B-136755, AUGUST 4, 1958, 38 COMP. GEN. 103

B-136755: Aug 4, 1958

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WHO IS ALSO IN RECEIPT OF MILITARY RETIRED PAY. THEREFORE THE RETROACTIVE PROVISIONS OF SECTION 17 (A) DO NOT HAVE TO BE APPLIED IN SUCH A SITUATION. MUST BE APPLIED IN THE CASE OF AN EMPLOYEE IN A CLASSIFICATION ACT POSITION WHO IS A RETIRED DISABLED MILITARY OFFICER SUBJECT TO THE $10. THE APPLICATION OF WHICH WOULD CREATE AN INDEBTEDNESS FOR THE RETIRED PAY HE WAS ENTITLED TO RECEIVE FOR THE PERIOD JANUARY 12. TO THE DATE THE FOREGOING ACT WAS APPROVED. YOU POINT OUT THAT SUCH APPLICATION WOULD CREATE AN INDEBTEDNESS TO THE UNITED STATES BY RETROACTIVE LEGISLATION BECAUSE THE EMPLOYEE'S CIVILIAN SALARY IS TAXABLE WHILE HIS DISABILITY RETIRED PAY IS NOT. WE UNDERSTAND INFORMALLY THAT THE QUESTION ARISES IN THE CASE OF AN EMPLOYEE WHOSE PAY STRUCTURE IS AS FOLLOWS: * * * * (CHART OMITTED) * * * * SECTION 17 (A) PROVIDES AS FOLLOWS: EXCEPT AS PROVIDED IN SUBSECTION (B) AND (C) OF THIS SECTION.

B-136755, AUGUST 4, 1958, 38 COMP. GEN. 103

CIVILIAN PERSONNEL - FEDERAL EMPLOYEES SALARY INCREASE ACT OF 1958 - RETROACTIVE INCREASE EFFECT ON DUAL COMPENSATION LIMITATION WHERE A RETROACTIVE SALARY INCREASE PAYMENT AUTHORIZED FOR CLASSIFIED POSITIONS UNDER SECTION 17 (A) OF THE FEDERAL EMPLOYEES SALARY INCREASE ACT OF 1958 WOULD CAUSE AN EMPLOYEE, WHO IS ALSO IN RECEIPT OF MILITARY RETIRED PAY, TO BE INDEBTED TO THE UNITED STATES BY REASON OF INCREASING THE CIVILIAN SALARY AND MILITARY RETIRED PAY BEYOND THE $10,000 DUAL COMPENSATION LIMITATION IN 5 U.S.C. 59 (A), THE EFFECT WOULD BE TO CREATE AN OBLIGATION OR DESTROY A VESTED RIGHT OF THE EMPLOYEE BY THE RETROSPECTIVE OPERATION OF LAW CONTRARY TO THE ESTABLISHED RULE OF STATUTORY CONSTRUCTION, THEREFORE THE RETROACTIVE PROVISIONS OF SECTION 17 (A) DO NOT HAVE TO BE APPLIED IN SUCH A SITUATION.

TO THE CHAIRMAN, UNITED STATES CIVIL SERVICE COMMISSION, AUGUST 4, 1958:

YOUR LETTER OF JULY 7, 1958, ASKS WHETHER SECTION 17 (A) OF THE ACT OF JUNE 20, 1958, 72 STAT. 215, MUST BE APPLIED IN THE CASE OF AN EMPLOYEE IN A CLASSIFICATION ACT POSITION WHO IS A RETIRED DISABLED MILITARY OFFICER SUBJECT TO THE $10,000 LIMITATION IN 5 U.S.C. 59A, THE APPLICATION OF WHICH WOULD CREATE AN INDEBTEDNESS FOR THE RETIRED PAY HE WAS ENTITLED TO RECEIVE FOR THE PERIOD JANUARY 12, 1958, THE RETROACTIVE DATE CREATED BY THE FOREGOING SECTION, TO THE DATE THE FOREGOING ACT WAS APPROVED. YOU POINT OUT THAT SUCH APPLICATION WOULD CREATE AN INDEBTEDNESS TO THE UNITED STATES BY RETROACTIVE LEGISLATION BECAUSE THE EMPLOYEE'S CIVILIAN SALARY IS TAXABLE WHILE HIS DISABILITY RETIRED PAY IS NOT.

WE UNDERSTAND INFORMALLY THAT THE QUESTION ARISES IN THE CASE OF AN EMPLOYEE WHOSE PAY STRUCTURE IS AS FOLLOWS:

* * * * (CHART OMITTED) * * * *

SECTION 17 (A) PROVIDES AS FOLLOWS:

EXCEPT AS PROVIDED IN SUBSECTION (B) AND (C) OF THIS SECTION, THIS ACT SHALL TAKE EFFECT AS OF THE FIRST DAY OF THE FIRST PAY PERIOD WHICH BEGAN ON OR AFTER JANUARY 1, 1958.

