August 26, 2011

In the Matter of the Petition by

KATHRYN L. SCHRACK

P.S. Docket Nos. DCA 11-52, DCA 11-53 and DCA 11-54

APPEARANCE FOR PETITIONER
Mary DiGioia

APPEARANCE FOR RESPONDENT
Jesse Landy Vargas

Labor Relations Specialist

FINAL DECISION UNDER THE DEBT COLLECTION ACT OF 1982

          Petitioner, Kathryn Schrack, challenges three debt assessments issued by Respondent, United States Postal Service.  Respondent seeks to offset against Petitioner’s salary $3,697.07 based on salary overpayments issued to her in 2002 (P.S. Docket No. DCA 11-52 assessing $1,594.95, and P.S. Docket No. DCA 11-54 assessing $1,840.64), and a $261.50 unit reserve shortage in 2007 for which Respondent alleges Petitioner is accountable (P.S. Docket No. DCA 11-53). 

          I rule in favor of Respondent, in part, on the salary overpayments, and in favor of Petitioner on the unit reserve shortage.  As explained below, Respondent may offset $2,180.14 against Petitioner’s salary.  The Petitions are denied to that extent and otherwise are granted.

FINDINGS OF FACT

          1.         From April 1, 2002 until November 1, 2003, Petitioner was in leave without pay (LWOP) status for medical reasons from her position as a supervisor of distribution operations (Stipulation 2; Hearing Transcript (Tr.) 93, 95).  While she was in LWOP status, Petitioner was not entitled to receive a salary (Tr. 46, 121), and except as referenced in Finding 4, did not receive a salary for that reason (Tr. 28, 33, 45).    

          2.         Petitioner was released medically to return to work in January 2003.  However, for reasons not explained in the record, she was not permitted to do so by Respondent until November 2003, resulting in an EEO grievance.  (Tr. 95-96, 125-26).  The grievance was settled on terms that are not in the record except as described in Finding 3 (Tr. 96, 126).

          3.         On November 12, 2003, Respondent paid Petitioner $16,689.28, representing four months salary, to settle the grievance (Exhibit C; Tr. 96, 116).  Although a settlement agreement was executed, it is not in the record (Tr. 116-19, 122).

          4.         While Petitioner remained in LWOP status, Respondent mistakenly paid her a salary for work hours and associated pay premiums, as follows:

          Pay Period (PP) in 2002     Gross salary paid              Net salary paid¹

          PP 18                                 $369.95                                     $2.74
          PP 19 through PP 21          None (coded LWOP)                  None
          PP 22                                 $955.30                                     $401.62
          PP 23                                 $968.50                                     $587.85
          PP 26                                 $1,937.00                                  $1,187.93

      Totals                                     $4,230.75                                 $2,180.14

(Exhibit 1 B, Exhibit 9 A-H; Tr. 26-30, 40, 43-44, 46-50).² Net proceeds were deposited electronically into Petitioner’s designated bank account (Exhibit 1 B; Exhibit 9 A-H; Tr. 26-31, 43-44, 47, 112).

          5.         On December 17, 2008, Respondent transmitted two letters to Petitioner, attaching invoices notifying her that she owed $1,840.64 for salary overpayments in PP 18, PP 22 and PP 23 of 2002 (Exhibit 11), and $1,594.95 for a salary overpayment in PP 26 of 2002 (Exhibit 2).  Respondent did not present evidence explaining the calculation of these amounts.  On November 10, 2010, Respondent issued Petitioner two Letters of Debt Determination on the same bases (Exhibit 12 and Exhibit 3).³

          6.         Although Petitioner’s representatives previously requested documents concerning the salary overpayments, they were not provided to Petitioner until this proceeding (Stipulation 4).  However, all such documents requested by Petitioner during this proceeding were provided by Respondent (Stipulation 5; Tr. 41).

          7.         On December 4, 2007, the unit reserve at the Beach Center Station, Huntington Beach, California, was counted revealing a shortage (Exhibit 5; Tr. 56-57, 66, 93).

          8.         The record does not contain evidence of the status of the account at any time prior to the December 4 audit.  The record does not identify when Petitioner became unit reserve custodian, whether the unit reserve was counted at that time, its balance, or any intervening transactions (Stipulations 5-6; Tr. 65, 81-83, 87).  Documents related to previous unit reserve counts, requested by Petitioner during this proceeding, were not produced by Respondent because they were not available (Stipulation 5).

          9.         On January 2, 2008, Respondent issued a demand letter attaching an invoice notifying Petitioner that she owed $261.50 for the unit reserve shortage (Exhibit 7).  On November 10, 2010, Respondent issued a Letter of Debt Determination on the same basis (Exhibit 6).

