BNUMBER:  B-260843
DATE:  October 24, 1996
TITLE:  Alan D. Zempel-Salary Overpayments-Waiver

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Matter of:Alan D. Zempel-Salary Overpayments-Waiver

File:     B-260843

Date:October 24, 1996

DIGEST

GS-13 employee was temporarily promoted to GM-14 for the period April 
1989  through April 1991, when he was returned to his previous GS-13 
position.  In February 1992, he was again temporarily promoted to the 
GM-14 position, until February 1993, when he was returned to GS-13.  
In March 1993 the agency advised him that due to several errors in 
setting his pay during these periods, he had been overpaid for which 
he would be in debt.  At about the same time, he was permanently 
promoted to GM-14, and his pay was again erroneously set at a higher 
rate which caused him to receive overpayments through November 1993 
when the agency corrected the error.  Waiver was granted for 
overpayments he received during the period through February 1993, but 
denied for the subsequent period on the basis that the advice he 
received in March should have put him on notice that his pay was 
incorrect.  On appeal, waiver is granted for the additional period 
since record supports employee's contention that the March advice 
related only to prior problems with his pay, and he was not aware that 
upon his subsequent promotion it again was set erroneously.

DECISION

This is in response to Mr. Alan D. Zempel's appeal of our Claims 
Group's partial denial of his request for waiver of a debt which arose 
from overpayments of pay he received in various positions over several 
years as an employee of the Internal Revenue Service.[1]  Upon review 
of the matter, as explained below, we overrule the portion of the 
Claims Group's settlement denying waiver and waive the additional 
amount. 

BACKGROUND

Mr. Zempel's debt resulted from several personnel and pay setting 
actions that took place between April 1991 and November 1993, which 
were determined by the agency to have resulted from administrative 
errors.  Specifically, the agency reports that Mr. Zempel was 
temporarily promoted from a GS-13 Statistician position to a GM-14 
Supervisory Statistician position effective April 23, 1989, at the 
salary rate of $55,072, for a period that was not to exceed April, 22, 
1990.  In April 1990, that appointment was extended for an additional 
year at a salary rate of $57,894.  In April 1991 he was returned to 
the GS-13 position at a salary of $54,694, which the agency 
subsequently determined should have been set at the rate of $57,650.  
This error was corrected and he was paid the correct amount.

In February 1992, an agency staffing specialist incorrectly determined 
that Mr. Zempel was entitled to pay retention upon his return to the 
GS-13 position in April 1991, based on his previous temporary 
promotion.  Consequently, the agency erroneously "corrected" his pay 
rate to increase his then current pay rate to $61,143 and to pay him 
retroactively to April 1991 for the extra amount erroneously 
determined due him.  This pay setting error was compounded when Mr. 
Zempel was given another 1-year temporary promotion to the GM-14 
position, effective February 9, 1992.  Because of the error in setting 
his GS-13 pay at a higher rate, his GM-14 pay was set erroneously at 
$65,433, when it should have been set at $63,707.

On February 8,1993, Mr. Zempel's temporary appointment expired and he 
was to be returned to his GS-13 position.  However, later that month 
he was selected for permanent promotion to the GM-14 position and his 
return to the GS-13 position was cancelled.  The agency states that in 
processing the permanent promotion, a personnel specialist discovered 
the series of mistakes in Mr. Zempel's pay that had occurred over the 
April 1991 to February 1993 period, and Mr. Zempel was notified of 
that problem verbally in a meeting on March 3, 1993.  It was not until 
over 4 months later that he was officially notified, by memorandum 
dated July 23, 1993, that after careful review of his personnel file, 
it was discovered that "you were not entitled to pay retention.  This 
administrative error resulted in your being overpaid for the periods 
of April 21, 1991, through February 6, 1993."  The memorandum also 
stated that a personnel action had been processed correcting his 
change to a lower grade from the temporary promotion, effective 
February 7, 1993, which set the correct pay and step for his GS-13 
position, and "this corrective action prevents the continuation of the 
overpayment."  Finally, the memorandum advised him of the approximate 
amount of the overpayment, that the National Finance Center would be 
taking collection action in the form of a notice of intent to offset 
his salary, and advised him of how to request waiver of the debt.  The 
July 23 memorandum made no mention of any problem with the GM-14 rate 
at which he was then being paid as a result of his permanent 
promotion.

Shortly after receiving the July 23 memorandum, Mr. Zempel replied by 
memorandum stating that he was not informed on March 3 that he had 
been overpaid as a GS-13; that he was informed only that he was not 
entitled to retained pay at the GM-14 rate; that the first he learned 
he had been overpaid was when he received the July 23 memorandum in 
early August; and that all the pay setting changes that had been made 
in his pay were made by the agency's personnel specialists, and he had 
no reason to believe they were incorrect.

