In the Matter of the Petition by

JAMES PALAGANO
815 Sycamore Court

at

Toms River, NJ 08753-3731

P.S. Docket No. DCA 03-213

APPEARANCE FOR PETITIONER:
Sheila Hunter
NAPUS Representative
P.O. Box 232
Everette, PA  15537-0232

APPEARANCE FOR RESPONDENT:
Keith L. Reid
Labor Relations Specialist
United States Postal Service
21 Kilmer Road
Edison, NJ  08817-9998

FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982

            Petitioner, James Palagano, filed a Petition for Hearing after his request for reconsideration of a letter of indebtedness was denied.  Since that time, on June 20, 2003, a Notice of Involuntary Administrative Salary Offsets was issued by Petitioner’s supervisor, Mr. Fascio.  This Notice stated the Postal Service’s intention to withhold $5,715.08 from Petitioner’s salary to recover a shortage in an account in his post office.

            Petitioner requested a hearing based on written submissions.  Both parties were given time to file additional evidence and argument, beyond that filed with the Petition and the Answer.  Petitioner filed his sworn declaration and attached documents.  Respondent filed nothing other than a repetition of the argument set forth in the Answer.  The following findings of fact are based on the entire record.

FINDINGS OF FACT

            1.  At the time pertinent to this case, Petitioner was the postmaster at Point Pleasant, New Jersey.  A vending machine credit at a branch office under Petitioner’s supervision was assigned to a clerk, Mr. Ferraro.  (Petition; Palagano Declaration).

            2.  On January 9, 2003, the vending machine credit was audited by a Mr. Serrano, and found to be short $5,715.08 (Forms attached to Answer).

            3.  At or about the time of the audit, Petitioner learned that the supervisor who was responsible for auditing the vending credit had not been conducting audits every 120 days as is required by regulation.  On March 10, 2003, after consultation with Labor Relations officials, Petitioner issued a Letter of Warning to the supervisor, Mr. Peterson, for his failure to conduct timely audits of the vending credit.  Neither Mr. Ferraro nor Mr. Peterson was charged with liability for the shortage.  (Palagano Declaration, Exs. 1 and 2).

            4.  On March 19, 2003, Petitioner’s supervisor issued Petitioner a letter of indebtedness, charging him with liability for the $5,715.08 shortage (Palagano Declaration, Ex. 3).

            5.  A December 4, 1985 memorandum from the Senior Assistant Postmaster General to regional Postmasters General states, in pertinent part:

“Normally, it is the policy of the Postal Service not to hold supervisors and postmasters personally accountable for employee shortages, if they do not have direct responsibility for the shortage.  While this does not relieve management’s responsibility for auditing and supervising credits assigned to employees, other action should be taken based on the circumstances of each case, bearing in mind our basic principle that, in the administration of discipline, our actions should be corrective in nature rather than punitive.”  (Ex. A to supplement to Petition).

            6.  A second memorandum dated September 16, 1987, from two Assistant Postmasters General to regional directors of finance and human resources further states:

“It has been brought to our attention that there is some confusion in regard to the policy of the Postal Service concerning the personal accountability of postmasters and supervisors in situations involving employee credit shortages where contractual or other reasons preclude collection of the shortage from the employee.

The Postal Service will not normally hold postmasters and supervisors personally accountable for such employee shortages if they do not have direct access to the credit or are not involved in collusion with the employee.  That policy was enunciated in a December 4, 1985, memorandum from former Senior Assistant Postmaster General for the Employee and Labor Relations Group, Michael S. Coughlin, and it has not been withdrawn or modified.  The policy is not intended to absolve a postmaster, supervisor or others who have financial accountability for postal funds and accountable paper from conscientiously enforcing Postal Service policies and procedures.  However, rather than issuing a letter of demand to these individuals, it is more appropriate to consider counseling or discipline for failure to properly carry out the duties of their position.  The action warranted should be determined on a case by case basis depending upon the particular circumstances.”  (Ex. B to supplement to Petition).

            7.  Postal Service Handbook PO-102, Retail Vending Operational and Marketing Program (May 1999), Section 643, is titled Shortages.  Section 643.12 states:

Other Operational Problems.  Servicing personnel do not have complete personal control, at all times, of the assigned credit; therefore, shortages must be assumed to be the result of machine malfunction, unless the following can be determined:

a.  Fire, theft, robbery, errors on PS Forms 17, Stamp Requisition, customer refunds, acceptance of bogus and/or foreign coin-like and bill-like objects, or any other procedural errors.

b. The loss was the direct result of negligence on the part of the servicing personnel.

c. Theft, embezzlement, etc., by the servicing person with sufficient evidence to prefer charges.

DECISION

            Petitioner argues that he cannot be held personally liable for a vending machine loss because the vending account was never assigned to him and to hold him liable would be contrary to the Postal Service policy stated in the two memoranda quoted above.  Also, he argues that personal liability for vending machine losses must be based on negligence or wrongdoing by the servicing employee and that there is no evidence of either, nor is there any evidence that anything Petitioner did, or failed to do, caused the loss.

            Respondent’s theory of liability here is that a postmaster is responsible for the overall operation of his office, including all financial matters, and that Petitioner is personally liable because he did not enforce Postal Service policies and procedures.  Respondent cites a provision in the Employee and Labor Relations Manual (ELM) that states that postmasters are responsible for collecting debts owed by employees under their supervision.  As to the matter of liability for vending losses having to be based on negligence or wrongdoing, Respondent argues that Petitioner “exhibited negligence in his responsibility as the postmaster.”

            Respondent’s arguments lack merit.  First, Respondent has not presented any evidence to prove what it claims, i.e., that Petitioner was negligent or otherwise failed to enforce Postal Service policies and procedures.  Second, to hold a postmaster personally liable under the circumstances shown here is clearly contrary to the policies stated in the two quoted memoranda.  Respondent has made no argument that these memoranda are no longer current or do not apply in this case.

            If Petitioner has not properly performed his duties as a postmaster, other action may be appropriate, but there is nothing in this record to support holding him personally liable for the debt that is alleged.  The Petition is granted.  Respondent may not collect $5,715.08 from Petitioner’s salary.

Bruce R. Houston
Chief Administrative Law Judge