Winning A Back Pay Award But Losing That Federal Annuity Payment

An employee who won over $73,000 in back pay and reinstatement to his job, was advised by OPM he had to repay the annuity amount he had already received. The employee appealed and went to court to try and keep the extra money.

The Federal Circuit has upheld the decision by OPM to recoup retirement annuity payments from an employee who successfully challenged his reduction in force and won reinstatement and back pay for a period of time for which he had collected a discontinued service annuity. Grabis v. Office of Personnel Management (U.S. Court of Appeals for the Federal Circuit, No. 04-3239, 9/27/05)

Mr. Grabis was a federal fire inspector at St. Elizabeth’s Hospital in Washington, DC, prior to transfer of operation and control of the facility to the DC government in 1987. At that time he became a DC government employee but kept the right to federal retirement benefits.

In 2000, Grabis and other fire protection inspectors were RIF’ed. Grabis received a discontinued service annuity from OPM. Meanwhile, all the RIFed employees challenged their removal in a union grievance, arbitration, and eventually in court. They eventually settled the case with the District. As a result, Grabis was retroactively reinstated to his job, and received $73,921 in back pay. OPM was not involved in the settlement.

When OPM became aware of the situation, the agency told Grabis that he owed them $29,109.72 for annuities he received. He tried to convince OPM to waive the amount due, but the agency declined, stating that he was “not totally without fault in this matter.” Grabis appealed to the MSPB but found that agency unsympathetic. (Grabis v. OPM, No. PH-831M-03-0035-I-1 (M.S.P.B. Mar. 2, 2004 (“Final Decision”) and Feb. 20, 2003 (“Initial Decision”)).

Grabis did not dispute that he was overpaid by the total annuity amount. Instead he argued that the amount should instead be collected by OPM from the DC Government or that OPM should waive the overpayment. The AJ ruled that when he was restored to his job retroactively, Grabis should have set aside the annuity amount from his back pay award. Since an offset was not made to repay the federal government, Grabis received a “windfall.”

The AJ pointed out in his decision that “appellant has liquid assets in excess of $26,000.00, and he owns two homes worth more than $300,000.00; one of which he rents for $1,000.00 per month. Thus, even if I had reached this issue, I would not have found that waiver or adjustment was warranted.” (Opinion, p. 4 citing Initial Decision at 6)

The Federal Circuit agreed with MSPB, holding that although the annuity payments were proper when made, keeping those payments after his retroactive reinstatement “constituted double payment and therefore unjust enrichment. Grabis points to no reason why he should be permitted to retain these double payments, and we cannot discern any.” (Opinion, pp. 4-5)

The court did not buy the argument that OPM should have collected the money from the DC Government since it had erred in not withholding the annuity amount as required by the Back Pay Act (5 U.S.C. 5596). Not so, said the court, since the settlement agreement made no mention of that law. Further, the Federal Claims Collection Act directs agencies to collect debts such as the one Grabis owed. (Opinion, p. 6)

The court also was not persuaded by the argument that OPM should have waived the overpayment to Grabis, noting that OPM has discretion to waive a repayment if it deems the individual is without fault and to collect would be against equity and good conscience. But the court found no reason to question OPM’s exercise of its discretion in this case. (Opinion, p. 9)

The moral to this story is that one cannot, and indeed should not expect to get paid twice for the same period of time. Normally when an agency settles a case such as this it will do so under the Back Pay Act. That law requires the agency to offset for payments an employee received such as annuities. The unusual facts in this case led to a situation where the federal agencies with an interest were not involved in the negotiations and could not keep an eye on the fact that the employee had collected the annuity.

About the Author

Susan McGuire Smith spent most of her federal legal career with NASA, serving as Chief Counsel at Marshall Space Flight Center for 14 years. Her expertise is in government contracts, ethics, and personnel law.