July 9, 2018

In the Matter of the Debt Collection Act Petition

THOMAS A. CURTIS v. UNITED STATES POSTAL SERVICE

P.S. Docket No. DCA 17-190

APPEARANCE FOR PETITIONER:
Albert Lum
Labor Relations Admin Group LLC

APPEARANCE FOR RESPONDENT:
James Verdi, Esq.
United States Postal Service

DECISION ON MOTION TO DISMISS

This case presents an unusual situation in which the Postal Service waived the debts at issue, yet Petitioner seeks review of an alleged offset of salary for a different portion of the same debt.  The facts here are largely undisputed.
On April 25, 2016, Petitioner, a Level 17 Supervisor Maintenance Operations, settled a claim against the Postal Service under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA).  See Settlement Agreement and Release, Petition at 4-11.  That settlement entitled Petitioner to consideration for future promotions.  Id.  At the time of the settlement, Petitioner was a Level 17 Supervisor Maintenance Operations.  In March 2017, the Postal Service retroactively promoted Petitioner to a Level 20 Manager Maintenance Engineering and Support effective June 27, 2015.  Joint Modified Stipulations, ¶1.  As a result of the retroactive promotion, the Postal Service recalculated Petitioner's wages between June 27, 2015, and March 17, 2017, the retroactive period.  Id. at ¶2.  The effects of this retroactive promotion created the unusual situation this case presents.
While serving in his Level 17 position, Petitioner earned “straight time” or Code 35 pay.  Id. at ¶4.  Code 35 pay provides overtime compensation at the employee’s normal hourly rate.  Tr. 27.  The parties agree that Petitioner was entitled to this Code 35 pay at the time he received it.  Tr. 28.  Thus, these Code 35 payments made to Petitioner prior to his retroactive promotion were not made in error.  See Employee and Labor Relations Manual (ELM) § 434.143.
Petitioner’s retroactive promotion also entitled him to back pay for the retroactive period, and the Postal Service applied Management Instruction EL-430-2017-1 to calculate that amount.  Resp. Exh. 6; Tr. 32.  Using an “hours calculation” under the Management Instruction the result revealed an unusual situation where Petitioner earned more as a Level 17, including his Code 35 pay, than he would have received had he been in the Level 20 promoted position during the same period.  Resp. Exh. 6 at 2; Tr. 32-38.  This anomaly occurred because a Level 20 supervisor is not entitled to Code 35 overtime pay.  See ELM § 434.141; Tr. 20, 28.  Thus, even with the salary increase connected to his promotion, Petitioner actually earned more money as a Level 17 during the same period.  Applying the Management Instruction, the Postal Service adjusted Petitioner’s salary, reducing his potential back pay to zero, and yielding an additional amount owed by Petitioner in the amount of the debt assessments at issue in this case.  Resp. Exh. 3.  After the retroactive promotion was processed, the Postal Service invoiced Petitioner for three debts associated with the remainder of the Level 17, Code 35 payments.  The invoices represented Code 35 pay paid to Petitioner over and above what he would have earned as a Level 20 supervisor.¹  Petitioner challenged these invoiced debt assessments in this Debt Collection Act case.
During the course of this litigation, the Postal Service decided to waive all invoiced debts associated with Petitioner’s salary adjustment.  The Postal Service argues that because it waived the only debts that it sought to collect from Petitioner, and because the salary adjustments at issue are not offsets, this case must be dismissed because jurisdiction is lacking.  Petitioner contends, however, that the disputed debt consists both of the now-waived invoiced amounts and the Postal Service’s failure to pay him retroactive back pay.  Petitioner argues that notwithstanding the waiver of the balance of debt, the agency improperly offset his promotion related back pay against his previously earned Code 35 pay, and this action constitutes an offset of salary within the meaning of the Debt Collection Act.²
Generally, we will dismiss a Petition when the Postal Service, in its discretion, waives the debts it previously assessed.  See Hough v. United States Postal Service, AO 17-30, 17-32, 17-33, 2017 WL 8727491 (I.D. May 2, 2017), aff’d, 2017 WL  5516565 (P.S.D. May 11, 2017).³  On that basis, the Postal Service moved to dismiss the Petition on February 23, 2018.  I took the Postal Service’s Motion to Dismiss under advisement pending a hearing.
I conducted a hearing on June 8, 2018.  The purpose of the hearing was to gather testimony on the application of Respondent’s salary adjustment rules to Petitioner’s case to determine whether the salary adjustment constituted an “offset” within the meaning of the Debt Collection Act.  If the salary adjustment was an offset involving a related debt sought by the Postal Service, then Petitioner could be entitled to a review of the entire transaction, not just the waived debts.  For the reasons that follow, I decline to do so.

