United States Department of the Treasury, Internal Revenue Service (Agency) and National Treasury Employees Union Chapter 73 (Union)
| Decision Date | 22 August 2012 |
| Docket Number | 0-AR-4704 |
| Citation | 66 FLRA No. 164 |
| Court | Federal Labor Relations Authority Decisions |
| Parties | UNITED STATES DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE (Agency) and NATIONAL TREASURY EMPLOYEES UNION CHAPTER 73 (Union) |
Before the Authority: Carol Waller Pope, Chairman, and Ernest DuBester, Member
This matter is before the Authority on exceptions to an award of Arbitrator Terry A. Bethel filed by the Agency under § 7122(a) of the Federal Service
Labor-Management Relations Statute (the Statute) and part 2425 of the Authority’s Regulations. The Union filed an opposition to the Agency’s exceptions.
The Arbitrator found that the Agency overpaid employees when it underdeducted taxes from their salaries. The Arbitrator determined that the Agency violated the parties’ agreement when it refused to waive its claims to those overpayments. For the reasons that follow, we deny the Agency’s exceptions.
The Agency withholds federal, state, and city taxes from employees’ salaries. See Award at 2. Consistent with this practice, the Agency, through its contractor, [1] deducted taxes owed to the City of Florence, Kentucky (the City) from the salaries of the employees at issue here. See id. at 1-2, 6 n.1. On July 1, 2007, [2] the City raised its tax rate from 1.25% to 2%. Id. at 1-2. Nevertheless, the Agency continued to deduct City taxes from employees’ salaries at the 1.25% rate. See id. In August, a manager noticed the apparent underdeductions and alerted the Agency. See id. On September 15, the Agency began to deduct City taxes from employees’ salaries at the 2% rate. See id.
In mid-October, the Agency informed employees that, due to the Agency’s underdeductions, employees owed taxes to the City. See id. In order to compensate for the underdeductions, the Agency decided that it would overdeduct City taxes from employees’ salaries for the next several pay periods. See id. at 3, 10. In response, the Union filed a grievance asserting that the Agency violated Article 53, Section 9 (Article 53-9) of the parties’ agreement, [3] and misapplied 5 U.S.C. § 5584 (§ 5584), [4] by refusing to waive its claims to the overpayments that resulted from the underdeductions. See Award at 3, 7.
The grievance was unresolved and submitted to arbitration. See id. at 2. At arbitration, the parties stipulated to the following issue: “Whether the Agency violated the [parties’ agreement] when it failed to grant a waiver of overpayment to all [Agency] employees in Florence, Kentucky for the under[deduction] of [City] income tax.” Id. at 2.
The Arbitrator found that the Agency’s underdeductions “resulted in... overpayment[s]” that arose from “administrative error, ” not “fraud, misrepresentation, fault[, ] or lack of good faith on the part of... employees.” Id. at 7. Based on these findings, the Arbitrator determined that Article 53-9 applied to the dispute. See id. In addition, the Arbitrator found that the Agency: (1) waited until mid-October to inform employees of the underdeductions; (2) did not consult with the Union about the underdeductions; and (3) could have caused employees to fail to pay taxes, subjecting them to interest, penalties, and discipline. Id. at 10. Further, the Arbitrator found “[n]o... suggest[ion]” that “waiver of the overpayment[s]” would “adversely affect the interest” of the United States Government. Id. Based on these findings, the Arbitrator determined that “equitable factors warrant[ed] relief.” Id. at 9.
The Arbitrator rejected the Agency’s assertion that employees were not indebted to the Agency and that the Agency therefore had no “claims” against employees. See id. at 8. In this regard, the Arbitrator determined that since “employees were paid more than they had earned, ” and since the Agency “made the mistake and... recovered the overpayment[s], ” employees were indebted to the Agency. Id. at 8. Additionally, the Arbitrator stated that, under Kentucky law, the Agency was “responsibl[e] for payment” of taxes to the City. Id. In this connection, the Arbitrator found it irrelevant that, according to the Agency, the City could not compel the Agency to submit employees’ City taxes. See id. at 9. The Arbitrator also cited two arbitration awards as supporting the Union’s arguments. See id. at 8. In those awards, arbitrators found that an agency was required to waive claims to overpayments that occurred when the agency failed to deduct union dues from employees’ salaries. See id. Finally, the Arbitrator rejected the Agency’s assertion that Kentucky law was not applicable. See id. at 8-9.
Based on the foregoing, the Arbitrator sustained the grievance, see id. at 11, and directed the Agency to “restore funds to employees in an amount equal to the overpayments they received” as a result of the Agency’s underdeductions, id. at. 10. The Arbitrator retained jurisdiction to resolve issues pertaining to attorney fees. See id.
