Balick v. Office of Personnel Management, 93-3326

• Decision Date: 31 May 1996
• Docket Number: No. 93-3326,93-3326
• Citation: 85 F.3d 586
• Parties: Lawrence F. BALICK, Petitioner, v. OFFICE OF PERSONNEL MANAGEMENT, Respondent.
• Court: U.S. Court of Appeals — Federal Circuit

Page 586

85 F.3d 586

Lawrence F. BALICK, Petitioner, v. OFFICE OF PERSONNEL MANAGEMENT, Respondent.

No. 93-3326.

United States Court of Appeals, Federal Circuit.

May 31, 1996.

Randall L. Shepard, Fitzsimmons and Shepard, Rochester, Michigan, argued, for petitioner.

Steven E. Gordon, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, Washington, D.C., argued, for respondent. With him on the brief were Frank W. Hunger, Assistant Attorney General, David M. Cohen, Director, and, Richard E. Rice, Assistant Director.

Before MAYER, MICHEL, and RADER, Circuit Judges.

PER CURIAM.

Lawrence F. Balick petitions for review of a decision of the Merit Systems Protection Board, No. CH831M930039-I-1 (March 1, 1993), which affirmed, in part, the Office of Personnel Management's reconsideration decision that Balick had underreported income resulting in disability annuity payments to which he was not entitled. We affirm.

Background

On July 18, 1975, Balick retired on disability from his position as an Internal Revenue Agent, GS-11, with the Internal Revenue Service. His disability annuity was subject to the statutory condition that he continue to be medically disabled and that his income from wages and self-employment in any one year not exceed 80 percent of the then current pay of his former position. ^*

From 1987 through 1991, Balick sold insurance for several different companies. Some of the companies reported his commissions on IRS Form 1099 (Miscellaneous Income) as non-employee compensation. Two of the companies reported his income as employee wages. Balick calculated the amount of income he reported to the Office of Personnel Management (OPM) each year for determining his earning capacity by deducting his business related expenses from the sum of his commissions and wages. He thus reported the taxable income he calculated for his federal income taxes as his income for determining earning capacity.

In 1992, OPM audited Balick's income for the years 1987 through 1991. It calculated his income by adding the amount of his gross receipts from insurance sales, commissions, to the amount of reported wages. OPM did not allow any deduction for business related expenses. Based on this methodology, OPM concluded that Balick received income which exceeded the 80 percent limit in each of the five audited years, and that therefore his earning capacity had been restored for those years. Because his earning capacity had been restored in 1987, pursuant to 5 U.S.C. § 8337(d) OPM determined that Balick should not have received disability annuity payments beginning 180 days after December 31, 1987, the last day of the year in which his income was restored. These payments totaled $59,973. An additional $11,589.96 was added for interest on the overpayments.

Balick appealed the decision to the Merit Systems Protection Board which rejected his method of computing income in determining earning capacity, stating that section 8337(d) "defines the test for determining earning capacity in terms of 'wages' and wages is not the same as taxable income." It held that OPM could reasonably define "wages" as the portion of income that was subject to federal employment taxes (e.g., social security and medicare). The board also held that Balick could not deduct expenses from reported employee wages, but that he could deduct business related expenses from his self-employment income. As a result, it determined that OPM correctly computed the wage portion of Balick's income without deducting his business expenses, but had incorrectly determined that he was not permitted to deduct business related expenses from the income attributable to self-employment sales commissions. Therefore, all of Balick's self-employment income was offset by business expenses. Looking only at wages, the board determined that he exceeded the income limit only in 1987, 1990, and 1991, and ordered OPM to recompute the overpayment based on those years. Balick appeals.

Discussion

Judicial review of disability determinations under the Civil Service Retirement System is limited to determining whether "there has been a substantial departure from important procedural rights, a misconstruction of the governing legislation, or some like error 'going to the heart of the administrative process.' " Lindahl v. Office of Personnel Management, 470 U.S. 768, 791, 105 S.Ct. 1620, 1633, 84 L.Ed.2d 674 (1985)(citing Scroggins v. United States, 184 Ct.Cl. 530, 397 F.2d 295, 297 (1968)); see also Anthony v. Office of Personnel Management, 58 F.3d 620, 624-25 (Fed.Cir.1995). We review this decision to determine whether the agency misconstrued the governing legislation.

Balick argues that OPM misinterpreted 5 U.S.C. § 8337(d) when it did not allow him to calculate his earning capacity by deducting his business expenses from his wage...