## j2023-1 — INTRODUCTION

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### Case overview and parties
- Applicants: Mr. Thomas Elkjaer, Mr. Gamal El-Masry, Ms. Linchun Li, Ms. Martine Rossignol, and Ms. Haiyan Shi.
- Respondent: International Monetary Fund (“Fund”).
- Tribunal composition: Judge Nassib G. Ziadé, President; Judges Edith Brown Weiss and Andrew K.C. Nyirenda.
- Counsel: Applicants represented by Mr. Ryan Griffin, James & Hoffman, P.C.; Respondent represented by Ms. Juliet Johnson, Senior Counsel, and Mr. Yongqing Liu, Counsel, Administrative Law Unit, IMF Legal Department; Mr. Brian Patterson, IMF Assistant General Counsel, also appeared.

### Subject matter and remedy sought
- Challenge to FY2022 staff compensation decision approved by the Executive Board on April 21, 2021, with effect from May 1, 2021 (implemented retroactively on July 1, 2021).
- Applicants sought:
  - Rerun of comparatio analysis mandated by the 2019 salary erosion safeguard mechanism:
    - using salary data as of April 30, 2021;
    - accounting for the actual proposed total salary increases for FY2022, including the smaller increase for staff in Grades B4-B5;
    - and notification to staff of both the data used and the results.
  - Compliance with additional safeguard-mechanism steps if comparatio < 98 percent, with staff notification of evidence and analysis.
  - Notification to staff of any augmentation of the previously approved total salary increase and the basis for such change.
  - Legal fees and costs if Applications found well-founded.

### Core factual and legal issues
- 2019 CCBR adopted a “safeguard mechanism” to maintain comparatio within a range of 98–102 percent of market-adjusted pay-grade midpoints.
- Comparatio: average of salaries for each pay grade relative to its midpoint, weighted by number of staff at each grade.
- Applicants alleged Management misapplied the safeguard for FY2022 by:
  - using salary data terminating prior to end of the financial year (March 1, 2021 rather than April 30, 2021); and
  - applying a 2.8 percent average total salary increase without accounting for the 1.8 percent increase applicable to Grades B4-B5.
- Applicants asserted these errors materially affected the comparatio and potential total salary increases.
- Respondent maintained the FY2022 decision complied with governing rules, the Board lawfully exercised discretion, and Board had benefit of Management and SAC views.

### Procedural timeline (selected)
- Applications filed: August 2, 2021; transmitted to Respondent: August 3, 2021.
- Consolidated Answer: September 17, 2021.
- Reply: November 5, 2021. Rejoinder: December 8, 2021.
- Oral proceedings held: August 29, 2022.
- Record completed and further determinations notified November 14, 2022.
- Decision issued: January 30, 2023.

---

### Procedural decisions on document admissibility and oral proceedings
- Annex 6 (Applicants’ calculation using April 30, 2021 data) admitted to record on August 19, 2022; Document Request No. 2 dismissed as moot.
  - Annex 6 showed comparatio of 97.99 when April 30, 2021 data applied but used 2.8 percent across all staff.
  - Footnote: Annex 6 did not account for the 1.8 percent increase for Grades B4-B5.
- Supplemental Document Request No. 1 withdrawn by Applicants on August 19, 2022.
- Supplemental Requests Nos. 2–6 denied on November 14, 2022 as not probative.
- Annex 9 (EBAP/22/9, March 21, 2022) not admitted to the record.
- Oral proceedings held in hybrid format on August 29, 2022; Fund staff were granted exceptional access to written pleadings and to observe proceedings.

---

### Background: 2019 CCBR and FY2022 implementation

### 2019 CCBR — framework and safeguard mechanism
- CCBR decoupled payline (structural midpoint adjustments) from salary increases (indexation).
- Safeguard mechanism purpose: “to ensure that average salaries continue to track the midpoints well and maintain the current international competitiveness test.” (CCBR Overview Paper, p. 12.)
- Safeguard steps (paras. 20–22):
  - Step 1: Determine ratio of average salaries at end of financial year to midpoints at end of previous financial year → end-year comparatio.
  - Step 2: Determine ratio of average salaries at end of financial year to new midpoints after adjustment.
  - Step 3: Determine if salary increase indicated by indexation formula is sufficient to maintain comparatio in 98–102 percent range; if not, management proposes adjustment based on paragraph 21 four factors.
- Paragraph 21 four factors that could justify adjustment:
  - indexes not representing U.S. comparator trends;
  - changes in U.S. tax policy likely to cause significant net salary changes;
  - movements in euro- or yen-dollar exchange rates creating recruitment/retention issues;
  - Fund recruitment and retention experience pointing to need for adjustment.

### FY2022 process highlights and contested choices
- HRD circulated draft: February 21, 2021. SAC submitted comments: March 1, 2021 raising two main issues:
  - Vintage of data: SAC observed mid-February data used rather than April 30, 2021, allegedly omitting around 20 percent (2.5 month/12 months) of salary erosion.
  - Treatment of Grades B3–B5: SAC argued reliance on B3–B5 averages above midpoints to keep overall comparatio in corridor is illogical because B3–B5 midpoints are interpolated, not market-derived.
- HRD presented calculations for January 15, February 15, March 1, 2021 — each yielding comparatio 98.1; applying 1.8 percent for B4–B5 reduces comparatio from 98.1 to 98.0 (HRD PowerPoint, March 8, 2021).
- Final Board Paper (EBAP/21/7, March 23, 2021) used March 1 data, proposed:
  - increasing payline by 1.8 percent for all grades (structural increase);
  - increasing staff salaries by average 2.8 percent, with 2.8 percent to Grades A1–B3 and 1.8 percent to Grades B4–B5.
- SAC proposed Board approve total salary increase of 3.8 percent; SAC argued use of non-end-fiscal-year data and 2.8 percent across all grades inflated comparatio.

---

### Tribunal legal standard and analytic approach

### Standard for review of non-fundamental employment changes
- For non-fundamental amendments the Tribunal follows de Merode (WBAT Decision No. 1 (1981), para. 47):
  - Changes must be based on proper consideration of relevant facts.
  - Reasonably related to objectives.
  - Made in good faith, not improperly motivated.
  - Not discriminatorily applied.
  - Made reasonably to avoid excessive/unnecessary harm.
  - Care and conditions of reform are relevant.

### Rules-based constraints on discretion
- Fund’s compensation system is “rules-based” and “comparator-based,” narrowing discretion.
- Board decisions setting salaries are “closely cabined” by those rules.
- Tribunal applies variable deference; highest deference for regulatory/policy decisions but will scrutinize compliance with express rules (safeguard mechanism Steps 1–3).

