436 Back Pay

 

Reference Note:

For additional material concerning the subject matter found in 436, refer to:

436.1 Corrective Entitlement

An employee or former employee is entitled to receive back pay for the period during which an unjustified or unwarranted personnel action was in effect that terminated or reduced the basic compensation, allowances, differentials, and employment benefits that the employee normally would have earned during the period.

For purposes of entitlement to employment benefits, the employee is considered as having rendered service for the period during which the unjustified or unwarranted personnel action was in effect.

436.2 Limitations

Limitations to corrective entitlement are as follows:

  1. Any amount that the employee earned in a new employment or in an enlarged part-time employment to replace Postal Service employment must be determined and offset against the amount of the reimbursement to which he or she would be entitled.
  2. Back pay is allowed, unless otherwise specified in the appropriate award or decision, provided the employee has made reasonable efforts to obtain other employment, as follows (see also 436.42f).
    1. Job applicants not hired by the Postal Service must immediately make reasonable efforts to obtain other employment.
    2. Separated employees, or employees on indefinite suspension, are allowed 45 days before they must make reasonable efforts to obtain other employment.

    Exception: Postal Service employees eligible for veterans’ preference are not required to make reasonable efforts to obtain other employment while pursuing an administrative appeal with the Merit Systems Protection Board (MSPB).

  3. No back pay is allowed for any period during which the person was not ready, willing, and able to perform the duties of the postal position.
  4. Leave that is recredited as a result of the corrective action may not exceed the maximum amount of leave to which the employee was eligible (see 512.321).
  5. Exception: Uncapped annual leave is recredited as a result of the reversal or modification of a removal by the Equal Employment Opportunity Commission or, for employees eligible for veterans’ preference, by the MSPB.

  6. The employee is not entitled to (1) increases in pay resulting from deferment of step increases due to unsatisfactory service or (2) salary increases resulting from ranking action.
  7. Any claim made by a postal employee or his or her authorized agent or attorney for back pay must be submitted to the appropriate office within 6 full years after the date the claim first accrued.

436.3 Corrective Action

The installation head or other appropriate authority determining that a previous decision was unjustified or unwarranted initiates and directs the corrective action to be taken to ensure appropriate earnings to the employee for the period affected.

436.4 Documents in Support of Claim

436.41 Statements by Local Official

The following must be provided on PS Form 8039, Back Pay Decision/Settlement Worksheet:

  1. The local official must provide a tabulation of the number and type of pay hours with which the employee should have been credited during the back pay period, including any annual or holiday leave taken, as follows:
    1. Overtime hours and/or night differential, as applicable, are determined by averaging the number of hours that other employees of the office with the same employment status were assigned during the back pay period.
    2. If the claim is for a part-time flexible employee, a tabulation must be provided that shows the number and type of pay hours the employee experienced for a full 13 pay periods prior to the separation or suspension. If the back pay period is less than 1 full pay period, only a 6-pay-period tabulation is required.
  2. The local official must provide a statement indicating whether the employee is entitled to any of the following during the back pay period:
    1. Premium pay (see 434).
    2. Change in pay rate or salary schedule
    3. Step increase and date effective.
    4. Change in leave category and date effective.
    5. Other changes in pay of a general application.
    6. Any other employment-related benefits.
  3. The local official must provide a statement indicating that had the employee not been suspended or removed he or she would have worked the hours as reported.
  4. The local official must provide a statement showing that monies earned by the employee for other employment during the period covered by the corrected action must be deducted, provided the earnings were from work that replaced the lost postal employment (see 436.2a).
  5. The local official will use the employee’s responses to the questions in PS Form 8038, Employee Statement to Recover Back Pay, as a reference when completing PS Form 8039 (see 436.42). Any discrepancies between the two back pay forms should be resolved prior to submission of the forms for processing.
  6. The local official must ensure that PS Form 8039 is completed in full and all necessary signatures, including the employee’s, are obtained prior to submission of the documents for processing.
436.42 Statements by Employee

The following must be provided by the employee on PS Form 8038, Employee Statement to Recover Back Pay:

