P.S. Docket Nos. AO 22-455 & AO 23-75

INITIAL DECISION

The Postal Service seeks to collect two debts from Mr. Carter by administrative offset. The first is based on a negative annual leave balance of 38 hours when Mr. Carter retired from the Postal Service in 2022. The second is for taxes associated with that leave.
For the reasons discussed below, I find that Mr. Carter is liable for the debts. The Postal Service may collect them by involuntary administrative offset.

FINDINGS OF FACT

Injury

1. In May 2018, Mr. Carter was injured while on duty with the Postal Service. He was cleared to return to regular duty 18 days later. It was not specified what type of leave he used. (Pet. Exhs. 3, 7 at 11, and 8; Tr. 66).¹
2. Mr. Carter submitted a notice of traumatic injury and claim for compensation under the Federal Employees’ Compensation Act (FECA), as amended, 5 U.S.C. chap. 81. But it took over four years, until July 12, 2022, for the Department of Labor (DOL), Office of Workers’ Compensation Programs (OWCP), to accept his claim. Among the conditions accepted were incomplete rotator cuff tears in both shoulders. (Pet. Exh. 7 at 11).
3. Mr. Carter was working when his claim was accepted, but he soon became unable to perform all his duties (Pet. Exh. 7 at 12–13; Tr. 66).
4. On Thursday, July 21, 2022, Mr. Carter’s doctor restricted him to light duty. He was specifically restricted from driving, lifting, pulling, pushing, reaching, and reaching above his shoulders. Mr. Carter used 24 hours of annual leave during that week, which was week one of pay period 16. (Pet. Exh. 7 at 12; Resp. Exh. 3 at 176; Tr. 66–67).
5. The following Monday, July 25, Mr. Carter’s physician ordered that he not work for four weeks (Pet. Exh. 7 at 13). Each day that week, which was week two of pay period 16 (July 23–29), Mr. Carter called the Postal Service’s automated telephone line for unscheduled absences. He requested Continuation of Pay (COP) for his leave code because he had not used the maximum allowance of 45 days when he was first injured back in 2018 (Pet. Exh. 5; Tr. 63–64). The Postal Service did not, however, record his leave as COP. While one Postal Service system reflected that he was on Leave Without Pay (LWOP) for most of week two, the payroll journals showed that he was on 32 hours of annual leave and 8 hours of sick leave. (Pet. Exh. 5; Resp. Exh. 3 at 176; Tr. 45–47, 54–57).

Debt Claims

6. Mr. Carter retired on July 29, 2022 (Resp. Exh. 3 at 176–77; Tr. 65).
7. At the end of the 2021 leave year, Mr. Carter had an annual leave balance of two hours (Resp. Exh. 3 at 162; Tr. 28).
8. At the beginning of the 2022 leave year, the Postal Service advanced 208 hours of annual leave to Mr. Carter, leaving him with a new balance of 210 hours. The advanced leave was available for his immediate use, but it had to be earned over the course of the year by being in a pay status. (Resp. Exh. 3 at 162; Tr. 26–29).
9. During 2022, Mr. Carter earned 120 hours of his advanced annual leave and used 160 hours of annual leave (Resp. Exh. 3 at 176–77; Tr. 30–31).
10. When he retired, Mr. Carter was overdrawn 38 hours of annual leave (Resp. Exh. 3 at 176–77; Tr. 32).
11. His last 38 hours of annual leave were taken during pay period 16 of 2022 (Resp. Exh. 3 at 176–77; Tr. 30–31).
12. Within a month of his retirement, the Postal Service issued to Mr. Carter a Notice of Debt Determination and Invoice No. 703335826 (Reference No. A29170 PRD) for $1,165.01 based on the overdrawn annual leave. The Notice of Debt Determination notified Mr. Carter that he could request copies of the Postal Service’s records relating to the debt. (Pet. Exh. 6).
13. The Postal Service used $82,270 to calculate the monetary value of his negative leave balance. That amount was Mr. Carter’s annual salary during his last 38 hours of annual leave. $82,270 divided by 2080 (the number of hours used by the Postal Service to represent a work-year) equated to an hourly salary of $39.5529, which multiplied by the overdrawn hours equaled $1,503.01. The Postal Service then subtracted $325.98 for taxes and $12.02 for retirement contributions, which decreased the debt to $1,165.01. (Resp. Exh. 3 at 176–77; Tr. 52–54; Employee and Labor Relations Manual (ELM) § 432.2).
14. Mr. Carter requested reconsideration of the debt from the Postal Service Accounting Services Center. After receipt of a denial, he filed a petition for hearing with the Judicial Officer Department, which docketed the petition as AO 22-455. (Pet. Exh. 5; Tr. 12–13; Notice of Docketing, Oct. 31, 2022).
15. The Postal Service then issued a Notice of Debt Determination and Invoice No. 703389880 in January 2023 for $322.68 to recover the taxes that Mr. Carter owed on the overdrawn annual leave invoice. The Notice of Debt Determination again notified Mr. Carter that he could request copies of the Postal Service’s records relating to the debt. (Pet. Exh. 23).
16. Mr. Carter filed a second petition for hearing, which was docketed as AO 23-75 and consolidated with the first petition (Order, Feb. 10, 2023).²

