New MSPB Case Highlights Dangers of Retirement Misinformation

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By Barbara Haga, September 11, 2023

FELTG President Emeritus Bill Wiley sent me an MSPB decision last week.  Many of you are aware  I spent most of my Federal career working for the Navy, and Bill spent some time there, too. At the end of my years with the Navy, I worked in the organization that oversaw the operation of the Civilian Benefits Center, which figures prominently in the decision. I was part of the transition team that worked on the original plans to centralize benefits functions in the Department.

The case is Edwards v. Navy, DC-3443-17-0636-I-1 (Aug. 29, 2023)(NP). It was part of that pile of cases that accumulated when there was no Board to issue decisions. The Board has now ruled that a hearing is required to determine the answer of whether Edwards’ retirement was involuntary. The Board says this is a non-precedential decision, but I think it takes a different tack (good Navy term) than what has been followed in misinformation cases previously.

At the time of the events in this case, the Navy used a system called EBIS (Employee Benefits Information System), which allowed employees to complete transactions, such as insurance changes, on their own. Another self-service function was obtaining a retirement estimate. EBIS is replete with warnings that the EBIS annuity could be overestimated if the employee had any part-time service or unpaid deposits or redeposits (Edwards had both). The system also warned that an individual should not retire solely based on the information in the EBIS estimate.

DoDI 1400.25, Volume 830 sets policy on processing Civil Service Retirement applications.  This instruction was in place at when the events in this case occurred. It states: “Within the DoD, servicing human resources offices and benefit centers will ensure that employees are provided adequate and timely information and assistance necessary to make informed decisions about retirement and to complete retirement applications.” Under the Navy benefits process, no one is supposed to retire without reviewing their service history and obtaining an estimate from a retirement specialist.

Edwards, a GS-12 auditor, applied for retirement in May 2016 to be effective February 2017. She obtained an EBIS estimate prior to submitting the application showing a monthly annuity of $3,640 per month.  When she submitted her retirement application, she was assigned a retirement specialist. The retirement specialist indicated she would provide the estimate and service history. Six months passed without that happening, so Edwards contacted the retirement specialist who said she would mail the estimate and history the following week.  The documents were not received, and despite alleged continued attempts by Edwards, the information never arrived. She retired as planned. Her estimate and service history were mailed roughly one month later. That estimate showed a monthly annuity of $1,991 without a deposit/redeposit to cover the time not credited. The official annuity computed by OPM was less at $1,810 per month.

It is not clear what steps Edwards took next when she realized the annuity was so much less than the original estimate.  We can’t tell if she tried to get her job back or went to the Benefits Center staff to raise these issues, but she did file an involuntary separation appeal in June 2017.

The AJ dismissed the case, finding that it did not meet the test for involuntariness because the agency did not provide any misinformation to Edwards, and she did not make a nonfrivolous allegation that she reasonably relied on the inaccurate EBIS annuity estimate when she decided to retire.

There are a fair number of retirement misinformation cases that have been decided over the years. Sometimes HR specialists have given bad information and sometimes managers have.  Here are two examples of cases the Board has found when an employee relied to his/her detriment on misinformation regarding benefits:

Hardin v. Treasury, 95 M.S.P.R. 416 (2004) (NP). This is a case where the manager gave bad information. Hardin was PIPed and didn’t improve. She was given a few days to think about what she wanted to do. She was advised by management that if she didn’t resign, she would be removed and she would lose all her benefits. The truth was that she met the requirements for discontinued service retirement, so if the IRS removed her for unacceptable performance, she would have qualified for an annuity on that basis.

Sink v. Energy, 2008 MSPB 231. Sink received a directed reassignment and declined to relocate. The HR Specialist informed Sink that if he didn’t retire before the decision to remove was effective, he would lose his health benefits. This was not true. He would also have qualified for discontinued service retirement had the removal decision been issued. The Board described the agency’s actions regarding the advice on health benefits eligibility as “negligent.”

Underneath all of this is the issue of the disservice to longtime Federal employees who are trying to collect their pensions. The fact that Edwards never got the official estimate in time to make an informed decision is unacceptable. We might see that word “negligent” in another decision.

The idea of centralizing benefits in DoD in the 1990s was the subject of huge debate. Taking processing of retirements out of the local offices where someone could go to their HR office and talk to a retirement specialist and switching to a centralized, heavily online system was not something most in HR were excited to see. However, DoD staffing cuts made it impossible to operate as we had before. Unfortunately, this case highlights the difficulties we were afraid it could present for employees and how their lives could be impacted.

What might have been the thinking in 2017 when Edwards’ claim surfaced? The Navy position would likely have been that EBIS contained disclaimers that employees should not rely on the estimate alone. Edwards was an auditor.  By OPM’s qualification standards, that means she would have to have a degree in accounting, auditing, or a similar business field or a combination of education and experience in accounting. I think it is a reach to say that someone with that type of education and experience would not understand that the funds she had previously withdrawn from the retirement system would have a significant impact on her annuity. At her level in the organization, she should have known how to escalate the matter if her retirement decision depended on the estimate. The other Navy consideration would likely have been that no one in the Benefits Center improperly advised her. In other misinformation cases, someone answered something incorrectly or gave a misleading answer, but not here.

The complication in 2017 could have been that Edwards’ employer didn’t want her back. Maybe with nine months’ lead time, they had already offered her job to someone.  Maybe they had cancelled that position and used that slot for another job that was officially offered to someone. In 2017, the risk in letting the appeal proceed would have been viewed as small – 120 days for an initial decision and maybe 12 more months to get a full Board review. Now they are facing over seven years’ worth of potential back pay, and attorney’s fees –and that will be paid by the employing organization, not the Benefits Center. If Edwards wins, she’ll have seven more years of service and plenty of money to make the deposit/redeposit.

We will keep an eye out for the AJ’s decision. [email protected]

What Came First: The Appointment or the Reason for Termination?

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By Barbara Haga, August 14, 2023

[Editor’s note: This is the third in a series of articles on excepted service, trial periods, and appeal rights. Read Barbara’s first two articles here and here.]

This month, we look at even more distinctions between probationary period appeal rights and those of excepted employees. Practitioners need to ensure they have considered these distinctions when taking a termination action.

