B-229620, Sep 14, 1988

B-229620: Sep 14, 1988

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Since this claim is not a debt directly owed to the government. It is not the proper subject of a setoff. As will be explained in more detail below. This claim is not a debt owed to the government. It is not the proper subject of a setoff. (A&J Security) was awarded a written contract with INS for the furnishing of unarmed guard services at the Port Isabel Service Processing Center located at Los Fresnos. The contract with A&J Security was terminated for default on June 24. The contract was completed by the Travelers Indemnity Company. /1/ and the EEOC have asserted claims against these funds. We have been asked only to resolve the question of whether the EEOC claim may be set off by INS.

B-229620, Sep 14, 1988

PROCUREMENT - Payment/Discharge - Defaulted contractors - Reserve funds - Set-off - Retroactive compensation DIGEST: The monetary claim involved in the Equal Employment Opportunity Commission's judgment against a defaulted government contractor represents a back pay award to two individuals. Since this claim is not a debt directly owed to the government, it is not the proper subject of a setoff.

Equal Employment Opportunity Commission-- Propriety of a Setoff of a Judgment Claim Against the Remaining Proceeds of a Government Contract:

The Regional Attorney for the Equal Employment Opportunity Commission's (EEOC) Atlanta District Office has asked us to determine whether its judgment claim against a defaulted government services contractor can be set off against the remaining proceeds of a contract between that company and the Immigration and Naturalization Service's (INS) Dallas, Texas Office. As will be explained in more detail below, since the monetary claim involved in the EEOC judgment represents a back pay award to two individuals, this claim is not a debt owed to the government. Therefore, it is not the proper subject of a setoff.

BACKGROUND

In October 1984, A&J Security Guard Services, Inc. (A&J Security) was awarded a written contract with INS for the furnishing of unarmed guard services at the Port Isabel Service Processing Center located at Los Fresnos, Texas (Contract No. DLS-5-85). A&J Security began work on October 23, 1984. The contract with A&J Security was terminated for default on June 24, 1986. The contract was completed by the Travelers Indemnity Company, the performance and payment bond surety.

At the end of the contract period, INS retained $82,100.76 against the contract. INS made a partial payment to the surety of $30,407.06 in August 1987, leaving $51,693.70 remaining to be disbursed. The surety, the Department of Labor, /1/ and the EEOC have asserted claims against these funds. We have been asked only to resolve the question of whether the EEOC claim may be set off by INS.

DISCUSSION

The EEOC claim arose out of charges of discrimination brought under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Secs. 2000e et seq., in June and August 1984, by two former A&J Security employees. The charges were unrelated to the INS contract. The EEOC ruled on July 17, 1985, that the charges had merit. It appears that attempts at settlement were unsuccessful. EEOC filed suit and a default judgment was entered on October 23, 1986. The default judgment included an award of back pay to the two former A&J Security employees. It is this back pay award that the EEOC wishes to recover on behalf of the two employees.

It is well-settled that the government has the same right belonging to every creditor to apply undisbursed moneys owed to a debtor to fully or partially extinguish debts owed by the debtor to the government. United States v. Munsey Trust Co., 332 U.S. 234, 239 (1947). However, in this case the debt is not owed to the government. Rather, EEOC is asserting a claim on behalf of the two aggrieved A&J Security employees. Unless the debt runs solely between the parties, they are not the proper subject of a setoff. See Whitney Brothers Plumbing & Heating, Inc. v. United States, 224 F.Supp. 860 (1963); 48 Comp.Gen. 387 (1968).

Accordingly, since there is no direct debt owed to the government, the EEOC claim cannot be set off against the monies retained against the INS contract.

/1/ The Department of Labor (DOL) is asserting a claim for $26,693.70, for alleged wage and hour violations under the Service Contract Act, 41 U.S.C. Secs. 3551-358, by A&J Security on two unrelated government projects. According to INS, this claim is being handled directly between the DOL and the surety. We understand that DOL has instituted an administrative action against A&J Security.