It appears that the next written communication Mr. Zempel received 
regarding this matter was a notice from the National Finance Center 
dated October 1, 1993, that as a result of an "internal adjustment" 
processed during pay period 18 [September], records showed that he had 
been overpaid $2,992.00, and that his salary would be offset to 
collect the debt.  He subsequently received another similar Finance 
Center notice, dated December 24, 1993, advising him that as a result 
of a "corrected or late" personnel action processed during pay period 
24 [November - December], he had been overpaid $872.59, and that his 
salary would be offset to collect that amount.  No specific 
information was provided in either notice as to the underlying errors 
that had been discovered that led to these collection actions.  
However, the October notice apparently related to the net indebtedness 
arising out of the erroneous payments addressed in the agency's July 
23 memorandum to Mr. Zempel, and the December notice apparently 
related to the net indebtedness incurred after his pay was erroneously 
set when he received the permanent promotion in late February or early 
March 1993, the latter error having been discovered in November.

In September 1994, the agency referred a request for waiver to our 
Claims Group recommending that Mr. Zempel's debt for the overpayments 
he received for the period from April 21, 1991, through March 2, 1993, 
be waived since they resulted from administrative errors regarding 
which there is no evidence that Mr. Zempel had any knowledge nor any 
reason to question the accuracy of the pay setting procedures which 
led to the errors.  

As to the indebtedness that resulted from overpayments Mr. Zempel 
received for the period March 3 through November 13, 1993, however, 
the agency recommended denial of waiver, stating that Mr. Zempel was 
verbally notified at the March 3, 1993, meeting that "an error had 
been made in pay setting," and that he was officially informed by the 
July 23, 1993 memorandum that "action was taken to correct his salary 
from April 21, 1991 - February 6, 1993."  Although no corrective 
action was taken for the March-November overpayments until November 
1993, the agency stated that the advice he received at the March 3 
meeting made him aware that he was receiving these overpayments, which 
he should then have set aside for refunding when the error was 
corrected.  The agency stated that he made no further attempts to have 
the error corrected, and thus the agency concluded he accepted these 
payments with knowledge of their erroneous nature, which constitutes a 
lack of good faith on his part, precluding waiver.[2]

Our Claims Group agreed with the agency and waived the gross amount of 
the overpayments received during the first period, $4,512.80, and 
denied waiver for the gross amount of the overpayments received for 
the second period, $1,271.20.

Mr. Zempel has appealed the denial of waiver of the $1,271.20, 
asserting that the March 3, 1993, meeting was held at his request 
because he had been informed that upon his return to the GS-13 
position effective February 8, he would not be entitled to retained 
pay as he had been upon return to the GS-13 position from the previous 
2-year temporary promotion.  He states that he wished to clarify why 
he would not be granted retained pay upon return from the second 
temporary promotion.  He also states that he left that meeting 
believing that he had no right to pay retention either for the current 
reduction to GS-13 or for the previous reduction to that grade, but he 
was not informed that he was then receiving erroneous payments.  He 
indicates that the first he heard that agency personnel thought he had 
been informed of an overpayment was in the July 23 memorandum, to 
which he responded promptly to set the record straight.  He states 
that he was surprised to hear that his pay had been incorrectly set 
during the earlier period, but that he was not aware that his GM-14 
pay had been incorrectly set when he received the permanent promotion, 
and he was not informed of that until his pay was reduced in pay 
period 23 (November 1993).  He argues that he did everything a 
reasonable and prudent person could have done to act in good faith, 
and that the remainder of his debt should be waived also. 

ANALYSIS

Upon review of the record, we agree with Mr. Zempel.  The errors that 
occurred in his pay during the April 1991 through February 1993 
period, relating to granting him retained pay when he first returned 
to his GS-13 position, appear to have been the primary subject of the 
March 1993 meeting.  The language of the July 23, 1993, agency 
memorandum supports Mr. Zempel's assertion in that regard.  As noted 
above, the memorandum indicates that, although he would be placed in 
debt for the resulting overpayments that occurred during the period of 
April 1991 - February 1992, action had been taken that corrected the 
matter and that "prevents continuation of the overpayment."  The 
record contains no other indication that he was advised his salary had 
been set at an incorrect rate incident to his permanent promotion and 
that he was receiving additional overpayments, until November 1993 
when action was taken to reduce his GM-14 pay rate.

In these circumstances, we find that it was not unreasonable for Mr. 
Zempel to have been unaware that he was receiving erroneous payments 
during the March - November 1993 period.  Accordingly, the remaining 
portion of his debt in the amount of $1,271.20 qualifies for waiver 
under 5 U.S.C.  sec.  5584, and it is hereby waived.

/s/Seymour Efros
Robert P. Murphy
General Counsel  

1. Claims Group Settlement Z-2927659-050, Nov. 29, 1994.

2. The waiver statute, 5 U.S.C.  sec.  5584, provides that the waiver 
authority may not be exercised if there exists "an indication of 
fraud, misrepresentation, fault, or lack of good faith on the part of 
the employee" seeking waiver.