HOUSE BILL REPORT

HB 1700

BYRepresentatives H. Sommers,  Baugher, Chandler, Unsoeld and Brough; by request of Office of Financial Management

Recouping overpayment of salaries to state employees.

House Committe on State Government

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (9)

      Signed by Representatives H. Sommers, Chair; Anderson, Vice Chair; Baugher, Chandler, Hankins, O'Brien, Peery, Taylor and Walk.

House Staff:Ken Conte (786-7135)

AS REPORTED BY COMMITTEE ON STATE GOVERNMENT FEBRUARY 2, 1988

BACKGROUND:

Beginning on July 1, 1981, the Department of Transportation programmed its payroll computer to pay certain employees a shift differential of $0.40 per hour rather than the existing $0.20 per hour payment.  This pay increase was made in error, based upon a miscommunication within the Department.  Nonetheless, the error was not discovered for an eighteen-month period and, in the interim, 1337 employees were overpaid a total of $120,197.

When the Department discovered the error, it halted the overpayments and began discussions with the employees regarding the recovery of the overpayments.  Most of the employees involved agreed to a monthly voluntary deduction from future pay checks until the overpayments were recovered.  However, some 430 employees questioned the Department's claim and would not agree to voluntary deductions.  The employees' concerns related to both the validity of the State's claims as well as the amount of repayment being requested.

The matter was taken to the courts and on February 5, 1987, the Washington State Supreme Court found that 1) the State has a right and a duty to collect overpayments and 2) there is no statutory procedure to protect the employees from erroneous claims by the State and therefore, the State's only recourse to collect overpayments is to file a civil action in court.

In essence, the Supreme Court found that in the absence of a statutory, due process procedure that allows employees to contest or refute the State's determination regarding overpayments, the State can not administratively require repayments.  Instead, the State's only recourse is to initiate court action to recover overpayments.

SUMMARY:

SUBSTITUTE BILL:  An employing agency is required to recover employee overpayments by deducting a reasonable amount from each of the employee's paychecks until the total overpayment is recovered. Recoupment of overpayments may be waived if the agency determines that the cost of recoupment will exceed the amount of overpayment.

Prior to initiating the recovery of overpayments, the agency is required to give the employee at least fifteen days notice of the impending reduction in salary.  The employee is to be given an opportunity to provide evidence or information refuting the agency's determination.  After reviewing any information submitted by the employee, the agency is to make the final determination regarding the recovery of overpayments.  An employee may appeal an agency determination under the Administrative Procedure Act.  Recoupment may not be initiated until the appeals process is completed.

The Office of Financial Management is to adopt rules relating to the overpayment recovery process.  The State's right to recover payments through statutory or common law remedies, including civil action, is retained.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  Recoupment of overpayments may be waived if the agency determines that the cost of recoupment will exceed the amount of overpayment.  An employee may appeal an agency determination under the Administrative Procedure Act.  Recoupment may not be initiated until the appeals process is completed.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Collum Liska, Office of Financial Management; and Art Morse, Department of Transportation.

House Committee - Testified Against:      Gary Moore, Washington Federation of State Employees.

House Committee - Testimony For:    This bill gives the state the ability to collect overpayments without having to go to court.  Voluntary repayments are always preferable, but where a dispute exists the state needs an administrative procedure for requiring recoupment of overpayments.  This bill attempts to reach a balance between the rights of employees and the duty of the agency to collect overpayment.

House Committee - Testimony Against:      Overpayment is almost always the agency's fault; the employee generally doesn't know it's happening.  DOT used overpayments as a way of getting people to take night shifts.  The bill should require a full due process procedure under the Administrative Procedure Act.  The agency should be able to waive overpayment.