---

### Tribunal findings on contested issues

### Cut-off date for salary data (March 1, 2021 vs April 30, 2021)
- Rule J-9 defines financial year: May 1 through April 30.
- Tribunal conclusions:
  - Respondent’s budgetary predictability argument for using March 1 data found unpersuasive.
  - Purposive interpretation: safeguard mechanism must capture wage erosion over the full financial year.
  - Allowing “latest available” data in place of “end of the financial year” undermines predictability, consistency, and transparency.
  - Management exceeded its discretionary authority by using salary data that terminated prior to April 30, 2021.

### Treatment of Grades B4–B5 (2.8 percent vs 1.8 percent)
- Safeguard text does not compel inclusion of the lower 1.8 percent B4–B5 treatment in the comparatio calculation.
- Tribunal concluded:
  - Management’s choice to calculate comparatio using 2.8 percent applicable to the majority of staff was within its discretion.
  - Applicants’ allegation that Management erred on this point was not sustained.
  - Management’s “thought experiment” rerun incorporating B4–B5 lower increase yielded comparatio 98.0.

### Evidence on comparatio levels (figures preserved)
- HRD and Board Paper reported comparatio: 98.1 based on January 15, February 15, and March 1, 2021 data.
- Applicants’ Annex 6 applying April 30, 2021 data (but using 2.8 percent across all staff) showed comparatio 97.99.
- Applicants’ calculation, when both corrections made (April 30 data and accounting for 1.8 percent for B4–B5), yielded 97.93 (reported as “somewhere around 97.9 (97.93, by Applicants’ calculations)”).
- HRD’s recalculation treating B4–B5 at 1.8 percent reduced comparatio from 98.1 to 98.0.

### Procedural and substantive shortfalls identified
- Management did not undertake a formal analysis of the four factors in paragraph 21 for FY2022 because it considered such a review “not necessary in the current context.”
- The Board did not perform the four-factor analysis before taking the FY2022 decision.
- Tribunal found the Board was not in a position to exercise properly its discretionary authority because Management failed to comply fully with the safeguard mechanism rules.

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### Remedies, orders, and awards

### Ordered remedial steps (Tribunal unanimous)
- Management failed to comply fully with safeguard mechanism by using pre-April 30, 2021 salary data.
- Tribunal orders (summarized):
  - Management shall rerun the safeguard mechanism calculation for the FY2022 compensation decision on the basis of salary data concluding at April 30, 2021.
  - Management may consider whether to take account of the actual 1.8 percent salary increase to Grades B4–B5 when recalculating the comparatio.
  - 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 analysis of the four factors set out in paragraph 21 of the 2019 CCBR decision.
  - The Fund shall take all measures necessary to implement any such adjustment.
  - 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.
- Legal fees and costs awarded to Applicants in full: $28,987.50 (attorneys’ fees and costs).

### Tribunal orders (numbered conclusions)
- 1. Management failed to comply fully with the safeguard rules by using salary data terminating prior to the “end of the financial year.”
- 2. Management shall rerun the safeguard calculation using salary data concluding April 30, 2021.
- 3. Tribunal does not sustain Applicants’ allegation regarding Management’s treatment of the lower B4–B5 increase.
- 4. In recalculation, Management could consider whether to take account of the actual 1.8 percent increase for Grades B4–B5.
- 5. If recalculated comparatio < 98 percent, Board shall consider whether retroactive salary adjustment is warranted after analysis of the four factors in paragraph 21 of the 2019 CCBR decision.
- 6. Fund shall implement any such adjustment as determined following the rerun.
- 7. Fund shall notify all staff of the steps taken, results, and essential elements of the analysis.
- 8. Fund shall pay Applicants $28,987.50 (legal fees and costs).

---

*The Administrative Tribunal of the International Monetary Fund, JUDGMENT No. 2023-1 (INTRODUCTION and Decision), Washington, D.C., January 30, 2023.*

### INTRODUCTION ...........................................................................................................

### j2023-1 - INTRODUCTION

### Case overview and parties
- The Administrative Tribunal of the International Monetary Fund (“Tribunal”) adjudicated Applications brought by Mr. Thomas Elkjaer, Mr. Gamal El-Masry, Ms. Linchun Li, Ms. Martine Rossignol, and Ms. Haiyan Shi against the International Monetary Fund (“Respondent” or “Fund”).
- Tribunal composition: Judge Nassib G. Ziadé, President; Judges Edith Brown Weiss and Andrew K.C. Nyirenda.
- Applicants were represented by Mr. Ryan Griffin, James & Hoffman, P.C. Respondent was represented by Ms. Juliet Johnson, Senior Counsel, and Mr. Yongqing Liu, Counsel, Administrative Law Unit, IMF Legal Department; Mr. Brian Patterson, IMF Assistant General Counsel, also appeared for Respondent in oral proceedings.

### Subject matter and remedy sought
- Applicants challenge the FY2022 staff compensation decision approved by the Fund’s Executive Board on April 21, 2021, with effect from May 1, 2021 (implemented retroactively on July 1, 2021), pursuant to Article VI, Section 2 of the Tribunal’s Statute.
- Applicants seek:
  - An order requiring the Fund to rerun the comparatio analysis mandated by the 2019 salary erosion safeguard mechanism:
    - using salary data as of April 30, 2021;
    - accounting for the actual proposed total salary increases for FY2022, including the smaller increase for staff in Grades B4-B5;
    - and to notify all staff members of both the data used and the results.
  - Compliance with additional safeguard-mechanism steps if the resulting comparatio falls below the threshold of 98 percent, and notification to staff of evidence and analysis for those steps.
  - Notification to staff of any augmentation of the previously approved total salary increase and the basis for such change.
  - Legal fees and costs if the Applications are found well-founded in whole or in part.

### Core factual and legal issues
- The 2019 framework adopted a “safeguard mechanism” that decoupled adjustments to the payline from total salary increases and aimed to ensure that, on average, staff salaries remain within a range of 98-102 percent of market-adjusted pay-grade midpoints.
- The comparatio is defined as the average of salaries for each pay grade relative to its midpoint, weighted by the number of staff members at each pay grade.
- Under the safeguard mechanism, if average salaries fall below the 98 percent threshold (or above the 102 percent ceiling), the Fund must assess whether salaries remain competitive in the market and may adjust the total salary increase based on that assessment.
- Applicants allege two principal misapplications by Fund Management in implementing the safeguard mechanism for FY2022:
  - Use of salary data that terminated prior to the end of the financial year, so it did not reflect annual wage erosion for the full financial year.
  - Application of a 2.8 percent average total salary increase (applicable to Grades A1-B3) without taking account of the 1.8 percent salary increase applicable to Grades B4-B5.
- Applicants assert that these errors likely materially affected the comparatio calculation and resulted in a lower total salary increase than staff were entitled to under the safeguard mechanism.
- Applicants further claim the Fund lacked authority to disregard or modify the safeguard mechanism procedures adopted by the Board in 2019; alternatively, they allege an abuse of discretion even if discretion existed.