5 CFR 315 makes a distinction in processing the termination of probationary employees for reasons prior to the appointment (such as falsification of a resume or failure to disclose information on employment documents) and reasons that arose after employment (such as unsatisfactory performance or failure to follow conduct rules on the job).  If the agency does not follow the proper set of procedures for the pre-appointment actions, the Board will have jurisdiction to review the process by which termination took place, not the substance of the reasons why the action was taken.

These determinations sometimes seem like “chicken and egg” situations. In Rivera v. Navy, 114 MSPR 52 (2010), the employee failed to qualify for a credit card. Without a credit card, he was unable to attend the extensive training required for his police officer position. Rivera argued that the prior credit issues before his employment led to the denial of the credit card. Thus, he should have been given notice and a right to respond as required by 5 CFR 315.806. The Board wrote, “there is a distinction between a preexisting condition and the effect that condition has on an employee’s performance during his probationary period.”  In this case, the Board found that while not qualifying for the credit card was attributable to pre-employment conditions, Rivera was actually terminated for a post-appointment deficiency.

The good news is that there is no such consideration for termination of most excepted employees.  There’s no differentiation between pre- or post-appointment terminations notice requirements.

Marital status and partisan politics

5 CFR 315.806(b) provides that a probationary employee may appeal a termination alleged to be based on partisan political reasons or marital status. Appeals on this basis do not extend to excepted employees except as discussed below with appointments that convert to competitive service.  See Allen v. Navy, 102 MSPR 302 (2006). In several cases, the Board has noted that agencies have provided misinformation in their termination notices indicating that employees could appeal on these bases. See Barrand v. Department of Veterans Affairs, 112 MSPR 210 (2009); Ramirez-Evans v. Department of Veterans Affairs, 113 MSPR 297 (2010).

5 USC 75l1(a)(1)(C)(i) excludes from the definition of “employee” those (other than preference eligibles) in the excepted service serving a probationary or trial period under an initial appointment pending conversion to the competitive service.

Because these are competitive positions occupied by excepted employees, OPM has issued regulations explicitly providing competitive-type provisions to these employees.  5 CFR 307.105 states:

Individuals serving under VRAs have the same appeal rights as excepted service employees under parts 432 and 752 of this chapter. In addition, as established in § 315.806 of this chapter, any individual serving under a VRA, whose employment under the appointment is terminated within 1 year after the date of such appointment, has the same right to appeal that termination as a career or career-conditional employee has during the first year of employment.

Given this, a VRA appointee, just like a career or career-conditional employee, may appeal his probationary period termination to the Board if he alleges his termination was based on partisan political reasons or marital status, or that his termination for pre-appointment conditions was procedurally deficient.

In LeMaster v. Department of Veterans Affairs, 123 MSPR 453 (2016), a probationary employee was terminated based on his failure to disclose a 2007 court-ordered probation agreement following his release from prison for bank fraud.  The terms of the agreement meant that he was required to inform any employer or prospective employer of his current conviction and supervision status. The agreement also prohibited him from possessing or using a computer with access to any online service without the prior written approval of the court.

The VA’s position was he was terminated for post-appointment misconduct for failing to disclose the probation agreement. The termination also noted his inability to use the agency’s computer system prevented him from performing his job duties.

The AJ dismissed the case for lack of jurisdiction. Unfortunately for the VA, the Board had a different view. It found LeMaster’s termination was based, at least in part, on pre-appointment reasons, and he was, therefore, entitled to notice and a right to respond as required by in 5 CFR 315.805.

Following that same logic, the Board found a due process violation in Taylor v. Navy, 124 MSPR 111 (2017). Taylor was hired by the Navy as a police officer in February 2016 under a VRA appointment with a two-year trial period. The position required her to possess a firearm.  The Navy terminated her in May 2016 after they learned that a February 2016 protective order stemming from domestic violence allegations prevented her from possessing a firearm.  The Navy did not give notice or provide an opportunity for Taylor to respond.

The AJ found there was no Board jurisdiction in the case. Again, the Board came to a different conclusion. The Board stated:

“Because the termination action was at least partially based on the February 3, 2016, protective order, which arose before her February 8, 2016, appointment, the appellant was entitled to the procedural protections of 5 C.F.R. § 315.805.”

The Board remanded the case and asked the AJ to determine if there had been a harmful error committed.

If confronted with one of these “chicken and egg” type terminations, you can save yourself a lot of grief by giving advance notice and allowing the person to respond before you issue a decision.  There is no mandatory timeframe for notice for this, so it could be very quick.  That way, if the AJ or the Board determines that there are pre-appointment reasons included in your termination, you’ve satisfied the regulatory requirement. [email protected]

How Preference Eligibility Can ‘Upset’ a Simple Termination Case

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By Barbara Haga, July 18, 2023

While the purposes of a trial period and a probationary period are much the same, the rights for excepted service employees who are subject to an adverse action are different than those for competitive service employees. In fact, it wasn’t until 1990 that non-preference eligible excepted service employees had appeal rights to the MSPB at all.

Under the original Civil Service Reform Act, excepted employees who were not preference eligibles did not have MSPB appeal rights. The Supreme Court addressed the issue in United States v. Fausto, 484 U.S. 439 (S. Ct. 1988), affirming the MSPB’s determination that non-preference eligibles were not included in the groups of employees eligible to appeal adverse personnel actions to the Board. The Civil Service Due Process Amendments Act of 1990, Pub. L. No. 101-376, granted those rights to the non-preference excepted employees about two years later.

Preference in hiring applies to permanent and temporary positions in the competitive and excepted services of the executive branch. When we address the broad category of who is a preference eligible, we typically picture those who served in uniform in the military, and certainly the vast majority of individuals who have preference obtained in that way.

However, it is important to remember that there are other categories of preference that extend from a military member’s service.

This is called derived preference and includes the spouse of a disabled veteran who is unemployed, the widow or widower of a deceased veteran, or the parent of a disabled or deceased veteran. As the Board wrote in Redus v. USPS, 88 M.S.P.R. 193 (2001):

The Veterans’ Preference Act should be construed, whenever possible, in favor of the veteran, especially when the right to defend against charges of wrongdoing is involved. See Flanagan v. Young, 228 F.2d 466, 472 (D.C. Cir. 1955). Therefore, we find that the plain language of the statute indicates that Congress intended to confer preference eligible status on spouses of disabled veterans who are unable to support their families through employment with the government because they suffer from service-connected disabilities.

