UNITED STATES OF AMERICA

MERIT SYSTEMS PROTECTION BOARD

ATLANTA REGIONAL OFFICE

MARCUS D. SMITH, DOCKET NUMBER

Appellant, AT-0752-05-0901-P-2

v.

DEPARTMENT OF DATE: June 13, 2017

TRANSPORTATION,
Agency.

Elaine L. Fitch, Esq., Washington, D.C., for the appellant.

Brian A. Price, Esq., Des Plaines, Illinois, and Russell B. Christensen,

Esq., Washington, D.C., for the agency.

BEFORE
Pamela B. Jackson
Administrative Judge

INITIAL DECISION

On February 14, 2017, the appellant, Marcus D. Smith, filed the instant
claim for damages, seeking compensation for damages he suffered as a result of
the agencys unlawful retaliation. See Smith v. Department of Transportation,
AT-0752-05-0901-I-1 (April 25, 2012). The Board has the authority to award
compensatory damages. Hooker v. Department of Treasury, 63 M.S.P.R. 497,
505 (1994), affd, 64 F.3d 676 (Fed. Cir. 1995).
For the reasons stated below, the appellants request for compensatory
damages is GRANTED.
 2

ANALYSIS AND FINDINGS

On April 25, 2012, the Board issued a Final Order concurring in and
adopting the EEOCs decision finding that the agency has retaliated against the
appellant for engaging in protected activity and ordering the agency to cancel the
appellants 30-day suspension and restore him effective August 1, 2005. See
Smith v. Department of Transportation, AT-0752-05-0901-E-1 (Apr. 25, 2012).
On October 25, 2012, the appellant filed a Second Petition for
Enforcement, 1 in which he alleged, among other things, that he was entitled to
additional monies because of the increased tax liability he suffered as a result of
him receiving a lump-sum back payment in one year, rather than over a period of
years in which the income would have actually have been earned. I declined to
rule on that portion of the appellants claim, finding it was premature, given the
back pay award had at that time not been fully calculated and, therefore, any
increased tax liability could not yet be quantified. I informed the appellant when
the amount of any increased tax liability was known to him, he could renew his
request for such payment.
After extended proceedings before the Board, and additional acts by the
agency to come into compliance with the Boards order, the Board on January 3,
2017, issued a final order finding the agency in compliance and all back pay
issued resolved. See Smith v. Department of Transportation, MSPB Docket Nos.
AT-0752-05-0901-X-1 and AT-0752-05-0901-X-2 (Jan. 3, 2017). With the
agencys recently provided explanation of its back pay calculations, the appellant
obtained the services of an accountant, who determined that the appellants
increased tax liability resulting from the $93,114.87 lump-sum back pay award
was $10,941.00. Petition for Damages File, Tab 1. The appellant, therefore,
requested that amount plus $3,712.50 in accountant fees, for a total of
$14,653.50, to make him whole. PFE File, Tab 1.

1
The First Petition for Enforcement was filed May 29, 2012.
 3

The Board has the authority to remedy the adverse tax consequences of a back
pay award.
Both parties acknowledge that the Board has previously and consistently
held since Wilson v. U. S. Postal Service, 38 M.S.P.R. 156 (1988) that it lacks
authority to order a remedy for the tax consequences of a back-pay award. Id. at
57. The appellant points out, however, that Wilson was decided before the 1991
Amendments to Title VII, or the Civil Rights Act of 1991, which allowed for
compensatory damages as part of Title VIIs make whole relief. 42 U.S.C.
1981a(b)(3).
The rationale in Wilson and progeny is that Title VII makes no mention of
damages for incidental or consequential losses which are not a part of the
employment relationship, and the Board, therefore, concluded that it had no
authority to award compensation for the increased tax burden of a back pay
award. Since the 1991 Civil Rights Act, however, the Boards statement
regarding its lack of authority to award compensatory damages under Title VII is
no longer good law. Furthermore, the Board, deferring to the Equal Employment
Opportunity Commissions (EEOC) interpretation of the Civil Rights Act of
1991, has long recognized its authority to award compensatory damages since
Hooker v. Department of Treasury, 63 M.S.P.R. at 505.
Notwithstanding the recognition of its authority to award compensatory
damages under Title VII, the Board has continued to cite Wilson and progeny for
the proposition that it has no authority to order a remedy for the tax consequences
of a back pay award. The Board has continued its unexamined adherence to
Wilson even as the EEOC and federal courts have recognized the right under Title
VII to award compensatory damages to address the adverse tax consequences of
receiving several years of back pay at one time.
For example, in Holler v. Department of Navy, EEOC Appeal Nos.
01990407 and 01982627 (Aug. 22, 2001), the Commission explicitly stated that
the purpose of compensatory damages under Title VII is to compensate an
 4

