When Settlement Agreements Fall Apart: Leave Issues

By Barbara Haga, March 13, 2023

I enjoyed putting together the columns on clean record agreements so much that I thought we should follow that thread. This month, we look at things agreed to in settlement agreements that were ruled to be illegal and resulted in the MSPB overturning the settlement. These types of provisions fall in the “mutual mistake” category. Sometimes, there is a lot more to these agreements than back pay and attorney fees. This time we are going to look at leave issues.

Crediting Leave. In Franchesca V. v. Department of Veterans Affairs, EEOC Appeal No. 0120170632 (Mar. 2017), the complainant filed an age discrimination and reprisal claim.  She retired while the complaint was being processed. A settlement agreement was ultimately executed to resolve the complaint. The agreement said, among other things: “The Agency will, within 60 days of execution of this Agreement initiate restoration of the necessary amount of sick leave (approximately 606 hours) so Complainant retires with a balance of one year [in addition to her other years of service].”

The agency immediately ran into problems executing this portion of the agreement. The payroll office (DFAS, outside of VA) said it was a violation to grant this amount of leave under these circumstances. The agency’s servicing HR office intervened. Finally, the payroll office processed it and submitted the corrected record to OPM.

This lengthy process resulted in the complainant alleging a breach of the agreement, which escalated the matter to the agency HQ. They requested review of the matter, which included the following:

Complainant retired with 29 years and 4 months in service. The OGC staff attorney wrote that the intent of the sick leave restoration provision was to round up Complainant’s service to the next full year for retirement purposes. She wrote that when she negotiated the settlement agreement, she did not know this type of provision was frowned upon and considered an inappropriate use of retirement benefits. The OGC staff attorney wrote that DFAS made it clear that since Complainant never used 606 hours of sick leave, the Agency was asking to credit her more sick leave than she earned, which was not possible. Referring to the settlement negotiations, she wrote that she thought everyone assumed that Complainant would have spoken up if the Agency was offering the “restoration” of leave she never took.

After reviewing the information and consulting with the Department of Justice, the VA’s benefits and leave administration expert determined the provision was not just frowned upon but a violation of the law. The agency could not credit sick leave in excess of what the employee would have earned during her career.

Administrative Leave. In McDavid v. Army, 46 MSPR 108 (MSPB 1990), the appellant was found to be medically disqualified from flying. He was removed from his supervisory pilot position effective July 23, 1987.  McDavid appealed the removal, and it was settled on Nov. 3, 1987. One of the settlement provisions stated the agency agreed to pay him his salary from the date of the agreement until his retirement on Sept. 30, 1988, meaning roughly ten months of administrative leave would be granted.

Here’s what the Board had to say when it reviewed the enforcement action:

In Miller v. Department of Defense, MSPB Docket No. DE07528810290 (MSPB 1990), the Board set aside a settlement agreement on the basis of mutual mistake on which the parties relied in reaching the agreement. In Miller, the parties had entered into an agreement in settlement of the appellant’s appeal from his removal. The agreement provided, among other things, that the appellant would be placed on administrative leave for one year and would thereafter resign. The Board sought an advisory opinion from the Comptroller General, who found that the administrative leave was unlawful. While not bound by the Comptroller General’s opinion, see Apple v. Department of Transportation, MSPB DE07528/C0653-1 (Sept. 14, 1988), the Board found persuasive the Comptroller General’s conclusion that, except for brief absences, unless there is specific statutory authority, the agency could not expend appropriated funds where it received no benefit in return. See Miller, slip op. at 7-8. The Board noted that the Comptroller General advised that the provision granting administrative leave was not in furtherance of the agency’s mission, because the agency had no authority to provide such benefits, even though it was granted in an agreement in settlement of a personnel action. See Id. at 8. Finding that the unlawful provision was central to the agreement, and numerous other provisions were dependent upon it, the Board set aside the agreement.

In today’s world, OPM would be answering compensation and leave claims not covered by negotiated grievance procedures, since responsibility for these matters was moved from GAO to OMB, who in turn delegated the responsibility for adjudication to OPM in 1996.  Given what we know about OPM’s posture on use of administrative leave in conjunction with disciplinary and performance actions as included in their current guidance, as well as the limitations on administrative leave that OPM included in the not-yet-finalized administrative leave regulations issued in July 2017, I would expect OPM would answer the same way today.

Unspecified Amount of LWOP. The settlement agreement in Garcia v. Air Force, 83 MSPR 277 (MSPB 1999), stated that Garcia would be carried in an LWOP status from the date of execution of the settlement agreement until the date he became eligible to retire from Federal service. That’s all it said. There was nothing about the type of retirement or what else the agency might do in relation to the retirement.

The problem was that at the time of the agreement, Garcia was not even close to being eligible to retire optionally. He was 45 years old with almost 25 years of service. Optional retirement would have required a minimum of 55 years of age with 30 years of service. Was the agency agreeing to 10 years of LWOP? (Of course, all that LWOP would have meant Garcia wouldn’t have been eligible to retire then either.)  Or was it as Garcia argued?  That he would be kept in LWOP for six months until he had 25 years or service and reached eligibility for discontinued service retirement – and then the agency would abolish his position?

The agency representative stated he had believed that the appellant would qualify for regular retirement at the end of six months. Unfortunately, that was not the case. The Board set aside the agreement.