          10.       On February 14, 2011, Respondent issued three Notices of Involuntary Administrative Salary Offsets (Notices) for the alleged debts:  a Notice assessing $1,594.95 for 2002 salary overpayments (P.S. Docket No. DCA 11-52), another Notice assessing an additional $1,840.64 for 2002 salary overpayments (P.S. Docket No. DCA 11-54), and a Notice assessing a $261.50 2007 unit reserve shortage (P.S. Docket No. DCA 11-53).  (Attachments to Petitions).  Petitioner timely filed Petitions under the Debt Collection Act, which were thereafter consolidated (March 3, 2011 Order).

          11.       Postal witnesses were unable to explain Respondent’s delay from the 2002 salary overpayments until its 2011 issuance of the Notices (Tr. 20-22, 38, 51).⁴

          Five witnesses testified in a June 20, 2011 hearing in which the undersigned Administrative Judge presided.  The parties filed post-hearing briefs, and the record closed on August 4, 2011.

DECISION

Salary Overpayments

          To recover a salary overpayment, Respondent bears the burden to prove by competent evidence that the payments were made, the amount of the payments, and that the employee was not entitled to the payments.  See Benjamin N. Blanco, P.S. Docket Nos. DCA 11-42, 11-43, 11-44 (June 8, 2011).  Where an employee mistakenly is credited with work hours and paid accordingly during pay periods in which she was in LWOP status, the employee is accountable to reimburse the Postal Service regardless of the employee’s lack of complicity or fault.  See Rosina A. Vacchiano, P.S. Docket No. DCA 00-435 (March 6, 2001).

          It is undisputed that Petitioner was in LWOP status during the pay periods in question and therefore was not entitled to be paid a salary (Finding 1).  Respondent presented payroll journals and explanatory testimony demonstrating that Petitioner was paid mistakenly for hours that she did not work during this period⁵ in the cumulative net amount of $2,180.14 (Finding 4), which I find sufficient to satisfy Respondent’s initial burden of proof, to that extent.  See Michael Garner, P.S. Docket Nos. DCA 09-447, 09-448 (October 7, 2010) (even in the absence of explanatory testimony, detailed payroll records sufficient to enable Administrative Judge to calculate amount of salary overpayment).

          Although Respondent has satisfied its initial evidentiary burden, Petitioner has presented four defenses against liability.  First, she argues that while Respondent may have issued the salary payments, her bank did not receive them.  However, Petitioner offered no proof in that regard other than her own vague testimony, and she did not submit banking records.  In contrast, Respondent presented adequate evidence that the net proceeds were deposited electronically into Petitioner’s designated bank account.  I conclude that Petitioner received the payments (Finding 4), and reject the defense.

          Second, Petitioner argues that the amounts Respondent sought to recover for the salary overpayments in the Notices do not correlate with the evidence it presented in the hearing, and that it should be precluded from any recovery as a result.  I agree with Petitioner’s basic premise (Finding 5), and have limited Respondent’s recovery accordingly.  However, Respondent’s lack of explanation does not negate my conclusion that Petitioner was overpaid – it only reduces recovery to the amounts proved.  See Michael Garner.

          Third, Petitioner argues that Respondent released her from these debts in the November 2003 grievance settlement (Findings 2-3).  For this affirmative defense, Petitioner bears the burden to prove that a release or waiver clearly was  within the settlement terms.  See Peter G. Harris, P.S. Docket No. AO 09-41 (I.D. August 26, 2009).  Petitioner failed to meet her burden – e.g., by failing to provide the terms of the settlement agreement (Finding 3; see also Tr. 122-23).  Without the settlement agreement or other competent evidence, I am unable to determine that Respondent released Petitioner from responsibility for these salary overpayments.⁶  See Robert D. Grigsby, P.S. Docket No. DCA 03-397 (August 26, 2005) (to release a debt, a settlement agreement from another forum unambiguously must cover the overpayment issue that is the subject of the debt collection action).

          Fourth, Petitioner argues that the extraordinary lapse of time between the 2002 salary overpayments and the 2011 Notices seeking administrative salary offsets to recover those overpayments so prejudiced her ability to present a defense that due process considerations require that I excuse her liability.

          Respondent’s lengthy delay in this case appears excessive, and has not been explained (Finding 11).  However, no statute of limitations applies to bar stale actions to collect a debt under the Debt Collection Act.  See Merritt W. Foster III, P.S. Docket No. DCA 07-119 (May 27, 2009).⁷  While Respondent must prove the debt with competent, if not exacting evidence in the face of such a delay, I find that it has done so through its unrebutted evidence.  See Clarence Taylor, P.S. Docket No. DCA 10-153 (January 19, 2011) (Respondent’s unexplained delay of a decade to initiate collection actions does not affect Petitioner’s obligation to repay salary overpayment). 

