OOPS! OUR MISTAKE, BUT YOU STILL OWE UNCLE SAM THOUSANDS
More than a few federal employees have been in this situation. They got an increase in their pay check for what they thought was a long overdue raise, an award, a grievance settlement, or even a simple area pay adjustment. It felt good and they started thinking about how to spend the extra cash. When they told a co-worker about the additional income and s/he said it did not sound right, the employee even checked with HR who assured her the extra money was correctly calculated. So, she spent it on a vacation, new car, college tuition, or whatever–only to learn a year or more later that the federal government decided it made a mistake sending her the money it did and it wanted it back—with interest. When the employee went to see the same HR folks who assured her the payments were legitimate and correct, the HR staffer merely shrugged his shoulders and said, “Sorry, I guess I was wrong. The only opinion that matters on alleged overpayments to the employee is the federal government’s.” The employee appealed, but lost and when she asked the agency to waive her obligation to repay the money it refused. When the employee said she did not have the money to repay, the feds said “Not to worry” because it was going to take some money out of every pay check until the debt was repaid—including her annuity checks if she retired before repaying it.
A bargaining unit employee can usually grieve the decision as to whether/she owes any money and the decision whether to waive the obligation to repay Uncle Sam, but not always. A good example as to how this all plays out can be found in Overseas Private Investment Corporation (OPIC) and AFGE, Local 1534, 68 FLRA 982 (2015). But it is not a perfect example because the agency erred by failing to make a certain argument.
The employee transferred from another agency to OPIC and in the process her pay was increased from a GS-14/6 to a 14/9 because of some pay flexibility the hiring official thought s/he had. Two years later OPIC increased her to a GS-14/10. A year after that someone in OPIC discovered that both the initial three-step pay increase and the subsequent step increase technically violated law and regulation. As a result, the agency demanded the employee repay it $17,213. The union grieved and took it to arbitration where the issue was whether the agency should have waived the debt. That turns on the correct interpretation of 5 USC 5584(a)
A claim of the United States against a person arising out of an erroneous payment of pay or allowances made on or after July 1, 1960, or arising out of an erroneous payment of travel, transportation or relocation expenses and allowances, to an employee of an agency, the collection of which would be against equity and good conscience and not in the best interests of the United States, may be waived in whole or in part by—
(1) the authorized official;
(2)the head of the agency when—
(A) the claim is in an amount aggregating not more than $1,500; and
The arbitrator ordered the agency to waive the money owed for improperly moving her from a Step 6 to Step 9 when it hired her, but he ordered her to repay the Step 10 increase she got.
The agency filed exceptions which were dismissed by FLRA, but it seems that the agency never made the argument to the arbitrator or FLRA that the OPIC agency head can only waive debts up to $1,500. Because this debt was far more than that, the waiver decision belonged to the Director of OMB. Had OPIC argued that the waiver decision was not arbitrable because the decision belonged to someone outside the collective bargaining relationship, namely, OMB, it seems to us the employee would have been required to repay the full $17,213.
There is not much an employee can do about an improper payment of money to him/her. Even when the mistake is solely management’s, s/he is obligated to repay no matter what the size of the overpayment absent a waiver. A bargaining unit employee might draw a sympathetic arbitrator who broadly interprets the statutory waiver criteria of “against equity and good conscience and not in the best interests of the United States,” but there is a ton of OMB case law imposing a very narrow interpretation on it. Maybe the best the employee or union can do is to make sure that any payment outside the ordinary and expected ones is absolutely correct and defensible. If they can’t, it might be wise for the employee to put any sizeable extra payment in the bank to earn some interest until the six year statute of limitations tolls when the government can no longer collect.