OPM's Final Performance Rating Rule: Rating Caps, Level 2 and the End of Rating Grievances

Bottom line

On paper, the rule is effective August 6 ^[1]. In practice, almost nothing in it reaches a rating of record until fiscal 2027, and the provision employees will feel most, a limit on top ratings, has no number attached ^[1]. The change to union grievance rights arrives on yet another schedule: agency by agency, as each collective bargaining agreement expires ^[1].

What happened: what OPM’s final performance rating rule changes

OPM’s final rule on performance appraisal for General Schedule, prevailing rate and certain other non-SES employees appeared in the Federal Register on July 7 as FR Doc. 2026-13715 ^[1]. Bloomberg Law reported its release a day earlier, noting that administration officials describe it as part of a suite of changes meant to reward high performers and act on low performers ^[3]. The rule finalizes a February 24 proposal that drew a 30-day comment window, closing March 26 ^[2]. OPM received 626 comments, and its own summary is that “most commenters either opposed the rule as a whole or objected to one or more of the major provisions” ^[1]. Agencies had criticized the draft as well. Government Executive reported in January that the Defense Department called forced distribution “fundamentally at odds with the Merit Systems Principles” in internal review ^[4].

How we got here. The ban being lifted is old. The preamble traces it to the Civil Service Reform Act of 1978, passed in part because, in OPM’s words, “the existing appraisal system did not meaningfully measure employee performance” ^[1]. OPM’s 1979 implementing rule barred “preestablished distributions of expected levels of performance (such as a requirement to rate on a bell curve),” and its 1995 rule called forced distribution “incompatible with effective performance management” ^[1]. That position held for three decades. The turn came with a June 17, 2025 OPM memorandum titled “Performance Management for Federal Employees,” which the preamble cites alongside several 2025 executive orders on accountability and probationary periods as background for the change ^[1]. The February proposal followed ^{[2, 5]}.

The rule does six things ^[1]:

• Removes the ban on forced distribution. New 5 CFR 430.208(c) says “OPM may establish, and refine as needed, a standardized distribution of some or all rating levels which agencies must apply when rating employees.” Ratings may be derived by “comparing, categorizing, and ranking employees.”
• Eliminates Level 2. Three patterns remain. Pattern A, pass/fail, is limited to seasonal employees, teachers, GS-1 through GS-4 and Federal Wage System employees. Pattern B uses Levels 1, 3 and 5; Pattern C uses Levels 1, 3, 4 and 5.
• Drops mandatory higher-level review of Level 1 ratings. Agencies may still require it by policy.
• Bars negotiated grievances over ratings of record, subject to 5 U.S.C. 7116(a)(7).
• Requires a supervisory critical element for every covered supervisor, built from OPM requirements and agency criteria on protecting whistleblowers.
• Requires OPM to certify agency appraisal systems every two years. After an unfavorable evaluation, OPM may recommend that OMB limit the agency’s aggregate awards spending.

The base data OPM relied on is in the proposal. For fiscal years 2022 to 2024, about 64.4 percent of non-SES employees on a five-level system received one of the top two ratings, and 0.5 percent were rated below Fully Successful ^[2]. The final rule puts Level 2 at 0.3 percent of ratings in that period and Unacceptable at roughly 0.1 percent ^[1]. Level 2, in other words, is being removed from a scale on which it was almost never used.

What it means for you: can a union still grieve a federal performance rating?

On the cap. The final rule contains no percentage. OPM writes that it “intends that any standardized distribution will limit only the highest rating levels (e.g., Levels 4 and 5), rather than prescribing limits for all rating levels” ^[1]. FEDweek reported in February that earlier statements pointed to the SES model, which caps the top two levels at 30 percent ^[6]; that figure is not in this rule. OPM also says the distribution will be applied at an “appropriate aggregate” level, not team by team, and may vary by component, grade or supervisory status ^[1]. The preamble uses the phrase five times. The regulatory text uses it no times and defines it nowhere ^[1]. Until OPM publishes its criteria, nobody outside OPM can say what share of any office will be eligible for a 4 or 5.

