Labor & Employment Law Daily Wrap Up, FEDERAL REGULATIONS—OPM finalizes sweeping changes to federal reduction-in-force framework, (Aug 3, 2026)

By Patricia K. Ruiz, J.D.

The new regulations restructure employee retention rankings and shift appeals of workforce reduction actions to the agency itself.

The Office of Personnel Management (OPM) has finalized two closely related rules that significantly revise federal reduction-in-force (RIF) procedures and the process for challenging those actions. One rule overhauls how agencies determine which employees are retained during a RIF, placing performance ratings at the center of retention decisions and narrowing the population of employees who compete in RIF actions. The second rule removes the Merit Systems Protection Board as the forum for future non-SES RIF appeals and establishes a new OPM-administered adjudicatory process.

Performance becomes the primary retention factor. The centerpiece of the rulemaking is a fundamental restructuring of retention standing in RIF competitions. Under the prior framework, tenure and veterans' preference categories largely determined retention order, with performance reflected through adjustments to service credit. Under the new rule, agencies will maintain separate retention registers for competitive-service and excepted-service employees and rank workers principally on performance credit.

OPM adopted a numerical system that assigns points based on an employee's three most recent ratings of record during the relevant four-year period. Ratings at the highest level receive seven points, the next level five points, and fully successful ratings three points. Lower ratings receive no points.

Veterans' preference remains part of the retention calculation, but it is incorporated through added points. Employees with a compensable service-connected disability of 30 percent or more receive five additional points, while other preference-eligible employees receive three additional points. Tenure subgroup and length of service remain relevant but generally function as tie-breakers after performance and veterans' preference have been considered.

Changes to tenure groups and employee coverage. The final rule replaces the traditional tenure-group framework with a simplified structure consisting of a competitive-service tenure group and an excepted-service tenure group, each divided into two subgroups. The regulations also exclude several categories of employees from RIF competition. Those categories include employees serving initial probationary or trial periods, certain employees on temporary or time-limited appointments of one year or less, and Schedule C and Schedule G employees. OPM said agencies may retain or release such employees without applying the RIF competition procedures applicable to competing employees.

Assignment rights and competitive areas revised. The OPM rule revises several longstanding RIF concepts. Among other changes, it replaces traditional "bump and retreat" rights with a framework that generally provides assignment rights to positions occupied by employees with lower retention standing. The rule also updates competitive-area requirements and adds safeguards when agencies establish or materially modify competitive areas shortly before issuing RIF notices. In addition, OPM narrowed transfer-of-function rules to focus on transfers between agencies rather than transfers occurring within a single agency.

Other workforce restructuring provisions. The final rule contains numerous additional revisions affecting workforce management during RIFs. Those changes include new rules governing the abolishment of entire competitive areas, modifications to reemployment priority list and career transition programs, requirements for skills-based assessments in certain placement decisions, and updated treatment of Pathways and student appointments. OPM also clarified protections relating to rights under the Uniformed Services Employment and Reemployment Rights Act and added language emphasizing that agencies must administer RIF regulations consistent with merit system principles.

Appeals move from MSPB to OPM. In a separate final rule, OPM established a new administrative appeals system for employees who are furloughed for more than 30 days, separated, or demoted through a RIF action. Under the rule, OPM will replace the MSPB as the adjudicative forum for future non-SES RIF appeals. The change applies only to RIF actions for which agencies issue specific RIF notices on or after the rule's effective date. Appeals involving actions noticed before that date remain subject to the prior MSPB process. OPM characterized the new framework as a uniform, record-based review process designed to improve timeliness, consistency, and efficiency while maintaining administrative review.

Structure of the new appeals process. The rule establishes detailed procedures for filing appeals, producing records, adjudication, reconsideration, and final agency review. A central feature is a requirement that agencies provide a comprehensive RIF-specific record. The required materials include notices, documents supporting the basis for the RIF, competitive-area and competitive-level records, retention registers, order-of-release documentation, assignment-rights materials, and certifications that the complete agency record has been produced. Appellants may respond to agency submissions, and OPM may require additional information, conduct audits or investigations, or hold hearings when it determines those steps are necessary and efficient.

Standard for proving a RIF appeal. OPM revised the standard for prevailing on appeal from the version proposed earlier in the rulemaking. Under the final rule, an appellant must show both that the agency failed to comply with an applicable statute or OPM regulation governing RIF actions and that the violation caused prejudice by resulting in the challenged action or the loss of a materially more favorable outcome. The rule places the burden on the appellant to establish timely filing, OPM jurisdiction, a violation of applicable RIF requirements, and resulting prejudice.

Safeguards and preserved remedies. The appeals rule includes provisions addressing adjudicator independence, restrictions on ex parte communications, protective orders, reconsideration, and public disclosure of decisions. OPM also preserved collateral remedies administered by other entities. The rule expressly recognizes that matters within the independent jurisdiction of bodies such as the Equal Employment Opportunity Commission, the Office of Special Counsel, the Department of Labor's Veterans' Employment and Training Service, Inspectors General, and the MSPB where it has separate statutory jurisdiction may continue to proceed through those channels. Together, the two final rules represent a substantial revision of the federal RIF framework, affecting both the process agencies use to conduct workforce reductions and the procedures employees may use to challenge them.

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