The Agency asserts that the award is contrary to § 5584 because it directs the Agency to waive claims that are not claims “‘of the United States.’” Exceptions at 11 (quoting 5 U.S.C. § 5584(a)). There are no such “claims, ” the Agency argues, because “employee debt to the Agency was never established.” Id. at 17; see also id. at 11-12. Rather, the Agency argues, the “only liabilities” were “owed to the [C]ity..., not the United States.” Id. at 10.
In this regard, the Agency asserts that “[n]either the Union nor [the Arbitrator]... cited any precedent that would allow the waiver of third party debts.” Id. at 14-15. In this connection, the Agency cites Authority decisions that involved “employee debts [owed] to the[] employing agencies.” Id. at 14 (citing AFGE, Local 3615, 57 FLRA 19 (2001) (Local 3615); U.S. Dep’t of Def. Dependents Sch., 53 FLRA 196 (1997) (DoD); U.S. Navy Pub. Works Ctr., 27 FLRA 156 (1987) (Navy)). Similarly, the Agency argues that Comptroller General decisions relied on by the Union at arbitration “did not [involve] liabilities to third parties.” Id. at 15 (citing In re Damon R. Short-Underdeduction of FICA-Waiver, Comp. Gen. B-230903, 1988 WL 228012 (Oct. 7, 1988) (unpublished decision) (Short); In re Mrs. Patricia J. Engevik - Corr. of Payroll Deduction Errors, Comp. Gen. B-202201, 1981 WL 22962 (Dec. 23, 1981) (unpublished decision) (Engevik)).
With regard to the Arbitrator’s finding that the Agency was “solely responsible for the payment of... the [C]ity tax, ” the Agency contends that employees were “personally liable” for those taxes. Id. at 12. Also, the Agency again disputes the Arbitrator’s finding that the City could not compel the Agency to submit taxes to the City. See id. at 12-13. With regard to the awards cited by the Arbitrator, the Agency contends that those awards are distinguishable because the agency involved “paid an obligation on behalf of... employees and subsequently sought to receive reimbursement.” Id. at 13. Additionally, the Agency contends that, “[l]ogically extended, ” the award would “require all... agencies to pay their employees’ third party debts... each time an administrative error” occurs. Id. at 15.
Finally, with regard to the remedy, the Agency argues that the Arbitrator provided “‘money damages’” that are “not authorized” under § 5584. Id. at 16 (citing Lawrence v. United States, 69 Fed.Cl. 550, 554-55 (2006) (Lawrence)). In this connection, the Agency argues that the Arbitrator’s remedy was issued ” and that § 5584(c), which “permits... refund[s] only for debts ‘repaid to the United States, ’” id. (quoting 5 U.S.C. § 5584(c)), does not apply because employees “did not repay any debt to the Agency, ” id. at 17.
The Union asserts that the Agency had a claim under § 5584 because the Agency: (1) overpaid employees, see Opp’n at 13; (2) had a “right to withhold” funds to “make up for the overpayment[s], ” id. at 9; and (3) was “obligated to collect... funds on behalf of the City, ” id. at 8 (citing 5 U.S.C. § 5520 (§ 5520); Ky.Rev.Stat. (KRS) §§ 67.780, 67.783). [5] With regard to the Agency’s arguments, the Union asserts that: (1) a claim under § 5584 can “exist without... a debt, ” id. at 9 n.1; (2) claims under § 5584 can be for funds “owed to third part[ies], ” id. at 8-9 (); (3) waiver under § 5584 can “apply to failure to withhold taxes, ” id. at 8 (citing Short, 1988 WL 228012); (4) the City’s alleged inability to compel the Agency to submit taxes does not id. at 13; and (5) denying the Agency’s exceptions would “not require the waiver of all debts ultimately payable to third parties when there is an overpayment, ” id., because § 5584 contains “requirements” that “limit [its] application, ” id. at 14. Additionally, the Union contends that the Agency’s exceptions challenge the Arbitrator’s factual findings and do not demonstrate that the award is deficient. See id. at 6-8.
When an exception involves an award’s consistency with law, the Authority reviews any question of law raised by the exception and award de novo. See NTEU, Chapter 24, 50 FLRA 330, 332 (1995) (citing U.S. Customs Serv. v. FLRA 43 F.3d 682, 686-87 (D.C. Cir. 1994)). In applying the standard of de novo review, the Authority assesses whether an arbitrator’s legal conclusions are consistent with the applicable standard of law. See U.S. DoD, Dep’ts of the Army & the Air Force, Ala. Nat’l Guard, Northport, Ala., 55 FLRA 37, 40 (1998). ...
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