B-157822, OCT. 20, 1965

B-157822: Oct 20, 1965

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CALLAHAN WAS REMOVED FROM HIS POSITION. ON THE GROUND THAT HIS REMOVAL WAS NOT JUSTIFIED. THE EMPLOYEE WAS RESTORED TO DUTY AS DIRECTED AND ALLOWED BACK PAY AS PROVIDED IN 5 U.S.C. 652. WAS IN THE PROCESS OF LIQUIDATION AND WHICH. HIS GROSS INCOME FROM THE BUSINESS DURING THE ABOVE PERIOD IS SHOWN TO HAVE BEEN $1. WAS THE AMOUNT OF $1. MEANT "NET EARNINGS" WHEN AN EMPLOYEE COMING WITHIN THE PURVIEW OF THE STATUTE WAS ENGAGED IN A BUSINESS RATHER THAN WORKING FOR SALARY OR WAGES. IN SUCH CASES WE SAID THAT IN DETERMINING WHETHER REPORTED BUSINESS EXPENSES ARE LEGITIMATE AND REASONABLE. YOU DETERMINE THAT THE REPORTED BUSINESS EXPENSES ARE REASONABLE AND LAWFUL. YOUR QUESTION 3 IS ANSWERED IN THE AFFIRMATIVE.

B-157822, OCT. 20, 1965

TO MR. E. K. SOKOLOSKI, AUTHORIZED CERTIFYING OFFICER, GENERAL SERVICES ADMINISTRATION:

YOUR LETTER OF OCTOBER 7, 1965, REFERENCE 3BCRPA, WITH ENCLOSURES, ASKS OUR OPINION CONCERNING THE PROPER AMOUNT OF BACK PAY ALLOWABLE TO MR. BRADFORD CALLAHAN, AN EMPLOYEE OF THE GENERAL SERVICES ADMINISTRATION, INCIDENT TO HIS RESTORATION TO DUTY ON FEBRUARY 19, 1965, UNDER THE ACT OF JUNE 10, 1948, 62 STAT. 354, 5 U.S.C. 652.

THE RECORD SHOWS THAT ON MAY 23, 1964, MR. CALLAHAN WAS REMOVED FROM HIS POSITION, WB-3502, AT $3.07 PER HOUR. ON FEBRUARY 9, 1965, THE UNITED STATES CIVIL SERVICE COMMISSION DIRECTED HIS RESTORATION, EFFECTIVE MAY 24, 1964, ON THE GROUND THAT HIS REMOVAL WAS NOT JUSTIFIED.

THE EMPLOYEE WAS RESTORED TO DUTY AS DIRECTED AND ALLOWED BACK PAY AS PROVIDED IN 5 U.S.C. 652, LESS INTERIM EARNINGS OF $1,870. IT APPEARS FROM THE RECORD THAT DURING THE PERIOD OF SEPARATION FROM THE GOVERNMENT SERVICE THE EMPLOYEE ENGAGED IN AN UNSUCCESSFUL BUSINESS ENTERPRISE WHICH, AS OF DECEMBER 31, 1964, WAS IN THE PROCESS OF LIQUIDATION AND WHICH, ON THE BASIS OF A FINANCIAL ANALYSIS FURNISHED BY HIS ATTORNEY, RESULTED IN AN ESTIMATED NET LOSS AFTER LIQUIDATION OF $870.13. HIS GROSS INCOME FROM THE BUSINESS DURING THE ABOVE PERIOD IS SHOWN TO HAVE BEEN $1,789.69 RATHER THAN $1,870. APPARENTLY, THE EMPLOYEE DERIVED NO OTHER INCOME FROM HIS SERVICES IN THE NATURE OF WAGES OR OTHER COMPENSATION DURING THE PERIOD OF HIS SEPARATION.

YOUR LETTER PRESENTS THE FOLLOWING QUESTIONS:

"1. WAS THE AMOUNT OF $1,870, SHOWN AS EARNINGS ON THE AFFIDAVIT, THE PROPER DEDUCTION FROM HIS GROSS SALARY FOR THE RETROACTIVE PERIOD?

"2. IF NOT, WHAT AMOUNT SHOULD BE DEDUCTED FROM THE GROSS SALARY FOR MR. CALLAHAN'S RETROACTIVE BACK PAY?

"3. SHOULD THE OPERATING LOSS BE RECOGNIZED, AS DEFINED IN 35 CG 268, AND NO AMOUNT DEDUCTED ,AS EARNINGS" FROM HIS GROSS SALARY FOR THE PERIOD INVOLVED?

IN OUR DECISION REPORTED IN 35 COMP. GEN. 268, WE CONCLUDED THAT THE TERM "INTERIM EARNINGS" AS USED IN 5 U.S.C. 652, MEANT "NET EARNINGS" WHEN AN EMPLOYEE COMING WITHIN THE PURVIEW OF THE STATUTE WAS ENGAGED IN A BUSINESS RATHER THAN WORKING FOR SALARY OR WAGES. IN SUCH CASES WE SAID THAT IN DETERMINING WHETHER REPORTED BUSINESS EXPENSES ARE LEGITIMATE AND REASONABLE, RECOURSE MUST BE HAD TO THE INTERNAL REVENUE LAWS APPLICABLE IN DETERMINING THE NET EARNINGS IN BUSINESS ENTERPRISES.

IF, IN MR. CALLAHAN'S CASE, YOU DETERMINE THAT THE REPORTED BUSINESS EXPENSES ARE REASONABLE AND LAWFUL, AS DEFINED IN 35 COMP. GEN. 268, WE WOULD INTERPOSE NO OBJECTION TO AN ADMINISTRATIVE FINDING THAT MR. CALLAHAN HAD NO "INTERIM EARNINGS" DURING THE PERIOD OF HIS SEPARATION FROM THE SERVICE.

IF SUCH BE THE EVENT, YOUR QUESTION 3 IS ANSWERED IN THE AFFIRMATIVE, RENDERING UNNECESSARY ANSWERS TO QUESTIONS 1 AND 2.

WE ARE IN RECEIPT OF A LETTER DATED OCTOBER 13, 1965, FROM MESSRS. CRAIGHILL AND AIELLO, ATTORNEYS FOR MR. CALLAHAN, WHICH IS BEING ACKNOWLEDGED TODAY AND IN WHICH THEY REQUEST THAT SETTLEMENT OF HIS CLAIM BE EXPEDITED.