Chioma Udemgba, M.D., DAB CR6381 (2023)

DECISION

I sustain the determination of the United States Department of Health and Human Services (HHS or Department) that Petitioner, Chioma Udemgba, M.D., was incorrectly paid a sum of $18,877.95, due to an administrative error by the Department.  I find no irregularity in the manner that the Department has employed to recoup this money.

I.  Background

This case was assigned originally to another administrative law judge, then very recently reassigned to me.  I issued orders adjusting the schedule by which the parties submitted their arguments and evidence.  The parties complied with my orders, and I closed the record on October 20, 2023.

HHS submitted 17 exhibits in support of its arguments, identified as HHS Ex. 1 – HHS Ex. 17.  Petitioner submitted exhibits that she identified as Exhibits 1 through 11d.  I note that Petitioner did not put identifying markings on her exhibits.  However, the exhibits are filed sequentially in the Departmental Appeals Board's e-filing system and are identifiable by the order in which Petitioner filed them.  I receive the parties' exhibits into the record.

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II.  Issues, Findings of Fact and Conclusions of Law

A. Issues

The issues are whether HHS correctly determined that Petitioner was incorrectly paid in the amount of $18,877.95 due to an administrative error, and whether Petitioner is entitled to relief due to alleged irregularities in the manner that HHS employed to recoup the indebtedness.

B.  Findings of Fact and Conclusions of Law

1. Petitioner's indebtedness

I find no dispute that an administrative error by the Department caused Petitioner to be paid $18,877.95 incorrectly, thereby creating a debt owed by Petitioner to HHS in that amount.

On July 1, 2020, Petitioner was given a temporary appointment by HHS to work as a Clinical Fellow at the National Institutes of Health (NIH).  HHS Ex. 1 at 1.  That appointment was for a term that expired on June 30, 2023.  Id.  In 2023, NIH processed a personnel action to extend Petitioner's term of employment.  HHS Ex. 10 at ¶¶ 8-11; HHS Ex. 13.  However, and through administrative error, Petitioner's extension was not processed timely.  Consequently, she was terminated from her employment on June 30, 2023.  Id.  That error was immediately rectified and HHS reinstated Petitioner.  As a consequence of the immediate reinstatement Petitioner continued to work for the Department uninterrupted.

Petitioner had accrued a substantial amount of unused annual leave during the three-year initial term of her employment at NIH.  The erroneous termination of her employment caused the Department's payroll contractor to pay Petitioner for the accrued annual leave, a sum totaling $18,877.95.

Reinstatement of Petitioner's employment restored Petitioner's annual leave, thus leaving her with the identical balance of unused leave that she had as of the termination of her employment.  However, reinstatement also created a debt in the amount of $18,877.95, equaling the cash value that the payroll contractor erroneously paid to Petitioner for her accrued annual leave.

2. Recoupment

The Department's payroll contractor adjusted Petitioner's indebtedness so as not to charge her for amounts previously withheld, including federal income taxes, thus resulting in an outstanding debt owed by Petitioner to the Department of $11,535.69.

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HHS Ex. 7 at ¶ 7.  The contractor then proceeded to recoup the indebtedness using two different collection actions.

1. Mandated refund

As a first method of recoupment, the contractor processed a mandatory refund pursuant to 5 U.S.C. § 6306.  This section provides that when an individual who receives a lump-sum payment for accrued leave is reemployed before the end of the period covered by the payment, that individual: “shall refund to the employing agency an amount equal to the pay covering the period between the date of reemployment and the expiration of the lump-sum period.”  5 U.S.C. § 6306(a).

The statutory language does not vest discretion with the Department in applying it, the use of the word “shall” makes it clear that the employee must refund a portion of the debt.

The contractor found that this section applied to Petitioner.  It applied a “refund” of $4,043.37 by withholding that amount from Petitioner's pay.  HHS Ex. 7 at ¶¶ 7-8.  The contractor determined Petitioner's remaining indebtedness to be $7,492.32.  HHS Ex. 4 at 55.

