The Commission shall establish a Panama Canal Employment System and prescribe the regulations necessary for its administration. The Panama Canal Employment System shall—

(1) be established in accordance with and be subject to the provisions of the Panama Canal Treaty of 1977 and related agreements, the provisions of this part, and any other applicable provision of law;

(2) be based on the consideration of the merit of each employee or candidate for employment and the qualifications and fitness of the employee to hold the position concerned;

(3) conform, to the extent practicable and consistent with the provisions of this chapter, to the policies, principles, and standards applicable to the competitive service;

(4) in the case of employees who are citizens of the United States, provide for the appropriate interchange of those employees between positions under the Panama Canal Employment System and positions in the competitive service; and

(5) not be subject to the provisions of title 5, unless specifically made applicable by this chapter.

The head of any Executive agency (other than the Commission) and the Smithsonian Institution may elect to have the Panama Canal Employment System made applicable in whole or in part to personnel of that agency in the Republic of Panama.

(1) The head of any Executive agency (other than the Commission) and the Smithsonian Institution may elect to have the Panama Canal Employment System made applicable in whole or in part to personnel of that agency in the Republic of Panama.

(2) Any Executive agency (other than the Commission) and the Smithsonian Institution, to the extent of any election under paragraph (1), shall conduct its employment and pay practices relating to employees in accordance with the Panama Canal Employment System.

(3) Notwithstanding any other provision of this chapter, the Panama Canal Act Amendments of 1996 (subtitle B of title XXXV of Public Law 104–201; 110 Stat. 2860), or the Panama Canal Transition Facilitation Act of 1997 (subtitle B of title XXXV of Public Law 105–85; 110 [1] Stat. 2062), or the Panama Canal Commission Authorization Act for Fiscal Year 1999, this subpart, as in effect on September 22, 1996, shall continue to apply to an Executive agency or the Smithsonian Institution to the extent of an election under paragraph (1) by the head of the agency or the Institution, respectively.

The Commission may exclude any employee or position from coverage under any provision of this subpart, other than the interchange rights extended under subsection (a)(4).

(Pub. L. 96–70, title I, § 1212, Sept. 27, 1979, 93 Stat. 464; Pub. L. 104–201, div. C, title XXXV, § 3530(a), Sept. 23, 1996, 110 Stat. 2862; Pub. L. 105–85, div. C, title XXXV, §§ 3523(d), 3550(d)(5), Nov. 18, 1997, 111 Stat. 2065, 2074; Pub. L. 105–261, div. A, title XXXV, §§ 3507(c), 3512(a)(2), Oct. 17, 1998, 112 Stat. 2269, 2271.)