Requirement to Repay Overpayment of Premium Pay Confirmed

The U.S. Court of Appeals for the DC Circuit recently confirmed the statutory provisions that limit the payment of overtime and other forms of premium pay as well as the provisions that require Federal employees to repay any overpayments. The author explains what this means for some federal employees’ paychecks.

In April of this year, the U.S. Court of Appeals for the District of Columbia Circuit confirmed the statutory provisions that limit the payment of overtime and other forms of premium pay as well as the provisions that require Federal employees to repay any overpayments.1

A statutory provision on the books since 19452 prohibits Federal employees from receiving a combination of basic pay and premium pay that exceeds a certain amount.  The amount is the greater of the maximum basic rate payable for GS-15 including any applicable locality based comparability payment or similar provision of law, and any applicable special rate; OR the rate payable for Level V of the Executive Schedule.  This limitation is known as the premium pay cap.

For most Federal employees this cap operates on a biweekly basis. This means that when most Federal employees are paid every two weeks they cannot receive more in basic pay and premium pay than the greater of the GS-15 maximum rate OR the rate payable to an Executive Level V.  However, for certain Federal employees this premium pay cap operates on an annual basis.  Those who are eligible for the annual cap must be (a) either an employee who is performing work in connection with an emergency or its aftermath3; (b) or an employee who is performing work that is critical to the mission of the agency.

Five Department of State employees, including Richard Lubow, volunteered to work in Iraq in 2004 under the Coalition Provisional Authority. Their assignments required significant amounts of overtime for which the employees received overtime pay.  In early 2005 the assignments were completed and the employees returned home.

In November 2004, the employees were notified that the Department of State was examining the amount of pay including premium pay each had received while stationed in Iraq. This notice stated that each employee’s earnings to date had already or would shortly put him above the premium pay cap for the current year.  In April 2005, each employee was notified that he must repay certain payments received while in Iraq; the smallest amount to be repaid was just over $435, while the largest was more than $10,000.

The employees believed the requirements to repay were unfair and filed claims to have the repayments waived.  The initial question the employees raised was the pay limit that applied to them.

The State Department determined that the employees had been working in an emergency situation and, therefore, the annual pay cap applied to them.  The next question was the amount of the pay cap. During 2004, the employees had been reassigned to the American Embassy in Baghdad the State Department.  That meant they were no longer eligible for locality pay; and that resulted in the pay rate for Level V of the Executive Schedule being applied to the employees4.  Finally, the employees requested a waiver of the requirement to repay the stated amounts, which the State Department denied.

When the case reached the Appeals Court, the Court was faced with three basic questions – had the pay cap been properly applied to the employees; had the increase in the premium pay cap for certain Federal employees established by Congress in 2005 had any impact on Lubow and his colleagues; and, had the Department’s denial of the employees’ request for discretionary waivers of the repayment been appropriate?

Answering the first question raised some issues because the official duty station was Washington DC when first assigned to Iraq.

It was only later in 2004 that the employees were officially reassigned to Baghdad.  Thus, to answer the first question, the Court had to decide which pay limit was in effect at the end of the year – the one that applied in Washington DC that would have included locality pay or the one that applied in Baghdad which involved no locality pay.  The Office of Personnel Management’s (OPM’s) guidance is the pay limit that covers an employee is the one that applies to him or her at the end of the calendar year.  The Appeals Court found this was a permissible construction of the statute.  This meant that the Department’s finding that the rate payable to the Executive Level V was the appropriate premium pay cap for the employees was correct.  It was correct because the employees were assigned to Baghdad on the last day of 2004, and the EL V rate was greater than the maximum GS-15 rate with no locality pay.

Answering the second question involved looking at the Emergency Supplemental Appropriations Act passed by Congress in May 2005.  That Act gave agencies the authority to waive the premium pay cap for certain employees during calendar 2005.  Lubow and the other employees claimed that the waiver was in effect on the last day of calendar year 2004 and, therefore, the higher cap established, i.e., $200,000 per annum, should apply to their earnings.  The Appeals Court found that neither the Act nor the waiver implemented by the Department based on the Act had any impact on Lubow and his colleagues.  The Department was seeking to have surplus payments made to the employees in 2004 repaid, so the waiver of earnings paid in 2005 did not extend to Lubow and his colleagues.