DISCUSSION

I begin by recognizing that the Postal Service possesses broad authority under the Postal Reorganization Act to establish policies regarding employee compensation.  39 U.S.C. § 1003(a)(“the Postal Service shall classify and fix the compensation and benefits of all officers and employees in the Postal Service.”).  Within that authority, the Postal Service issued regulations and policies to calculate back pay in the form of the previously-cited Management Instruction.  See Resp. Exh. 6.  At the hearing, the Postal Service demonstrated that it applied its Management Instruction to Petitioner’s back pay calculation in a manner consistent with the policy and its authority under the Postal Reorganization Act.  See generally Testimony of Larry Dean, Tr. 25-63.  While I acknowledge it seems unfair to an employee to be denied back pay as the result of a retroactive promotion, the wisdom of this policy is not for me to decide.  Rather, the question is whether the Postal Service’s application of the Management Instruction and its calculation of Petitioner’s salary adjustment is permissible under the Debt Collection Act.
In simple terms, under the Debt Collection Act, an involuntary salary offset occurs when an agency, in an attempt to collect a debt, takes money from the employee’s paycheck.  This normally occurs when an employee has been overpaid in a prior pay period, and the agency seeks to collect the overpayment.  As noted earlier, occasionally this offset is taken prior to the agency following the Debt Collection Act’s notification procedures.  See discussion supra at note 2.  In this case, Petitioner received no prior notice that the Postal Service intended to apply its Management Instruction.  Accordingly, Petitioner argued that the salary adjustment the Postal Service performed that resulted in his failure to receive back pay was such an involuntary salary offset.  I disagree.
In this case, Petitioner’s biweekly pay was not reduced by the Postal Service’s action at any time.  Petitioner received his Level 20 pay following his promotion and the subsequent salary adjustments.  No amount was removed or reduced from Petitioner’s paycheck.  Likewise, Petitioner retained his previous receipt of Code 35 pay.  The Postal Service, properly applying its Management Instruction, did not pay Petitioner any accumulated back pay for his retroactive promotion because his total compensation for the retroactive period exceeded his Level 20 compensation for the same period.  Because Petitioner never incurred a reduction in salary, nor did he see any debt offset in his pay, I necessarily find that the application of the Postal Service’s back pay policy was a salary adjustment, and not an “involuntary salary offset” within the meaning of the Debt Collection Act and our prior precedent.
The difference here is subtle but important.  Petitioner’s actual claim is an affirmative one for a salary underpayment.  Petitioner contends that he is entitled to the full amount of retroactive back pay under the terms of his USERRA settlement, and he is also entitled to retain his Code 35 pay.⁴   I make no finding related to that argument because a review of such a salary underpayment in this forum, if at all, can only take place in the form of a defense against a claim of debt properly before me.  Here, the waiver of the invoiced debts by the Postal Service mooted Petitioner’s claim in this forum.  See Hough, 2017 WL 8727491.
Accordingly, as the only debts at issue in this Petition have been waived, the Postal Service’s Motion to Dismiss is GRANTED on the grounds that there is no remaining debt to adjudicate.  See Berg v. United States Postal Service, AO 16-177, 2016 WL 10572238 (October 13, 2016).

ORDER

The Petition is DISMISSED.

James G. Gilbert
Chief Administrative Law Judge