### Respondent’s position
- The Fund maintains the FY2022 staff compensation decision was taken in accordance with governing rules, including the safeguard mechanism.
- The Fund asserts the Board lawfully exercised its discretionary authority, based the decision on appropriate consideration of relevant facts, and was not improperly motivated.
- Respondent notes the Board had benefit of views from both Management and the Staff Association Committee (“SAC”) concerning the elements of the safeguard mechanism now challenged.

### Procedural history (key dates and filings)
- Applications filed: August 2, 2021; transmitted to Respondent on August 3, 2021.
- Respondent’s consolidated Answer filed: September 17, 2021.
- Applicants’ Reply filed: November 5, 2021.
- Respondent’s Rejoinder filed: December 8, 2021.
- Parties responded to Tribunal requests on oral proceedings and related matters: June 22 and 24, and August 11, 2022.
- Tribunal invited additional comments on August 10, 2022; parties submitted comments on August 16 and 17, 2022.
- Oral proceedings held: August 29, 2022.
- Parties filed views on admission of an additional annex: September 7, 2022.
- Applicants submitted supplemental request for costs: September 2, 2022; Fund responded: September 13, 2022.
- Tribunal issued provisional and further Decisions on Requests for Production of Documents and Admissibility of Additional Annexes, culminating in a determination that the record was complete (further developments notified November 14, 2022).

### Document production disputes and Tribunal rulings (highlights)
- Rule invoked: Rule XVII (Production of Documents).
- Document Request No. 1 (seeking all emails/documents relating to Board Paper EBAP/21/7 paragraph 17, footnote 12, and use of then-current salary data from approximately March 1, 2021, instead of end-fiscal year data):
  - Respondent opposed, asserting no “decision” as Applicants claimed and producing responsive documents except those claimed privileged.
  - Tribunal provisionally denied Request No. 1 on August 19, 2022, on the basis Respondent asserted no responsive documents exist; the denial became permanent on November 14, 2022 after Applicants did not present further argument at oral proceedings.
- Document Request No. 2 (seeking a comparatio calculation run using fiscal year-end salary data as of April 30, 2021):
  - Respondent objected that Request No. 2 amounted to seeking relief rather than discovery.
  - During post-pleading developments, Applicants sought admission of Annex 6 from newly filed FY2023 applications: an email dated March 5, 2022 from an HRD official to the lead Applicant showing the comparatio result using April 30, 2021 data.
  - Respondent acknowledged existence of the document and stated it made Document Request No. 2 moot, but requested the Tribunal not take account of the document’s content on the ground it was not available to the Board at the time of the FY2022 decision.
- Applicants made six supplemental document requests in their Reply; Respondent opposed in its Rejoinder. The Tribunal made provisional and further rulings, and ultimately concluded the record was complete.

### Factual background matters introduced
- 2019 Comprehensive Compensation and Benefits Review (“CCBR”) decision adopted a safeguard mechanism to maintain comparatio within 98-102 percent of market-adjusted pay-grade midpoints.
- The FY2022 staff compensation decision process included HRD consultation with SAC, Management’s transmittal of a finalized paper to the Board, SAC statements, Executive Directors’ requests for clarification, Management’s responses, and a Board decision.
- The FY2022 decision was challenged as a direct regulatory decision under Article VI, Section 2 of the Tribunal’s Statute.

*Source: Administrative Tribunal of the International Monetary Fund, JUDGMENT No. 2023-1 (INTRODUCTION).*

### 21. On August 19, 2022, the Tribunal notified the parties that it had decided to admit to the

### Procedural decisions on document admissibility, supplemental requests, and oral proceedings

### Admission of Annex 6 of the newly filed applications
- On August 19, 2022, the Tribunal admitted Annex 6 of the newly filed applications to the record of the instant case and dismissed Applicants’ Document Request No. 2 as moot.
- The Tribunal invited the parties to present arguments at oral proceedings on whether the Tribunal should take account of the content of the admitted document and, if so, what significance it had for the Tribunal’s decision.
- At oral proceedings:
  - Respondent argued the document’s content should not be considered because it had not been before the Board when taking the challenged decision.
  - Applicants argued the document is relevant because it shows that using salary data as of April 30, 2021, results in a comparatio of 97.99, differing from the 98.1 figure on which the Board relied in taking the FY2022 staff compensation decision.
- Footnote clarification in the record: the calculation shown in Annex 6, applying April 30, 2021 data, does not take account of the 1.8% salary increase applicable to Grades B4-B5 staff, but rather applies to all staff the increase of 2.8% applicable to Grades A1-B3 staff.
- On November 14, 2022, the Tribunal confirmed Applicants’ Document Request No. 2 was dismissed as moot, admitted Annex 6 to the record, and decided it may take account of the content of Annex 6 in considering issues of the instant case.

### Supplemental Document Request No. 1 (withdrawal)
- Applicants’ Supplemental Document Request No. 1 sought spreadsheets or other documents showing calculations by management that the comparatio assessment based on data as of January 15, February 15 and March 1, 2021 led to 98.1, with requested formats enabling formula inspection and results to at least two decimal places to assess rounding effects.
- Respondent opposed, asserting the Board had no reason to doubt management’s technical competence and good faith; the Tribunal should not indulge Applicants’ oversight of management’s work.
- On August 19, 2022, given Applicants’ representations of August 17, 2022, and admission of Annex 6, the Tribunal considered Applicants had withdrawn Supplemental Document Request No. 1.

