The Modern Employment Reform, Improvement, and Transformation Act of 2025, or MERIT Act, significantly overhauls federal employee adverse action processes. It aims to streamline procedures for addressing poor performance and misconduct, making it easier for agencies to remove or discipline employees. A core change is the elimination of mandatory performance improvement plans (PIPs) before taking adverse actions based on performance.

For general federal employees, the bill amends existing law to allow adverse actions, such as removal or reduction in grade, based on a preponderance of the evidence for performance or misconduct. It shortens the employee response period to 7 business days and requires a final agency decision within 15 business days, unless a crime is suspected. Employees subject to a reduction in grade will immediately receive the lower pay and cannot be on administrative leave during an appeal, instead needing to report for duty or use accrued leave.

The legislation extends similar streamlined adverse action procedures to Senior Executive Service (SES) members and supervisors, including the "preponderance of the evidence" standard and expedited timelines. It also removes pay retention for SES career appointees removed for performance or conduct reasons. For supervisors, the bill explicitly states that performance appraisal procedures under Chapter 43 do not apply to these adverse actions.

The Act modifies furlough procedures, distinguishing between "general furloughs" and "emergency furloughs" due to appropriations lapses. For emergency furloughs, only notice is required, and no other procedures or appeals are available. Furthermore, the bill prohibits grieving adverse actions and certain reduction-in-force actions through collective bargaining agreements, ensuring the new procedures supersede any conflicting agreements.

To enhance accountability, the bill allows for the recoupment of bonuses or awards from employees if an "adverse finding" of misconduct is made in the same fiscal year, and prohibits future bonuses for five years. It also provides for the reduction of an employee's annuity if they are convicted of a felony related to their official duties, even if they voluntarily separated. Finally, the Act significantly extends probationary periods for most federal employees, including those in the competitive service and the Senior Executive Service, to two years, with specific provisions for positions requiring formal training or licenses.