DOL Form CA-7 and Leave Buy Back

17. Before the hearing, Mr. Carter tried to submit to DOL a Form CA-7, Claim for Compensation, to receive OWCP compensation for week two of pay period 16 of 2022 (i.e., his last week). The Postal Service stated that it would not fill out the Employing Agency portion of that form because Mr. Carter was paid for that time through leave. (Pet. Exh. 17; Order, Aug. 22, 2023).
18. Mr. Carter also requested orally and on his Form CA-7 that the Postal Service change the coding of the annual leave during his last week to LWOP based on a leave buy back. But the Postal Service refused to exercise its discretion to do so, citing the fact that he was no longer an employee. (Pet. Exhs. 2, 17).

DECISION

Invoice No. 703335826
Invoice No. 703335826 was based on Mr. Carter’s negative annual leave balance of 38 hours. A retired employee’s negative annual leave balance equates to a salary overpayment, entitling the Postal Service to recover the monetary value of the unearned annual leave under the Debt Collection Act. ELM § 512.72. To recover, the Postal Service bears the initial burden of proving the existence and amount of the debt by a preponderance of the evidence. 31 C.F.R. § 285.11(f)(8); Terrell v. United States Postal Service, AO 21-77, 2021 WL 5579791, at *2 (Sept. 23, 2021). If the Postal Service meets its burden, the burden shifts to the petitioner to show by a preponderance of the evidence that no debt exists, or the amount of the debt is incorrect. Id.
Here, the Postal Service proved, through payroll journals and witness testimony, that Mr. Carter had a negative annual leave balance of 38 hours when he retired. It also proved that the monetary value of that leave was at least $1,165.01.  
There was an exhibit, Petitioner’s Exhibit 19, that was inconsistent with the payroll journals. That exhibit contained screenshots of a Postal Service system that suggested that Mr. Carter was on LWOP for most of his last week, but the payroll journals showed that he was paid 32 hours of annual and 8 hours of sick leave. The Postal Service’s witness could not explain the difference except to speculate that an adjustment occurred. Even so, as the Postal Service’s witness testified, the payroll journals reflected how Mr. Carter was paid, and they proved that he was paid the annual leave in dispute.
Mr. Carter acknowledged that he did not have that annual leave to take, but he argued that the Postal Service erred in coding his last week’s absences as annual leave. In one of his exhibits, he argued that his supervisor should not have approved his timecard because he was using advanced leave and she knew that he would not be returning to work. At the hearing, he argued that his absences should have been coded as COP, as he requested when using the absence line, and, if COP was rejected, he should have been instructed to complete a Form CA-7. (Pet. Exh. 4 at 4; Tr. 69–70).
Advanced annual leave is available for use even before it is earned. ELM
§ 512.311. Before his retirement, Mr. Carter had a sufficient annual leave balance.
Under FECA, employees may be entitled to, among other things, up to 45 days of COP for the period of the disability for a traumatic job-related injury and compensation for wages lost because of a job-related injury. ELM § 541.131. COP is the continuation of an employee’s regular pay and is paid to Postal Service employees by the Postal Service. ELM §§ 541.2.d, 545.71–.78. Compensation after 45 days comes from OWCP and requires completion of a Form CA-7 by the employee and the Postal Service. ELM § 545.811.
Mr. Carter believes that he has a right to COP during his last week even though that week was more than four years after his initial injury because he did not use the 45-day maximum initially (Tr. 69–70). His right to COP that week is not for me to decide. 5 U.S.C. chap. 81; 31 U.S.C. § 3716(a)(3); 31 C.F.R. § 901.3; ELM §§ 470, 480, 540; see also Rosa v. United States Postal Service, AWG 21-337, 2023 WL 3504884, at *2 (Mar. 1, 2023) (holding that entitlement to workers’ compensation is controlled by DOL).³
Moreover, even if the Postal Service erred in using advanced leave or not applying COP, administrative error does not relieve an employee of a valid debt. Lofton v. United States Postal Service, AO 13-313, 2018 WL 1606049, at *2 (March 29, 2018) (remanded on other grounds). 
At the hearing, Mr. Carter questioned for the first time why the Postal Service did not provide payroll journals from his injury or recordings of his calls to the Postal Service’s absence line his last week. He contended that those payroll journals would show that he did not receive COP for 45 days and that the recordings would show that he asked for COP his last week. Mr. Carter acknowledged that he should have asked for these payroll journals and recordings before the hearing. (Tr. 32–38, 48, 63).
Under certain circumstances, if a party fails to produce relevant evidence within its control, I may infer that the evidence would have been adverse to the controlling party. Helman v. U.S. Department of Veterans Affairs, VA 14-397, 2015 WL 13647663 at *8 (Sept. 16, 2015). I do not, however, need to make any adverse inferences here because, using the preponderance of the evidence standard, I find Mr. Carter’s contentions to be true based on his testimony and the record. But regardless of whether Mr. Carter received less than 45 days of COP or asked for COP his last week, my decision remains the same. The issue that I may decide here is a narrow one: Was the petitioner overpaid by the alleged hours? Bell v. United States Postal Service, AO 19-361, 2020 WL 5255635, at *2 (Aug. 24, 2020). The Postal Service showed by a preponderance of the evidence that he was. None of these findings changes the fact that he was overpaid 38 hours of annual leave.
The Postal Service could have helped Mr. Carter by approving his leave buy back request. Its handling of that request was overly bureaucratic, particularly considering that its decisions to change his COP requests to annual leave are now, according to the Postal Service, preventing its completion of his Form CA-7. It does not, however, change the fact that Mr. Carter was paid the annual leave in dispute.
In sum, the Postal Service met its burden of proof on the annual leave debt, and Mr. Carter did not present any valid defenses.