5 U.S.C. 59A PROVIDES, IN PERTINENT PART, AS FOLLOWS:

(A) AFTER JUNE 30, 1932, NO PERSON HOLDING A CIVILIAN OFFICE OR POSITION, APPOINTIVE OR ELECTIVE, UNDER THE UNITED STATES GOVERNMENT * * * SHALL BE ENTITLED, DURING THE PERIOD OF SUCH INCUMBENCY, TO RETIRED PAY FROM THE UNITED STATES FOR OR ON ACCOUNT OF SERVICES AS A COMMISSIONED OFFICER IN ANY OF THE SERVICES MENTIONED IN TITLE 37, AT A RATE IN EXCESS OF AN AMOUNT WHICH WHEN COMBINED WITH THE ANNUAL RATE OF COMPENSATION FROM SUCH CIVILIAN OFFICE OR POSITION, MAKES THE TOTAL RATE FROM BOTH SOURCES MORE THAN $10,000 * * *.

THE GENERAL RULE IS THAT STATUTES TAKE EFFECT AT THE TIME OF THEIR PASSAGE AND ARE TO BE APPLIED PROSPECTIVELY, AND ARE NOT RETROACTIVE UNLESS MADE SO BY EXPRESS LANGUAGE THEREIN OR BY NECESSARY IMPLICATION. 34 COMP. GEN. 404, AT PAGE 406, AND CASES CITED.

SECTION 17 (A), ABOVE, EXPRESSLY MAKES THE INCREASE RETROACTIVE WITH RESPECT TO THE COMPENSATION OF CLASSIFICATION ACT POSITIONS. HOWEVER, UNTIL THAT ACT WAS APPROVED JUNE 20, 1958, THE EMPLOYEE IN THE EXAMPLE SHOWN ABOVE WAS RECEIVING RETIRED PAY IN THE AMOUNT OF $3,610 PER ANNUM. SUCH AMOUNT WHEN ADDED TO THE STATUTORY COMPENSATION OF HIS CLASSIFICATION ACT POSITION, NAMELY $6,390, DID NOT EXCEED THE $10,000 LIMITATION OF 5 U.S.C. 59A, ABOVE, AND WAS LEGAL AND PROPER. IN OTHER WORDS, FOR THE PERIOD JANUARY 12 TO JUNE 20, 1958, THE EMPLOYEE HAD A VESTED RIGHT TO RETIRED PAY AT THE RATE OF $3,610 PER ANNUM. 31 COMP. GEN. 619; 34 ID. 149. TO APPLY SECTION 17 (A) WOULD HAVE THE EFFECT OF INCREASING HIS CIVILIAN SALARY FOR THIS PERIOD AND DECREASING HIS RETIRED PAY BECAUSE 5 U.S.C. 59A REQUIRES SUCH ACTION. AS POINTED OUT BY YOU, SUCH ACTION WOULD INCREASE HIS TAXABLE INCOME AND DECREASE HIS NONTAXABLE INCOME, CREATING AN INDEBTEDNESS TO THE UNITED STATES BY RETROACTIVE LEGISLATION.

THE RULE IS WELL ESTABLISHED THAT, GENERALLY, NEITHER THE FEDERAL GOVERNMENT NOR THE STATES MAY IMPAIR OR DIVEST VESTED RIGHTS, EXCEPT IN A LEGITIMATE EXERCISE OF THE POLICE POWERS, AND THAT RETROSPECTIVE LAWS OR ADMINISTRATIVE ACTION DISTURBING OR DESTROYING EXISTING OR VESTED RIGHTS, OR CREATING NEW OBLIGATIONS CONCERNING PERTINENT TRANSACTIONS, ARE INVALID. 16 C.J.S. CONSTITUTIONAL LAW, SECTION 216, 223, 417; 31 COMP. GEN. 619, AT PAGE 623 AND CASES CITED; 34 ID. 149 AND CASES CITED.

WE FIND NOTHING IN THE LEGISLATIVE HISTORY SHOWING WHETHER THE RETROACTIVE PROVISION IS OR IS NOT TO BE APPLIED TO SUCH A SITUATION. BUT WE FEEL IT REASONABLE THAT THE CONGRESS IN APPROVING THE FOREGOING STATUTORY PROVISION WAS MAINLY INTERESTED IN ACCORDING EMPLOYEES A BENEFIT, NOT IN CREATING AN OBLIGATION UPON AN EMPLOYEE OR DIVESTING AN EMPLOYEE OF A VESTED RIGHT.

UPON THAT PREMISE, AND IN VIEW OF THE ESTABLISHED RULE RESPECTING VESTED RIGHTS, WE ARE CONSTRAINED TO HOLD THAT THE RETROACTIVE LANGUAGE OF SECTION 17 (A), ABOVE, DOES NOT APPLY IN A SITUATION SUCH AS THAT PRESENTED HEREIN.