  1. Where the original action resulted in separation or suspension, the employee must furnish the following:
    1. The employee must provide a statement as to whether he or she earned any income during the back pay period. If the employee received any outside earnings, the employee must provide information on whether the earnings were from any of the following: (a) a part-time job held at the time of removal; (b) in a new job; or (c) in an enlarged part-time job obtained to replace Postal Service employment. In any of those cases, the employee must provide a statement from the employer showing the record of hours worked and gross earnings during the back pay period.
    2. If the employee was already working in a part-time job at the time of removal or suspension, the employer should include the employee’s record of employment for the 6–month period prior to the removal or suspension.
    3. If outside earnings were from self-employment, the employee must provide an affidavit stating the amount earned during the back pay period. If such employment existed before the back pay period, the earnings must also be stated for 13 pay periods prior to the back pay period.
  2. The employee must provide a statement as to whether he or she received any unemployment compensation, and if so, state the amount received and the state that made the payments.
  3. The employee must provide a statement that the he or she was ready and able to perform his or her job during the back pay period. If not, the employee must state inclusive dates not ready and able, and the cause of the incapacity or unavailability. The employee may request payment of sick or annual leave, as appropriate, to his or her credit, for the period of incapacity or unavailability during the back pay period.
  4. Where the original action resulted in separation or indefinite suspension and the employee obtained no outside employment for all or any part of the back pay period, the employee must furnish the following:
    1. If the back pay period is 45 days or less, the employee is not required to certify or to provide documentation in support of efforts to secure other employment during this period.
    2. If the back pay period is more than 45 days and does not exceed 6 months, the employee must provide a statement certifying the reasons why he or she did not obtain outside employment for all parts of the back pay period that exceeded the first 45 days.
    3. If the back pay period is more than 6 months, the employee must provide documentation in support of efforts to secure other employment for all parts of the back pay period that exceed the first 45 days.
  5. On health benefit coverage, the employee should state whether he or she desires to: (1) enroll in any plan, the same as a new employee; or (2) have the prior enrollment reinstated retroactive to the date it was terminated.
  6. Where the original action resulted in denial of employment with the Postal Service, the individual must provide documentation in support of his or her efforts to secure other employment for all parts of the back pay period. The individual must also provide a statement of earnings during the back pay period as required by 436.42a.
  7. The employee must complete in full and sign both PS Form 8038 and PS Form 8039 indicating his or her agreement or disagreement with the local official’s completion of the form. If the employee does not agree, the basis for the disagreement should be explained.

436.5 Life Insurance Coverage

If an individual is restored to duty in a pay status, or hired through a settlement or decision, life insurance coverage is dealt with according to Federal Employees’ Group Life Insurance (FEGLI) Program regulations, depending on the circumstances encountered during the back pay period, as follows:

  1. Employee is on the rolls but in nonpay status. While the employee is in nonpay status, basic and optional coverage continue without cost for up to 12 months. After 12 months, coverage ceases, subject to a 31day extension. (This 12month period in nonpay status may be broken by periods of less than 4 consecutive months in pay status. If the employee returns to pay status for a period of 4 consecutive months or more, a new 12month period of continued coverage begins.) When the employee returns to duty in a pay status, if coverage has ceased, on the first day of his or her return, basic and optional insurance are restored automatically, according to the last election on file (see 534.1, LWOP). Until coverage ceases, optional insurance may be elected, or increased, if the employee submits SF 2817, Life Insurance Election (FEGLI), within 60 days of experiencing a qualifying life event (e.g., marriage, divorce, death of spouse, birth or adoption of child).
  2. Employee is separated from the Postal Service for less than 180 days. On the last day in pay status, basic and optional coverage cease, subject to a 31day extension (see 535.6, Termination). The employee may also convert FEGLI coverage to an individual policy. When the employee is reinstated, the employee automatically receives the FEGLI coverage according to his or her last election on file. The FEGLI regulations allow changes to this election under any one of the following three circumstances:
    1. FEGLI Open Season. A new election form may be submitted during a FEGLI Open Season.
    2. Satisfactory medical information. An employee who waived life insurance before the separation may acquire Basic Life Insurance and Option A Standard and/or Option B Additional (up to a total of five multiples) insurance by providing satisfactory medical information to the Office of Federal Employees’ Group Life Insurance (OFEGLI) by using SF 2822, Request for Insurance (FEGLI). If the request is approved, the employee is automatically signed up for Basic Life Insurance. He or she is given 31 days to elect Option A and/or Option B by submitting SF 2817. An employee who already has Basic Life Insurance may elect Option A and/or Option B or increase Option B multiples by providing satisfactory medical information through the same procedure. The employee must meet pay and duty status requirements to have the coverage become effective.
    3. Qualifying life event. An employee who has Basic Life Insurance coverage may elect Option B or Option C or increase multiples of Option B or C (up to a total of five multiples) if there is a qualifying life event during the separation or during the 60day period immediately before the separation. The employee is given 31 days from the date of reinstatement, or 60 days from the date of the event, whichever gives the employee more time, to elect optional insurance by submitting SF 2817. An employee who experiences a qualifying life event after returning to service has 60 days from the qualifying life event to increase FEGLI coverage. The amount of coverage that can be elected can vary depending on the life event and eligible family members. (See the chart under Life Event in FE 7620, FEGLI Program Booklet for Postal Service Employees.)
  3. Employee is separated from the Postal Service for 180 days or more. On the last day in pay status, basic and optional coverage cease, subject to a 31day extension (see 535.6, Termination). When the employee is reinstated, any waiver of insurance previously on file is cancelled. Basic Life Insurance becomes effective on the first day the employee returns to duty in a pay status. The employee may file a new waiver of coverage or elect optional insurance within 31 days of returning to duty by submitting SF 2817. If the employee files no election, he or she is given the optional insurance on file immediately before the break in service.
  4. Individual hired as a new employee of the Postal Service. As a new employee, the individual is eligible for basic and optional insurance according to 531.2, Eligible Employees, subject to 531.3, Exclusions. Basic Life Insurance coverage begins for an eligible employee on the first day of duty in a pay status, and he or she has 31 days to elect optional insurance by submitting SF 2817.
  5. Individual dies during the back pay period. According to 5 U.S.C. 8706(d), if the insurance of an employee stops because of separation from the service or suspension without pay, and the separation or suspension is thereafter officially found to have been erroneous, the employee is deemed to have been insured during the period of erroneous separation or suspension. Deductions otherwise required by 5 U.S.C. 8707 are not withheld from any back pay awarded for the period of separation or suspension unless death or accidental dismemberment of the employee occurs during such period. Deductions must be made from the back pay awarded in these two situations because an insurance claim is paid.

