OFFICE OF GOVERNMENT ETHICS

                                   98 x 2

                    Letter to a Designated Agency Ethics
                      Official dated February 11, 1998

Your letter of December 29, 1997, requested an opinion from the Office
of Government Ethics (OGE) as to what is meant by the term "rate of
basic pay" when determining whether employees in [a division within an
agency of a department] are senior employees under the post-employment
statute's coverage at 18 U.S.C. § 207(c), and whether they are persons
required to file reports under the public financial disclosure statute
at 5 U.S.C. app., § 101(f).

We understand that the Secretary of the Department is empowered by
[citation deleted] to appoint in the [agency] a maximum of 500 members
in the [division]. The statute directs that pay for these employees
will be determined by the Secretary, in an amount not less than the
minimum rate payable for GS-15 nor more than the rate payable for
level I of the Executive Schedule. Under current pay scales, the range
of pay for members of the [division], therefore, is between $72,525
and $151,800. Implementing regulations at [citation deleted] indicate
that no established pay grades or steps exist within those parameters,
but instead the system has a single, flexible pay range. Each
employee's actual pay is individually determined by the Secretary or
her designee, based on factors in the regulation, and that amount may
be periodically adjusted.

               Applicability of Post-Employment Restrictions

The post-employment provision at 18 U.S.C. § 207(c) applies special
restrictions to former senior employees,(1) defined, inter alia, at
section 207(c)(2)(A)(ii) as persons employed in a position "for which
the basic rate of pay, exclusive of any locality-based pay adjustment
. . . is equal to or greater than the rate of basic pay payable for
level 5 of the Senior Executive Service" (SES), which is currently
$118,400. Your inquiry seeks clarification of the statute's term "rate
of basic pay"(2) when applied to [division] employee positions.

As your letter acknowledges, OGE Informal Advisory Letter 92 x 20 of
July 23, 1992, reviewed a similar issue for employees at [the
department] serving in SL (senior level) or ST (scientific or
professional) positions, for which pay is individually established
within a pay range. In that matter, OGE determined, after consultation
with the Office of Personnel Management, that the term "rate of basic
pay" (and the equivalent term "basic rate of pay") for purposes of 18
U.S.C. § 207(c) means the actual amount of pay for each individual
employee, with certain adjustments and exclusions, rather than the
amount of pay authorized for the lowest level of the SL or ST pay
range.

This interpretation in OGE Informal Advisory Letter 92 x 20 is not
limited to the SL or ST pay structure. In general, for purposes of 18
U.S.C. § 207(c)(2)(A)(ii), the "rate of basic pay" for any pay system
refers to the base amount of actual pay(3) for each individual
employee, not the minimum rate of pay for a position's authorized pay
range. If an employee's base amount of actual pay is equal to or
greater than the rate payable for SES level 5(4) at the time of
termination from a position, then he falls within the statutory
definition of senior employee.

Thus, [a division] employee whose rate of basic pay, as described
above, is equal to or greater than SES level 5 (currently $118,400) at
the time of termination from his position is a senior employee for
purposes of 18 U.S.C. § 207(c), notwithstanding that the minimum rate
of pay at the lowest level authorized for [the division] (currently
$72,525) is well below that triggering threshold amount.

                   Public Financial Disclosure Reporting

Your inquiry also seeks guidance for [division] employee positions
about the meaning of the term "rate of basic pay" in 5 U.S.C. app., §
101(f)(3), which defines, inter alia, persons required to file public
financial disclosure reports. Among employees required by that section
to file are those occupying a position outside the General Schedule
"for which the rate of basic pay is equal to or greater than 120
percent of the minimum rate of basic pay payable for GS-15 of the
General Schedule" (which currently equals $87,030). The issue is
whether the term "rate of basic pay" in this context has the same
meaning as discussed above in ascertaining who is a senior employee
under 18 U.S.C. § 207(c). For the reasons indicated below, we have
determined that it does not.