### Supplemental Document Requests Nos. 2–6 (denial)
- Supplemental Request No. 2 sought documents or analysis on which management relied for the proposition that a 2.8 percent average salary increase versus a 1.8 percent increase in grade structure implies progression toward grade midpoints.
  - Respondent opposed, describing the statement as a straightforward mathematical fact and not something requiring Respondent to explain to Applicants.
- Supplemental Request No. 3 sought documents or historical analyses of staff separations on which management relied for asserting separations that affect aggregate comparatio normally occur in the second half of the year.
  - Respondent opposed, noting the Board could have requested backup and that Recruitment and Retention paper trends were available; it characterized Applicants’ request as speculative regarding separations in March and April 2021.
- Supplemental Request No. 4 sought documents or historical analyses of hiring trends by time of year, analyses of wage erosion during the final two months of fiscal years, and data on separations, hires and promotions between March 1, 2021 and April 30, 2021.
  - Respondent opposed, arguing Fiscal Year 2021 was without precedent due to the Covid-19 pandemic and that recruitment and retention data (including a 20 percent increase in hiring over CY 2019 reported to the Board) were already available; it argued prior-year data were irrelevant.
- Supplemental Request No. 5 sought documents or analysis supporting management’s representation that it did not believe a higher salary increase would be called for even if comparatio fell below 98 percent, based on additional safeguard reviews.
  - Respondent opposed, stating the economic environment and available analyses supported management’s view and that the Board was satisfied with management’s response.
- Supplemental Request No. 6 sought raw survey data and the indexation formula calculations used to develop indices based on “widely-accepted published survey data” for FY2021 and FY2022 salary increase proposals.
  - Respondent opposed, asserting Applicants (as SAC members) knew what survey data were used and that demanding raw data and formula calculations would impugn HRD’s technical competence without basis.
- On November 14, 2022, the Tribunal denied Applicants’ Supplemental Document Requests Nos. 2–6, concluding that, given the totality of the evidence and identified issues, responses to these requests would not be probative.

### Admissibility of Annex 9 (2022 Board Paper)
- On August 30, 2022 the Tribunal requested written comments on whether Annex 9 (the 2022 Review of Staff Compensation, EBAP/22/9 (March 21, 2022)) should be admitted to the record.
- Applicants contended Annex 9 was relevant because:
  - (a) it shows the Fund’s approach to determining the cut-off date for the comparatio does not foster predictability;
  - (b) it “confirms the inadequacy of management’s response to the Board’s technical questions as a substitute for the required supplemental competitiveness analysis by showing the depth of analysis that the safeguard rule actually requires”; and
  - (c) it “demonstrates that management continues to misreport its safeguard analysis to the Board and thus continues to deprive it of the full information needed to make compensation decisions in compliance with the 2019 compensation framework” (referencing information available to management as of March 5, 2022, as found in Annex 6).
- Respondent opposed admission, arguing nothing in the 2022 Board Paper bears relevance to the issues and that evaluation must be based on the information known to the Board at the relevant time.
- On November 14, 2022, the Tribunal decided Annex 9 would not be admitted to the record of the instant case.

### Oral proceedings: format, access, and conduct
- Article XII of the Tribunal’s Statute and Rule XIII (1) of the Tribunal’s Rules of Procedure govern whether oral proceedings are warranted; neither party requested a hearing but the Tribunal sought parties’ views and both favored holding oral proceedings open to Fund staff via video link.
- The Tribunal decided oral proceedings, limited to oral arguments of the parties and their counsel (Rule XIII (6)), would be “useful” and notified parties on July 11, 2022.
- On August 1, 2022, the Tribunal decided oral proceedings would be held in “hybrid” format permitting in-person or virtual attendance, invoking Article XI of its Statute to allow electronic sessions in light of public health considerations related to the COVID-19 pandemic.
- After consulting parties, the Tribunal decided Fund staff would be given access to the written pleadings on an exceptional basis in conjunction with holding oral proceedings “open to all interested persons.”
- On August 22, 2022, the Tribunal issued a Procedural Order governing protocol for oral proceedings and the Registrar invited Fund staff via FUNDALL announcement to observe by audio-visual link and access written pleadings.
- Oral proceedings were held on August 29, 2022. The Tribunal found oral representations helpful in elucidating issues and refers to those representations in its Judgment.

*Source: The Tribunal (procedural record of the instant case).*

### 49. The  key  facts,  some  of  which  are  disputed  between  the  parties,  may  be  summarized  as

### j2023-1 - 49. The  key  facts,  some  of  which  are  disputed  between  the  parties,  may  be  summarized  as 

### A. 2019 Comprehensive Compensation and Benefits Review (“CCBR”) decision — Overview
- The controversy concerns application, in relation to the FY2022 staff compensation decision, of the “safeguard mechanism” rule adopted as part of the 2019 CCBR decision.
- The CCBR was the first major revision of the Fund’s compensation and benefits system since 2006.
- The CCBR process:
  - Emerged from extensive consultation with stakeholders, including SAC, staff focus groups, and Fund-wide townhalls.
  - Was carried out under Management direction, assisted by a Steering Committee comprising senior staff and supported by HRD, LEG, OBP, and an outside consulting firm. (Comprehensive Compensation and Benefits Review—Overview Paper, EBAP/19/88 (October 15, 2019), p. 5.)
- Steering Committee principles (CCBR Overview Paper, p. 5): the review must be comprehensive and transparent; proposals rules- and comparator-based and consistent with guiding legal principles followed by the IMF’s Administrative Tribunal.
- The revised compensation system decouples adjustments to the Fund’s salary structure (payline) from increases to staff salaries:
  - One set of comparator-based calculations establishes midpoints of pay grades (structural increase).
  - A separate analysis of salary increase budgets of comparable institutions sets the average Fund salary increase.
  - Individual increases allocated based on performance and placement within grade ranges.
- Market competitiveness review cycle:
  - Year 1: midpoints at Grades A1-A8 and A9-B2 compared to U.S. market salary data; Grades A9-B2 also compared to France, Germany, and Japan; Grades B3-B5 midpoints interpolated between B2 midpoint and Deputy Managing Directors’ salary because market data are not obtained for B3-B5. (Comprehensive Compensation and Benefits Review–Revised Proposed Decision, EBAP/19/104, Supp. 1, December 16, 2019, para. 23.)
  - Years 2 and 3: salary structure adjustment made uniformly across Grades A1-B5, based on an indexation formula reflecting pertinent U.S. public and private entity salary data.
- Board involvement changed:
  - Board would be asked to approve a single salary increase aligned to increases in annual salary budgets of market comparators.
  - Management could propose adjustments to that single salary increase based on the safeguard mechanism and international competitiveness test; Board-approved increase distributed to staff by pay range position and performance. (CCBR Overview Paper, pp. 12-13.)