436.6 Erroneous Separation for Retirement

436.61 Explanation

An individual who separates under optional (voluntary) retirement before meeting both age and service requirements is considered erroneously separated. In such cases, the Office of Personnel Management (OPM) usually disallows the retirement application and requests the Postal Service to retroactively restore the employee to the active rolls as of the date of the erroneous separation. If the date on which the applicant would attain the age and/or service requirements has already passed and the time span for attaining eligibility is rather short, e.g., 30 days or less, OPM may administratively place the employee in a LWOP status from the date of the erroneous separation to the date on which the minimum service or age requirement is attained.

436.62 Corrective Action

OPM’s letter requesting the Postal Service to restore the employee to the rolls will indicate that the employee “may be entitled to back pay covering the period from the date of the erroneous separation to the date the employee is restored to the rolls.” Before any action is taken on OPM’s letter, the employee’s service record must be verified. If the reason for the erroneous separation is based on age, records must be verified to ascertain the employee’s correct birth date. After the retirement separation is established as erroneous, the employee must be contacted promptly and action taken to restore him or her to the rolls.

In these erroneous optional retirement cases, the back pay is calculated so that employees are compensated as if they had worked during the period of erroneous separation.

436.7 Interest on Back Pay

436.71 Purpose

This section establishes procedures for paying interest that the Postal Service is obligated to pay pursuant to the law, court order, arbitration or federal agency decision, national labor agreement, or Postal Service settlement agreement. This section does not create any Postal Service obligation to pay interest on back pay claims.

436.72 Availability of Interest

Interest is paid on back pay only under the following circumstances:

  1. Decisions — awards resulting from legally binding determinations by courts of law, administrative agencies, or the grievance and arbitration process. They are handled as follows:
    1. Administrative Agency Decisions. Interest is paid automatically by Accounting Services for decisions issued by the following agencies:
      1. Merit Systems Protection Board.
      2. Equal Employment Opportunity Commission.
      3. National Labor Relations Board.
    2. Court Decisions. Interest is not paid unless specifically awarded in the decision.
    3. Arbitration Decisions. Interest is paid automatically for arbitration decisions that award back pay for a disciplinary suspension or removal for:
      1. Employees represented by the National Postal Mail Handlers Union (NPMHU) for cases heard after February 20, 1991.
      2. Employees represented by the National Association of Letter Carriers (NALC) and the American Postal Workers Union (APWU) for cases heard after June 12, 1991.
      3. Employees represented by the National Rural Letter Carriers’ Association (NRLCA) for cases heard after February 3, 1996.

      Note: For arbitration decisions that are unrelated to a disciplinary suspension or removal, interest is not paid unless it is specifically required by the award.

