S. 662 — MERIT Act of 2025

This section designates the short title of the Act as the “Modern Employment Reform, Improvement, and Transformation Act of 2025” (or “MERIT Act of 2025”) and sets forth the table of contents.

This section repeals 5 U.S.C. §4303, thereby terminating agency authority to reduce in grade or remove federal employees for unacceptable performance (i.e., separate from chapter 75 authority for misconduct). (Thus, agencies must use chapter 75 adverse action procedures—including fewer due process rights—for performance-related removals or demotions.) The repeal does not apply to any such actions commenced before the effective date provided in section 12, and the section makes conforming amendments to titles 5 and 31, U.S. Code (e.g., removing cross-references in whistleblower protections, MSPB appeal standards, and other provisions) and to the table of sections for chapter 43.

This section revises 5 U.S.C. §7513 to establish new standards and procedures for adverse actions (i.e., removal, suspension for more than 14 days, or reduction in grade or pay) against federal employees based on performance or misconduct, replacing the prior "cause [that] will promote the efficiency of the service" standard with a preponderance-of-the-evidence determination that such action is warranted. It requires deciding officials to apply specified factors—including offense nature and seriousness, employee job level and record, and mitigating circumstances—supported by substantial evidence on agency review; eliminates any requirement for a performance improvement plan prior to action; limits written employee response periods to 7 business days (from a reasonable time, not less than 7 days); requires final agency decisions within 15 business days of notice (new requirement, unless reasonable cause to believe a crime was committed); mandates immediate application of reduced-grade pay rates for demotions (with no administrative leave or pay during appeals unless the employee reports for duty or uses accrued leave); and shortens Merit Systems Protection Board appeal filing deadlines to 10 business days after the action's effective date (from 30 days under prior law). This section also amends 5 U.S.C. §7515(b)(2)(B) to accelerate agency determinations and notifications for disciplining supervisors who retaliate against whistleblowers to 7 business days (from 14 days).

This section expands the exclusions from negotiated grievance procedures in federal collective bargaining agreements (i.e., the exclusive administrative process under 5 U.S.C. § 7121(a)-(b) for resolving disputes between federal agencies and union-represented employees) by adding to subsection (c)—(1) adverse actions under subchapter II of chapter 75 (i.e., removals, suspensions for more than 14 days, reductions in grade or pay, or furloughs for more than 30 days based on misconduct or unacceptable performance); and (2) reductions-in-force (RIF) actions under subchapter I of chapter 35 consisting of furloughs of more than 30 days, separations, or demotions. (Thus, these matters are no longer subject to binding arbitration under a collective bargaining agreement and instead must proceed through statutory appeal procedures, such as to the Merit Systems Protection Board.) The section further revises the election-of-remedies provision in subsection (e)—which previously allowed employees to choose between grievance procedures or statutory procedures for certain matters, including performance actions under 5 U.S.C. § 4303—to cover only matters similar to adverse actions under subchapter II of chapter 75; strikes obsolete language referencing both performance and adverse actions; and makes conforming changes to subsections (a), (e), and (f).

This section revises adverse action procedures applicable to career appointees in the Senior Executive Service (SES)—executives selected for leadership roles in federal agencies just below presidential appointees—as follows: (1) modifies pay retention upon removal and reassignment from the SES under 5 U.S.C. §3594(c)(1)(B) by entitling appointees placed under certain circumstances to the highest of three specified basic pay rates and others to the rate of the new position; (2) authorizes removal from the civil service, as warranted, in SES performance appraisal systems under §4314(b)(3) and (4); (3) expands the definition of "employee" subject to suspensions of 14 days or less under §7501(1) to include SES career appointees who have completed the probationary period under §3393(d) or were covered by subchapter II of chapter 75 immediately before SES appointment; (4) replaces cause and procedure requirements for SES suspensions, demotions, and removals under §7543 with a preponderance-of-the-evidence standard, specified factors for initial decisions (e.g., offense nature and seriousness, job level), substantial-evidence agency review, a 7-business-day employee response period, a 15-business-day final decision deadline (absent suspected crime), enumerated employee rights, optional hearings, 10-business-day MSPB appeals, recordkeeping, and an expanded definition of misconduct (i.e., including neglect of duty, malfeasance, or refusal of directed reassignment); and (5) limits the applicability of §3592(b)(1).

This section establishes expedited procedures under subchapter II of title 5, U.S. Code (adverse actions such as removal, suspension without pay for more than 14 days, reduction in grade or pay, or furlough of more than 30 days), for agencies to discipline supervisors (defined in 5 U.S.C. §7103(a)) based on a preponderance-of-evidence standard that their performance or misconduct warrants action, and redesignates existing §§7514 and 7515 as §§7516 and 7517. Among other changes, the section requires the deciding official to consider specific factors in the initial decision (e.g., offense nature and seriousness, intent, repetition, and the supervisor's job level and fiduciary role); mandates agency review and upholding of the initial decision if supported by substantial evidence (regardless of supervisor response); shortens the written response period to 7 business days; requires a final written decision within 15 business days of notice (unless reasonable cause exists to believe a crime was committed); permits reduction in grade to any qualified lower grade that reduces pay, with immediate pay adjustment to the new rate; prohibits administrative leave or pay without working (or approved use of accrued leave) during appeals of reductions in grade; bars pay or benefits if the supervisor does not report for duty or use approved leave; allows actions without a performance improvement plan; and excludes chapter 43 performance appraisal procedures. (Thus, the provision streamlines and accelerates supervisor accountability compared to standard employee procedures, with stricter pay retention limits during discipline and appeals.)

