The stunning news that nearly 10,000 soldiers have been asked to repay enlistment bonuses they received years ago has a lot of folks asking what happens if they are overpaid through no fault of their own. Large-scale overpayments such as this one are not common, but individual and group overpayments do happen. Agencies handle them in different ways, but the basic processes are similar.
When an agency overpays an employee, the agency is required to notify the employee of the overpayment, how it happened, the amount, and the process for repaying the money or requesting a waiver to avoid paying it. The law authorizing most waivers of overpayments is 5 U.S. Code § 5584. It says, in part, “A claim of the United States against a person arising out of an erroneous payment of pay or allowances made on or after July 1, 1960, or arising out of an erroneous payment of travel, transportation or relocation expenses and allowances, to an employee of an agency, the collection of which would be against equity and good conscience and not in the best interests of the United States, may be waived in whole or in part….”
In an ideal world we would never have overpayments. This is not an ideal world. They happen due to carelessness, bad training, simple mistakes, and sometimes deliberately. Many of the enlistment bonus overpayments appear to be deliberate. The critical factor in dealing with overpayments is what the person who was overpaid knew or reasonably should have known. The Defense Finance and Accounting Service (DFAS) outlines the DoD civilian employee process for waivers on its website.
Waivers are not appropriate and are not/should not be granted when the employee should have known it was an overpayment. If, for example, your pay suddenly goes up for no reason (such as a within grade increase that you know is not due for a year), you are required to advise the agency that it happened. One case I remember from my Navy experience was a woman who had been overpaid for several years. When we discovered the overpayment, we told her about it and told her she would have to repay the money unless a waiver was approved. She said she knew it was an overpayment and had saved all of the extra money, but she wanted a waiver anyway because it was the government’s mistake. She did not get her waiver.
But what happens when employees act in good faith and have no idea that they were not entitled to the money they received? When I was HR Director for the the Defense Logistics Agency (DLA), we had an example of an overpayment and the way I believe an agency should respond to them. DLA found that its police officers were on the wrong pay scale. The people who made the mistake were not trying to pull a fast one – they simply made a mistake. Dozens of police officers were affected. The officers were hired in good faith, did their jobs, and could not reasonably be expected to know they were on the wrong pay scale. The agency could not continue to use the wrong pay scale and was required to notify the officers that they had been overpaid.
The normal process would be to notify the employees, tell them how much they owed, and what the process for requesting a waiver would be. That approach is fine when someone is overpaid a few dollars, but when it is thousands of dollars, it falls apart. Imagine being told you were overpaid 5 or 10 or 20 thousand dollars or more. The typical middle-class family cannot just write a check for thousands of dollars. The financial impact is devastating. The emotional distress can be equally damaging.
Recognizing that the overpayment would create so much turmoil for our officers, we decided on a different approach. First, we notified all of the employees in a group meeting. We explained exactly what happened, how it happened, and what the agency was going to do to try to make it right. Rather than giving them a letter that said they could apply for a waiver, we wrote the waiver letters for them. We also talked with senior officials at DFAS to ensure they knew what happened and that the waiver requests would be approved. At the same time, we began working on a long-term fix to the pay cuts that switching pay scales would create. Every action we took was intended to keep these good men and women from suffering because of the agency’s mistake.
I can’t help but think there should have been a similar approach to the enlistment bonus overpayments. If there was ever a case where, as the law says, “the collection of which would be against equity and good conscience and not in the best interests of the United States” this is it.
The ACT-IAC Institute for Innovation has produced a report, 
ChiefHRO.com 