Prevailing Rate Systems; Change in Criteria for Defining Appropriated Fund Federal Wage System Wage Areas

<RULE> OFFICE OF PERSONNEL MANAGEMENT <CFR>5 CFR Part 532</CFR> <DEPDOC>[Docket ID: OPM-2024-0016]</DEPDOC> <RIN>RIN 3206-AO69</RIN> <SUBJECT>Prevailing Rate Systems; Change in Criteria for Defining Appropriated Fund Federal Wage System Wage Areas</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Office of Personnel Management. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Office of Personnel Management (OPM) is issuing a final rule to change the regulatory criteria used to define Federal Wage System (FWS) wage area boundaries and make changes in certain wage areas. The purpose of this change, which will affect around ten percent of the FWS workforce, is to make the FWS wage area criteria more similar to the General Schedule (GS) locality pay area criteria. This change is based on a December 2023 majority recommendation of the Federal Prevailing Rate Advisory Committee (FPRAC), the statutory national-level labor-management committee that advises OPM on the administration of the FWS. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> <E T="03">Effective date:</E> This rule is effective October 1, 2025. <E T="03">Applicability date:</E> Changes to wage schedules resulting from the revised wage areas of application in appendix C to subpart B of 5 CFR part 532 apply on the first day of the first applicable pay period beginning on or after October 1, 2025. Changes to wage survey areas apply at various times beginning on or after October 1, 2025, based on the annual schedule of wage surveys, as listed in appendix A to subpart B of 5 CFR part 532, and with the timing of survey area expansions for affected wage areas as noted in the wage area listings in appendix C to subpart B of 5 CFR part 532. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Ana Paunoiu, by telephone at (202) 606-2858 or by email at <E T="03">paypolicy@opm.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Overview</HD> There are two major job classification and pay systems in use by the Federal Government: the GS and the FWS. The GS covers around 1.5 million employees, and the FWS covers around 200,000 employees with around 170,000 in the appropriated fund system. On October 11, 2024, OPM issued a proposed rule (89 FR 82874) to change the regulatory criteria used to define FWS wage area boundaries for the appropriated fund system and make changes in certain wage areas. Specifically, OPM proposed to amend 5 CFR 532.211 to make the criteria OPM uses to define the geographic boundaries of FWS wage areas more similar to the GS locality pay area criteria and to define revised wage area boundaries in accordance with those revised criteria. The 60-day comment period ended on December 10, 2024. OPM received 585 comments from Members of Congress, labor organizations, several hundred Federal employees, and one agency. Public comments, with one exception, strongly supported changing the regulatory criteria in 5 CFR 532.211. After consideration of public comments about the proposed rule, OPM is issuing a final rule that amends the regulatory criteria in 5 CFR 532.211, pursuant to its authority to issue regulations governing the FWS in 5 U.S.C. chapter 53, subchapter IV. In general, this final rule implements changes to certain wage areas, as identified in the proposed rule. This final rule also reflects a few corrections, which are described in detail after the discussion of comments, and it makes nonsubstantive changes to the authority citations for part 532 by amending the existing authority citations to comply with 1 CFR part 21, subpart B. <HD SOURCE="HD1">Background</HD> During the period GS locality pay was being introduced in the early 1990s, FPRAC  <SU>1</SU> <FTREF/> examined the differences in criteria between the GS and FWS, and by consensus, recommended that OPM not change the FWS criteria just for the sake of changing the criteria to make the systems look more similar. Locality pay for GS employees was a new and unproven concept at that time. Since then, however, the differences in geographic pay area boundaries for the GS and FWS have increasingly raised concerns among employees, their unions, local management officials, and consequently Members of Congress. <FTNT> <SU>1</SU>  The Federal Prevailing Rate Advisory Committee is composed of a Chair, five representatives from labor unions holding exclusive bargaining rights for Federal prevailing rate employees, and five representatives from Federal agencies. Entitlement to membership on the Committee is provided for in 5 U.S.C. 5347. The Committee's primary responsibility is to review the Prevailing Rate System and other matters pertinent to establishing prevailing rates under subchapter IV, chapter 53, 5 U.S.C., as amended, and from time to time advise the Director of OPM on the Governmentwide administration of the pay system for blue-collar Federal employees. Transcripts