This section establishes procedures for general furloughs (i.e., not due to a lapse in appropriations) and emergency furloughs (i.e., due to a lapse in appropriations) under subchapters I and II of 5 U.S.C. ch. 75 (governing federal employee adverse actions such as short-term suspensions under subch. I and longer-term suspensions, pay reductions, and furloughs under subch. II). In subchapter I, it (1) adds definitions to §7501; (2) expands applicability of §7502 to general furloughs of 14 days or less and emergency furloughs of any duration; and (3) inserts new §7504 requiring the Office of Personnel Management to promulgate regulations within 180 days after enactment for general furloughs ≤14 days (specifying circumstances, scaled procedures including written notice of reasons, representation by an attorney or other representative, and written decision to the extent practicable, and recordkeeping furnished to affected employees and the Merit Systems Protection Board upon request) and requiring only notice explaining reasons for emergency furloughs as soon as practicable (with no other procedures). In subchapter II, it (1) revises §7511 to exclude emergency furloughs from the definition of adverse action; (2) amends §7512 to cover furloughs of more than 14 days but less than 31 days (from 30 days or less) as adverse actions and to exclude emergency furloughs; (3) inserts new §7515 requiring the Office of Personnel Management to promulgate regulations within 180 days after enactment for general furloughs of more than 14 days (specifying circumstances, procedures per §7513 to the extent practicable, and recordkeeping, with appeal rights to the Merit Systems Protection Board within 10 business days of the action's effective date); and (4) excludes emergency furloughs from administrative law judge jurisdiction under §7521. It makes conforming changes to headings for §§7503 (suspensions ≤14 days) and 7513 (cause and procedure for actions other than furlough) and to the table of sections.

This section establishes in the Civil Service Retirement System (CSRS) a new §8323 that excludes "felonious service" (i.e., the period of a covered individual's acts or omissions in official duties sufficient to support removal under 5 U.S.C. §7513, §7543, or other law) from creditable service when calculating annuities under CSRS subchapter III or the Federal Employees Retirement System (FERS; chapter 84) if the individual is finally convicted of a related felony. (Covered individuals include those removed for performance or misconduct or those who voluntarily separate before a final removal decision.) The agency head must provide 15 business days' notice of the determination and an opportunity to respond within 10 business days, issue a final order within 5 business days after a response (or 15 business days if no response), to the maximum extent practicable, and allow appeal to the Merit Systems Protection Board (MSPB) within 10 business days of the order. Agencies must amend retirement records within 30 business days of a final agency order or MSPB decision and transmit them to the Office of Personnel Management (OPM), which must recalculate annuities for current annuitants within 30 business days of receipt. Affected individuals receive lump-sum credit attributable to felonious service, spouses remain eligible for benefits if they fully cooperated with prosecuting authorities, and the provision does not affect other CSRS reductions. (Thus, the exclusion reduces annuity amounts based on years of service, high-3 average salary, and accrual rates under CSRS or FERS.)

This section establishes limitations on bonuses (i.e., performance or cash awards under 5 U.S.C. §§4505a, 5384, or 5754) for federal agency employees subject to an adverse finding of misconduct (5 U.S.C. §4531). (1) An adverse finding is a determination by the agency head that the employee violated an agency policy warranting removal or a 14-day-or-longer suspension, or a law punishable by over one year of imprisonment, based on information from the agency Inspector General, a senior ethics official, or the Comptroller General. (2) Prohibits awarding a bonus until five years after the fiscal year of an adverse finding. (3) For bonuses awarded after enactment, requires recoupment (after notice and hearing) if an adverse finding occurs in the award fiscal year, with repayment plans permitted, employee certification of repayment obligation, and appeal rights to the Merit Systems Protection Board. (4) Authorizes agency heads to promulgate implementing rules.

This section extends the probationary period required before an initial appointment as a career appointee in the Senior Executive Service becomes final to 2 years (from 1 year) and makes a conforming amendment to the related performance appraisal provision for such appointees. The changes apply to individuals initially appointed on or after the effective date specified in section 12 of the Act.

This section establishes a 2-year probationary period (typically 1 year under current Office of Personnel Management regulations) for appointments in the competitive service under 5 U.S.C. §3321(a)(1) and initial appointments as supervisors or managers under §3321(a)(2), with the period for positions requiring formal training (i.e., agency-required program to perform duties) ending 2 years after training completion, for positions requiring a license ending 2 years after appointment or license issuance (whichever later), and for other positions ending 2 years after appointment. (As background, probationary periods allow agencies to assess employee performance before an appointment becomes final, with limited appeal rights during that time; failure in supervisory probationary periods requires return to a prior-equivalent position.) This section further requires agency heads to (1) disclose probationary terms in vacancy announcements and offers; (2) provide timely notice of performance requirements; (3) notify supervisors of probation end dates at 1 year, 6 months, 3 months, and 30 days prior; and (4) upon retention, certify to the President with a brief statement of basis. This section extends exemptions from these probationary provisions to Senior Executive Service appointments and Federal Bureau of Investigation and Drug Enforcement Administration Senior Executive Service appointments. This section also amends appeal rights for adverse actions under 5 U.S.C. §§7501(2) and 7511(a)(1) to require 2 years of current continuous service (from 1 year) before competitive service employees acquire protections against removal or reduction in grade or pay. (Thus, employees serve longer without full due process rights.) The probationary changes apply to appointments taking effect on or after the effective date in section 12; adverse action changes apply to continuous service commencing on or after that date.

This section (1) sets an effective date of one year after enactment for amendments made by the Act (unless otherwise provided), (2) provides that procedures established or amended by the Act supersede any inconsistent collective bargaining agreement, and (3) defines "business day" as any day other than a Saturday, Sunday, or legal public holiday under 5 U.S.C. § 6103(a).