### A. 2019 CCBR decision — Safeguard Mechanism (text and operational rules)
- Purpose: “to ensure that average salaries continue to track the midpoints well and maintain the current international competitiveness test.” (CCBR Overview Paper, p. 12.)
- The safeguard mechanism tests whether average staff salaries remain within a range of 98-102 percent of the market-adjusted pay-grade midpoints, using the “comparatio” (average of salaries for each pay grade relative to its midpoint, weighted by headcount).
- If average salaries fall below the 98 percent threshold, a four-factor test is applied to assess market competitiveness; if that test is not met, the Board would be expected to adjust the salary increase.
- Full safeguard mechanism text (paras. 20–22, Comprehensive Compensation and Benefits Review–Revised Proposed Decision, EBAP/19/104, Supp. 1, December 16, 2019):
  - Step 1: Determine ratio of average salaries at end of financial year to midpoints at end of previous financial year → end-year comparatio.
  - Step 2: Determine ratio of average salaries at end of financial year to new midpoints after adjustment of salary structure.
  - Step 3: Determine if the salary increase indicated by the indexation formula is sufficient to maintain or restore a comparatio in the range of 98–102 percent.
    - If sufficient, management recommends full increase indicated by indexation formula, subject to international competitiveness test in year 1.
    - If not sufficient, management would propose an adjustment to the salary increase based on considerations in paragraph 21.
  - Paragraph 21 lists Board views that would justify expected approval of an adjustment:
    - Compelling evidence that indexes do not represent general U.S. comparator trends;
    - Changes in U.S. tax policy likely to cause significant net salary changes at next review;
    - Movements in euro- or yen-dollar exchange rates creating recruitment/retention competitiveness problems or advantages warranting remedial action;
    - Fund’s recruitment and retention experience pointing to need for adjustment.
  - Year 1 interaction with international competitiveness test:
    - Downward adjustment to payline raises comparatio; upward adjustment lowers comparatio.
    - Downward payline adjustment permitted only to extent it does not raise comparatio above 102 percent.
    - If comparatio exceeds 102 percent before downward adjustment, management may propose lower salary increase.
    - If upward adjustment to payline would lower comparatio below 98 percent, proposed salary increase may be supplemented.
  - Footnote definition: comparatio measures actual salary relative to salary range midpoints; comparatio of 100 indicates average actual salaries equal average midpoints.

### B. FY2022 Staff Compensation Decision — Overview of dispute and process
- The case arises from application of the safeguard mechanism in connection with the FY2022 staff compensation decision (Year 2 under CCBR).
- Timeline and procedural steps:
  - February 21, 2021: HRD circulated a draft Board paper to SAC for comment.
  - March 1, 2021: SAC submitted comments raising two issues now before the Tribunal.
    - Issue 1: Vintage of salary data used for comparatio calculation — SAC observed calculation used mid-February rather than end-April data, asserting that this omission results in a “systematic bias to underestimate the gap between average salaries and average midpoints because around 20 percent (2.5 month/12 months) of salary erosion is omitted” and that such bias is inconsistent with the new compensation framework and the agreed 98-102 percent corridor. (SAC Comments on Draft 2021 Compensation Paper, March 1, 2021.)
    - Issue 2: Treatment of Grades B3-B5 in comparatio — SAC argued reliance on B3-B5 averages above midpoints to bring overall staff-weighted salaries into the 98-102 corridor is illogical because B3-B5 midpoints are not expected to align with the market; thus, B3-B5 comparatio is a test of alignment to a non-market pay line. (Id.)
    - SAC noted the comparatio had fallen below 98 percent for core professional group A9-B2 (over 75 percent of Fund staff head count) and urged restoration for that group.
  - March 8, 2021: HRD meeting with SAC presented calculations using salary data as of January 15, February 15, and March 1, 2021 — each calculation resulted in a comparatio of 98.1. (HRD PowerPoint Presentation for SAC, March 8, 2021, p. 1.)
    - HRD showed that applying a 1.8 percent increase for Grades B4-B5 reduces the comparatio from 98.1 to 98.0 percent. (Id., p. 6.)
  - March 23, 2021: Management transmitted finalized 2021 Review of Staff Compensation (EBAP/21/7, March 23, 2021) to the Board. The Board Paper:
    - Used March 1 data to calculate the comparatio.
    - Proposed increasing the Fund’s payline by 1.8 percent for all grades (structural increase).
    - Proposed increasing staff salaries by an average of 2.8 percent. (Board Paper, “Executive Summary.”) The Board Paper stated: “2.8 percent reflects the total staff salary increase which includes both a structure and notional merit component derived from comparator organizations.”
    - Proposed that 2.8 percent apply to Grades A1-B3 and 1.8 percent apply to Grades B4-B5 to slow average salary growth at the uppermost grade levels. (Board Paper, pp. 8-11.)
  - The Board Paper reaffirmed the compensation system is “comparator-based” and “rules-based” and emphasized that de-linking the salary structure adjustment from the salary increase is a “methodological change” intended to be mitigated by the safeguard mechanism to prevent divergence between structure and salaries. (Board Paper, pp. 3-4, p. 8.)
- Footnote 12 in the Board Paper (safeguard analysis) on vintage of data:
  - States that under the new system end-fiscal year data is to be used in safeguard mechanism and comparatio calculation, but in practice the latest available staff and salary data is used because the Fund’s budget must be approved before the end of the fiscal year (cf., Rule J-4) and the compensation decision is part of that budget process.
- SAC responses to the finalized Paper:
  - April 15, 2021 and Revised Statement April 20, 2021 to the Board (Executive Board Meeting on 2021 Review of Staff Compensation, April 21, 2021):
    - SAC challenged validity and correctness of the 98.1 percent comparatio in the Board Paper, predicting that inclusion of all April 30 data would likely lower the comparatio, “possibly below 98 percent.”
    - SAC asserted the safeguard mechanism was “designed to protect staff’s salary and competitiveness, but the safeguard is calculated using math that is inconsistent with the rules and spirit of the mechanism.” (Revised Statement, pp. 1-3.)
    - SAC further disputed Management’s justification for using non-end of fiscal year data (footnote 12): argued (i) rules clearly state end-April data must be used, and (ii) savings from comparatio adjustment are budget neutral as they reflect savings within appropriated budget limits. (Revised Statement, p. 4.) 
    - SAC proposed the Board approve a total salary increase of 3.8 percent for FY2022.

