## Elkjaer et al. (No. 2), Applicants v. International Monetary Fund, Respondent, IMFAT Judgment No. 2023-1 (January 30, 2023)

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**Canonical URL:** [Elkjaer et al. (No. 2), Applicants v. International Monetary Fund, Respondent, IMFAT Judgment No. 2023-1 (January 30, 2023)](https://www.imf.org/-/media/files/imfat/j2023-1-summary.pdf)

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### Background and scope of the challenge
- Applicants: five staff members of the Fund, principals or former principals of the Staff Association Committee (“SAC”).
- Subject of challenge: FY2022 staff compensation decision approved by the Executive Board on April 21, 2021, with effect from May 1, 2021.
- Legal basis: Article VI (2) of the Tribunal’s Statute for direct challenges to “regulatory decisions” (rules concerning terms and conditions of staff employment).
- Core contested mechanism: the safeguard mechanism adopted in the 2019 Comprehensive Compensation and Benefits Review (“CCBR”) decision, which determines whether average staff salaries remain within a range of 98-102 percent of the market-adjusted pay-grade midpoints by calculating the “comparatio” (the average of salaries for each pay grade relative to its midpoint, weighted by the number of staff members at each pay grade).
- If comparatio falls outside the 98-102 percent corridor, the Fund is to undertake a four-factor analysis of market competitiveness and may adjust the total annual salary increase.

### Procedural matters
- Tribunal-initiated oral proceedings limited to oral arguments of counsel; proceedings were open to all interested persons via video link (Statute, Article XII; Tribunal’s Rules of Procedure, Rule XIII).
- On an exceptional basis, Tribunal granted staff access to the written pleadings in the context of a regulatory challenge affecting staff generally.

### Applicants’ allegations
- (a) Management used salary data terminating prior to the end of the Fund’s financial year (salary data ran only through March 1, 2021 rather than through April 30, 2021), thereby not reflecting annual wage erosion for the full financial year.
- (b) Management applied a 2.8 percent average total salary increase in the comparatio calculation (the increase applicable to Grades A1-B3) without taking account of the 1.8 percent salary increase applicable to Grades B4-B5, which Applicants argued affected the comparatio outcome and resulted in a lower total salary increase than staff were entitled to.

### Legal standards and deference
- The Tribunal noted heightened deference to the Fund on regulatory and policy decisions but emphasized that the compensation system is a “fundamental and essential” condition of employment and is required to be “rules-based” and “comparator-based” (CCBR).
- Consequently, the Board’s annual salary decisions are “closely cabined by the rules-based and comparator-based character of the compensation system,” and the Tribunal would “scrutinize closely the Fund’s adherence to the governing rules,” including the safeguard mechanism.

### Tribunal findings on implementation of the safeguard mechanism
- Financial year data requirement:
  - Rule J-9 specifies the Fund’s financial year runs from May 1 through April 30.
  - Purpose of safeguard mechanism is to take account of a full year of wage erosion and compare it to the previous year in setting annual staff compensation.
  - The Tribunal concluded Management exceeded its discretionary authority by interpreting the safeguard mechanism to permit use of salary data terminating prior to the end of the financial year (i.e., using data through March 1, 2021 rather than April 30, 2021). (Para. 92–93)
  - The failure to follow the “end of the financial year” rule undermined principles of “predictability, consistency, and transparency” and staff trust in the process.
- Treatment of Grades B4-B5 lower increase:
  - The safeguard mechanism terms did not compel Applicants’ interpretation that the comparatio must reflect the “actual” lower increase for Grades B4-B5.
  - The Tribunal concluded it was within Management’s discretion to calculate the comparatio using the 2.8 percent salary increase applicable to the majority of staff, while Grades B4-B5 were to receive 1.8 percent.
  - The Tribunal acknowledged alternative approaches might better align methodology with purpose, but could not say the Fund’s choice was unreasonable. (Para. 100)

### Tribunal findings on Board’s exercise of discretion
- The Board’s lawful exercise of discretionary authority was predicated on Management’s full compliance with the rules the Board prescribed in the 2019 CCBR decision, including using salary data through the end of the financial year.
- The Tribunal found that neither Management nor the Board had performed the four-factor analysis required by the safeguard mechanism where comparatio falls outside the safety corridor.
- The Board could not be said to have been in a position to exercise properly its discretionary authority in taking the FY2022 staff compensation decision given Management’s flawed implementation of the rules. (Para. 112, 117)
- The Tribunal rejected the argument that the Board’s consideration of SAC arguments during consultation excused non-compliance with applicable rules; consultation does not substitute for adherence to prescribed rules. (Para. 105)

### Remedy and operative provisions
- The Tribunal exercised its authority under Article XIV (3) of the Tribunal’s Statute and, given the “singular circumstances,” determined that a remedy short of annulment was appropriate so as not to prematurely annul the Board’s final decision before it had an opportunity to make a properly informed decision. (Para. 121)
- Operative provisions ordered by the Tribunal:
  1. Management failed to comply fully with the rules governing the safeguard mechanism, as prescribed by the 2019 CCBR decision, when it calculated the comparatio using salary data that terminated prior to the “end of the financial year.”
  2. Management shall rerun the safeguard mechanism calculation for the FY2022 compensation decision on the basis of salary data concluding at the end of the Fund’s financial year, that is, April 30, 2021.
  3. The Tribunal does not sustain Applicants’ additional allegation that Management failed to comply with the safeguard mechanism rules in respect of its treatment, for purposes of calculating the comparatio, of the lower salary increase applicable to Grades B4-B5 staff members.
  4. In recalculating the comparatio for the FY2022 compensation decision, Management could nonetheless consider whether to take account of the actual salary increase to Grades B4-B5 staff members of 1.8 percent.
  5. If the recalculated comparatio falls below the safeguard threshold of 98 percent, then the Board shall consider whether any adjustment to staff salaries, retroactive to FY2022, is warranted, following an analysis of the four factors set out in paragraph 21 of the 2019 CCBR decision.
  6. The Fund shall take all measures necessary to implement any such adjustment to staff salaries.
  7. The Fund shall notify all staff members that it has taken the above steps and the results thereof, along with the essential elements of the underlying analysis, in accordance with its commitment to transparency in the compensation review process.
  8. The Fund shall pay Applicants $28,987.50, which is the total amount of legal fees and costs they have incurred in the case.

### Key numeric facts (preserved exactly)
- Executive Board approval of FY2022 decision: April 21, 2021.
- FY2022 decision effective date: May 1, 2021.
- Fund financial year (Rule J-9): May 1 through April 30.
- Salary data used by Management terminated: March 1, 2021.
- Required salary data end date for FY2022 comparatio recalculation: April 30, 2021.
- Safeguard mechanism comparatio safety corridor: 98-102 percent.
- Salary increase applied in comparatio calculation by Management: 2.8 percent (applicable to Grades A1-B3).
- Lower salary increase applicable to Grades B4-B5: 1.8 percent.
- Tribunal-ordered payment of legal fees to Applicants: $28,987.50.

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_Source: https://www.imf.org/-/media/files/imfat/j2023-1-summary.pdf_