employee for the proximate injury caused by employment discrimination, and

[c]ompensation for the adverse tax consequences of receiving a lump sum back
pay award meets this criteria. See also Sears v. Atchison, Topeka & Santa Fe
Railway Company, 749 F.2d 1451, 1456 (10 th Cir. 1984)(under Title VII, a
federal district court may compensate an employee for increased tax liability
occasioned by a back pay award).
Furthermore, under the principles long established in Ignacio v. United
States Postal Service, 30 M.S.PR. 471, 486 (Spec. Pan 1986), the Board defers to
the EEOCs interpretation of discrimination laws. See also see also Sloan v. U.
S. Postal Service, 77 M.S.P.R. 58, 70 (1997)(the Board will defer to and adopt
the criteria used by the EEOC for proving entitlement to compensatory damages).
The Boards case law regarding its ability to address the tax consequences of a
back pay award, however, do not appear to be consistent with either the EEOC or
federal courts.
The agency correctly points out that I have no authority to overrule the
Board, and I am not attempting to do so here. I am, however, obligated to point
out to the Board when its case law appears to be out of sync with controlling
authority, and when its rationale supporting certain legal conclusions does not
appear to withstand scrutiny based upon current law. If the Board had considered
the arguments that the appellant presents here and concluded that,
notwithstanding the Civil Rights Act of 1991, Wilson and progeny were still good
case law, I would be duty bound to follow the Boards ruling; but I can find no
evidence that the Board has ever considered the arguments that the appellant has
set forth here. Moreover, I feel confident that if the Board did consider the
appellants arguments, and also considered the case law on this issue set forth by
the EEOC, to which it defers on discrimination issues, the Board would overrule
Wilson and progeny. I am, therefore, declining to follow Wilson and progeny,
and deferring to the case law of the EEOC, set forth above. Accordingly, I find
that the appellant is entitled to compensatory damages to remedy the increased
 5

tax burden that resulted in his having received a lump-sum back pay award in one
year.

The appellant has established the amount he is requesting is appropriate.

To receive an award of compensatory damages, an appellant must
demonstrate that he has been harmed as a result of the agencys discriminatory
action and must establish the extent, nature, and severity of the harm, as well as
the duration or expected duration of the harm. Hollingsworth v. Department of
Commerce, 117 M.S.P.R. 327 (2012).
Pecuniary damages are available for out of pocket expenses shown to be
related to discriminatory conduct. Id. at 7. Furthermore, as set forth above,
the EEOC has specifically stated in Holler v. Department of Navy, that
compensatory damages may be awarded for the adverse tax consequences of
receiving a lump sum back pay award.
In the instant case, the appellant has presented the tax calculations of a
Certified Public Accountant (CPA) he hired to determine the tax consequences of
receiving a back pay award in one year covering a period of several years.
Appeal File, Tab 1. The accountant concluded that the appellants had a $9,839
increased tax liability to the Federal government, and $1,102 to the State of
Georgia, for a total of $10,941 in increased tax liability. The appellant requests
that amount plus the $3,712.50 the accountant charged to determine his increased
liability, for a total of $14,653.50. The agency does not challenge the appellants
claimed tax consequences of his back pay award. Compensatory Damages File,
Tab 10.
Inasmuch as the appellant has provided support for his claim, which has
not been challenged by the agency, that he suffered an increased tax liability of
$10,941 and an additional $3,721.50 in accountant fees, I find that he has
established his entitlement to $14,653.50 in pecuniary compensatory damages.
 6

DECISION
The appellants petition for enforcement is GRANTED.

ORDER
I order the agency to pay the appellant the amount of $14,653.50 in
compensatory damages.

FOR THE BOARD: __________/S/____________________

Pamela B. Jackson
Administrative Judge

NOTICE TO THE PARTIES

If the agency takes the actions ordered above, it must submit to the Clerk
of the Board a statement that it has done so, along with evidence establishing
compliance. The narrative statement must explain in detail why the evidence of
compliance satisfies the requirements set forth in this decision. See 5 C.F.R.
1201.183(a)(6)(i). Any such submission must be filed with the Clerk of the
Board within 35 days of the date of issuance of this decision, or if the
agency/appellant shows that it was received more than 5 days after the date of
issuance, within 30 days of the date the agency received this initial decision. The
address of the Clerk of the Board is:
The Clerk of the Board
Merit Systems Protection Board
1615 M Street, NW.
Washington, DC 20419

The Clerks fax number is (202) 653-7130. Submissions may also be made
by electronic filing at the Board's e-Appeal site (https://e-appeal.mspb.gov) in
accordance with the Board's regulation at 5 C.F.R. 1201.14. A submission may
be rejected and returned to you if you fail to provide a statement of how you
served the other party. See 5 C.F.R. 1201.4(j).
 7

If the agency decides not to take all of the actions required by this decision,
it must file a petition for review under the provisions of 5 C.F.R. 1201.114 and
1201.115. See 5 C.F.R. 1201.183(a)(6)(ii). The responses required by sections
1201.183(a)(6)(i) and (ii) may be filed separately or as a single pleading. The
agencys response must advise the Board of any change in the identity or location
of the official responsible for compliance.
The appellant may file evidence and argument in response to the agencys
submission. Any such submission must be filed with the Clerk of the Board at
the above address within 20 days of the date of filing of the agencys submission.
If the agency does not file a timely pleading with the Clerk of the Board as
required by sections 1201.183(a)(6)(i) and (ii), the findings of noncompliance
will become final and the case will be processed by the Board in accordance with
5 C.F.R. 1201.183(c)(1).
For agencies whose payroll is administered by either the National Finance
Center of the Department of Agriculture or the Defense Finance and Accounting
Service, two lists of the information and documentation necessary to process
payments and adjustments resulting from a Board decision are attached.