Numerous conditions must be met to qualify for use of such preference. An OPM guide describes requirements for each category. It is not completely up to date since it still addresses preference for “mothers,” even though preference is currently extended to both mothers and fathers.

The language regarding spousal eligibility in 5 USC 2108(3)(E) states that preference eligible includes “the wife or husband of a service-connected disabled veteran if the veteran has been unable to qualify for any appointment in the civil service or in the government of the District of Columbia.”

The “spouse” section of the OPM guide gives examples of when disqualification may be presumed. These occur when the veteran is unemployed and 1) is rated by appropriate military or Department of Veterans Affairs authorities to be 100 percent disabled and/or unemployable; 2) has retired, been separated, or resigned from a civil service position on the basis of a disability that is service-connected in origin; or 3) has attempted to obtain a civil service position or other position along the lines of his or her usual occupation and has failed to qualify because of a service-connected disability.

The guide applies to hiring, so why would readers of this column be concerned about that? Here’s why: If the individuals exercising this preference are excepted employees, it will give them due process and appeal rights a year earlier than they would otherwise have them.

Never saw this coming!

The Redus case is a perfect example of how this issue can completely upset an otherwise simple termination case. Redus was a Postal Service employee. Her coverage as an employee entitled her to due process and was based on her status as a preference eligible. The information here is applicable with other excepted service cases.

Redus was terminated in June 1998 after more than a year of service as a Distribution Clerk. The charges were failure to report for duty as instructed and AWOL. She was not given a proposed notice and opportunity to reply, nor was she given MSPB appeal rights. Regardless, Ms. Redus found her way to the Board.

Her husband was 100 percent disabled. The Postal Service was not aware of this. She did not use spousal preference to obtain employment.  She produced documentation of his disability after her termination. The VA documentation she supplied was dated Jan. 20, 1998, and said:

“This will certify that Leon Redus is a beneficiary of the Department of Veterans Affairs; that said beneficiary has been rated incompetent by the Department of Veterans Affairs in accordance with the laws and regulations governing said Department and that the appointment of a guardian of his estate is a condition precedent to the payment of monies due said beneficiary by the Department.”

Redus was persistent in advancing her case.  She lost at the initial level because the AJ ruled that while her husband was disabled, there was no evidence that he had failed to qualify for any appointment. The AJ’s decision was upheld by the Board. Redus continued her challenge to the Federal Circuit.  The Board asked the Federal Circuit to let them review the decision. The Court agreed, which led to the decision cited above.

The Board changed its mind regarding what was necessary to meet the last portion of the definition in 5 USC 2108(3)(E). It found the  information Redus showed that her husband would not have qualified for any Federal position was sufficient to give her preference. Because of that, she was entitled to due process. The agency stated that it did not give notice because it did not know that she was a preference eligible. That was immaterial. The Board overturned the action and waived the untimely filing, since she was not given notice of her appeal rights.

In Cowan v. Interior, DE-0752-10-0066-I-1 (MSPB 2010), something similar happened. Cowan claimed preference when she was hired.  She produced documentation that her husband had been rated as 70 percent disabled by the VA, had been granted a disability annuity by SSA, and had resigned from his civil service position due to his diabetes.

In spite of this, Interior violated her due process rights, and they were reversed. [email protected]

Making Sense of Excepted Service, Trial Periods, and Appeal Rights

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By Barbara Haga, May 16, 2023

Practitioners often ask me about when an excepted service employee has appeal rights. The answer to this question is not as simple as it might seem.

Let’s look at what excepted service is all about.

Depending on the agencies you have worked for, you may have a different view of what the excepted service covers. Some may be familiar with jobs such as intelligence specialist or attorneys, which are always excepted. Others may work in agencies where authorities to hire Veterans Readjustment Appointees are used frequently. If you work at your agency’s headquarters, you may be familiar with policy-making positions hired under excepted authorities.  Presidential Management Fellows and student appointments are also excepted.

Federal hiring around the time of the Civil War was largely accomplished through political patronage. That changed with the passage of the Pendleton Act in 1883, which created a merit-based hiring system known as the competitive service. Even at that time, there were exceptions established to the competitive process in what was identified as Schedules A and B. With passage of the Pendleton Act, only about 10 percent of the Federal jobs were competitive.  Over time that number increased, until by 1980 about 90 percent of Federal positions were competitive. According to the MSPB report Federal Appointment Authorities: Cutting through the Confusion, by 2005, only 28 percent of employees entering Federal service came in through a competitive appointment.

5 CFR 213.101 states that excepted service positions are those Executive Branch positions defined by statute, by the President, or by OPM which are not in the Senior Executive Service.  Excepted positions are identified as part of Schedules A, B, C, or D.  The “Excepted Schedules” are listed in Subpart C of Part 213 of the CFR.  As OPM makes adjustments to the jobs in those categories, they have to publish the list of new exceptions established and any that are revoked.

In deciding whether positions should be excepted from competitive service, there are two categories of jobs to be considered. The criteria are listed in 5 CFR 213.102(c).  The first group are those where OPM has determined that the positions are indefinitely removed from competitive service because the nature of the work precludes it from being included, for example, because it is impracticable to examine for the knowledge, skills, and abilities required for the job. This category includes positions such as attorneys and chaplains.

The other group are positions that are temporarily removed from the competitive service for the ease of hiring. However, they can convert to competitive service at a later date. That category covers Veterans Reemployment Act (VRA) appointments and appointments of individuals with severe disabilities.

Competitive service positions are subject to the civil service laws passed by Congress in Title 5. Excepted service positions are not covered by the appointment, pay, and classification rules in Title 5. Agencies have considerable latitude in designing personnel systems for excepted positions, although many tend to structure the excepted systems in very similar ways to the competitive processes. While I was researching material for this column, I found one agency’s document which briefly attempts to explain some of the differences between competitive and excepted positions.

There are some basic differences between the two services. One is an employee’s ability to move to another position. Employees with competitive status can move to any other competitive position; they can also voluntarily leave the competitive service and take an excepted service position. However, when this happens, an employee must be informed of the consequences of making the switch. 5 CFR 302.102(b) requires that the agency:

  1. Notify the individual that the position is excepted, and that acceptance of that position takes him/her/them out of competitive service while in that position; and
  2. Obtain a written statement from employees that they understand they are leaving voluntarily to accept that excepted appointment.

