Views on Entitlement to State Unemployment Compensation During Backpay Award Period]

The Acting Commissioner of the Customs Service requested a decision as to whether unemployment compensation paid by a State to a Federal employee for a period during which he was wrongfully removed from Government employment may be deducted from a subsequent backpay award. Customs believed that, according to the Back Pay Act, State unemployment compensation received by an employee during a period of wrongful removal should be regarded as employee earnings entitling a Federal agency to deduct that amount from any backpay award. State unemployment payments to Federal employees are totally financed by a Federal fund; however, overpayments of unemployment compensation are determined and recovered or waived in accordance with the provisions of State law. Therefore, GAO held that, where applicable State law may require refund of unemployment compensation, a Federal agency should not deduct unemployment compensation received by an employee during a period of unjustified or unwarranted separation from the backpay to which he is otherwise entitled. Whether and in what manner the employee must repay the State must be resolved under State laws. Accordingly, Customs may not make any deduction from the backpay award because of unemployment compensation paid by the State.