          Nonetheless, although Respondent’s delay does not require that I excuse Petitioner’s proved debt, if her ability to present a defense was materially prejudiced, principles of laches potentially apply to preclude recovery.  See Barry Bente, P.S. Docket No. DCA 01-147 (July 23, 2001).  Even if the doctrine is applicable to a case of this nature,⁸ to preclude recovery under laches, Petitioner must show (1) unreasonable and unexcused delay by Respondent, and (2) prejudice in the impairment of her ability to mount a defense on the merits, such as loss of records, destruction of evidence, or witness unavailability.  See JANA, Inc. v. United States, 936 F.2d 1265, 1269-70 (Fed. Cir. 1991).  Such prejudice to Petitioner resulting from the delay must be material, and the unreliability of memories of long past events, to the extent it undermines my ability to judge the facts, presents an appropriate consideration of whether such material prejudice has been shown.  See A.C. Aukerman Co. v. R.L. Charles Construction, Co., 960 F.2d 1020, 1033 (Fed. Cir. 1992) (en banc). 

          Petitioner identifies three elements of prejudice caused by Respondent’s delay.  She complains that she was unable to obtain potentially exonerating documents from Respondent; she claims a faded memory; and she asserts that an intervening home burglary resulted in the loss of relevant records.

Regarding relevant payroll documents, Petitioner was afforded an opportunity to obtain all such documents during this proceeding.  While Petitioner complains in her post-hearing brief about a continued lack of provision of exonerating documents, she has stipulated, and accordingly, I have found that Respondent provided all relevant payroll documents she requested during this proceeding (Finding 6).  Therefore, Petitioner cannot be heard to argue prejudice based upon inadequate payroll documents provided by Respondent. 

          Petitioner professes that Respondent’s delay resulted in her lack of memory as to whether the overpayments were deposited into her bank account and about the salary overpayments themselves.  However, Petitioner did not identify any specific matter for which her memory failed due to the passage of time, or the matters on which she may have testified to rebut Respondent’s position had collection efforts been more timely.  Further, she testified that her memory problems were caused, at least in part, by her medical situation rather than by Respondent’s delay.  Moreover, at least as to the bank deposit issue, Petitioner lacked diligence in failing to seek her own banking records (see Tr. 124-25).  The availability of the explanatory payroll documents mitigates the effect of Petitioner’s lost memories.  See Council of Athabascan Tribal Governments v. United States, 693 F. Supp. 2d 116,123 (D.D.C. 2010).   I find that prejudice to Petitioner in this regard is overcome by the documents which provide information sufficient to allow reasoned reconstruction of the pertinent events.  See Gull Airborne Instruments, Inc. v. Weinberger, 694 F.2d 838, 845 (D.C. Cir. 1982).

          Similarly, although Petitioner testified that her house was burglarized at an unidentified time resulting in the loss of unidentified documents, (Tr. 129-29), her testimony was too vague to be credited.  She has not shown what records may have been lost, how she may have been prejudiced by any such loss of records, or any mitigating efforts she made to recreate any burglarized documents.  Furthermore, Petitioner’s suggestion that the grievance settlement agreement may be unavailable because it was lost in the burglary is contradicted by her earlier testimony that she does not know why she failed to produce the settlement agreement and thought incorrectly that she had done so.  (Compare Tr. 122 with Tr. 129).  In addition, as discussed above, Petitioner was afforded the opportunity to obtain any lost documents from Respondent during this proceeding. 

          All in all, assuming that the defense of laches is available to Petitioner in this case, while some measure of hindrance to Petitioner’s defense inevitably must have resulted from Respondent’s unreasonable delay, I am not persuaded that the prejudice rises to such a material level so as to be sufficient to deny Respondent’s entitlement to offset the salary overpayments.

          None of Petitioner’s defenses excuse her obligation to repay the salary overpayments.  However, Respondent’s recovery is limited to the net proceeds proved:  $2,180.14.

Unit Reserve Shortage

          Regarding the unit reserve shortage, Respondent’s evidence falls far short, and I rule in Petitioner’s favor.  To recover for a unit reserve shortage, Respondent must satisfy an initial burden to prove that a properly conducted count demonstrates that an actual loss exists in the unit reserve, and that Petitioner is accountable as custodian.  See Zeola Brady, P.S. Docket No. DCA 10-190 (February 11, 2011).