Assuming the employee held a competitive appointment that would confer reinstatement rights, he/she/they could apply for competitive positions as a reinstatement eligible. Aside from the excepted positions which allow the employee to move into the competitive service, like VRAs, excepted employees may only be appointed in other excepted positions they qualify for. Unless they held a competitive appointment at some other time, they do not have status to apply under merit promotion programs for internal promotions/reassignments.

An excepted employee trying to move to the competitive service would have to be reached through an external hiring mechanism such as an OPM certificate of eligibles or Delegated Examining.

Being an excepted employee also affects an employee’s status in a reduction-in-force (RIF).  Page 20 of OPM’s Workforce Reshaping Operations Handbook sums up what happens: “An employee with an excepted service appointment has no assignment rights under OPM’s RIF regulations. However, an agency may elect to provide its excepted service employees with RIF assignment rights.”

Competitive and excepted employees are listed in separate competitive levels based on the excepted authority that was used to hire them.  A displaced employee could not move into a competitive position unless he/she/they had personal competitive status from a prior appointment.

Excepted employees serve a trial period rather than a probationary period. The processes can be very different depending on the kind of excepted appointment. [email protected]

Pay Attention: Avoid These Compensation Issues That Derail Settlement Agreements

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By Barbara Haga, April 17, 2023

I’m wrapping up this series on settlement agreements with a couple of cases where the agency agreed to a condition regarding a pay matter that could not be legally done.

You can find my settlement agreement article from last month’s FELTG Newsletter here.

[Editor’s note: Did you miss the recent Drafting Enforceable and Legally Sufficient Settlement Agreements earlier this month? Then mark down this date – August 23 when it will be held again. You can register now.]

Overtime pay. In Farrell v. Interior, 86 MSPR 384 (MSPB 2000), the Board found that a mutual mistake regarding the rate of overtime pay rendered the settlement agreement unenforceable. Farrell, an employee of the Park Police, was downgraded from the position of lieutenant to a sergeant under 752 procedures.

The underlying issue in the case was Farrell’s authorship of a “parody” entitled “The Quest: The Final Passage Home.” This document insinuated that certain female officers were lesbians, identified some employees as “Moorish,” and contained sexually explicit passages. A copy of the document was placed in the inbox of one of the senior officers. An investigation by the Internal Affairs Office ensued. Farrell admitted he had written it at home, typed it on the computer at work, and distributed copies within the Police Department over several months.

To settle the case, the parties agreed that Farrell would receive back pay and benefits, the agency would pay $7,500 in attorney’s fees, and Farrell would retire at the end of his 27th year of service. Also, he would be retained in the sergeant position, but paid as a lieutenant for the remainder of his employment. The agency delivered on all provisions.

The sticking point was the settlement agreement also stated that he would be eligible for overtime pay. In the sergeant position, OT is be paid a rate of one and a half times his lieutenant pay, a difference of roughly $15 per hour.  While the number of hours, and thus the value of this difference, is not specifically identified in the decision, it must have been a considerable amount because this was the only issue raised in the enforcement proceedings.

Farrell argued before the Board that “he had entered into the settlement agreement only because he could replace the potential lost income from the demotion with overtime pay.”  Farrell also argued that the original representative who entered into the agreement understood the settlement to mean that overtime would be paid at one and a half times his lieutenant’s pay.

What went wrong? The agency was prohibited by law from paying the agreed-upon rate of overtime. The agency cited the section of the D.C. Code, which said that an individual paid at the rate of a lieutenant was only entitled to overtime at his basic hourly rate.

The agency argued they were in compliance because they had paid everything that they could, but the Board set aside the agreement. That led to an AJ decision in 2000, a Board decision in 2001, and finally a Federal Circuit decision in 2002 – all arising from what should have been a settled case.

While this was a Park Police case, the GS system has a similar limitation on rates of payment for overtime. An exempt employee who earns more than GS-10, step 1 may only be paid overtime at a rate the greater of:

  1. His or her hourly rate, or
  2. The hourly rate for a GS-10, step 1.

(This limitation does not apply to wage employees or non-exempt employees.)

Review OPM’s guidance on Title 5 overtime pay.

Pay retention. In Day v. Air Force, 78 MSPR 364 (MSPB 1998), the agency removed a GS-9 supervisory art specialist under 752 procedures. The settlement agreement cancelled the removal, provided back pay, and required withdrawal of the appeal. Then the agreement went off the rails. The agency agreed to assign the employee to a WG-7 position with GS-9 pay retention, step increases, and other adjustments at the GS-9 level.

There are so many problems here, it’s hard to know where to start.

First, the basics. Pay retention is paid under 5 CFR 536. 5 CFR 536.102(b) sets conditions when payment of grade or pay retention is prohibited. The first situation on the list is when the employee is reduced in grade or pay for personal cause or at the employee’s request. Given that Day was removed for cause and this alternative of a downgrade was reached to resolve the ensuing litigation, it would seem to me that pay retention was never appropriate to begin with. The Board didn’t dwell on this aspect of the case. There was another problem.

Under pay retention, an employee does not receive step increases. The individual’s pay is beyond the limit for the grade. It’s also important to note that an individual remains in pay retention basically until the pay scale catches up with them. They receive 50 percent of the annual cost of living increase each year. Again, contrary to the language in the agreement, Day could not receive “other adjustments at the GS-9 level.”

There was even discussion during the enforcement proceedings that, perhaps, the agency should give Day grade retention. Even if that were appropriate (it seems very clear it’s not appropriate, per OPM guidance), grade retention lasts only two years. Then the individual would go into pay retention, so the agency would be right back in the same conundrum then.

DoD has a useful plain language document on the ins and outs of grade and pay retention. 

Without understanding the fine points of how the wide variety of pay issues are handled, an advocate might be lured into agreeing to something that is contrary to the pay laws in Title 5 just as the representatives in Farrell and Day did. To avoid this problem, make sure HR practitioners are available to assist agency representatives with settlement details so the provisions agreed to can actually be implemented.

[email protected]

When Settlement Agreements Fall Apart: Leave Issues

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By Barbara Haga, March 13, 2023

I enjoyed putting together the columns on clean record agreements so much that I thought we should follow that thread. This month, we look at things agreed to in settlement agreements that were ruled to be illegal and resulted in the MSPB overturning the settlement. These types of provisions fall in the “mutual mistake” category. Sometimes, there is a lot more to these agreements than back pay and attorney fees. This time we are going to look at leave issues.

