Matter of: Dr. Joella Campbell File: B-259660 Date: June 8, 1995
B-259660: Jun 8, 1995
An employee was underpaid salary for four successive pay periods due to administrative error. The employee was immediately notified of the underpayment and its amount. The employee seeks waiver of the debt arguing that she was without fault and that the delay by the agency in satisfying her regarding the amount of the debt now causes her financial hardship if she has to repay it. Waiver is denied because the employee was aware of the amount underpaid and should have been aware of the erroneous payment at the time it occurred and set the amount aside for repayment. DECISION This decision is in response to an appeal from our Claims Group's settlement Z-2927432. Campbell is an employee of the Department of Health and Human Services stationed in Washington.
Matter of: Dr. Joella Campbell File: B-259660 Date: June 8, 1995
An employee was underpaid salary for four successive pay periods due to administrative error. Upon discovery, the employee was immediately notified of the underpayment and its amount. An additional error caused her to be repaid the amount twice on successive paydays by direct deposit to her checking account. The employee seeks waiver of the debt arguing that she was without fault and that the delay by the agency in satisfying her regarding the amount of the debt now causes her financial hardship if she has to repay it. Waiver is denied because the employee was aware of the amount underpaid and should have been aware of the erroneous payment at the time it occurred and set the amount aside for repayment. The employee could not reasonably expect to retain the overpayment and financial hardship cannot form the basis for waiver.
This decision is in response to an appeal from our Claims Group's settlement Z-2927432, Nov. 21, 1994, which sustained the agency's denial of waiver of the debt of Dr. Joella Campbell incident to the overpayment of compensation in May 1992. We concur with our Claims Group's action for the following reasons.
Dr. Campbell is an employee of the Department of Health and Human Services stationed in Washington, DC. During the period March 8 through May 2, 1992, she was underpaid her salary due to administrative error. By action dated May 11, 1992, an error notice was issued notifying Dr. Campbell of the underpayment and on May 16, 1992, payment was issued to her in the gross amount of $4,713.60, to compensate for that underpayment. However, due to an additional administrative error, a duplicate payment was issued to her on May 30, 1992. We understand that both payments were directly deposited into her checking account, as were her normal biweekly salary checks.
By notice dated August 3, 1992, Dr. Campbell was informed that an audit of her account showed that she had received the $4,713.60 overpayment. In explanation as to how the debt arose, a copy of the audit report was attached. In addition, that notice informed her how the debt could be settled, or in lieu thereof, that she could request a waiver of the debt or request a hearing on the matter. Dr. Campbell sought a hearing and eventually requested waiver of her debt in 1994. By action dated July 15, 1994, the agency denied waiver. On appeal here, our Claims Group sustained that denial on a finding that when she received the second payment on or about May 30, 1994, she should have realized that she was receiving salary in excess of her proper entitlement.
In her appeal from our Claims Group action, Dr. Campbell argues that the parties responsible for the error failed to provide her with timely notification or adequate explanation as to the cause of the problem or attempt to clarify the exact amount until her meeting with agency officials in 1994. Since the errors that occurred were not caused by anything Dr. Campbell did and were not resolved promptly, it is her view that she is qualified to have that debt waived. In this connection, she contends that repayment would cause her financial hardship. She also contends that the amount of the debt is incorrectly stated. While she admits that the gross amount of the payment was $4,713.60, it is her contention that since she only received $2,799.65, that is the amount of her debt for waiver or repayment purposes.
Waiver of a debt under the provisions of 5 U.S.C. Sec. 5584 (1988) is an equitable remedy. As such, waiver must necessarily depend on the facts in each case, since by statute "an indication of . . . fault, or lack of good faith on the part of an employee" precludes waiver. 
Fault, as used in 5 U.S.C. Sec. 5584, is considered to exist if it is determined that an employee exercising reasonable diligence should have known that an error existed, but failed to take corrective action.  The standard employed is whether a reasonable person should have been aware of receiving payment in excess of the proper entitlement. 
We recognize that erroneous payments usually arise as a result of mistakes by those who are charged with the administrative responsibility for making the payments. However, where a payment made is in excess of the amount authorized by law, the government has the right to recover the excess amount. We have held that an employee who knows or suspects that she has received an overpayment should be prepared to return any overpayment she has received and it is not against equity or good conscience to collect an overpayment from such a person.  We have also held that financial hardship does not provide a basis to grant waiver of an indebtedness. 
In the present case, Dr. Campbell was notified on May 11, 1992, regarding the salary underpayment errors. Dr. Campbell states that she reviewed her May 16, 1992, earnings and leave statement and determined that, in the process of correcting her pay records, an additional error was introduced identifying California as her home state for state income tax purposes, rather than Virginia. She immediately contacted her payroll office for an explanation and correction of the error, which according to her was not corrected for many months thereafter. In this regard, we note that all her salary payments, including the salary correction payment and the erroneous payment, were deposited in her checking account by direct deposit. We believe that had she examined her bank statement for the period covering both the May 16th and 30th deposits in a timely manner she would have become aware that an extra correction payment had credited to her account. In combination with the earlier known payroll problem, it should have alerted her to the probability that one of the deposits was improper, even before she received the August 3rd notice of overpayment. Her claim that the matter was not immediately resolved to her satisfaction would not serve as a basis to allow waiver, nor would her assertion that repayment now would cause a financial hardship.
An employee on notice of an overpayment of pay has a duty to return the excess amount or set it aside for refund at such time as the administrative error is corrected and repayment sought. It is our view that Dr. Campbell should have realized that either the May 16th or the May 30th payment was erroneous and that she should have taken action to repay it. She did not do so. Accordingly, we sustain our Claims Group's action denying waiver in her case.
With regard to Dr. Campbell's assertion that her debt is $2,799.65, not $4,713.60, as stated in our Claims Group's settlement, the total amount of the debt due the United States includes both the amount Dr. Campbell received directly and the other amounts disbursed on her behalf for such items as medicare, health benefits, life insurance, retirement, and federal and state tax withholdings. The required withholding of monies for those items does not reduce the total indebtedness. However, if the agency has not already done so, it should attempt to recover the disbursements for all withholdings other than the amount appropriately withheld for her federal and state income tax liability and credit Dr. Campbell with any recovery. Dr. Campbell should contact the federal Internal Revenue Service and the Virginia Department of Taxation for information concerning the appropriate methods of adjusting her tax liability as the result of repaying the overpayment she received.
1. 5 U.S.C. Sec. 5584(b) (1988).
2. 4 C.F.R. Sec. 91.5 (1995).
3. George R. Beecherl, B-192485, Nov. 17, 1978.
4. Hawley E. Thomas, B-227322, Sept. 19, 1988.
5. David L. Williams, 70 Comp.Gen. 699 (1991).