirement from the uniformed service. Recovery of excess annual leave accrued in the past based on the erroneous SCD-Leave has been waived. If required by the corrected SCD-Leave, employee's current annual leave accrual rate will be corrected prospectively."

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