Crediting Leave. In Franchesca V. v. Department of Veterans Affairs, EEOC Appeal No. 0120170632 (Mar. 2017), the complainant filed an age discrimination and reprisal claim.  She retired while the complaint was being processed. A settlement agreement was ultimately executed to resolve the complaint. The agreement said, among other things: “The Agency will, within 60 days of execution of this Agreement initiate restoration of the necessary amount of sick leave (approximately 606 hours) so Complainant retires with a balance of one year [in addition to her other years of service].”

The agency immediately ran into problems executing this portion of the agreement. The payroll office (DFAS, outside of VA) said it was a violation to grant this amount of leave under these circumstances. The agency’s servicing HR office intervened. Finally, the payroll office processed it and submitted the corrected record to OPM.

This lengthy process resulted in the complainant alleging a breach of the agreement, which escalated the matter to the agency HQ. They requested review of the matter, which included the following:

Complainant retired with 29 years and 4 months in service. The OGC staff attorney wrote that the intent of the sick leave restoration provision was to round up Complainant’s service to the next full year for retirement purposes. She wrote that when she negotiated the settlement agreement, she did not know this type of provision was frowned upon and considered an inappropriate use of retirement benefits. The OGC staff attorney wrote that DFAS made it clear that since Complainant never used 606 hours of sick leave, the Agency was asking to credit her more sick leave than she earned, which was not possible. Referring to the settlement negotiations, she wrote that she thought everyone assumed that Complainant would have spoken up if the Agency was offering the “restoration” of leave she never took.

After reviewing the information and consulting with the Department of Justice, the VA’s benefits and leave administration expert determined the provision was not just frowned upon but a violation of the law. The agency could not credit sick leave in excess of what the employee would have earned during her career.

Administrative Leave. In McDavid v. Army, 46 MSPR 108 (MSPB 1990), the appellant was found to be medically disqualified from flying. He was removed from his supervisory pilot position effective July 23, 1987.  McDavid appealed the removal, and it was settled on Nov. 3, 1987. One of the settlement provisions stated the agency agreed to pay him his salary from the date of the agreement until his retirement on Sept. 30, 1988, meaning roughly ten months of administrative leave would be granted.

Here’s what the Board had to say when it reviewed the enforcement action:

In Miller v. Department of Defense, MSPB Docket No. DE07528810290 (MSPB 1990), the Board set aside a settlement agreement on the basis of mutual mistake on which the parties relied in reaching the agreement. In Miller, the parties had entered into an agreement in settlement of the appellant’s appeal from his removal. The agreement provided, among other things, that the appellant would be placed on administrative leave for one year and would thereafter resign. The Board sought an advisory opinion from the Comptroller General, who found that the administrative leave was unlawful. While not bound by the Comptroller General’s opinion, see Apple v. Department of Transportation, MSPB DE07528/C0653-1 (Sept. 14, 1988), the Board found persuasive the Comptroller General’s conclusion that, except for brief absences, unless there is specific statutory authority, the agency could not expend appropriated funds where it received no benefit in return. See Miller, slip op. at 7-8. The Board noted that the Comptroller General advised that the provision granting administrative leave was not in furtherance of the agency’s mission, because the agency had no authority to provide such benefits, even though it was granted in an agreement in settlement of a personnel action. See Id. at 8. Finding that the unlawful provision was central to the agreement, and numerous other provisions were dependent upon it, the Board set aside the agreement.

In today’s world, OPM would be answering compensation and leave claims not covered by negotiated grievance procedures, since responsibility for these matters was moved from GAO to OMB, who in turn delegated the responsibility for adjudication to OPM in 1996.  Given what we know about OPM’s posture on use of administrative leave in conjunction with disciplinary and performance actions as included in their current guidance, as well as the limitations on administrative leave that OPM included in the not-yet-finalized administrative leave regulations issued in July 2017, I would expect OPM would answer the same way today.

Unspecified Amount of LWOP. The settlement agreement in Garcia v. Air Force, 83 MSPR 277 (MSPB 1999), stated that Garcia would be carried in an LWOP status from the date of execution of the settlement agreement until the date he became eligible to retire from Federal service. That’s all it said. There was nothing about the type of retirement or what else the agency might do in relation to the retirement.

The problem was that at the time of the agreement, Garcia was not even close to being eligible to retire optionally. He was 45 years old with almost 25 years of service. Optional retirement would have required a minimum of 55 years of age with 30 years of service. Was the agency agreeing to 10 years of LWOP? (Of course, all that LWOP would have meant Garcia wouldn’t have been eligible to retire then either.)  Or was it as Garcia argued?  That he would be kept in LWOP for six months until he had 25 years or service and reached eligibility for discontinued service retirement – and then the agency would abolish his position?

The agency representative stated he had believed that the appellant would qualify for regular retirement at the end of six months. Unfortunately, that was not the case. The Board set aside the agreement. [email protected]

When Clean Record Agreements Address Retirement: OPM Gets the Final Say

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By Barbara Haga, February 14, 2023

In this third column of the series on Clean Record Agreements (CRAs), I am focusing on retirement. Before we return to the 2013 MSPB report Clean Record Settlement Agreements and the Law, we need to look at another reference. 

OPM Guidelines

If you are in the business of settling cases, whether adverse actions or EEO, you should have the OPM Settlement Guidelines at your fingertips. OPM’s document opens with: “Since OPM administers the retirement funds, agencies may not agree to matters in settlement agreements that give more than what the retirement regulations would provide.” The report includes the following illustration:

For example, assume that an employee who meets the statutory age and service requirements for immediate retirement is discharged on grounds of misconduct. A court or administrative body could order reinstatement of the individual with back pay if it determined that the discharge was erroneous. It could not order a two-grade level promotion effective three years prior to the removal at issue. A claimant may urge that such a provision be included in a settlement, to create a higher annuity, by altering the “high-three” year average pay that is part of the annuity computation formulas under both CSRS and FERS. Because the court or administrative body could not order such a retroactive promotion, the settlement may not provide it.

Disability Retirement. OPM guidelines also include limitations related to eligibility to retire under disability provisions. OPM states the application must be filed within one year of the date of separation unless the employee was mentally incompetent. Also, per OPM, it is inappropriate for an agency to settle an action by putting the employee in a non-pay status to a date within the one-year period solely to allow the individual to file for disability absent compelling evidence that the individual was actually mentally incompetent.

