P.S. Docket No. AO 13-378


May 15, 2014

In the Matter of the Petition by

Joseph Anzalone

P.S. Docket No. AO 13-378

APPEARANCE FOR THE PETITIONER:
Joseph Anzalone, Esq.

APPEARANCE FOR THE RESPONDENT:
William D. Bubb, Esq.
United States Postal Service

 

INITIAL DECISION

Respondent, United States Postal Service, and Petitioner, Joseph Anzalone, entered into a retention agreement.  Mr. Anzalone voluntarily left the Postal Service, and the Postal Service seeks to recover the retention payments because Mr. Anzalone breached the agreement.  I rule in favor of the Postal Service.

FINDINGS OF FACT

  1. Mr. Anzalone worked as an attorney in the Postal Service’s Office of General Counsel (Petition at 1; Exhs. 3 and 5).[1] 
  2. Mr. Anzalone and the Postal Service signed an agreement on November 20, 2012 entitled “UNITED STATES POSTAL SERVICE AGREEMENT TO ACCEPT RETENTION SALARY INCENTIVE UNDER THE PROFESSIONAL TECHNICAL SALARY GUIDELINES” (“Agreement”).  The Agreement provided that Mr. Anzalone’s salary would be increased by $10,060 per year for an employment term of two years.  (Exh. 1).
  3. The Agreement provided that “I [Mr. Anzalone] understand and agree that by accepting this retention salary incentive, I am agreeing to maintain my employment with the U.S. Postal Service . . . .”  (Exh. 1).
  4. It also provided that “I understand and agree that if I voluntarily leave my current position . . . prior to the expiration of the contract period specified, I will be indebted to the U.S. Postal Service for the gross amount (less any applicable deductions) of the retention incentive received by me.”  (Exh. 1).
  5. Further, “I understand and agree that at the conclusion of the contract period designated above, all terms of this agreement will be considered fulfilled.  I fully understand this is a binding and enforceable contract.”  (Exh. 1, emphasis in original).
  6. On July 12, 2013, Mr. Anzalone voluntarily left the Postal Service during the first year of the Agreement.  He went to work at another government agency “to pursue [his] dream” job.  (Petition at 2; Exh. 3). 
  7. On July 31, 2013, Mr. Anzalone received two invoices from the Postal Service totaling $3,797.12.  The invoices were sent by Respondent’s Accounting Service Center (ASC) in Eagan, Minnesota.  (Petition at 2; Exh. 2).  This amount represented the payments made by the Postal Service from the inception of the agreement until Mr. Anzalone’s departure (Exh. 3).
  8. By letter dated August 21, 2013, Mr. Anzalone requested that the ASC reconsider and waive the debt (Exh. 3).
  9. By letter dated September 9, 2013, the ASC denied the request for reconsideration.  The letter included a notice, also dated September 9, 2013, which provided that “[i]f you feel the determination of the existence or amount of this debt following reconsideration is incorrect, you may request a review of the Postal Service’s determination by filing a written petition for review with the Judicial Officer. . . .  A timely petition for review will stay the commencement of the collection of the debt.”  The notice further explained that if Mr. Anzalone did not repay the debt or file a petition, the Postal Service would collect the money from any terminal leave and refer the debt to the U.S. Treasury for collection.  In addition, “Treasury may enforce collection by . . . offsetting federal payments . . . .”  (Exh. 4).
  10. The Postal Service sent Mr. Anzalone another invoice on September 20, 2013, for $3,797.12 (Exh. 2).
  11. By e-mail dated September 30, 2013, Mr. Anzalone requested that Respondent’s Director of Compensation and Benefits waive the assessed debt.  The Director denied the request on October 7, 2013.  (Exh. 5).
  12. By Petition dated October 9, 2013, Mr. Anzalone challenged the assessed debt.[2]

DECISION

The issue in this dispute is whether the Postal Service is entitled to a decision in its favor based on the terms of the Agreement.  As the Agreement itself states, it is a contract between two parties (Finding 5).  Thus, for the purpose of deciding the parties’ rights and obligations under the Agreement, this decision will rely heavily on the principles of contract law.

Contract interpretation begins with the plain language of the contract.  See, e.g., Minesen Co. v. McHugh, 671 F.3d 1332, 1337 (Fed. Cir. 2012).  If the terms of a contract are clear and unambiguous, they must be given their ordinary and customary meaning.  See, e.g., Bell/Heery v. United States, 739 F.3d 1324, 1331 (Fed. Cir. 2014).  Contract interpretation is governed by the objective intent of the parties as embodied by the words of the contract.  See, e.g., Epistar Corp. v. Int’l Trade Comm’n, 566 F.3d 1321, 1332 (Fed. Cir. 2009).  The plain language of the Agreement provided that if Mr. Anzalone voluntarily left the Postal Service before the end of the two-year Agreement, he would be indebted to the Postal Service for the amount of the retention incentive he actually received (Finding 4).