          In this case, the record lacks evidence that a unit reserve count was done at the time Petitioner took over responsibility as custodian, and any records related to the circumstances of any prior count were not available (Finding 8).  Absent such a count, or other persuasive evidence of the status of the account at that time, I am unable to determine that the shortage discovered on December 4, 2007 (Finding 7) was attributable to the period that Petitioner was responsible for the account.  For that reason alone, Petitioner may not be held accountable for the shortage.  See Terrianne Stryhas, P.S. Docket No. DCA 09-385 (November 6, 2009). 

          Where, as here, the evidence presented is insufficient to show that an actual loss occurred during the time that Petitioner was accountable, recovery is not permitted.  See Patricia Todd, P.S. Docket No. DCA 08-82 (May 17, 2002).  Respondent may not recover for the unit reserve shortage.⁹

CONCLUSION AND ORDER

          For P.S. Docket Nos. DCA 11-52 and DCA 11-54, which seek a combined recovery of $3,435.59 for salary overpayments made to Petitioner, I rule in Respondent’s favor but only as to $2,180.14 of that demand.  These Petitions are granted in part and denied in part.

          I grant the Petition in P.S. Docket No. DCA 11-53 concerning Respondent’s demand to recover a $261.50 unit reserve shortage from Petitioner. 

          Respondent may collect $2,180.14 by administrative offset from Petitioner’s salary.

Gary E. Shapiro
Administrative Judge

¹ Deductions included nine retroactive health insurance premiums incurred but not paid by Petitioner previously while she was in LWOP status (Exhibit 1 B; Exhibit 9; Tr. 32, 40).

² Respondent’s payroll records included notations of higher gross and net payments for PP 22 ($2,555.13 gross/$1,262.85 net) and PP 23 ($1,778.15 gross/$1,179.97 net).  However, those entries do not correspond in any way with the detailed payments and deductions identified.  Neither Respondent’s financial witness nor anyone else was able to explain the discrepancies (Tr. 49-51).  I specifically asked Respondent’s financial witness, as follows, to explain the differences between the gross and net salary payments, and the other unexplained gross and net monetary entries in the payroll records for PP 22 and PP 23:

         Q. Why is that number different than the gross and net that we just talked about?
         A. I can’t tell you from looking at this.  I don’t see anything that adds up to the difference. 

(Tr. 51, lines 6-11).

³ Although Respondent also issued a Letter of Debt Determination for the same salary overpayments in 2003 (Exhibit 4), Petitioner denies having received it (Tr. 109).

⁴ Respondent presented testimony that application of the Sarbanes-Oxley legislation caused it more aggressively in 2008 to pursue collection of unsecured employee debts, but it did not explain its failure previously to have done so, or its further delay from 2008 until 2011 (Tr. 38, 51).

⁵ Although the parties argue about the cause of the overpayments, I find the issue irrelevant to my conclusions.

⁶ Further, as Respondent points out, the grievance settlement covers a different period of time and a different issue than the salary overpayments in dispute here.  Without the actual settlement agreement, or at least detailed and persuasive testimony concerning its scope and meaning, I am unable to infer that the grievance settlement included a release of these debts.

⁷ Petitioner has not argued that any regulation or policy of Respondent precludes it from recovering salary overpayments of this vintage.  It is not clear that a three-year policy of Respondent, recognized in another case, to write-off salary overpayments older than three years remains in place or applies to this matter.  See Nancy L. Petitti, P.S. Docket No. DCA 09-449 (April 30, 2010).  Respondent’s financial witness was unaware of any such present policy (Tr. 45).  Furthermore, although postal management may grant a waiver of such a debt (see ELM § 437), I play no role with regard to a waiver decision.  See Joyce W. Hale, P.S. Docket No. DCA 07-179 (September 4, 2007).

⁸ Because I conclude that Petitioner has not demonstrated laches in any event, I do not reach the question of the doctrine’s application against the Postal Service in Debt Collection Act cases.  Even though application of laches to a case of this nature is uncertain, I possess the discretionary authority to rule in Petitioner’s favor where Respondent’s failure to act despite a requirement to do so materially affects Petitioner’s ability to present her case.  See Deborah Chong, P.S. Docket No. DCA 99-384 (November 17, 1999); Danny Nieves, P.S. Docket No. DCA 00-37 (April 28, 2000). 

⁹ Because I rule in Petitioner’s favor on this issue, I need not address her contentions that the count sheets differ in a way that is fatal to Respondent’s proof, or that had Respondent counted the retail inventory at the time the unit reserve shortage was discovered, an offsetting overage would have been found.