The Board and OPM have not always been on the same page regarding the issue of settlements that change the date of a separation action to a much later date, which brings the appellant into the one-year period for filing for disability retirement. In Parker v. Office of Personnel Management, 93 MSPR 529, (MSPB 2003), aff’d  91 F. App’x 660 (Fed. Cir. 2004) the Board reversed itself on whether OPM could deny benefits in such situations.

Parker stands for the proposition that when OPM is not a party to a settlement agreement, such as when an agency settles an erroneous removal with an employee, it can review such a settlement to determine if a separation date was fixed solely to meet statutory requirements to entitling an appellant to annuity benefits. In Parker, the agency gave a retroactive four-year term appointment in the settlement that would allow the employee to gain additional service time, which would qualify him for discontinued service retirement (DSR). Once that term ended, he would be eligible to apply for DSR. OPM found the appointment not qualifying service, because Parker was on military duty for some of the time. OPM determined the appointment was simply a construct to allow the employee to obtain retirement benefits when he would have otherwise not been eligible.

In prior cases, the MSPB had found a settlement entered into the record of an appellant’s appeal for enforcement purposes was equivalent to a final Board order in all respects, and that OPM was required to affect its terms when adjudicating the appellant’s entitlement to retirement benefits. In Parker, however, the Board found that OPM was not obligated to credit the appellant with service based on such a “fabricated” appointment.

Inability to Perform. With an inability to perform action, if the individual subsequently applies for disability retirement, the case is subject to the Bruner presumption. If the agency removes for inability to perform, then the employee is presumed to meet the criteria for disability retirement. Bruner v. Office of Personnel Management, 996 F.2d 290 (Fed. Cir. 1993). However, OPM does not apply the presumption unilaterally.

For example, an individual is separated for misconduct or other non-medical related performance grounds, but, by agreement, documentation is changed to base the separation on medical inability to perform the job. Where this is done merely to enhance the individual’s application for a disability annuity, OPM will not apply the Bruner presumption. If the medical evidence demonstrates that the original personnel action was erroneous because the individual was unable to perform the job and the agency was unaware of the medical conditions at the time of separation, OPM then will apply the presumption.

The bottom line: OPM must approve the disability of discontinued service retirement. While you may settle with the intention that retirement benefits will be granted to the employee, only OPM can make that determination. OPM may deny the benefits if it believes the action was created solely to enable the person to obtain retirement benefits for which he would otherwise not have been eligible. If that happens, there goes your settlement.

More from MSPB

A disability retirement application requires a supervisor’s statement about the employee’s limitations and the impact of those conditions on performance, conduct, and attendance. The statement is completed on an official government form and the person completing it must sign and certify that the information is true to the best of her knowledge.  Not answering  questions on the document is not an option. The report explains the issue and the options to deal with it:

Occasionally, parties will settle an appeal with the expectation that the appellant will apply for disability retirement. Under these circumstances, the parties should anticipate that the agency’s obligation to provide a truthful supervisor’s statement may conflict with the general disclosure limitations of the CRA. A well-drafted CRA should take this into account and address the supervisor’s statement separately, adjusting the parties’ expectations of what the supervisor’s statement may (and must) contain, and defining any limitations on the information that the agency may provide. As discussed below, parties have taken different approaches to this matter, including promises to support an application, promises not to oppose an application, and promises to refrain from including negative remarks in the supervisor’s statement.

The report includes examples of cases where those various options were used. The case where the agency was found not to have breached the settlement agreement was Miller v. USPS, 90 MSPR 550 (MSPB 2002). In Miller. the settlement agreement stated the agency would not affirmatively oppose the appellant’s disability retirement application. However, the agreement also added that it did “… not require the agency to provide incorrect information to the Office of Personnel Management.” The Board found the information provided by the agency, which ultimately led to a denial of disability retirement, was factual and did not constitute a breach of the agreement. [email protected]

[Editor’s note: Join FELTG for Clean Records, Last Rites, Last Chances, and Other Discipline Alternatives, a two-hour virtual training on May 17.]

To Tell the Truth: Clean Record Agreements and Hiring

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By Barbara Haga, January 17, 2023

Last month, I wrote about problems with clean record agreements (CRA) in the hiring process.  While the OPM regulations now contain no bar to doing them, living up to their terms can present some huge problems. This month, Iet’s look at the impact of CRAs on employees in their future job search.

The MSPB 2013 report Clean Record Settlement Agreements and the Law is an excellent resource if you want to delve into the fine points of these agreements. Pages 51 to 56 of that report deal with an employee’s obligation to disclose information after the signing of a clean record agreement.

Answering Tough Questions

MSPB asked OPM what the employee’s obligation is to disclose the actual nature of the action that was settled if they return to work for the Federal government or are in that process.  You are probably familiar with the types of questions that appear on official forms.

The OF-306 asks in question 12, “During the last 5 years, have you been fired from any job for any reason, did you quit after being told that you would be fired, did you leave any job by mutual agreement because of specific problems, or were you debarred from Federal employment by the Office of Personnel Management or any other Federal agency?”

Question 13.A5 of the Questionnaire for Public Trust Positions (SF-85P) asks if in the last 7 years the individual has been fired, quit after being told he or she would be fired, left under mutual agreement following allegations of misconduct or left following notice of unsatisfactory performance.  Question 13.A6 asks about other less serious actions such as warnings, reprimands, suspensions, or other discipline.  The SF-86, Questionnaire for National Security Positions includes the very same questions.

OPM’s answer to the Board was “yes,” the employee is obligated to disclose the truth.  I wonder how many employees whose representatives are signing CRAs understand that.  The report notes:

“Several of the appellant attorneys we spoke with indicated that the primary reason why appellants seek clean records is to aid them in their efforts to obtain another Federal position.”

We might say these employees are going to go look for employment outside the Federal government. That might be true in some cases, but there will be many trying to return to Federal jobs.

Where has their experience been? Is that Federal experience translatable to a non-Federal job? How many jobs like management analyst and program analyst would be available at comparable pay rates to what Federal agencies pay for that work? And the pay and benefits are the biggest reasons those employees are likely to try to find another Federal job. For many types of work in many localities, working for the Federal government is the best deal in town.