Invoice No. 703389880
Invoice No. 703389880 was for taxes on Mr. Carter’s annual leave debt (Pet. Exh. 23). It is well settled that an employee who fails to repay a salary overpayment by the end of the calendar year incurs another debt to the Postal Service. Salzano v. United States Postal Service, DCA 17-228, 2019 WL 479670, at *3 (Jan. 7, 2019). The Postal Service withholds taxes and other amounts such as retirement contributions on the total salary payment (known as the “gross payment”) and then pays the employee the remainder (known as the “net payment”). Id. The Postal Service takes the tax withholdings and forwards them to the appropriate taxing authorities. Id.
When the Postal Service calculates the debt amount for a salary overpayment that occurred before the end of the calendar year, it seeks only the net payment. Id. If the employee repays the net payment before the end of the calendar year, the Postal Service asks the taxing authorities to make a corresponding adjustment to the employee’s tax records and the employee is cleared from any further liability for the overpayment. Id.
If, however, an employee fails to repay the salary overpayment by the end of the calendar year, the Postal Service is no longer able to recoup the taxes that it forwarded to the taxing authorities. Id. After the first of the year, the overpayment is treated as income by the taxing authorities, and the taxes paid by the Postal Service on behalf of the employee are credited as taxes paid by the employee. Id.; see also Internal Revenue Service (IRS) Publication 15 (Circular E), Employer’s Tax Guide 41–42 (2024). At that point, it is too late for the Postal Service to recall those taxes from the taxing authorities. Salzano, DCA 17-228, *3. The employee though was never entitled to the net payment or the taxes paid on his behalf to the taxing authorities. Id. The employee thus incurs a debt for both the net payment (here, Invoice No. 703335826) and the tax withholdings (here, Invoice No. 703389880).⁴ Id.
The Postal Service withheld taxes in 2022 on the wages it paid to Mr. Carter that year, and it did not recover Invoice No. 703335826 in 2022 (Pet. Exh. 6). Thus, the Postal Service issued Invoice No. 703389880 for taxes (Pet. Exh. 23).
The recovery of a tax debt requires the same standard of proof and elements as the salary overpayment, except that there is a rebuttable presumption that the Postal Service forwarded the withholdings to the applicable tax authorities consistent with its legal obligations. Jollivette v. United States Postal Service, AO 22-280, 23-132, 2023 WL 6847479, at *4 (Aug. 2, 2023).
The Postal Service did not provide a witness who could testify about the tax debt, but it proved through the payroll journals that it withheld taxes and retirement contributions. Mr. Carter did not allege that the Postal Service failed to forward those withholdings to the applicable government authorities. He also did not challenge the amount of the tax debt, which is slightly lower than the withholdings shown on the payroll journals. (Resp. Exh. 3 at 176–77).
As to entitlement, as discussed above, the Postal Service proved that Mr. Carter was not entitled to 38 hours of annual leave. Accordingly, he was also not entitled to the associated taxes forwarded on his behalf.
In sum, the Postal Service met its burden to recover the tax debt, and Mr. Carter did not present any valid defenses.

DOL Form CA-7
Before the hearing, Mr. Carter tried to submit to DOL a Form CA-7 to receive OWCP compensation for his last week. The Postal Service stated that it would not fill out the Employing Agency portion of that form because Mr. Carter was paid for that time through leave. Generally, an employee may not receive his salary and OWCP compensation for the same time. 5 U.S.C. § 8116. After Mr. Carter repays the overdrawn annual leave from his last week, he may seek OWCP compensation for those hours. The Postal Service should cooperate with Mr. Carter on his submittal of a revised Form CA-7 at that time. Whether Mr. Carter is entitled to OWCP compensation is for DOL to decide. Rosa, AWG 21-337, at *2.

ORDER

The petitions are denied. The Postal Service may collect the debts by involuntary administrative offset.