[Query Concerning Entitlement to Backpay and State Unemployment Compensation]

An official of the Department of Health and Human Services (HHS) requested a decision as to whether an employee's backpay award should have been reduced by the amount of unemployment compensation he received during the period for which the backpay was awarded. The agency and the employee agreed to the withdrawal of his appeal of his dismissal due to a reduction in force, reinstatement, and the award of backpay minus any income from other employment or unemployment insurance compensation received. The agency had deducted the employee's unemployment compensation from the backpay award; however, it requested clarification of its ability to do so. GAO has held that unemployment compensation should not be deducted from a backpay award because the employee might be required to refund the unemployment compensation to the appropriate state agency. Both the Department of Labor and the Office of Personnel Management have issued instructions to that effect and have directed federal agencies to inform the appropriate state agency of a backpay action so that the agency may take administrative steps to obtain a refund of unemployment benefits, if such action is provided for by state law. Accordingly, there was no legal basis for HHS to deduct unemployment compensation from the employee's backpay award, the employee should be paid the amount of backpay otherwise due, and the appropriate state should be notified of the award.