When employees don’t tell the truth on those forms, bad things happen. The examples that the Board describes in the report involve departures/settlement agreements from outside employers. Here are summaries of those:

A tax examining technician with the IRS provided inaccurate information on her OF-306 regarding her termination from two prior jobs.  In response to the question quoted earlier in the article, the examiner answered, “no,” even though she was terminated by her two previous employers.  She was removed for providing false/misleading information on an official employment document. The Board upheld the action. Ly v. Treasury, 112 FMSR 165 MSPB (2012).

An assistant personnel officer was removed for a negative response on employment documents and security paperwork when responding to the questions listed. In this case, the officer argued he was not fired but “released by mutual agreement” due to a mismatch between his skills and the job he was holding. The AJ overturned the removal. The Board restored the removal, indicating that the charge of falsification was proven.  Forma v. Justice, 93 FMSR 5139 MSPB (1993).

A former New York State Police employee was told he would be terminated due to bad judgment and his inability to react appropriately in stressful or complex situations. When hired as a Board Patrol agent (trainee), he responded negatively to the questions about resigning after being told he would be fired. OPM took a negative suitability action in this case. The employee was debarred for three years due to deception or fraud in the examination process.  Again, the AJ did not uphold the action, but the Board restored the negative suitability determination, and the Federal Circuit affirmed without opinion on April 13, 1998.  Pappas v. OPM, 97 FMSR 5368 MSPB (1997).

Recent cases?

I was able to locate one relatively recent initial decision that deals with a Federal employee who failed to disclose he had been removed from a Federal position. This was a GS-15 supervisory human resources specialist.  He had a CRA from one Army installation and then was rehired by another. Torres v. Army, AT-0752-16-0319-I-1/AT-0752-11-0876-C-1, (June 23, 2016).

The employee argued he had bargained for a CRA and was entitled to the benefit of it. The Army had a different answer and removed him based on making false statements. In this case, however, the Army decision was not sustained.

When provided the MSPB report and the information discussed above about employees having to answer truthfully, the AJ said OPM’s answer was not dispositive. The AJ overturned the Army’s removal.

I sincerely hope that the Torres case is in that pile of cases waiting for the new Board to issue a decision. [email protected]

 

Clean Record Agreements: You Can Use Them Now, But Should You?

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By Barbara Haga, December 6, 2022

With issuance of OPM’s final regulations covering Parts 315, 432, and 752 on Nov. 10, 2022 (87 FR 67765), the prohibition on clean record agreements will end.  Effective Dec. 12, you are free to hide the dirty laundry to your heart’s content. With this new regulation, you can agree to remove the information and let the employee – who, by the way, was so bad you were going through the time, paper, and process to fire or demote him or her – walk out the door with a record that says he or she was fine.  You can do it, but to me the important question is: Should you do it?

Under the microscope

Some may think the Trump EO 13839 prohibition on these agreements came out of the blue. That is not the case. The MSPB has been talking about issues related to these agreements for years. The Federal Circuit has said some not very favorable things about them for 25 years. In Pagan v. VA, 170 F.3d 1368, (Fed. Cir. 1999), the Fed Circuit repeated what they said earlier:

Settlement agreements may serve a useful purpose in terminating disputes without the necessity for further administrative or judicial proceedings. The incorporation into such agreements of a “clean record” requirement has proven to be a source of problems — problems that necessitate the very administrative or judicial proceedings sought to be avoided. As a result, this court has expressed its concern with agency settlement agreements that allow an unsatisfactory employee to resign in exchange for a personnel record clear of all charges and adverse actions. See Thomas v. Department of Housing & Urban Dev., 124 F.3d 1439, 1442 (Fed. Cir. 1997) (“It may well be that it is virtually impossible for agencies to ensure that settlement agreements such as this. . .can be performed to the letter … Perhaps as a matter of sound governmental administration such agency agreements should be prohibited.”). Indeed, such agreements invite trouble. The employee expects, perhaps unrealistically, that with a “clean record” potential employers will be unable to find out about adverse actions taken by the former employer. The former employer, when asked, must either outright lie, or attempt some artful evasion which, because other employers now recognize what these agencies do, in fact fools no one.

The decision went on to say:

Although reasonable settlement of employment disputes is commendable, when the agency is required to give no information or an agreed-upon “neutral” reference, “the practice of one government agency palming off an unacceptable employee on another government agency by withholding material evidence concerning the employee’s conduct hardly serves the public interest.” Holmes v. Department of Veterans Affairs, 58 F.3d 628, 634 (Fed. Cir. 1995).

Even OPM wasn’t telling agencies they should do it. In response to those who opposed lifting the ban, OPM stated they weren’t saying agencies should do it, just that they were not prohibited from doing it.

We are simply rescinding a rigid regulation that, upon reflection and further consideration, we deem impracticable, unrealistic, and unhelpful because it absolutely prohibits agencies from altering or removing information about performance or misconduct as a condition to resolve or settle a complaint or challenge to a personnel action, even where doing so furthers the best interests of an effective and efficient Government and the interests, voluntarily expressed, of both parties to personnel litigation. OPM’s rescission does not take a position on whether any particular case should be settled, and does not prohibit settlements, which through lessening a penalty or permitting resignation, may in certain circumstances lessen the risk of outright reversal with its high costs without benefit, or may otherwise adversely affect governmental interests.

Practical effect

I deliver training sessions on conducting effective interviews and reference checks. The course includes a segment on asking applicants direct and pointed questions about their experience and another segment aimed at helping managers ask the same types of questions of past employers.  As a reference, I use the September 2005 MSPB report Reference Checking in Federal Hiring:  Making the Call.  The report focuses on hiring issues stemming from managers not fully or effectively checking out applicants.

[Editor’s note: Contact Dan Gephart at [email protected] to bring Barbara and this course to your agency.]

Interestingly, that report contains a discussion of the problem of getting good information on candidates who have clean record agreements. That report cites the same information from the Federal Circuit that I included earlier in this article.  The Board wrote that in spite of the problems with such agreements, they continue (and likely will begin again in a few days).

Where does that leave the supervisor who is trying to do a good job and fully vet a potential applicant?  Sometimes they run into a brick wall.

The former supervisor will not answer questions about an individual’s performance and/or conduct on the job. Two things can happen then – 1) the hiring supervisor elects not to hire this applicant because they could not verify the information in the resume, or 2) the hiring supervisor decides to take the risk and hires without verification. The hiring manager may regret that decision.