  2. Settlements — awards resulting from agreements between a representative of the Postal Service and an authorized employee representative that are reached through negotiation. Interest is not paid unless it is specifically required by the settlement agreement.
436.73 Determination of Rate of Interest

When interest is paid on back pay, the interest rate is determined as follows:

  1. Decisions (see Exhibit 436.73a):
    1. Merit Systems Protection Board. The rate of interest is based on the veterans’ preference eligibility of the employee.
      1. For veterans’ preference eligible employees, the rate of interest is calculated using the Internal Revenue Code overpayment rate (26 U.S.C. 6621(a)(1)). Computation methods for applying the rate of interest are as found in 5 CFR 550.806.
      2. For non–veterans’ preference eligible employees, the rate of interest is calculated using the federal judgment rate (28 U.S.C. 1961).
    2. Equal Employment Opportunity Commission. Interest is paid at the Internal Revenue Code overpayment rate (26 U.S.C. 6621(a)(1)). Computation methods for applying the rate of interest are as found in 5 CFR 550.806.
    3. National Labor Relations Board. Interest is paid at the rate assessed by the Internal Revenue Service for the underpayment of federal taxes (28 U.S.C. 1961).
    4. Arbitration Decisions. For arbitration decisions that award back pay for disciplinary suspension or removal, interest is paid at the federal judgment rate (28 U.S.C. 1961).
    5. Note: For arbitration decisions unrelated to disciplinary suspension or removal, interest is not paid unless specifically required by the award.

  2. Settlements (see Exhibit 436.73b):
    1. Merit Systems Protection Board. The rate of interest for MSPB causes is based on the veterans’ preference eligibility of the employee.
      1. For veterans’ preference eligible employees, the rate of interest is calculated using the Internal Revenue Code overpayment rate (26 U.S.C. 6621(a)(1)). Computation methods for applying the rate of interest are found in 5 CFR 550.806.
      2. For non–veteran’s preference eligible employees, the rate of interest is calculated using the federal judgment rate (28 U.S.C. 1961).
    2. Equal Employment Opportunity Commission. Interest is paid at the Internal Revenue Code overpayment rate (26 U.S.C. 6621(a)(1)). Computation methods for applying the rate of interest are found in 5 CFR 550.806.
    3. National Labor Relations Board. Interest is paid at the rate assessed by the Internal Revenue Service for the underpayment of federal taxes (28 U.S.C. 1961).
    4. Court Settlements. Interest is paid at the federal judgment rate (28 U.S.C. 1961).
    5. Grievance Settlements. Interest is paid at the federal judgment rate (28 U.S.C. 1961).

Exhibit 436.73a

Interest on Back Pay Decisions

 

Type of Decision

Merit Systems Protection Board Decisions

Equal Employment Opportunity Commission Decisions

National Labor Relations Board Decisions

Court Decisions

Arbitration Decisions

Application

Veterans’ Preference Eligible Recipients

NonVeterans’ Preference Eligible Recipients

All Recipients

All Recipients

All Recipients

All Recipients

Whether Interest Is Paid

Yes, paid automatically by AS

Yes, paid automatically by AS

Yes, paid automatically by AS

Yes, paid automatically by AS

No, unless specifically stated in the decision

Refer to Note1

Rate of Interest

IRS Overpayment Rate2

Federal Judgment Rate4

IRS Overpayment Rat2

IRS Underpayment Rate3

Federal Judgment Rate4

Federal Judgment Rate4


Interest is paid automatically for arbitration decisions related to disciplinary suspension or removal for employees represented by the National Postal Mail Handlers Union (NPMHU) for cases heard after February 20, 1991, and for employees represented by the National Association of Letter Carriers (NALC) and the American Postal Workers Union (APWU) for cases heard after June 12, 1991. If an arbitration award is unrelated to disciplinary suspension or removal, interest is not paid unless specifically required by the award

Exhibit 436.73b

Interest on Back Pay Settlements

 

Type of Settlement

Merit Systems Protection Board Settlements

Equal Employment Opportunity Commission Settlements

National Labor Relations Board Settlements

Court Settlements

Grievance Settlements

Application

Veterans’ Preference Eligible Recipients

Non–Veterans’ Preference Eligible Recipients

All Recipients

All Recipients

All Recipients

All Recipients

Whether Interest Is Paid

No, unless specifically stated in the settlement

No, unless specifically stated in the settlement

No, unless specifically stated in the settlement

No, unless specifically stated in the settlement

No, unless specifically stated in the settlement

No, unless specifically stated in the settlement

Rate of Interest

IRS Overpayment Rate1

Federal Judgment Rate2

IRS Overpayment Rate1

IRS Underpayment Rate3

Federal Judgment Rate2

Federal Judgment Rate2


436.74 Responsibility

Eagan Accounting Services is responsible for calculating the amount of interest payable.