As your inquiry mentioned, OGE Informal Advisory Letter 81 x 22 of
July 20, 1981, which interpreted a similar provision in the
predecessor statute, suggested that the term "rate of basic pay" means
the lowest step authorized for a position's pay grade. That informal
advisory letter, citing a 1977 Senate Governmental Affairs Committee
report, noted that coverage under the disclosure law is determined by
an employee's level of responsibility, as indicated by the grade
within which his pay is set, rather than the actual amount of an
individual employee's pay. Similarly, OGE Informal Advisory Letter 81
x 3 of January 23, 1981, observed that "it is clear from both the
wording of the statute and the legislative history surrounding Title
II(5) of the Ethics in Government Act that it is the position and not
the individual which controls the public financial disclosure
reporting requirements."

While we recognize that using the lowest step authorized for a pay
grade in determining coverage under the financial disclosure statute
results in an interpretation of the term "rate of basic pay" which is
different from the meaning discussed above for purposes of 18 U.S.C. §
207(c), the basis for that difference is sound. These divergent
meanings are derived from separate statutory provisions, each serving
a particular purpose and having a unique legislative history. Nor is
the financial disclosure statute the only law in which the term "rate
of basic pay" has been interpreted to mean the lowest level of pay
authorized for a position's pay grade. For example, OGE's regulation
at 5 C.F.R. § 2636.303(a), which implements statutory restrictions on
outside earned income and employment for certain noncareer employees,
interprets the term "rate of basic pay" in 5 U.S.C. app., §§ 501 and
502 as meaning the lowest step of an employee's pay grade.

Even though the pay structure for [division] employees contains a
broad pay range, with only a minimum and maximum level rather than a
series of steps, our opinion remains the same. "Rate of basic pay" in
5 U.S.C. app., § 101(f)(3) means the lowest step or entry level pay
authorized for a particular pay grade or range. It is that pay grade
or range that defines the level of responsibility. Since the entry
level minimum pay authorized for positions in the [division] pay range
is set by statute as the minimum rate payable for GS-15, which will
always be less than the statutory pay threshold for requiring public
financial disclosure reports (120 per cent of the minimum rate payable
for GS-15), members of the [division] are not required by 5 U.S.C.
app., § 101(f)(3) to file such reports.(6)

As you suggest, the result is that some [division] employees who
receive relatively high amounts of pay would not be required to file.
We agree that this may occur, but that is also the case with a number
of other pay systems. It would be up to Congress to amend the
financial disclosure statute, if they intended a different result. As
an alternative, [division] employees may be required by [the
Department] to file confidential financial disclosure reports, under
subpart I of 5 C.F.R. part 2634, if the criteria therein for defining
confidential filers are met. While less intrusive of filers' privacy,
the confidential system serves the same goal as the public system,
which is primarily to prevent conflicts of interest.

Please let us know if further questions remain about the term "rate of
basic pay" in the context of either 18 U.S.C. § 207(c) or the public
financial disclosure reporting requirement.

Sincerely,

Stephen D. Potts

Director

1. The statute actually uses the term "senior personnel," which
includes both officers and employees, but all references in this
letter will be to the more commonly used term "senior employee."

2. While the statutory language includes both "basic rate of pay" and
"rate of basic pay," it has been determined that there is essentially
no difference between the two terms. (See OGE Informal Advisory Letter
92 x 20 of July 23, 1992.)

3. The base amount excludes locality adjustments and "additional" pay
(such as bonuses, awards, and allowances), but includes annual or
periodic pay adjustments (such as cost-of-living raises and step or
equivalent increases).

4. At the time that OGE Informal Advisory Letter 92 x 20 was written,
18 U.S.C. § 207(c) referred to level V of the Executive Schedule as
the threshold amount, but that statute was amended in 1996 by Pub. L.
No. 104-179, which substituted level 5 of the SES.

5. Title II of the Ethics in Government Act was replaced by the
current Title I, as a result of the Ethics Reform Act of 1989 (Pub. L.
No. 101-194).

6. The statute allows OGE, in unusual cases, to determine on an
individual basis that an employee must file because his position is of
equal classification, even though the position's rate of basic pay
falls below the normal filing threshold. Your inquiry suggests,
however, that this may not provide a practical solution for [division]
employees.