In Pagan, the USPS hiring supervisor declined to hire.  The former supervisor at the VA, Mr. Lopez, took an interesting approach to responding to the USPS questionnaire.  In answering the question about whether the employee would be rehired, Lopez added as asterisk and wrote, “Due to circumstances beyond my control no coment [sic] can be made at this time.”   “Another question asked Lopez to rate Pagan’s attendance, work performance, behavior, and attitude using an excellent to unsatisfactory scale. Lopez crossed out the whole scale without rating Pagan in any of the above categories.” When the Postal Service told Pagan there were no more jobs available, he filed a petition for enforcement with the Board.

The Federal Circuit found fault with the supervisor.  The question about rehiring obviously presented a problem for the supervisor and there was nothing in the agreement that specified what kind of reference would be given.  Lopez could have responded “yes”, which he knew not to be true, or he could have answered “no”, which was an honest response. His option would certainly lead a potential employer to believe there was an issue with Pagan.

Crossing out the entire rating scale might look like a better choice. The Federal Circuit didn’t think so. “Although the agency did not promise to provide a favorable reference, or even any reference at all, it was required to act, in matters relating to Pagan, as if he had a “clean record.” The act of crossing out the portion of the USPS questionnaire asking that Pagan be ranked according to his attendance, work performance, behavior, and attitude, and then returning the form in that condition would have strongly suggested to any recipient of the form that Pagan did not have a “clean record” with the DVA.” [email protected]

Weingarten and Performance Counseling Don’t Mix

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By Barbara Haga, November 15, 2022

Last month, my colleague Ann Boehm wrote a great article The Good News: With Weingarten, The Law Is Enough. I cheered as she discussed the various elements of the Weingarten right and when she suggested that agencies should not agree to anything beyond what the law requires. How is it in management’s interest to add additional notice requirements? If the statute says annual notice is good enough, then, like Ann, I am all about complying with just that.

The basics

Understanding the reasoning behind the Weingarten right helps make it clear when it applies and when it doesn’t.  In Department of Justice, Bureau of Prisons, Safford, AZ and AFGE, Local 2313, 35 FLRA No. 56 (FLRA 1990), the Authority quoted from the legislative history of the Civil Service Reform Act (CSRA), where Congress adopted the same framework regarding representation for Federal employees in disciplinary situations that applied under the National Labor Relations Act.

In Weingarten the Court noted that “[a] single employee confronted by an employer investigating whether certain conduct deserves discipline may be too fearful or inarticulate to relate accurately the incident being investigated, or too ignorant to raise extenuating factors.” Id. at 262-63. In such circumstances, the Court concluded that “[a] knowledgeable union representative could assist the employer by eliciting favorable facts, and save the employer production time by getting to the bottom of the incident occasioning the interview.” Id. at 263. In support of its conclusion that representation could be beneficial to the employer as well as the employee, the Court quoted from an arbitrator’s award that described the representation process as contemplating “that the steward will exercise his responsibility and authority to discourage grievances where the action on the part of management appears to be justified.”

Performance evaluation issues

When leading training sessions for various agencies, I hear some managers say they allow union representatives to participate in performance discussions and performance counseling sessions because they believe it is required. Perhaps, their agencies agreed to such a provision in contract negotiations, or it has become a past practice over time, or perhaps they are allowing the representatives even though their advisors would say it is contrary to their policies.

However, the situation the Supreme Court addressed in Weingarten — a lone employee being questioned by management about events that could lead to a disciplinary action — is quite different than discussions between a supervisor and employee about missing information in a report or whether the employee applied the wrong per diem rate in a travel reimbursement.

The FLRA’s view 

The question of whether Weingarten extended to performance conversations arose early after passage of the CSRA. The Authority issued decisions in 1981 and 1982 that clearly indicated that Weingarten was inapplicable to these types of situations.

In Internal Revenue Service, Detroit, MI and National Treasury Employees Union and NTEU, Chapter 24, 5 FLRA No. 53 (FLRA 1981), the Authority dealt with the case of an annual performance review. Mr. Goff was a GS-11 revenue officer whose work was subject to a 100 percent review by his manager. This was a normal process which had occurred in prior years. It included preparation of a form identifying the findings of the manager and then a meeting with the employee to discuss those findings. After prior such evaluations, Goff had to make adjustments on some cases. Prior to the meeting at issue, Goff requested that a union representative be present at the meeting.

The manager denied Goff’s request. As Goff expected, the manager criticized his work and gave him a “critical elements” letter, which was essentially a PIP notice.

The union filed an unfair labor practice charge. The ALJ who heard the case found no violation and the Authority adopted the ALJ’s findings. The ALJ found that the performance review meeting was not an examination and that there was no reasonable basis to conclude that disciplinary action could arise from it. It was noted that the “critical elements” letter was not a disciplinary action, but instead, “… identifies serious work performance deficiencies and does advise the employee what is expected to improve performance to an acceptable level within a specified period of time, at the end of which there will be a further evaluation of the employee’s performance on these identified elements.”

Roughly one year later, the Authority issued its decision in Department of the Treasury, Internal Revenue Service and National Treasury Employees Union and NTEU, Chapter 22, 8 FLRA No. 72 (FLRA 1982). In a similar set of circumstances, Mr. Kotofsky’s cases were reviewed. He had received several written counseling notices that year about deficiencies in his work. His supervisor told him a branch chief was coming in to hold a discussion with him and the supervisor about the unacceptable work results. Kotofsky asked for a representative, which was denied. Kotofsky was not asked to provide responses on any of the case reviews. In fact, neither the branch chief nor the supervisor took notes during the meeting.

The ALJ in this case found that there was no right to representation under the circumstances. The decision includes the following finding:

“The purpose of the meeting was to generally highlight these known deficiencies to the employee and tell him how to raise the level of his performance to expected standards. This was nothing more than a pure counseling session and was remedial in nature; without the requisite investigatory element it did not qualify as an ‘examination of an employee . . . in connection with an investigation,’ even though the employee asked to be represented by the union. The Statute does not provide a right to representation under these circumstances.”

Bottom line  

In the situations described in these cases, the Authority found that Weingarten did not apply. If union representation is being allowed in performance meetings, it isn’t because Weingarten makes it so. So, please allow me to echo Ann’s message from last month: Agencies don’t need to go beyond what the law provides. And please make sure your managers know what the limits are. [email protected]