On ratings below the top. OPM states that the rule “does not require a fixed percentage of employees to receive low ratings” ^[1]. Level 1 is still assigned if, and only if, performance on a critical element is Unacceptable ^[1]. The practical effect lands on employees who would have been rated 4 or 5 and are now rated 3.

Why a 3 instead of a 4 matters. Ratings feed awards. They also feed layoffs: 5 U.S.C. 3502(a) requires OPM’s reduction-in-force rules to “give due effect” to performance ratings in retention standing, and the rule keeps the link between summary levels and additional retention service credit ^{[1, 6]}. A lower rating can therefore mean less RIF retention credit as well as a smaller award. Readers should note that the rule does not change how much credit each level carries; it changes how many people can reach the higher levels ^[1].

Bargaining unit employees. The grievance bar does not override a contract already in force. Where an existing agreement lets employees grieve ratings, that right continues “up until the term of the agreement expires” ^[1]. After that, no negotiated grievance or arbitration. For grievances still pending when a contract lapses, OPM “expects agencies to assert that such grievances are no longer arbitrable,” and encourages converting them to administrative grievances where agency policy allows ^[1]. The fallback for everyone is an informal request to change a rating, due within 60 days of issuance ^[1]. Check the expiration date of your contract. It is now the date that matters.

Employees rated Level 1. A second-level reviewer is no longer guaranteed ^[1]. Your agency’s policy will say whether one remains.

Supervisors. Expect a new critical element in your own plan. You still rate each employee against standards; OPM says the distribution is applied afterward, above you, at the agency level ^[1]. Your summary rating for FY2026 can still land on any of the five levels, because the new patterns are not mandatory until January 1, 2027 ^[1].

Political appointees. Schedule C and Schedule G staff may be left out of the distribution entirely, at OPM’s discretion ^{[1, 5]}. The preamble also notes that both schedules remain under a freeze on discretionary awards ^[1].

Contractors. The rule amends 5 CFR part 430, which governs federal employee appraisal ^[1]. It does not reach contractor staff. Contractors working alongside federal teams may see effects in how government supervisors assign and recognize work, but the rule creates no obligation for them.

What to keep on file. None of this changes what an employee can do today. A copy of the current performance plan, the critical elements in it and the date the bargaining agreement expires are the three facts that will decide which rules apply to the next rating ^[1].

Questions you’re probably asking

Will my FY2026 performance rating use the new rating scale?

No. Compliance with the new summary-level patterns is not required until January 1, 2027, which lets agencies close out FY2026 appraisals on all five levels, Level 2 included ^[1].

What percentage of federal employees can be rated Outstanding under the new rule?

No percentage has been set. The rule lets OPM issue a standardized distribution later, and OPM has said it means to cap only the top levels, such as 4 and 5 ^[1]. An SES-style 30 percent figure has been reported but is not in the rule ^[6].

Can a union still grieve a federal performance rating after the OPM rule?

Yes, but only until the bargaining agreement that already allows it expires. After that term ends, a rating of record cannot go through negotiated grievance or arbitration ^[1].

How do I challenge a performance rating I disagree with now?

Through an informal request to change it, filed within 60 days of issuance under agency procedures, or through any formal proceeding that law or regulation permits outside negotiated grievance ^[1].

Does the ratings cap force agencies to rate some employees Unacceptable?

No. OPM states that no fixed share of employees must receive low ratings, and a Level 1 still depends on Unacceptable performance on a critical element ^[1].

Are Schedule C political appointees subject to the rating distribution?

Not necessarily. OPM may exclude Schedule C and Schedule G employees from the distribution requirement ^{[1, 5]}.

What I’m watching

• August 3: comments close on the separate OPM and MSPB proposal, “Promoting Employee Accountability,” which would change procedures for performance-based and adverse actions ^[7].
• August 6: the rule takes effect. Watch for OPM’s distribution criteria, which the rule leaves to later guidance ^[1].
• January 1, 2027: compliance date for the new summary-level patterns, the point at which Level 2 disappears from new appraisal programs ^[1].