*Source: International Monetary Fund.*

### 69. On April 16, 2021, twenty-three Executive Directors issued their positions on the proposed

### j2023-1 - 69. On April 16, 2021, twenty-three Executive Directors issued their positions on the proposed

### Executive Directors’ concerns and SAC’s position
- On April 16, 2021, twenty-three Executive Directors issued positions on the proposed FY2022 staff compensation decision; several requested further clarification in light of concerns raised by SAC.  
- SAC’s concerns summarized by the Secretary’s Department included:
  - “(i) that the total salary increase should be higher based on the comparatio test and inflation; (ii) the potential for wage drift and loss of competitiveness if the salary increase is not higher; and (iii) the incorrect administration of the safeguard mechanism.”
- SAC (Applicants) later advanced that:
  - Rule J-9 specifies the Fund’s “financial year shall begin on May 1 and end on the succeeding April 30,” and therefore end-fiscal-year data must be used in the safeguard calculation.
  - Use of non-end-fiscal-year salary data and application of a 2.8 percent average increase across all grades (instead of accounting for a 1.8 percent increase for Grades B4-B5) inflated the comparatio result reported to the Board.
  - Using salary data through April 30, 2021 results in a comparatio of 97.99 (Applicants’ Annex 6 calculation applied April 30, 2021 data but still used 2.8 percent for all staff).
  - When both corrections are made—using April 30 data and accounting for actual B4-B5 increases—Applicants’ calculation yields 97.93 (reported as “somewhere around 97.9 (97.93, by Applicants’ calculations)”).
  - Applicants argued that the true comparatio falling to 97.93 would be the difference between remaining within the safeguard corridor or falling below the floor.

### Management’s responses on data vintage, comparatio, and safeguard application
- Management’s position on data vintage:
  - It is “not practical to use end-fiscal year data since the Board’s decision must be taken by the end of the fiscal year.”
  - Based on January 15, 2021 data the comparatio is estimated at 98.1; it was 98.1 based on February 15, 2021 data and 98.1 based on March 1, 2021 data, which is the data used in the staff report.
  - “We have no reason—based on recruitment and separations data for the month of April so far—to expect the comparatio to be substantially different than a few weeks earlier.” (Emphasis in original.)
- Management’s position on treatment of B4-B5 increases and indexation:
  - The total salary increase of 2.8 percent is to be used in the comparatio test because “this is consistent with, and required by the rules under the new compensation system.”
  - Management has discretion over distribution of salaries (e.g., the lower salary award to B4-B5 staff), but “staff has no discretion in the administration of the system’s rules.” (Emphasis in original.)
  - The safeguard is applied to validate the indexation formula before measures that flatten the B4-B5 payline (i.e., 1.8 percent salary increase) because it “would not be in keeping with the rules-based system if this safeguard mechanism was influenced by the margin of discretion that is applied to the B4-B5 or B3-B5 payline segments.”  
  - Management’s “thought experiment”: applying 2.8 percent across grades A1-B3 and 1.8 percent for grades B4-B5 reduces the aggregate comparatio to 98.0 percent from 98.1 percent. (Id., note 1.)
- Management on remedial steps if comparatio outside test range:
  - “If the comparatio had fallen outside the test range of 98 to 102 percent, then a series of reviews would have been initiated to determine the cause, including [the four-factor test].”  
  - Management concluded a review was not necessary in the current context and did not see factors that would warrant deviation or recommend a higher salary increase. (Emphasis in original.)

### Board decision, implementation, and procedural timeline
- The Board met on April 21, 2021 and unanimously approved the FY2022 staff compensation decision as proposed by Management. (Decision No. A/14313-(21/39), adopted April 21, 2021.)
- The Board’s decision was notified to staff by FUNDALL announcement on April 21, 2021.
- The decision took effect from May 1, 2021; it was implemented retroactive to May 1, 2021 on July 1, 2021.
- Applicants filed their Applications with the Administrative Tribunal on August 2, 2021, within the three-month filing window for regulatory decisions under the Tribunal’s statute.

### Applicants’ principal legal contentions and requested relief
- Principal legal arguments summarized:
  - The Fund exceeded its regulatory authority by failing to apply properly the safeguard mechanism adopted in 2019 and lacked authority to disregard or informally modify those procedures.
  - The safeguard mechanism is an integral, nondiscretionary element of the Fund’s rules-based compensation system; staff are entitled to its proper application.
  - Management misapplied the safeguard by (a) using salary data terminating prior to the end of the fiscal year, and (b) applying an average total salary increase of 2.8 percent without accounting for the actual 1.8 percent increase for Grades B4-B5.
  - Management’s use of non-end-fiscal-year data and the failure to account for the lower B4-B5 increase materially affected the comparatio and potentially the total salary increases staff received.
  - Management’s approach creates the appearance or risk of manipulation and conflicts with an objective, rules-based system.
- Applicants’ requested remedies:
  - Order management to rerun the comparatio analysis mandated by the 2019 salary erosion safeguard mechanism:
    - (i) using salary data as of April 30, 2021; and
    - (ii) accounting for the actual proposed total salary increases for FY2022, including the smaller increase for staff in Grades B4-B5; and to notify all staff of both the data used and the results.
  - Require compliance with additional steps under the safeguard mechanism if the recalculated comparatio falls below the 98 percent threshold, and notify staff of evidence and analysis.
  - If such steps augment the previously approved total salary increase, notify staff of the additional total salary increase and the basis for the change.
  - Legal fees and costs under Article XIV, Section 4 if Applications are well-founded in whole or in part.

### Respondent’s principal contentions (Fund / Management / Board)
- Tribunal competence and deference:
  - The Tribunal’s review is limited; the FY2022 decision “represents a reasonable exercise of the discretion vested in the Board and should be given the highest deference.”
- Reasonableness of Management and Board actions:
  - The Board’s decision complied with the Fund’s revised compensation system adopted in 2019 and with the safeguard rules.
  - It was reasonable to interpret “at the end of the fiscal year” to mean the last segment of the year, permitting use of the most recent available data prior to the Board decision to ensure predictability and timely budgetary action.
  - Requiring use of April 30 data would be “excessively formalistic and unworkable” given Rule J-4’s requirement that budget materials be submitted by April 1 and approved before May 1.
  - Management’s discretionary determination of a separate, lower salary increase for B4-B5 should not affect the use of a single salary increase in the comparatio calculation; “aggregate salaries” is qualified by “salary increase indicated by the indexation formula.”
  - Even if comparatio fell outside 98-102 percent, that would trigger a further review by the Board—not an automatic salary increase.
  - Management advised the Board that it did not see any of the four factors specified in the safeguard mechanism to warrant deviation.
  - Based on assessment of the four factors, the Board was not disposed to adopt a supplemental salary increase and did not require rerunning the comparatio using end-fiscal-year data or accounting for the lower B4-B5 increase.

### Issues for the Tribunal and analytical framework
- Principal questions for the Tribunal:
  - Did Fund Management comply fully with the “safeguard mechanism” rules prescribed by the 2019 CCBR decision in recommending the FY2022 compensation decision?
    - Specifically, did those rules require Management (a) to utilize salary data running through April 30, 2021, and (b) to take account of the 1.8 percent salary increase applicable only to Grades B4-B5 when applying the average total salary increase, which was otherwise 2.8 percent?
  - Depending on answers above, would the Board have been in a position to exercise properly its discretionary authority in taking the FY2022 staff compensation decision?
- Tribunal’s analytic framework:
  - The Tribunal will apply a variable degree of deference, highest for regulatory and policy decisions of the Board. The depth of scrutiny depends on the nature of the decision, contested grounds, and the expertise vested in the original decision maker.