Mr. Anzalone raises five arguments to defeat the plain language of the Agreement.  First, he argues that allowing the Postal Service to recoup incentive pay is the equivalent of allowing punitive liquidated damages.  Liquidated damages are unenforceable if the amount fixed for damages is not a reasonable forecast of the harm caused by the breach.  See Monsanto Co. v. McFarling, 363 F.3d 1336, 1345-46 (Fed. Cir. 2004)(citing Restatement (Second) of Contracts § 356 (1981)).  “A term fixing unreasonably large liquidated damages is unenforceable on the grounds of public policy as a penalty.”  See Restatement (Second) of Contracts § 356 (1981).  In this case, the assessed debt only affects the incentive pay, not Mr. Anzalone’s salary.  (Finding 4).  In addition, the assessed debt is only for the actual incentive payments made by the Postal Service, not the entire two-year incentive.  See Rosen v. Smith Barney, Inc., 950 A.2d 205, 207 (N.J. 2008)(forfeiture of bonus provision was not an unenforceable penalty).  Under these facts, the $3,797.12 is not an unreasonable amount or unenforceable on the grounds of public policy as a penalty.

Second, Mr. Anzalone argues that there was inadequate consideration to support a binding contract.  “A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.”  Restatement (Second) of Contracts § 1 (1981).  An enforceable contract requires: (1) that both parties have the capacity to contract, (2) the essential terms of the agreement are sufficiently definite to be enforced, (3) consideration, and (4) that the subject of the agreement and its performance are lawful.  See Williston on Contracts § 3:2.  “[A]ny performance which is bargained for is consideration.”  Restatement (Second) of Contracts § 72 (1981).  In the present dispute, Mr. Anzalone agreed to work for the Postal Service for two more years and the Postal Service agreed to give him retention salary incentive pay, in addition to his salary, if he stayed for those two years.  (Findings 2 and 3).  These mutual promises are sufficient to provide consideration to support a contract. 

Third, Mr. Anzalone argues that because he successfully worked on a large procurement program that saved the Postal Service a large amount of money, he earned the retention incentive he received.  Even assuming that Mr. Anzalone’s work saved the Postal Service money, he does not identify a contract clause, statute, or regulation that would grant him relief from the terms of the contract.

Fourth, Mr. Anzalone argues that the Postal Service violated the law which requires that “it shall be the policy of the Postal Service to maintain compensation and benefits for all officers and employees on a standard of comparability to the compensation and benefits paid for comparable levels of work in the private sector of the economy.”  39 U.S.C. § 1003.  Mr. Anzalone argues that because he was underpaid in comparison to attorneys the private sector and other government corporations similar to the Postal Service, the retention salary incentive pay was actually an attempt to make the Postal Service’s total salary competitive.  Neither the Agreement itself nor anything else in the record supports this assertion.  Therefore, this argument fails for lack of factual support. 

Fifth, Mr. Anzalone argues that regulations issued by the Office of Personnel Management (OPM) governing executive agency incentive agreements entitle him to keep the retention payments.  See 5 C.F.R. § 575.311(d)(“the employee is entitled to retain retention incentive payments previously paid by the agency that are attributable to the completed portion of the service period.”).  These regulations are not binding on the Postal Service.  See 39 U.S.C. § 410(a)(“no Federal law dealing with . . . employees . . . shall apply to the exercise of the powers of the Postal Service”); § 1003(a) (“the Postal Service shall classify and fix the compensation and benefits for all officers and employees in the Postal Service”); see also Manriquez v. U.S. Postal Service, 29 M.S.P.R. 540, 542 (1985)(“federal labor laws are not applicable to the Postal Service absent a specific provision in the Postal Reorganization Act (PRA) or other statute”); Jackson v. United States, 10 Cl. Ct. 691, 693 (1986)(“the Postal Service is an ‘excepted’ agency, i.e., excepted from the rules governing competitive service federal agencies . . . .”).  OPM’s regulations are inapplicable and, therefore, they are not sufficient to overcome the plain language of the Agreement which was within the Postal Service’s statutory authority.

In summary, Mr. Anzalone breached the terms of the Agreement when he voluntarily left the Postal Service.  Based on a breach of the Agreement, the Postal Service may recover the assessed debt. 

ORDER

The Petition is denied.  The Postal Service may collect $3,797.12 through administrative offset.

 

Peter F. Pontzer
Administrative Judge

 

[1] The Petition includes five unnumbered exhibits.  For ease of reference, they have been numbered one through five. 

[2] At the parties’ request, this case is being decided on the written record, without an oral hearing.