NOTICE TO THE APPELLANT

REGARDING YOUR RIGHT TO REQUEST
COMPENSATORY DAMAGES
You may be entitled to be paid by the agency for your compensatory
damages, including pecuniary losses, future pecuniary losses, and nonpecuniary
losses, such as emotional pain, suffering, inconvenience, mental anguish, and loss
of enjoyment of life. To be paid, you must meet the requirements set out at
42 U.S.C. 1981a. The regulations may be found at 5 C.F.R. 1201.201,
1201.202, and 1201.204. If you believe you meet these requirements, you must
file a motion for compensatory damages with this office WITHIN 60
CALENDAR DAYS OF THE DATE THIS INITIAL DECISION BECOMES
FINAL.
 DFAS CHECKLIST
INFORMATION REQUIRED BY DFAS IN
ORDER TO PROCESS PAYMENTS AGREED
UPON IN SETTLEMENT CASES OR AS
ORDERED BY THE MERIT SYSTEMS
PROTECTION BOARD
AS CHECKLIST: INFORMATION REQUIRED BY IN ORDER TO PROCESS PAYMENTS AGREED UPON IN SETTLEMENT
CASES
CIVILIAN PERSONNEL OFFICE MUST NOTIFY CIVILIAN PAYROLL
OFFICE VIA COMMAND LETTER WITH THE FOLLOWING:

1. Statement if Unemployment Benefits are to be deducted, with dollar amount, address

and POC to send.
2. Statement that employee was counseled concerning Health Benefits and TSP and the
election forms if necessary.
3. Statement concerning entitlement to overtime, night differential, shift premium,
Sunday Premium, etc, with number of hours and dates for each entitlement.
4. If Back Pay Settlement was prior to conversion to DCPS (Defense Civilian Pay
System), a statement certifying any lump sum payment with number of hours and
amount paid and/or any severance pay that was paid with dollar amount.
5. Statement if interest is payable with beginning date of accrual.

6. Corrected Time and Attendance if applicable.

ATTACHMENTS TO THE LETTER SHOULD BE AS FOLLOWS:

1. Copy of Settlement Agreement and/or the MSPB Order.
2. Corrected or cancelled SF 50's.
3. Election forms for Health Benefits and/or TSP if applicable.
4. Statement certified to be accurate by the employee which includes:
a. Outside earnings with copies of W2's or statement from employer.
b. Statement that employee was ready, willing and able to work during the period.
c. Statement of erroneous payments employee received such as; lump sum leave, severance
pay, VERA/VSIP, retirement annuity payments (if applicable) and if employee withdrew
Retirement Funds.
5. If employee was unable to work during any or part of the period involved, certification of the
type of leave to be charged and number of hours.
NATIONAL FINANCE CENTER CHECKLIST FOR BACK PAY CASES
Below is the information/documentation required by National Finance Center to process
payments/adjustments agreed on in Back Pay Cases (settlements, restorations) or as
ordered by the Merit Systems Protection Board, EEOC, and courts.
1. Initiate and submit AD-343 (Payroll/Action Request) with clear and concise
information describing what to do in accordance with decision.
2. The following information must be included on AD-343 for Restoration:
a. Employee name and social security number.
b. Detailed explanation of request.
c. Valid agency accounting.
d. Authorized signature (Table 63)
e. If interest is to be included.
f. Check mailing address.
g. Indicate if case is prior to conversion. Computations must be attached.
h. Indicate the amount of Severance and Lump Sum Annual Leave Payment to
be collected. (if applicable)

Attachments to AD-343
1. Provide pay entitlement to include Overtime, Night Differential, Shift Premium, Sunday
Premium, etc. with number of hours and dates for each entitlement. (if applicable)
2. Copies of SF-50's (Personnel Actions) or list of salary adjustments/changes and
amounts.
3. Outside earnings documentation statement from agency.
4. If employee received retirement annuity or unemployment, provide amount and address
to return monies.
5. Provide forms for FEGLI, FEHBA, or TSP deductions. (if applicable)
6. If employee was unable to work during any or part of the period involved, certification of
the type of leave to be charged and number of hours.
7. If employee retires at end of Restoration Period, provide hours of Lump Sum Annual
Leave to be paid.
NOTE: If prior to conversion, agency must attach Computation Worksheet by Pay
Period and required data in 1-7 above.
The following information must be included on AD-343 for Settlement Cases: (Lump
Sum Payment, Correction to Promotion, Wage Grade Increase, FLSA, etc.)
a. Must provide same data as in 2, a-g above.
b. Prior to conversion computation must be provided.
c. Lump Sum amount of Settlement, and if taxable or non-taxable.
If you have any questions or require clarification on the above, please contact NFCs
Payroll/Personnel Operations at 504-255-4630.