Answering the third question required the Appeals Court to review the administrative process under which the employees’ initial claims were evaluated.  The employees pursued relief through the administrative claims process primarily within the Department of State.  During their final administrative review the employees were asked to provide the deciding official with additional information related to the five factors listed in the statute and implementing regulations demonstrating they were eligible for waivers5.  The employees chose not to add any new information to their request and, instead, relied on the existing documentation which did not include a discussion of the five factors.  When the administrative claims process was completed, the amounts owed were confirmed and the requests for waivers of the overpayments were denied.  The Appeals Court tried to determine if the agency’s determination was based on consideration of the relevant factors; and, if there was a clear error in judgement in making the decision.  The Appeals Court found that the agency had considered the relevant factors.  In fact, the agency specifically requested the employees to address the five relevant factors prior to making its final administrative decision.  The fact that the employees did not provide information demonstrating how they met the factors for receiving a waiver, the Appeals Court said, left the agency with no grounds for reasonably granting the waiver request.  As a result, the Court found the agency’s decision was not unreasonable and declined to change it.

In summary, the decision rendered by the Appeals Court reminds us that there is a premium pay cap in place that applies to most Federal employees6.  And that both agencies and employees are responsible for tracking premium payments and ensuring applicable caps are not exceeded.  In addition, this decision also reminds us that while statutory and regulatory provisions exist authorizing an agency to waive repayment of surplus payments, such waivers are not automatic.  Agencies must follow existing guidance in making those decisions, and employees must provide sufficient information to demonstrate their eligibility for such waivers when requesting them.

To avoid the problems faced by these State Department employees, all Federal employees are encouraged to review their biweekly pay statements and track the amount of premium pay being earned.  This is especially important if an unusually large number of premium hours are being worked, such as when an employee is assigned to deal with a work emergency or to respond in the case of natural disasters such as a hurricane or a flood.  When substantial amounts of premium pay are being earned during a calendar year, it is beneficial for an employee to check with the human resources or payroll office to determine if they are getting close to the premium pay cap that applies to their official duty station.  And if an overpayment occurs, be sure to provide timely information that demonstrates your eligibility for a waiver based on the factors listed above.


  1.  Case described as Lubow v United States Department of State; case #13-5057; decided 17 April 2015.
  2.  See 59 Stat. 302; 30 June 1945; now codified as 5 U.S.C. § 5547.  Regulations implementing this provision are at 5 C.F.R. §§ 550-105 & 550.106.
  3.  An emergency is defined as a temporary condition posing a direct threat to human life or property, including a forest wildfire.  Other examples have included tornadoes, hurricanes, and the like.  See 5 C.F.R. § 550.103.
  4.  In 2004 this amount was $128,000 per annum.
  5.  These factors are: (1) would there be serious financial hardship to the employee if collected; (2) would the employee have relinquished a valuable right or changed positions for the worse due to the erroneous payment; (3) how much time had elapsed between the erroneous payment, and the discovery of the error and notification of the employee;  (4) would the failure to make restitution result in an unfair gain to the employee; and (5) would the recovery of the claim be unconscionable under the circumstances.
  6.  It should be noted that one of the exceptions to this broad premium pay cap is overtime earned under the Fair Labor Standards Act (FLSA).  Such FLSA overtime is not subject to the premium pay cap.  However, the cap does apply to overtime pay and compensatory time off in lieu of overtime pay earned under the Federal Employees Pay Act (FEPA) or Title 5, as well as other Title 5 premium pay provisions such as night differential, Holiday and Sunday pay, and the like.  See the definition of the term “premium pay” at 5 C.F.R. § 550.103.

Wayne Coleman is a federal pay expert available to help your agency avoid premium pay claims through on-site training. Contact him for more information.

About the Author

Wayne Coleman is a compensation consultant whose career at various Federal agencies and in private practice spans almost 40 years. During this time he has written about and provided training on overtime and premium pay, on the principles of FLSA coverage and exemption, and on related Federal compensation issues. Wayne is available to help your agency avoid premium pay claims through consulting services and training. You can contact him at