William Michael McCauley 85, who retired in 1964 as director of the Bureau of Employees' Compensation of the Labor Department, died Thurusday at Northern Virginia Doctors Hospital following a stroke.

He moved to Falls Church in 1919, and began as a clerk with the U.S. Employees' Compensation Commission. He was executive secretary of the commission from 1928 until 1946, when the Bureau of Employees' Compensation was created and he was named director.

In 1961, Mr. McCauley was one of five federal employees to receive the President Award for Distinguished Federal Civilian Service from President Eisenhower. His citation read:

"A man of unusual foresight, judgment and executive competence, he has exercised a profound influence in developing the federal employees' compensation system to serve the human needs of the times. Through his keen sense of social awareness and superior administrative ability, he has greatly alleviated for federal personnel and their families the social and economic problems arising from accident disease and disaster."

Mr. McCauley was born in St. Louis Mo. He served in the Army in World War I.

He was an active member of St. James Catholic Church in falls Church the Knights of Columbus, the Catholic War Veterans and the Friendly Sons of St. Patrick.

He is survived by his wife, Simone L. of the home; a daughter, Jeanne Trott, and a son, Joseph, both of Falls Church; two other sons, Michael, of Mechanicville, Md., and Patrick, of Manassas; a sister, Virginia Shreve, of McLean, and 10 grandchildren.