of FPRAC meetings can be found under the Federal Wage System section of OPM's website ( <E T="03">https://www.opm.gov/policy-data-oversight/pay-leave/pay-systems/federal-wage-system/#url=FPRAC</E> ). </FTNT> As stated in the proposed rule, since around 2006 the labor and employing agency representative members of FPRAC have discussed the possibility of making FWS wage areas more similar to GS locality pay areas, but there was not a consensus for change. The labor organization members expressed views that the difference in geographic treatment between the FWS and GS systems is inequitable. The management members expressed views that the differences best meet the intent of the relevant laws that established the two systems. In House Report 117-79  <SU>2</SU> <FTREF/> accompanying the National Defense Authorization Act for Fiscal Year (FY) 2022, Congress encouraged OPM “to explore limiting the number of local wage areas defined within a GS Pay Locality to a single wage area.” Given the magnitude of the potential change in policy, FPRAC established a labor-management working group to study various issues concerning the FWS, including options on how to make the geographic wage area boundaries of FWS and GS pay areas more similar. At its 649th meeting, on December 21, 2023, based on working group discussions, FPRAC recommended by a 9 to 1 majority vote that OPM revise the regulatory criteria for defining wage areas so that wage area criteria approved by the Director of OPM will be more similar to GS locality pay area criteria approved by the President's Pay Agent. <FTNT> <SU>2</SU>  House Report 117-79 can be found at <E T="03">https://www.govinfo.gov/content/pkg/CRPT-117hrpt79/pdf/CRPT-117hrpt79.pdf.</E> </FTNT> OPM examined FPRAC's arguments and concluded that the amendments to 5 CFR 532.211 constitute an improvement to the FWS. OPM determined that the changes to the regulatory criteria used to define and maintain FWS wage areas will address the lack of equity that arises when FWS workers within a given GS locality pay area are paid from two, three, or more different wage schedules, while the GS employees who work alongside them are all paid from the same salary schedule. Implementation of the amendments to 5 CFR 532.211 will resolve equitably several of the thorniest issues on FPRAC's agenda related to specific geographic areas, such as the Tobyhanna Army Depot and other long-standing areas of interest, such as folding in the Narragansett Bay, Rhode Island, FWS wage area with the Boston wage area, redefining Monterey County, California, to the San Francisco, CA, wage area, and redefining Shawnee County, Kansas to the Kansas City, Missouri, wage area. <HD SOURCE="HD1">Comments Received on the Proposed Rule</HD> <HD SOURCE="HD2">Implementation Timeline</HD> OPM invited comments on the implementation timeline and requested input regarding any alternative implementation plans. OPM received over 100 comments regarding the implementation timeline from employees, many of whom requested that the final rule be implemented “as soon as possible.” See, <E T="03">e.g.,</E> Comments 008, 174, and 492. <SU>3</SU> <FTREF/> <FTNT> <SU>3</SU>  A reference at the end of a comment summary provides the location of the item in the public record. ( <E T="03">i.e.,</E> the three-digit number associated with the location in the docket). Comments filed in response to the proposed rule are available at <E T="03">OPM-2024-0016-0nnn,</E> where “nnn” is the comment number. Note that the number must be three digits, so insert preceding zeroes as appropriate. </FTNT> In addition, several commenters questioned the effective date of the proposed change recommending retroactive applicability. See, <E T="03">e.g.,</E> Comments 176, 187, 224, 227, and 414. OPM defines wage areas through regulations in 5 CFR part 532. Changes in OPM's FWS regulations are prospective, not retroactive. OPM lacks authority to implement this change on a retroactive basis. As OPM discussed in the proposed rule, many of the operational aspects of this rule could be achieved relatively quickly following publication of the final rule; however, one potential approach that OPM highlighted was to delay the effective date of the final rule to address budgetary constraints. OPM noted that, although the overall budgetary impact of the rule is relatively small, the impact at the local level could be considerable, making it difficult for local units to manage sudden, unexpected increases in payroll. Given that this final rule is publishing in the middle of FY 2025 and while agencies are operating under a continuing resolution, OPM has concluded that imposing the unplanned-for payroll costs 30 days after publication, in the middle of the fiscal year, would place undue burdens and potentially unmanageable costs on multiple agencies. OPM recognizes that the delayed im ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 249k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━