FAA Exhibit 02

FAA Personnel Management System
CHAPTER II: COMPENSATION
1. BASE PAY, PERSONNEL COMPENSATION, AND BENEFITS
(a) (b) (c) (d)	From April 1, 1996 until September 30, 1997, the base pay for all FAA positions shall be determined at the rate of base pay in effect for that position on March 31, 1996, plus any periodic step increases, promotions, comparability increases, or locality pay otherwise available or granted to Federal employees. Except as provided below, from April 1, 1996 until September 30, 1997, the personnel compensation and benefits of all FAA employees shall continue to be determined in accordance with the standards and procedures that were in effect on March 31, 1996. No later than April 1, 1997, the Associate Administrator for Administration shall submit a draft Compensation Revision Plan to the heads of the lines of business and staff organizations for review. The draft shall include recommendations for further changes to FAA's method of determining the personnel compensation and pay benefits of FAA employees. After reviewing the comments of the heads of the lines of business and staff organizations, and making such changes as deemed appropriate, the Associate Administrator for Administration shall forward a final Compensation Revision Plan to the Administrator no later than September 30, 1997. In drafting the Compensation Revision Plan, the Associate Administrator for Administration shall address the following initiatives and concepts:
	(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) (xiii) (xiv) (xv) (xvi) (xvii) (xviii) (xix) (xx) (xxi) (xxii) (xxiii) (xxiv) (xxv) (xxvi) (xxvii) (xxviii)	classification standards; FAA-wide pay system; specialized pay systems for lines of business or staff organizations; salary-based pay system for lines of business or staff organizations; Airway Facilities Pay and Fiscal Management System; air traffic pay system that values job complexity and compensates employees based on the level of work performed; FLSA status of all FAA employees; premium pay structure; executive pay systems; time off compensation instead of double pay for an in-lieu-of-holiday; locality pay and FAA-wide cost-of-living allowance; pay compression; use of compensatory time rather than overtime; payment of appropriate salary or annuities to retired members of the Federal and uniform services; line of business or staff organization flexibility to attract and retain employees for hard-to-staff facilities or positions; gainsharing programs; pay system pilot programs; first 40/80 hour work schedules; permanent change of station entitlements, including more flexible reporting dates; travel and temporary duty programs; annual, sick and compensatory time policy; pay and grade retention; dual career tracks; leave bank program; sick leave buyback exchange program; reduction in force procedures; permanent change of station; and student loan repayments.
(e)	The Associate Administrator for Administration may submit portions of the final Compensation Revision Plan to the Administrator for approval prior to September 30, 1997. The Administrator reserves the right to modify and/or implement, either in whole or in part, any recommendations made by the Associate Administrator for Administration in the final Compensation Revision Plan.
2. CLASSIFICATION OF POSITIONS
(a) (b)	The Office of Personnel Management classification standards and companion FAA classification guides shall continue to be used by FAA for classification of positions until replaced or supplemented by the Associate Administrator for Administration. No later than April 1, 1997, each head of a line of business or staff organization shall conduct a classification review of all positions in their organization. As part of this review, the number of position descriptions shall be consolidated and reduced to the maximum extent feasible. Classification level and Fair Labor Standards Act status will be verified for all remaining positions.
3. WAIVER OF RESTRICTION ON RE-EMPLOYED RETIREMENT OFFSET
(a) (b)	Effective April 1, 1996, under special circumstances, a head of a line of business or staff organization may request that the Administrator approve a full to partial waiver of the required reduction to retired or retainer pay of military retirees employed by the FAA. All authority to approve the waiver of salary or annuity offset that was previously vested in the Office of Personnel Management with respect to FAA on March 31, 1996, shall, to the extent permitted consistent with Chapter 83 of Title 5 of the United States Code, transfer to the Administrator of the FAA effective April 1, 1996. The exercise of this authority, or the authority to approve the request for a waiver, shall rest in the sole discretion of the Administrator and shall not be delegated or reviewable in any other forum. The Administrator will exercise this authority on a case by case basis for employees in positions for which there is an exceptional difficulty in recruiting or retaining a qualified employee or in emergency situations involving a direct threat of life or property or other unusual circumstances. At the request of a head of a line of business or staff organization, the Administrator may seek a partial to full waiver from Office of Personnel Management of the required reduction of re-employed civilian annuitants' retirement pay.
4. BIWEEKLY PAY PERIODS
(a) (b)	The pay period for FAA employees will continue to cover two administrative work weeks. When it is necessary for computation of pay to covert an annual rate of basic pay to a basic hourly, daily, weekly, or biweekly rate, the following rules govern:
	(i) (ii) (iii)	To derive an hourly rate, divide the annual rate by 2,087. To derive a daily rate, multiply the hourly rate by the number of daily hours of service required. To derive a weekly or biweekly rate, multiply the hourly rate by 40 or 80, as the case may be.
(c)	Rates are computed to the nearest cent, counting one-half and over as a whole cent.
5. PREMIUM PAY
(a)	Eligibility for Overtime Pay
	(i)	Overtime work will include officially ordered and approved hours of work in excess of an employee's scheduled tour of duty, e.g., hours in excess of 40 hours in an administrative workweek, 80 hours in a pay period, five 8hour days, four 10-hour days. In the case of "quick turnarounds," time worked in excess of 8 hours in a 24 hour period, but within an employee's regularly scheduled tour of duty, does not qualify as overtime and will be paid at the basic rate.
MODIFICATION TO FAA PERSONNEL MANAGEMENT SYSTEM MODIFICATION NUMBER: I
SUBJECT: Sunday/Night Pay Pursuant to my authority under Paragraph IV, page iii of the Federal Aviation Administration Personnel Management System, March 28. 1996, I hereby amend Chapter 2, Section 5 of FAA's Personnel Management System to read as follows:
	(c)	Sunday and Night Differential
		(i) (ii) (iii) (iv)	Effective April 1. 1996, or as soon thereafter as may practically be implemented, full-time GS employees will earn Sunday premium pay at an additional rate of 25 percent of hourly base for those non overtime hours actually worked on Sunday. Effective April 1, 1996, or as soon thereafter as may practically be implemented. GS employees will earn night differential at an additional rate of 10 percent of hourly base pay for those regularly scheduled hours actually worked between the hours of 6 pm and 6 am. Employees working between the Sunday hours of 12 am and 6 am and/or 6 pm and 12 am will receive both Sunday premium pay and night differential. Definitions:
			(a) (b)	"Regularly scheduled hours" are those hours to be worked which are identified in advance of the administrative workweek. "Actually worked hours" do not include hours of paid leave.