The amount withheld by the contractor is less than the statute permits.  There was no gap in Petitioner's reemployment – her reinstatement was immediate.  Consequently, the contractor could have extracted a refund for as much as the entire amount of Petitioner's indebtedness rather than limiting it to $4,043.37.

2. Recovery of the balance of the indebtedness

The payroll contractor determined to collect the remaining debt of $7,492.32 by offsetting Petitioner's pay until the outstanding balance was eliminated.

The contractor and HHS rely on 45 C.F.R. § 33.3(d)(2) as authority for collecting the remaining debt amount.  This section provides that an agency may adjust an employee's pay to collect on a debt, if:

[T]he overpayment occurred within the four pay periods preceding the adjustment and, at the time of such adjustment, or as soon thereafter as practical, the individual is provided written notice of the nature and the amount of the adjustment and point of contact for contesting such adjustment.

45 C.F.R. § 33.3(d)(2).

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The contractor deducted $1,208.76 from Petitioner's pay for the joint pay period ending July 29, 2023.  HHS Ex. 8 at 7-8.  It determined to deduct $598.38 from Petitioner's pay for each successive pay period until the debt is eliminated.  HHS Ex. 7 at ¶ 11.  This deduction amounts to 15 percent of Petitioner's disposable pay.  HHS Ex. 8 at 1-8.

The contractor provided notice as “is practical” by informing Petitioner of the payroll deductions and providing her with the name of a contact person with whom she could discuss what had transpired.

3. Validity of debt and lawfulness of recoupment

There is no question that the erroneous termination of Petitioner's employment resulted in a windfall to Petitioner that she is obligated to repay.  Put simply, she was paid incorrectly for leave that was subsequently restored to her.  Nor is there any dispute as to the amount of Petitioner's indebtedness.

Petitioner complains, however, about the process by which the contractor and the Department have recouped the debt.  I find these complaints to be without merit.

Petitioner argues that she was not provided with advance notice or the opportunity to challenge the lump sum refund that was withheld from the first payment that she received after being reemployed.  However, the refund was mandatory – HHS had no discretion in determining to extract a refund from Petitioner's pay.  Further the lump sum refund amount applied by the contractor is consistent with the requirements of 5 U.S.C. § 6306 and less than the statute permits.

Nor was there a failure to give Petitioner requisite notice of the refund.  Neither HHS nor its payroll contractor are required by law to give an individual prior notice when they extract a refund pursuant to the provisions of 5 U.S.C. § 6306.  Petitioner cites various statutes and regulations to support her contention that she must receive prior notice.  In particular, Petitioner relies on the notice requirements of 5 U.S.C. § 5514 to argue that she was not provided with the required notice.  I find these to be inapplicable.  The provisions of that section apply to debts other than payments subject to recoupment.  Nothing in 5 U.S.C. § 6306 suggests that this statute is subject to notice requirements contained in other, unrelated laws and regulations.

Furthermore, I am aware of no other law that permits me to direct HHS to refund money to a party where it has applied an incorrect debt collection method to recoup a valid debt.  The undeniable fact is that the money paid to Petitioner erroneously for her accrued leave constitutes a windfall that she must repay as a condition of her continued employment by the Department.  That remains so even if the Department may have used an incorrect method for recouping part of that debt.  The Department is not obligated to give back to Petitioner that money which, by law, belongs to the taxpayers.

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Petitioner argues, additionally, that recoupment of her debt will have adverse tax consequences.  I find this argument to be unpersuasive.  The contractor reversed the tax withholdings on Petitioner's erroneous lump sum leave payment.  HHS Ex. 7 at ¶ 7.  The unrefunded balance carries with it no adverse tax consequences so long as Petitioner repays it in the current tax year.  There may be consequences if Petitioner fails to return the entire windfall during this tax year because any part of the windfall carried over into the next year will be treated as income.  26 C.F.R. § 31.6413(a)-1(a)(1)(i).