*International Monetary Fund, Administrative Tribunal review (j2023-1).*

### 81. In reviewing regulatory decisions, the Tribunal distinguishes “fundamental and essential”

### 81. In reviewing regulatory decisions, the Tribunal distinguishes “fundamental and essential”

### Legal standard for reviewing regulatory changes to Fund employment
- The Tribunal distinguishes “fundamental and essential” conditions of Fund employment (not open to unilateral amendment) from non-fundamental and non-essential conditions (may be amended but subject to lawful exercise of discretionary authority). (Daseking-Frank et al., para. 59.)
- For non-fundamental amendments (including staff compensation), the Tribunal applies the World Bank Administrative Tribunal standard from de Merode, WBAT Decision No. 1 (1981), para. 47:
  - Changes must be based on a proper consideration of relevant facts.
  - Changes must be reasonably related to the objective they are intended to achieve.
  - Changes must be made in good faith and not prompted by improper motives.
  - Changes must not discriminate in an unjustifiable manner between individuals or groups within the staff.
  - Amendments must be made in a reasonable manner seeking to avoid excessive and unnecessary harm to the staff.
  - The care with which a reform has been studied and the conditions attached to a change are to be taken into account by the Tribunal.
  (Quoted in Daseking-Frank et al., para. 90; Elkjaer et al., para. 109.)

### Rules-based and comparator-based constraints on discretion
- The Fund constrains discretionary authority by adopting rules governing particular exercises of discretion; in compensation challenges the Fund’s obligation to adhere to written rules is heightened because the compensation system is “rules-based” and “comparator-based.” (Daseking-Frank et al., paras. 62-75; Board Paper, p. 3; CCBR Overview Paper (2019), p. 5.)
- The Board’s annual decisions setting staff salaries are closely cabined by the rules-based and comparator-based character of the compensation system.
- The system recognizes “scope for management and the Executive Board to exercise judgement, within defined parameters, in setting salary levels.” (Board Paper, p. 3.)

### Application to the FY2022 staff compensation decision — overview
- Applicants challenged the FY2022 staff compensation decision (proposed by Management and adopted by the Executive Board) and alleged misapplication of the 2019 CCBR “safeguard mechanism” rules in two respects:
  - (a) using salary data that terminated prior to the end of the financial year, thus not fully reflecting annual wage erosion; and
  - (b) applying a 2.8 percent average total salary increase (the increase for Grades A1-B3) without taking account of the 1.8 percent salary increase applicable to Grades B4-B5.
- The Tribunal will scrutinize adherence to the 2019 CCBR decision, including its safeguard mechanism, in deciding Applicants’ challenge.

### Safeguard mechanism text and implementation (Step requirements)
- The 2019 CCBR decision prescribes:
  - Step 1: “[D]etermine the ratio of average salaries at the end of the financial year to the midpoints at the end of the previous financial year. This will determine the end-year comparatio.” (2019 CCBR decision, para. 20.)
  - Step 2: “[D]etermine the ratio of average salaries at the end of the financial year to the new midpoints after adjustment of the salary structure.” (2019 CCBR decision, para. 20.)
- It is undisputed that Management used salary data as of March 1, 2021 in the final Board Paper (and mid-February data in an earlier draft).

### (1) Cut-off date for salary data: March 1, 2021 versus end of financial year
- Rule J-9 of the Fund’s Rules and Regulations specifies: “For purposes of the Fund’s accounts and reports, its financial year shall begin on May 1 and end on the succeeding April 30.” (Adopted February 7, 1947; amended May 28, 1947, effective September 17, 1947; April 1, 1978; and May 22, 1998.) (IMF Rules and Regulations, 65th Issue, November 2019.)
- Respondent argued using March 1, 2021 data was defensible to allow “predictable, orderly and timely preparation of the budget” and to give staff critical salary information at the start of the new fiscal year; footnote 12 of the Board Paper acknowledged that “in practice the latest available staff and salary data is used in the calculations.”
- Tribunal findings:
  - The Tribunal finds Respondent’s budgetary argument unpersuasive.
  - Purposive interpretation: safeguard mechanism’s purpose is to ensure annually that Fund salaries maintain competitiveness and therefore must capture wage erosion over the full course of the Fund’s financial year.
  - Allowing “latest available” data in place of “end of the financial year” creates potential for manipulation and undermines predictability, consistency, and transparency that the rules-based system seeks to provide. (Board Paper, p. 3; CCBR Overview Paper, p. 8.)
  - Conclusion: Management exceeded its discretionary authority by interpreting the safeguard mechanism to permit use of salary data terminating before April 30, 2021 (the end of the Fund’s financial year per Rule J-9). Three reasons:
    - Rule J-9 defines the financial year as May 1 through April 30.
    - The safeguard mechanism’s purpose is to take account of a full year of wage erosion.
    - Applying the safeguard mechanism imprecisely is inconsistent with “predictability, consistency, and transparency.” (CCBR Overview Paper, p. 8.)

### (2) Treatment of Grades B4-B5 1.8 percent increase versus 2.8 percent aggregate increase
- Applicants’ contention:
  - The safeguard mechanism is concerned with whether “actual Fund salaries in the aggregate will remain aligned with the market-adjusted pay grade midpoints after the proposed increases take effect.”
  - Management’s use of a 2.8 percent average total salary increase (A1-B3) in the comparatio calculation, without accounting for the 1.8 percent increase for Grades B4-B5, produced an “overstated and fictitious aggregate salary figure” that inflated the salary-to-midpoints ratio.
- Safeguard text and footnote:
  - The safeguard mechanism “will assess whether the salary increase indicated by the indexation formula leaves aggregate salaries below a comparatio of 98 or above a comparatio of 102 percent of the market.” (2019 CCBR decision, para. 20.)
  - Footnote: “The comparatio measures actual salary relative to the salary range midpoints. When used for aggregate salaries, a comparatio of 100 indicates that average actual salaries are equal to the average of the midpoints—that is, average salaries are at the market.”
- Respondent’s position:
  - Management complied by applying the indexation formula (2.8 percent) in the comparatio calculation before applying the discretionary lower increase (1.8 percent) to Grades B4-B5.
  - Management stated: “The safeguard is applied to validate the indexation formula before the measures that flatten the B4-B5 payline (i.e., 1.8 percent salary increase), because it would not be in keeping with the rules-based system if this safeguard mechanism was influenced by the margin of discretion that is applied to the B4-B5 or B3-B5 payline segments.” (Responses, p. 6.)
- Tribunal conclusion:
  - The safeguard mechanism text does not compel Applicants’ interpretation that the lower actual increase for B4-B5 must be reflected in the comparatio calculation.
  - There is no higher norm (e.g., J-Rules) constraining Management to include the 1.8 percent B4-B5 treatment in the comparatio calculation.
  - It was within Management’s discretion to calculate the comparatio using 2.8 percent applicable to the vast majority of staff, even though Grades B4-B5 were to receive 1.8 percent.
  - The Tribunal cannot say that Management’s choice was unreasonable on the record before it.
  - The decision fell within the recognized “scope for management and the Executive Board to exercise judgement, within defined parameters, in setting salary levels.” (Board Paper, p. 3.)
- Additional factual note:
  - Management, when queried by Executive Directors, reran the comparatio incorporating the percent salary increase actually applied to Grades B4-B5 as a “thought experiment,” yielding a comparatio of 98.0. (Responses to Technical Questions Posed by Executive Directors in Advance of EBM /21/39, note. 1.)

