Office of the General Counsel

Date: January 14, 1998
Matter of: [xxx]
File Number: s9701098

OPM Contact: Murray M. Meeker

On September 22, 1997, an employee at the [agency] in [xxx] requested a ruling concerning the applicability of the so-called "highest previous rate" rule, 5 C.F.R.  531.202, when setting the pay of an employee who is being promoted from a position in the Federal Wage System (WS) to a position in the General Schedule (GS).

The establishment of an employee's rate of pay under the General Schedule is governed by 5 U.S.C. 5334 and regulations issued by the Office of Personnel Management and published in Subpart B, Part 531 of title 5, Code of Federal Regulations. In accordance with these provisions, each employing agency has discretion to formulate its own policies regarding the application of the highest previous rate rule. See Donald R. Rutt, B-247265, June 5, 1992; Jean M. Drummond, B-229165, Aug. 8, 1988; and Carma A. Thomas, B-212833, June 4, 1984.

The employee reported that his highest previous grade level had been WS-15, step 4; that he was subsequently employed at WS-10, step 00, earning $23.90 per hour (while on grade retention from a WS-14, step 5, position); and that on September 15, 1996, while still on grade retention, he had been promoted from the WS-10, step 00, position to a GS-12 position. The employee reported further that while his pay was initially set at GS-12, step 9, based on his highest previous grade level of WS-15, step 4, and the receipt of an equivalent increase, his servicing Human Resources Office at the Shipyard had subsequently been directed to reset his pay to be equivalent to the highest dollar amount that he had ever received, i.e., at GS-12, step 8.

The Shipyard confirmed that it had set the employee's pay in accordance with directions that it had received from the Department of Defense, Defense Civilian Personnel Management Service, Field Adsvisory Services (FAS), which directed the Shipyard to set the employee's pay at the step that was equivalent to the highest dollar amount that the employee had ever received, notwithstanding that a higher step would have been used if the employee had been promoted from a GS position.

OPM concludes that the employee's pay has been lawfully set and that the "highest previous rate" rule does not mandate that the employee's pay be set at a higher step. The Supreme Court has held that the Government may apply different rules when setting the pay for employees promoted to GS positions from WS positions as compared with the rules used to set the pay for employees who have been promoted from GS positions. United States v. Clark, 454 U.S. 555, 556 (1982).

It is, moreover, well established that the "highest previous rate" rule is not an entitlement. Milton Morvitz, B-192562, June 11, 1979. Indeed, an employee has no vested right to receive the highest salary rate previously paid to him; an agency may exercise its discretion not to set an employee's salary at the employee's highest previous rate. See 5 C.F.R. 531.203(c) (the "highest previous rate" rule may be used to set an employee's pay); Doris M. Arehart-Zuidema, B-223356, August 21, 1987; and Michael F. Richardson, B-140790, November 13, 1959.

Where internal administrative regulations restrict usage of the highest previous rate rule and an employee's salary has been erroneously set without regard to those restrictions, a retroactive adjustment to lower the employee's pay rate is proper. 51 Comp. Gen. 30 (1971). We find no evidence that by setting the employee's pay in accordance with the directions that the [xxx] received from [agency], there was an abuse of administrative discretion. See Rutt, supra, and Morvitz, supra. Accordingly, we find that the employee is not entitled to have his pay set at a higher rate.