Administrator Date
6. PERMANENT CHANGE OF STATION BENEFITS
(a)	Effective April 1, 1996, no employee shall be entitled to permanent change of station benefits simply by virtue of competitive selection to a position with higher grade, pay, or promotion potential. Such selections will not be considered primarily for the benefit of the Government unless the vacancy announcement or solicitation for applications included a specific statement that permanent change of station benefits were available.
7. FEDERAL EMPLOYEES PAY COMPARABILITY ACT
(a)	Effective April 1, 1996, all authority to approve payments to FAA employees under all provisions of the Federal Employees Pay Comparability Act shall be vested solely in the Administrator. This authority may be redelegated by the Administrator.
8. HIGHEST RATE PREVIOUSLY PAID
(a)	Effective April 1, 1996, the heads of the lines of business and staff organizations shall have the authority to determine whether the pay of an employee entering into, returning to, or remaining in their organizations shall be retained at the highest rate previously paid to the employee.
9. BACK PAY
(a) (b) (c) (d)	Agency funds may be used to pay back pay to an FAA employee or former employee who, as the result of a decision or settlement under the FAA Grievance Procedure, a collective bargaining agreement, the FAA Appeals Procedure, or the Executive System Appeals Procedure is found by an appropriate authority to have been affected by an unjustified or unwarranted personnel action that resulted in the withdrawal, reduction, or denial of all or part of the pay, allowances, and differentials otherwise due to the employee. The amount of back pay shall be limited to making the employee financially whole, to the extent possible, for losses of pay (other than premium pay) to which the employee was entitled by statute or regulation by virtue of the performance of a Federal function. No employee shall be granted more pay, allowances, or differentials in back pay than would have been received if the unjustified or unwarranted personnel action had not occurred. "Unjustified or unwarranted personnel action" means an act of commission or omission that an appropriate authority subsequently determines, on the basis of substantive or procedural defects, to have been unjustified or unwarranted under applicable law, Executive Order, rule, regulation, or mandatory personnel policy established by FAA or through a collective bargaining agreement. Such actions include personnel actions and pay actions, alone or in combination. In calculating a back pay award, no back pay shall be awarded for:
	(i) (ii)	any period during which the employee was not ready, willing, and able to perform his or her duties because of an incapacitating illness or injury; provided, however, that an employee, upon written request, may be granted any sick or annual leave available to them for a period of incapacitation if the employee can establish that the period of incapacitation was the result of illness or injury; and any period during which the employee was unavailable to perform their duties for reasons other than those related to the unjustified or unwarranted personnel action.
(e)	The following amounts shall be deducted from any amount of back pay award:
	(i) (ii)	any amounts earned by an employee from other employment undertaken during the time the employee was separated or unable to perform duties because of the unjustified or unwarranted personnel action, but not including additional or "moonlight" employment the employee could have engaged in if the unjustified or unwarranted personnel action had not occurred; any payments received from the Government as a result of the unjustified or unwarranted personnel action which, in the case of payments received from a Federal employee retirement system, shall be returned to the appropriate system. Such payments shall be recovered from the back pay award prior to payment in the following order:
		retirement annuity payments (except health benefits and life insurance premiums); refunds of retirement contributions; severance pay; lump-sum payment for annual leave (and the annual leave shall be recredited for the employee's use); health benefits and life insurance premiums, if coverage continued during the period of erroneous separation; and other authorized deductions.
(f) (g)	Annual leave restored to an employee under this provision shall be accredited to a separate leave account for use by the employee, and must be used in accordance with standards issued by the Associate Administrator for Administration. Agency funds may not be used to pay either interest or attorney fees as the result of a decision in the FAA Grievance Procedure, the FAA Appeals Procedure, or the Executive System Appeals Procedure.
10. ATTENDANCE AT MEETINGS
(a)	FAA funds may be expended for attendance at meetings concerned with the functions or activities of the line of business or staff organization which will contribute to improved conduct, supervision, or management of the functions or activities of the line of business or staff organization. The amount of funds available for such training or attendance at meetings shall be determined by the head of a line of business or staff organization based on the strategic goals of the organization. Funds may be used for payment or reimbursement for travel and per diem.

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