### Board’s position to exercise discretion given Management’s safeguard implementation
- Tribunal concluded Management failed to comply fully with the safeguard mechanism by using pre-April 30, 2021 salary data.
- Respondent’s arguments that the Board still properly exercised discretion:
  - Management fully complied with the safeguard mechanism rules (rejected by Tribunal as to the data cut-off).
  - The Board considered and rejected SAC’s arguments identical to Applicants’ concerns.
  - Irrespective of Management’s safeguard analysis outcome, the Board properly decided not to approve any greater increase to staff salaries for FY2022.
- The Tribunal notes:
  - The Board had before it SAC’s views (Statement and Revised Statement) and Management’s responses (Board Paper and Responses to technical questions) on the non-end-of-financial-year data controversy.
  - Respondent contends the Board “made a reasonable and considered judgment in adopting the FY22 Compensation Decision” and thereby “adopted this practice [of using ‘latest available’ data] as an authentic interpretation of the 2019 CCBR decision.”

*Source: IMF Administrative Tribunal (paras. 81–104).*

### 105. The Tribunal has emphasized that “[w]hen decisions come before the Board relating to

### Tribunal findings on the FY2022 staff compensation safeguard mechanism

### Key factual and legal findings
- The Tribunal emphasized that “[w]hen decisions come before the Board relating to staff employment, compensation and benefits, the Board’s decision-making process will benefit from being fully informed of the views of all key stakeholders.” Elkjaer et al., para. 128.
- The consultative process does not excuse non-compliance with applicable rules, nor does it supplant formal amendment of those rules.
- Management did not have discretion to deviate from the requirement to use end-of financial year data in implementing the safeguard mechanism; using salary data that terminated prior to the “end of the financial year” was inconsistent with the text and purpose of the safeguard mechanism rules.
- Management advised: “Based on January 15, 2021 data the comparatio is estimated at 98.1; it was 98.1 based on February 15, 2021 data and 98.1 based on March 1, 2021 data, which is the data used in the staff report. We have no reason—based on recruitment and separations data for the month of April so far—to expect the comparatio to be substantially different than a few weeks earlier.” (Emphasis in original.) Documentation suggests, however, that the comparatio drifted downward in the final month of the financial year.
- The Tribunal concluded that the Board, in taking the FY2022 staff compensation decision, did not have all of the necessary facts and, arguably, was misdirected on the relevant facts.
- Management did not undertake a formal analysis of the four factors in the safeguard mechanism because it considered such a review “not necessary in the current context,” and the Board itself did not perform any analysis of those factors for the FY2022 decision.
- The safeguard mechanism sets out a sequential process: first, Management is to calculate the comparatio in conformity with prescribed rules; second, if the comparatio falls outside the safety corridor, the Board, after applying the four-factor test to assess market competitiveness, may exercise its discretion to adjust the salary increase.
- By promulgating that multi-step decision-making process, the Board constrained the exercise of its own discretionary authority.

### Tribunal conclusions
- 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.”
- The Tribunal did not sustain Applicants’ additional allegation that Management failed to comply with the safeguard mechanism rules regarding its treatment of the lower salary increase applicable to Grades B4-B5 staff.
- Given Management’s flawed implementation of the safeguard mechanism rules, the Board was not in a position to exercise properly its discretionary authority in taking the FY2022 staff compensation decision.
- The Tribunal recognized scope for management and the Executive Board to “exercise judgement, within defined parameters” (Board Paper, p. 3), but held that Management exceeded its authority in the comparatio calculation.

### Remedies ordered
- The Tribunal considered Article XIV, Section 3, of the Statute, which authorizes annulment of a regulatory decision, but concluded that a remedy short of annulment was appropriate in the singular circumstances of the case.
- The Tribunal’s remedy is to place the Board in a position to exercise properly its discretionary authority in relation to the FY2022 staff compensation decision and for the Board to take any further steps as it deems warranted.
- The Tribunal orders Management to 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.
- Although the Tribunal did not sustain the Applicants’ allegation about Grades B4-B5, Management could consider, in recalculating the comparatio for the FY2022 compensation decision, whether to take account of the actual salary increase to Grades B4-B5 staff members of 1.8 percent.
- 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.
- The Fund shall take all measures necessary to implement any adjustment to staff salaries as it determines following the rerun.
- 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.

### Remedies sought by Applicants (as framed in the Applications)
- Applicants sought an order requiring the Fund:
  - to rerun the comparatio analysis mandated by the 2019 salary erosion safeguard mechanism (i) using salary data as of April 30, 2021, and (ii) accounting for the actual proposed total salary increases for FY2022, including the smaller increase for staff in Grades B4-B5, and to notify all staff members of both the data used and the results;
  - to comply with the additional steps required under the safeguard mechanism to the extent the resulting comparatio falls below the safeguard threshold of 98 percent, and to notify all staff members of the evidence and analysis needed under these additional steps; and
  - to the extent that such steps result in augmentation of the previously approved total salary increase, to notify all staff members of the additional total salary increase and the basis for this change.

### Legal fees and costs award
- Under Article XIV, Section 4, of the Statute and Rule IX (5) of the Tribunal’s Rules of Procedure, the Tribunal concluded that Applicants have substantially prevailed and awarded Applicants the full amount of attorneys’ fees and costs incurred in the case, in the sum of $28,987.50.

### Tribunal decision (unanimous)
- 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. To correct the effects of that decision, 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.

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